<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997 Commission File Number 0-18858
KAISER VENTURES INC.
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-0594733
- -------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (909) 483-8500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No
Indicate by check mark whether registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes [x] No
On April 30, 1997, the Company had 10,542,548 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).
<PAGE>
TABLE OF CONTENTS TO FORM 10-Q
PAGE
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INTRODUCTION
BUSINESS UPDATE..................................................... 1
PART I
Item 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 6
Item 2. FINANCIAL STATEMENTS................................ 14
CONSOLIDATED BALANCE SHEETS......................... 14
CONSOLIDATED STATEMENTS OF OPERATIONS............... 16
CONSOLIDATED STATEMENTS OF CASH FLOWS............... 17
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY............................... 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......... 19
PART II
Item 1. LEGAL PROCEEDINGS................................... 21
Item 2. CHANGES IN SECURITIES............................... 21
Item 3. DEFAULTS UPON SENIOR SECURITIES..................... 21
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS... 21
Item 5. OTHER INFORMATION................................... 21
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 21
SIGNATURES............................................................ 22
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AVAILABILITY OF PREVIOUS REPORTS
--------------------------------
The Company will furnish without charge, to each stockholder, upon written
request of any such person, a copy of the Company's annual report on Form 10-k
for the year ended December 31, 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; OR
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. 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 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) a 12.29% 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 (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 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, there have been significant
developments with regard to the continued redevelopment of the Mill Site
Property and with respect to the Landfill Project. See, "Introduction -
Business Update - Property Redevelopment and "Introduction - Business Update -
Waste Management - Eagle Mountain Landfill Project." In addition, a reader of
this Form 10-Q Report is strongly encouraged to read the entire report, together
with the Company's 1996 Form 10-K Report for background information and a
complete understanding as to material developments concerning the Company.
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KAISER VENTURES INC. AND SUBSIDIARIES
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").
During the first quarter of 1997 the Company continued its litigation with
Cucamonga in San Bernardino County Superior Court to resolve a dispute over the
interpretation of the Cucamonga Lease and the Lease Rate. Discovery is ongoing
with a trial on the matter currently anticipated by year-end or in early 1998.
INVESTMENT IN PENSKE MOTORSPORTS, INC.
The Company owns 1,627,923 shares, or approximately 12.29% of the common stock
of PMI. 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 the California Speedway
("TCS") has been built; and (ii) the subsequent sale of the Speedway Business
Park, totaling approximately 54 acres to PMI in December, 1996. PMI is traded
on the NASDAQ National Market under the symbol "SPWY".
PMI is a leading promoter and marketer of professional motorsports in the
United States as well as an owner and operator of speedway facilities. PMI
currently owns: (i) Michigan International Speedway, Inc. which owns and
operates the Michigan Speedway, in Brooklyn, Michigan; (ii) The California
Speedway Corporation, the developer of TCS near Los Angeles, California; (iii)
Pennsylvania International Raceway, Inc. which owns and operates the Nazareth
Motor Speedway in Nazareth, Pennsylvania; (iv) Motorsports International Corp.,
a motorsports apparel and memorabilia company; (v) 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; and (vi) approximately four
(4) percent of the stock of North Carolina Motor Speedway, Inc. which owns and
operates the North Carolina Motor Speedway, Rockingham, North Carolina.
During the first quarter of 1997, PMI announced that it had entered into an
option to acquire an additional sixty five percent (65%) of the stock in North
Carolina Motor Speedway, Inc. PMI has also offered to acquire the balance of
the stock in North Carolina Motor Speedway, Inc. North Carolina Motor Speedway
is a 1.017 mile oval track which hosts two NASCAR Winston Cup Series races, two
NASCAR Busch Grand National races and the annual Unocal 76/Rockingham Pit Crew
Championship.
Except for minor items, the construction of TCS has been completed with its
inaugural races scheduled for the weekend of June 21, 1997. PMI paid to the
Company a quarterly fee of $162,500 in the first quarter. The agreement to pay
such quarterly fees expired at the end of the first quarter of 1997. For the
first quarter of 1997, PMI announced gross revenues of $5.4 million and a
net loss of $1.5 million or $.11 per share for the first quarter of 1997. Due to
the seasonal nature of racing, losses are anticipated in the first and fourth
quarter of the year and profits 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. In addition, PMI incurrred significant expenses in the
first quarter related to the start-up of TCS. 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."
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KAISER VENTURES INC. AND SUBSIDIARIES
The following table sets forth the range of the low and high reported bid
price of PMI's common stock for the first quarter of 1997, as reported on the
NASDAQ National Market System.
<TABLE>
<CAPTION>
1997: LOW HIGH
--- ----
<S> <C> <C>
First Quarter $25.00 $30.75
</TABLE>
On May 9, 1997, the range of the reported bid price of PMI's common stock were
$31.318 and $32.125, respectively.
PROPERTY REDEVELOPMENT
Mill Site Redevelopment Plan. The Company is continuing to move forward with
its plans to redevelop the balance of the Mill Site Property. After completion
of the transactions with PMI, and taking into account the land to be used for
the Mill Site materials recovery facility and transfer station ("Mill Site
MRF"), the Company now 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 first 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 development. However, the balance
of the Mill Site Property, owned by the Company, requires various entitlements
and permits from San Bernardino County prior to redevelopment. The first formal
step in the entitlement and permitting process was 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 the approximately 135 acres of the East Slag Pile
property.
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.
Separately and in addition to the permitting and entitlement process with the
County, the Company continued its work during the first 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.
Such freeway improvements near the Mill Site Property would also involve the
realignment of at least one existing street and the construction of other street
improvements.
The entire entitlement and permitting process which formally commenced April
9, 1997, is anticipated to take ten to fourteen months and involve an
expenditure of approximately $1.5 million. In addition, the Company will
continue to evaluate and undertake the required environmental remediation of
portions of the Mill Site Property.
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
3
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KAISER VENTURES INC. AND SUBSIDIARIES
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.
WEST VALLEY MATERIALS RECOVERY FACILITY
The Company and Burrtec Waste Industries, Inc. ("Burrtec"), a privately-held
company, are equal joint venture partners in the development of the West Valley
Materials Recovery Facility (the "Joint Venture"), a proposed rail-served
municipal solid waste transfer and recovery facility that, at full build out,
will be located on three parcels totaling approximately 30 acres of the Mill
Site Property . The Mill Site MRF has, other than the necessary construction
and ancillary permits, received all required permits. During the first quarter,
the Company and Burrtec continued to undertake those preliminary steps necessary
to construct Phase 1 of the Mill Site MRF which is currently expected to include
a 62,000 square foot building, sorting equipment, and related facilities for
waste transfer and recycling services. Offsite improvements and the grading of
the site were completed in the first quarter. Trenching for utilities and
foundation work has commenced. The total estimated cost for Phase 1 of the Mill
Site MRF, including all equipment, is approximately $10,300,000. It is
anticipated that the Company and Burrtec will be required to guarantee any third
party financing obtained by the West Valley MRF, LLC.
The Company is responsible for the environmental remediation of the property
for the Mill Site MRF and is currently in the process of remediating a portion
of the site. The remediation required has been more extensive than originally
anticipated. However, final regulatory approval of the nature and extent of the
required remediation has been obtained and the required remediation is nearing
completion.
The Company and Burrtec have reached agreement, in principle, on the terms of
restructuring the Joint Venture as a limited liability company (the West Valley
MRF, LLC, a California limited liability company), subject to obtaining
acceptable third-party financing and the finalization of the legal documentation
between the Company and Burrtec. It is currently anticipated that the legal
documentation and financing will be completed in the second quarter of the year.
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
$2,869,515, or $4.25 a square foot. The sales price, subject to normal closing
adjustments, will be paid by a minimum of a $1,000,000 cash down payment at the
close of the transaction with the balance of the purchase price being paid by
Budway's promissory note. 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 lot sale, which is subject to several contingencies including
Budway obtaining appropriate construction financing, is anticipated to close on
or before July 31, 1997. The Company currently estimates the gain 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
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KAISER VENTURES INC. AND SUBSIDIARIES
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 1997. The Company is expected to invest
approximately $1.9 million for its portion of this $2.5 million placement by the
end of the second quarter 1997. The Company also agreed to provide MRC with
up to an additional $1.8 million in equity during 1997. It is anticipated that
additional equity contributions of approximately $1.9 million by the Company may
be required 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. During the first quarter of 1997, MRC continued to pursue the
activities necessary to re-permit the Landfill Project. The final environmental
impact report/environmental impact statement ("EIR/EIS") prepared by Riverside
County's and the U.S. Bureau of Land Management's ("BLM") independent consultant
was released to the public in January, 1997. The EIR/EIS examines the Landfill
Project's potential impacts to such items as air quality, water, traffic, noise,
and natural resources and also identifies measures to mitigate potential
impacts.
After the release of the final EIR/EIS, 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 must now be considered by the
Riverside County Board of Supervisors. It is currently anticipated that the
Riverside County Board of Supervisors will schedule hearings on the Landfill
Project within the next 90 days. However, the Board has not, to date,
established a hearing schedule. Furthermore, as discussed in more detail in the
Company's 1996 10-K Report, it is unknown if the Board will delay the hearing of
the Landfill Project until the conclusion of the investigation by the Federal
Bureau of Investigation of Western Waste, Inc. which is proposing a major
expansion of its El Sobrante landfill in Western Riverside County. MRC and the
Landfill Project have no affiliation with Western Waste, Inc. and the El
Sobrante project, but the Riverside County Board of Supervisors put at least a
six month moratorium on the consideration of new or expanded landfills in
October, 1996. Once the EIR and EIS is approved, assuming the EIR and EIS
receive the necessary approvals, it will probably take up to an additional year
to secure the necessary technical permits for the Landfill Project.
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.
5
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KAISER VENTURES INC. AND SUBSIDIARIES
PART I
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SECTION 1: OPERATING RESULTS
GENERAL
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 12.29% 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) 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.
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KAISER VENTURES INC. AND SUBSIDIARIES
SUMMARY OF REVENUE SOURCES
Due to the development nature of certain Company projects and the Company's
recognition of revenues from bankruptcy-related and other non-recurring items,
historical period-to-period comparisons of total revenues may not be meaningful
for developing an overall understanding of the Company. Therefore, the Company
believes it is important to evaluate the trends in the components of its
revenues as well as the recent developments regarding its long-term ongoing and
interim revenue sources. See "Introduction. Business Update." 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. PMI has no current plans to host any major racing events in the first
quarter and only one major racing event in the fourth quarter 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 MARCH 31, 1997 AND 1996
An analysis of the significant components of the Company's resource revenues
for the Quarters ended March 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996 % INC. (DEC)
------------ ------------ -------------
<S> <C> <C> <C>
ONGOING OPERATIONS
Water resource......................... $1,133,000 $1,116,000 2%
Property redevelopment................. 342,000 263,000 30%
Income (Loss) from equity method
investments.......................... (23,000) 163,000 (114%)
---------- ----------
TOTAL ONGOING OPERATIONS............. 1,452,000 1,542,000 (6%)
INTERIM ACTIVITIES
Lease, service and other............... 385,000 475,000 (19%)
---------- ----------
TOTAL RESOURCE REVENUES.............. $1,837,000 $2,017,000 (9%)
========== ==========
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations..................... 79% 76%
Interim activities..................... 21% 24%
---------- ----------
TOTAL RESOURCE REVENUES............... 100% 100%
========== ==========
</TABLE>
Resource Revenues. Total resource revenues for the first quarter of 1997 were
$1,837,000, compared to $2,017,000 for 1996. Revenues from ongoing operations
decreased 6% during the quarter to $1,452,000 from $1,542,000 in 1996, while
revenues from interim activities declined 19% to $385,000 from $475,000 in 1996.
Revenues from ongoing operations as a percentage of total revenues increased to
79% in 1997 from 76% in 1996.
Ongoing Operations. Water lease revenues under the Company's take-or-pay lease
with Cucamonga, which terminates in the year 2092, were $1,133,000 during the
first quarter of 1997 compared to
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KAISER VENTURES INC. AND SUSIDIARIES
$1,116,000 for 1996. The 2% increase in water revenues during the quarter
reflects an increase, effective February 1, 1997, in the rate, from $346 per
acre foot to $351 per acre foot, that Cucamonga is paying the Company for water
under the lease with Cucamonga. As 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 March 31, 1997 is approximately $872,000. In addition, MWD has
stated that it may further refine its rate structure in the near future.
Property redevelopment revenues were $342,000 for 1997 compared to $263,000
for 1996. The 30% increase from 1996 is primarily a result of: (a) the
classification, in 1997, as ongoing operations-property redevelopment, the
revenue related to the Mill Site sewer treatment plant as a result of the
Company's renewed commitment to provide sewer services to PMI and future Mill
Site tenants ($56,000); and (b) higher iron ore sales from the Company's
California mines ($18,000).
Income (loss) from equity method investments decreased to a loss of $23,000
for the first quarter of 1997 compared to $163,000 for 1996 as a result of the
Company's 12.29% share of PMI's reported net loss during the first quarter of
1997 which amounted to $185,000 offsetting the $163,000 quarterly project
service fee due from PMI. 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. As previously disclosed, the quarterly project service
fee agreement terminated as of March 31, 1997.
Interim Activities. Revenues from interim activities for the first quarter of
1997 were $385,000 compared to $475,000 for 1996. The 19% decrease in revenues
from interim activities in 1997 is primarily attributable to lower scrap
revenues ($138,000) and the classification of the sewer treatment plant revenues
from interim activities commencing in 1997 ($53,000) being partially offset by
increases in tenant rental and related revenue ($88,000) and slag revenue
($13,000).
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for the
first quarter of 1997 increased to $833,000 from $724,000 in 1996. Operations
and maintenance costs for 1997 were $305,000 compared to $248,000 for 1996. The
23% increase in 1997 operations and maintenance costs was primarily due to
higher property tax expense associated with the land improvements recently
completed at the Mill Site ($30,000) and increased building and equipment
maintenance ($16,000). Administrative support expenses for the first quarter of
1997 increased 11% to $528,000 from $476,000 for 1996. The increase was
primarily due to increases in insurance expense because of the addition of third
party environmental pollution coverage insurance for the Mill Site ($29,000),
outside professional costs ($16,000) and depreciation expense on the recently
completed railroad improvements at the Mill Site ($9,000).
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the first quarter of 1997 increased 16% to
$1,116,000 from $958,000 for 1996. The increase is due to higher professional,
legal and outside consulting expenses ($178,000).
Net Interest Expense. Net interest expense for the first quarter of 1997 was
$183,000 compared to $111,000 in 1996. The increase was due primarily to
interest expense associated with increased borrowings under the Union Bank of
California ("Union Bank") credit facility.
8
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Pretax Income (Loss) and Income Tax Provision. The Company recorded a loss
before income tax provision of $295,000 for the first quarter of 1997 versus
pretax income of $224,000 recorded in 1996. An income tax benefit of $121,000
was recorded in the first quarter of 1997 as compared with an income tax
provision $97,000 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 (Loss). For first quarter of 1997, the Company reported a net loss
of $174,000, or $.02 per share versus net income of $127,000, or $.01 per share,
reported for 1996.
COMPREHENSIVE INCOME
The Financial Accounting Standards Board ("FASB") proposed, in 1996, a new
accounting statement concerning the reporting of comprehensive income.
Comprehensive income is defined as the aggregate of all changes in shareholder's
equity that occurred during the reporting periods other than changes resulting
from equity investments by or dividends and distributions to shareholders. The
purpose of the FASB proposal, which has not been adopted by the FASB and is,
therefore, not considered a generally accepted accounting principle, is to
highlight and disclose all transactions that impact shareholders equity
regardless of whether or not they flow through the consolidated income
statement. Comprehensive income, which should not be used as a replacement for
net income, is a very meaningful performance measure for Kaiser because of the
amount of deferred tax expense credited directly to equity caused by the
Company's NOL carryforwards and because of the impact of other transactions such
as the increase in equity due to the 1996 PMI public offering. Comprehensive
income and comprehensive income per share for the first quarter ended March 31,
1997, and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Net Income (Loss)....................... $(174,000) $ 127,000
Deferred tax expense credited to equity. --- 90,000
Increase in investment in Penske
Motorsports, Inc....................... --- 6,116,000
--------- ----------
Comprehensive (loss) income............. (174,000) 6,333,000
========= ==========
Comprehensive (loss) income per share... $ (.02) $ .59
========= ==========
Earnings (Loss) per Share............... $ (.02) $ .01
========= ==========
</TABLE>
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 $2,883,000 to $5,599,000 at March 31, 1997 from
$8,482,000 at December 31, 1996. Included in cash and cash equivalents is
$1,932,000 and $1,766,000 held solely for the benefit of MRC at March 31, 1997
and December 31, 1996, respectively. The decrease in cash and cash equivalents
is due primarily to the $2,570,000 in capital expenditures and $924,000 in
environmental remediation.
Working Capital. During the first quarter of 1997, current assets decreased
$2,891,000 to $8,927,000 while current liabilities decreased $208,000 to
$12,850,000. The decrease in current assets resulted primarily from the
$2,883,000 decrease in cash and cash equivalents, discussed above. The decrease
in current liabilities resulted primarily from payments of yearend accruals.
Included in current liabilities at March 31,
9
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
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. Current liabilities at March 31, 1997, and December 31, 1996 also
include $1,443,000 and $1,616,000, respectively, in accounts payable and accrued
liabilities relating to MRC. As a result, working capital decreased during the
first quarter of 1997 by $2,683,000 to a negative $3,923,000 at March 31, 1997.
Real Estate. Real Estate increased $696,000 during the first quarter of 1997
due to capital expenditures related to redevelopment of the Mill Site
properties.
Investments. The decrease in investment in PMI is related to the Company's
recording of its share of equity in PMI's undistributed loss during the first
quarter of 1997, which amounted to $185,000.
Other Assets. The increase in other assets is primarily related to
approximately $1.2 million of capitalized landfill permitting and development
costs for MRC.
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 the amount of future environmental related costs as a separate
liability in its financial statements. The restatement reflects the original
$34.7 million remediation adjustment to land; and 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 total remediation and other environmental costs
expended through March 31, 1997.
As of March 31, 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 $721,000
in remediation and other environmental costs incurred in the first quarter 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.
Long-term Debt. As of March 31, 1997, the Company had $8,042,000 in long-term
debt comprised of $5,042,000 of debt issued as part of the purchase of
properties from the Lusk Joint Ventures in July 1994 and $3,000,000 borrowed
under the $30,000,000 revolving-to-term credit facility with Union Bank.
Long-term Liabilities. The decrease in other long-term liabilities is
primarily due to the $721,000 in environmental remediation undertaken during the
first quarter of 1997, and an increase of $529,000 in the current portion of
environmental remediation.
Minority Interest and Other Liabilities. As of March 31, 1997, the Company
has recorded $2,016,000 of minority interest relating to MRC in which the
Company had approximately a 73% equity interest.
10
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Contingent Liabilities. The Company has contingent liabilities more fully
described in the notes to the financial statements.
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 1996 Form 10-K Report,
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
12.29% 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 $872,000 of lease payments in dispute as of March 31, 1997, which
the Company has fully reserved.
In regard to the Company's 12.29% 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
successful startup of the TCS that is on land acquired from the Company.
Construction of TCS is virtually completed and it will hold its first major
races, the International Race of Champions and a NASCAR Winston West series race
on June 21, 1997, followed by the "NAPA 500" NASCAR Winston Cup race, on June
22, 1997. Three other major events, the "Marlboro 500" CART PPG World Series
Event on September 28, 1997 and a NASCAR Busch Series race on October 17, 1997,
and a Sears Craftsman Truck Series on October 18, 1997, are also scheduled. The
success of these events, coupled with the results of the other ten 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
11
<PAGE>
KAISER VENTURES INC. AND SUBIDIARIES
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 remaining 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.
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 Company expects that the
Supervisors will act on the Landfill Project during the middle of 1997; however,
there are a number of issues and actions that could delay such action. In
addition, even if the Supervisors approve the Landfill Project, 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
expects to contribute approximately $3.7 million in equity to support MRC's
landfill re-permitting efforts in 1997 plus approximately $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, at March 31, 1997, $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 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 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 March 31, 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.
12
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
It should be noted that 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]
13
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
(Unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents............ $ 5,599,000 $ 8,482,000
Accounts receivable and other, net of
allowance for doubtful accounts of
$1,168,000 and $1,034,000
respectively......................... 3,209,000 3,217,000
Insurance Settlement receivable...... 119,000 119,000
------------ ------------
8,927,000 11,818,000
------------ ------------
Investment in common stock of Penske
Motorsports, Inc.
(Fair market value of 1,627,923
shares equal to $45,989,000 as of
March 31, 1997)....................... 38,678,000 38,863,000
------------ ------------
Investment in Fontana Union Water
Company................................ 16,108,000 16,108,000
------------ ------------
Real Estate
Land and improvements................ 52,635,000 52,274,000
Real estate under development........ 6,728,000 6,393,000
------------ ------------
59,363,000 58,667,000
------------ ------------
Other Assets
Landfill permitting and development.. 6,804,000 5,645,000
Buildings and equipment (net)........ 2,152,000 2,210,000
Other assets and investments......... 969,000 756,000
------------ ------------
9,925,000 8,611,000
------------ ------------
Total Assets............................ $133,001,000 $134,067,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable..................... $ 2,100,000 $ 2,936,000
Accrued liabilities.................. 4,224,000 4,125,000
Current portion of long-term debt.... 240,000 240,000
Environmental remediation............ 6,286,000 5,757,000
------------ ------------
12,850,000 13,058,000
------------ ------------
Long-term Liabilities
Accrued liabilities.................. 1,424,000 1,417,000
Deferred tax liabilities............. 1,958,000 1,958,000
Long-term debt....................... 8,042,000 8,102,000
Environmental remediation............ 25,216,000 26,466,000
------------ ------------
36,640,000 37,943,000
------------ ------------
Total Liabilities....................... 49,490,000 51,001,000
------------ ------------
Minority Interest....................... 2,016,000 1,618,000
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.03 per share,
authorized 13,333,333 shares; issued
and outstanding 10,511,790 and
10,488,114 respectively............. 316,000 315,000
Capital in excess of par value....... 70,657,000 70,437,000
Retained earnings since November 15,
1988................................ 10,522,000 10,696,000
------------ ------------
Total Stockholders' Equity.............. 81,495,000 81,448,000
------------ ------------
Total Liabilities and Stockholders'
Equity................................. $133,001,000 $134,067,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
RESOURCE REVENUES
Ongoing Operations
Water resource........................ $ 1,133,000 $ 1,116,000
Property redevelopment................ 342,000 263,000
Income (loss) from equity method
investments.......................... (23,000) 163,000
----------- -----------
Total ongoing operations........... 1,452,000 1,542,000
----------- -----------
Interim Activities
Lease, service and other.............. 385,000 475,000
----------- -----------
Total resource revenues............ 1,837,000 2,017,000
----------- -----------
RESOURCE OPERATING COSTS
Operations and maintenance............. 305,000 248,000
Administrative support expenses........ 528,000 476,000
----------- -----------
Total resource operating costs..... 833,000 724,000
----------- -----------
INCOME FROM RESOURCES................... 1,004,000 1,293,000
Corporate general and administrative
expenses.............................. 1,116,000 958,000
----------- -----------
INCOME (LOSS) FROM OPERATIONS........... (112,000) 335,000
Net interest expense................... 183,000 111,000
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX
PROVISION.............................. (295,000) 224,000
Income tax provision
Currently payable..................... 7,000 7,000
Deferred tax expense (benefit)........ (128,000) ---
Deferred tax expense credited to
equity............................... --- 90,000
----------- -----------
NET INCOME (LOSS)....................... $ (174,000) $ 127,000
=========== ===========
EARNINGS (LOSS) PER SHARE............... $(.02) $.01
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING............................ 10,732,000 10,748,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE>
KAISER VENTURES INC. AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)...................... $ (174,000) $ 127,000
Provision for income tax which is
credited to equity.................... --- 90,000
Equity (loss) income in Penske
Motorsports, Inc. .................... 185,000 ---
Deferred tax (benefit) expense......... (128,000) ,000
Depreciation and amortization.......... 213,000 136,000
Allowance for doubtful accounts........ 134,000 44,000
Changes in assets:
Receivable and other................. (126,000) 475,000
Changes in liabilities:
Current liabilities.................. 347,000 (463,000)
Long-term accrued liabilities........ 7,000 (3,000)
----------- -----------
Net cash flows from operating
activities............................ 458,000 406,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Minority interest and other liabilities 398,000 105,000
Capital expenditures................... (2,570,000) (1,985,000)
Environmental remediation expenditures. (924,000) (3,181,000)
Investment in Penske Motorsports, Inc.. --- 264,000
Other investments...................... (85,000) (103,000)
----------- -----------
Net cash flows from investing
activities............................ (3,181,000) (4,900,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock............... --- 64,000
Principal payments on note payable..... (60,000) (60,000)
Payment of loan fees................... (100,000) ---
----------- -----------
Net cash flows from financing
activities............................ (160,000) 4,000
----------- -----------
NET CHANGES IN CASH AND CASH EQUIVALENTS (2,883,000) (4,490,000)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR................................ 8,482,000 10,863,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,599,000 $ 6,373,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 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............ 23,676 1,000 220,000 --- 221,000
Net Income.................. --- --- --- (174,000) (174,000)
---------- -------- ----------- ----------- -----------
Balance at March 31, 1997...... 10,511,790 $316,000 $70,657,000 $10,522,000 $81,495,000
========== ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited, consolidated financial statements as of March 31, 1997, and for
the three month period ended March 31, 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 March 31, 1997, and
results of operations and cash flows for the three month periods ended March 31,
1997 and 1996.
The Company has reclassified certain 1996 quarterly information to conform
with the 1997 presentation.
NOTE 2. 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 the basis of amounts received.
The total amount of lease payments in dispute as of March 31, 1997 is
approximately $872,000.
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
During the first quarter of 1997 the Company issued $221,000 of common stock
for payment of 1996 bonuses and 1997 compensation.
NOTE 4. COMMITMENTS AND CONTINGENCIES
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 $32
million, depending both upon the ultimate extent of the environmental
19
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
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.
20
<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
first 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
None.
ITEM 5. OTHER INFORMATION
See the "Introduction" Section of this Form 10-Q Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
--------
Exhibit 10.1 - Purchase Agreement and Escrow Instructions dated April
9, 1997, between the Company and Budway Enterprises, Inc.
Exhibit 27 - Financial Data Schedule for first quarter 10-Q.
B. Reports on Form 8-K.
--------------------
None.
21
<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: May 13, 1997 /s/ James F. Verhey
-------------------
James F. Verhey
Principal Financial Officer
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<PAGE>
EXHIBIT 10.1
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
FOR
KAISER VENTURES INC.
(SELLER)
AND
BUDWAY ENTERPRISES INC.
(BUYER)
DATED: APRIL 9, 1997
<PAGE>
INDEX
<TABLE>
<CAPTION>
ITEM PAGE NO.
- ------------ --------
<S> <C> <C>
ARTICLE 1 RECITALS 1
1.1 ................................................................................. 1
1.2 ................................................................................. 1
1.3 ................................................................................. 1
ARTICLE 2 AGREEMENT OF PURCHASE AND SALE.................................................. 1
2.1 Purchase Price.................................................................. 1
2.2 Payment of Purchase Price....................................................... 1
ARTICLE 3 ESCROW.......................................................................... 2
3.1 Opening of Escrow............................................................... 2
3.2 Delivery of Documents to Escrow................................................. 2
3.3 Close of Escrow................................................................. 3
ARTICLE 4 REVIEW PERIOD................................................................... 3
4.1 Review Period................................................................... 3
4.2 Review of Condition of Title.................................................... 3
4.3 Disapproval of Contingencies.................................................... 3
ARTICLE 5 ADDITIONAL COVENANTS AND AGREEMENTS............................................. 4
5.1 Cooperation..................................................................... 5
5.2 Federal and State Withholding Requirements...................................... 5
ARTICLE 6 PRE CLOSING OBLIGATIONS......................................................... 5
6.1 Seller's Obligations............................................................ 5
6.2 Buyer's Obligations............................................................. 5
ARTICLE 7 POST CLOSING OBLIGATIONS........................................................ 6
7.1 Improvements.................................................................... 6
7.2 Buyer's Compliance with Environmental Laws and
Indemnification for Noncompliance............................................... 6
ARTICLE 8 ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES................................. 7
8.1 Buyer's Acknowledgments, Representations and Warranties......................... 7
8.2 Seller's Acknowledgments, Representations and Warranties........................ 8
8.3 Hazardous Materials............................................................. 8
ARTICLE 9 THE CLOSE OF ESCROW............................................................. 9
9.1 Conditions and Close of Escrow.................................................. 9
9.2 Termination Based on Failure to Close by Closing Date........................... 10
9.3 Prorations...................................................................... 10
9.4 Seller's Fees and Costs......................................................... 10
9.5 Buyer's Fees and Costs.......................................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM PAGE NO.
- ---------- --------
<S> <C>
ARTICLE 10 REMEDIES.......................................................................... 10
10.1 Seller's Remedies................................................................. 10
10.2 Damages Against Seller............................................................ 11
ARTICLE 11 GENERAL PROVISIONS................................................................ 11
11.1 Time of the Essence and Strict Construction....................................... 11
11.2 Notice and Demands................................................................ 11
11.3 Captions for Convenience.......................................................... 12
11.4 Severability...................................................................... 12
11.5 Governing Law..................................................................... 12
11.6 No Oral Amendment or Modifications................................................ 12
11.7 Relationship of Seller and Buyer.................................................. 12
11.8 Attorneys' Fees................................................................... 12
11.9 Amended and Successor Statutes and Regulations.................................... 12
11.10 Entire Agreement.................................................................. 13
11.11 Exhibits and Schedules............................................................ 13
11.12 Confidentiality................................................................... 13
11.13 Successors and Assigns............................................................ 13
11.14 Eminent Domain.................................................................... 13
11.15 Counterparts...................................................................... 13
</TABLE>
ii
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
This PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS ("AGREEMENT") is made and
entered into this 9th day of April, 1997 ("EFFECTIVE DATE"), by and between
KAISER VENTURES INC., a Delaware corporation ("SELLER"), and BUDWAY ENTERPRISES
INC., a California Corporation ("BUYER") with reference to the facts set forth
below.
ARTICLE 1
RECITALS
1.1 Seller is the owner of that certain real property, situated in the
County of San Bernardino, State of California, as more particularly described in
Exhibit "A", attached hereto and incorporated herein (the "PROPERTY").
1.2 The Property is part of the property owned by Seller formerly used as
an integrated steel mill facility (the "PROJECT"). The Project is included in
the San Bernardino San Sevine Redevelopment District.
1.3 Seller desires to sell the Property to Buyer upon the terms and
conditions set forth in this Agreement and Buyer desires to purchase the
Property as set forth herein.
NOW THEREFORE, in consideration of the mutual agreements set forth herein
and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Buyer agrees to purchase and Seller agrees to sell the
Property on the terms and conditions set forth below.
ARTICLE 2
AGREEMENT OF PURCHASE AND SALE
2.1 PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Property is Two Million, Eight Hundred Sixty-Nine Thousand, Five Hundred Fifteen
Dollars ($2,869,515.00) based on a purchase of approximately 15.5 acres, gross,
at a price of $4.25 a square foot. Should the actual gross acreage of the
Property be more or less than 15.5 acres, based on the final parcel map to be
recorded prior to Close of Escrow, the Purchase Price shall be adjusted, with
the adjustment being made in the amount of the Note and Second Deed of Trust.
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid in good
funds in accordance with the provisions set forth below.
2.2.1 DEPOSIT. Concurrently with the execution of this Agreement, Buyer
-------
shall deposit into escrow the amount of Thirty Thousand Dollars ($ 30,000.00).
Unless this agreement is terminated by Buyer, on or before the end of the Review
Period, the Deposit shall be immediately released from Escrow to Seller and
shall be non refundable to Buyer. The Deposit shall be credited and applied to
the Purchase Price at the Close of Escrow, but shall be retained by Seller as
its liquidated damages as provided in Paragraph 10.1 if Escrow fails to close as
a result of Buyer's default.
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2.2.2 BALANCE OF CASH PAYMENT. On or before one business day prior to the
-----------------------
Closing Date, Buyer shall deposit the balance of the cash portion of the
Purchase Price in the amount of Nine Hundred Seventy Thousand Dollars
($970,000.00) into escrow, which shall be released to Seller on the Close of
Escrow.
2.2.3 SELLER CARRY-BACK FINANCING. On or before one business day prior to
---------------------------
the Closing Date, Buyer shall deposit a Note and Second Deed of Trust, in the
forms as shown on Exhibits "B" and "C", attached hereto and made a part hereof.
The Note shall be released to Seller and the Second Deed of Trust shall be
recorded on the Close of Escrow.
2.2.4 DECLARATION OF CONSTRUCTION COVENANTS. As additional consideration
-------------------------------------
for the sale of the Property, on or before one business day prior to the Closing
Date, Buyer agrees to execute and deposit into Escrow a Declaration of
Construction Covenants, Use Restrictions, Lien rights and Repurchase Option in
the form attached hereto as Exhibit "E" (the "DECLARATION"), which shall be
recorded immediately on the Close of Escrow.
2.2.5 GUARANTY OF V.M. MCLEOD. As additional consideration for the sale
-----------------------
of the Property, on or before one business day prior to the Closing Date, Buyer
agrees to cause to have executed and deposited into Escrow a Guaranty in the
form attached hereto as Exhibit "F" (the "DECLARATION"), which shall be
delivered to Seller immediately on the Close of Escrow.
ARTICLE 3
ESCROW
3.1 OPENING OF ESCROW. Within two business days of the Effective Date of
this Agreement, Buyer and Seller shall open escrow by depositing with Chicago
Title Insurance Company, San Bernardino office ("ESCROW AGENT") a fully executed
original of this Agreement for use as escrow instructions and Escrow Agent shall
execute the consent of Escrow Agent and deliver a fully executed consent to
Buyer and Seller. If Escrow Agent requires additional instructions, the parties
agree to make any such deletions, substitutions and additions which do not
materially alter the terms of this Agreement.
3.2 DELIVERY OF DOCUMENTS TO ESCROW.
3.2.1 SELLER'S DOCUMENTS. On or before the Close of Escrow, Seller shall
------------------
sign, acknowledge and deposit into Escrow a grant deed in the form attached
hereto as Exhibit "D" and incorporated herein (the "GRANT DEED") conveying the
property to Buyer. Provided that all terms and conditions of this Agreement
have been satisfied, Escrow agent shall record the Grant Deed at the Close of
Escrow. Seller shall deliver on or before the Close of Escrow any other
documents required by the Escrow Agent in order to convey title to Buyer as
contemplated herein.
3.2.2 BUYER'S DOCUMENTS. On or before the Close of Escrow, Buyer shall
-----------------
deposit into Escrow the executed Note and Second Deed of Trust, the Guaranty,
appropriate UCC Financing documents, and any other document required by the
Escrow Agent in order secures Seller's interest as contemplated herein. Provided
that all terms and conditions of this
2
<PAGE>
Agreement have been satisfied, Escrow Agent shall record the Second Deed of
Trust at the Close of Escrow.
3.3 CLOSE OF ESCROW.
3.3.3 CLOSING DATE. Unless the parties mutually agree upon an earlier
------------
Closing Date, Escrow shall close ninety (90) days following the Effective Date.
3.3.4 EXTENSION OF CLOSING DATE. At Buyer's option, Buyer may extend the
-------------------------
Close of Escrow for one additional period of thirty (30) days. Should Buyer
wish to extend the Close of Escrow, Buyer shall notify Seller and Escrow no
later than five days prior to the scheduled Closing Date, and shall deposit
Thirty Thousand Dollars ($30,000.00) (the "Extension Payment") in immediately
available funds into Escrow. The Extension Payment shall be credited and applied
to the Purchase Price at the Close of Escrow, but shall be released immediately
to Seller and retained by Seller as additional liquidated damages as provided in
Paragraph 10.1 if Escrow fails to close as a result of Buyer's default.
ARTICLE 4
REVIEW PERIOD
4.1 REVIEW PERIOD. Buyer shall have eighty-five (85) days following the
Effective Date to determine the feasibility of its purchase of the Property (the
"REVIEW PERIOD"). Said feasibility shall include Buyer's ability to finance the
construction of its planned improvements, the condition of title, and the
physical condition of the Property. Seller shall no later than ten days after
the Effective Date make available to Buyer at Seller's notice address
documentation in its possession dealing with the Property, including the
proposed parcel map and conditions of approval, any soils, environmental or
engineering reports, the grading and utility plans and a copy of a Preliminary
Title Report ("PRELIMINARY REPORT"), prepared by Chicago Title Insurance Company
(the "TITLE COMPANY") with respect to the Property containing such exceptions as
the Title Company would specify in the title policy, along with copies of all
recorded documents referenced in the Preliminary Report and platted easements
("PERMITTED EXCEPTIONS").
4.2 REVIEW OF CONDITION OF TITLE. Buyer shall deliver notice of
disapproval of any exception or other title matter to Seller in writing on or
before thirty (30) days from the Effective Date (the "TITLE REVIEW PERIOD").
Buyer shall deliver notice of such disapproval to seller in writing on or before
the end of the Title Review Period or all Permitted Exceptions shall be deemed
approved. If Buyer disapproves any Permitted Exceptions, Seller may elect to
remove such Permitted Exceptions by the Close of Escrow or shall notify the
Buyer in writing that such Permitted Exceptions shall not be removed. Seller
shall give Buyer Notice of its election to not remove the disapproved exceptions
with ten (10) days of Seller's receipt of Buyer's notice of disapproval.
4.3 DISAPPROVAL OF CONTINGENCIES. Should Buyer, in its sole discretion,
determine that its plans for the Property are not feasible, Buyer shall deliver
a notice of cancellation to Seller in writing on or before the end of the Review
Period ("NOTICE OF CANCELLATION"). Should Buyer deliver a Notice of
Cancellation on or before the end of the Review Period, then, except
3
<PAGE>
for Buyer's obligations to indemnify Seller, the respective rights, duties and
obligations of Buyer and Seller under this Agreement shall forthwith terminate
without further liability. The Parties shall immediately thereafter sign such
instructions and other instruments as may be necessary to effect the
cancellation of this Escrow, and each party shall pay its respective share (if
any) of escrow cancellation charges. Upon cancellation, Escrow Agent shall
immediately return the funds, less applicable escrow cancellation charges, and
documents to the parties that furnished them. Should Buyer not deliver a Notice
of Cancellation to Seller on or before the end of the Review Period, Buyer shall
be deemed to have approved the feasibility of its purchase of the Property.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 COOPERATION. Buyer and Seller acknowledge that it may be necessary to
execute documents other than those specifically referred to herein in order to
complete the acquisition of the Property. Both Buyer and Seller hereby agree to
cooperate with each other by executing such other documents or taking such other
action as may be reasonably necessary to complete this transaction in accordance
with the intent of the parties as evidenced in this Agreement.
5.2 FEDERAL AND STATE WITHHOLDING REQUIREMENTS. The parties agree to
comply with the requirements of Section 1445 of the Internal Revenue Code,
California withholding requirements, and any regulations promulgated thereunder.
ARTICLE 6
PRE-CLOSING OBLIGATIONS
6.1 SELLER'S OBLIGATIONS.
6.1.1 PHASE 1 REPORT. Seller shall cooperate with Buyer to
--------------
obtain a Phase 1 environmental report covering the Property. Should the Buyer
purchase the Property, the Seller shall reimburse the Buyer for one-half the
cost of the Phase 1 Report at Close of Escrow. If the Phase 1 requires a Phase
2 Report, Seller shall obtain a Phase 2 Report from a company of its choosing,
and shall pay for the cost of the Phase 2 Report.
Should the Phase 1 report show evidence of Hazardous Materials that
require either remediation or a Phase 2 report and the Phase 2 report requires
remediation in excess of $250,000, Seller may cancel the within escrow.
6.1.2 LEGAL PARCEL. Prior to the Close of Escrow, Seller shall
------------
record a parcel map, making the Property a separate legal parcel. Seller shall
deliver a parcel map showing the final configuration of the Property to Buyer
for Buyer's approval prior to the end of the Review Period.
6.1.3 SELLER'S DOCUMENTS. Seller shall provide all documents
------------------
required by Article 4.1 within the time stated in said article.
4
<PAGE>
6.2 BUYER'S OBLIGATIONS.
6.2.1 CONDITIONAL USE PERMIT. Prior to the end of the Review
----------------------
Period, Buyer shall obtain a conditional use permit from the County of San
Bernardino for its intended use of the Property. Seller agrees to cooperate and
assist Buyer in obtaining the Conditional Use Permit.
6.2.2 FINANCING. Prior to the end of the Review Period, Buyer
---------
shall obtain financing in an amount sufficient to fund the construction of the
Planned Improvements. Seller shall agree to allow the deed of trust securing
such financing to record as a first deed of trust with priority over the deed
of trust to record at the Close of Escrow in favor of Seller, Seller shall in
good faith consider amending this Agreement and/or its exhibits to comply with
the reasonable requirements of the Lender, so long as said amendment(s) shall
not impair Seller's security for its loan or increase seller's costs of sale or
otherwise materially alter Seller's obligations, and Seller shall execute any
necessary loan documents, provided that:
(a) such financing is reasonably adequate to fully implement the
purpose of the financing, and such financing does not exceed Five Million
Dollars ($5,000,000);
(b) Buyer shall provide to Seller a copy of all financing documents
for review and approval which approval shall not be unreasonably withheld. All
financing documents shall be submitted for Seller's approval at least ten (10)
days prior to the scheduled closing. Seller shall review and provide any
comments it may have no later than seven (7) days after the receipt of all the
loan documents. Should Seller use an outside law firm for said review, upon
submittal of an invoice by Seller, Buyer shall reimburse to Seller Seller's
actual cost of the law firm's review of the loan documents, in an amount not to
exceed seven thousand five hundred dollars ($7,500);
(c) Any permitted Mortgage shall not be construed as in any way
releasing Buyer from its obligations pursuant to this Agreement or the
Declaration;
(d) Buyer may not subject the Property to any further or additional
encumbrance or lien other than the initial construction and permanent financing
for the Building and related improvements without Seller's express written
consent, which consent may be granted or withheld in its sole and absolute
discretion;
(e) Buyer shall include a provision in any financing documents
requiring the Lender to give written notice to Seller of any default, or alleged
default, by Buyer. In addition, the Seller shall have the right, but not the
obligation, to cure any such default and, if it does so, the Buyer shall be
obligated, on the demand of the Seller, to reimburse any such payments, plus
interest at the Default Rate;
(f) Buyer shall include a provision in any financing document allowing
Seller to acquire the note given by Buyer to the Lender and/or Lender's security
interest in the collateral pledged to secure the Lender upon such terms and
conditions as Lender and Seller may reasonably negotiate and in such instance
Lender shall not be required to institute or comply with the foreclosure
provisions of any financing documents and applicable law.
5
<PAGE>
ARTICLE 7
POST CLOSING OBLIGATIONS
7.1 IMPROVEMENTS. Seller shall have no liability or responsibility for
improvements on-site or off-site for the benefit of the Property.
7.1.1 FEES. Buyer shall be responsible for and obligated to pay
----
all fees, assessments, special taxes or in-lieu fees encumbering the Property or
required by any governmental agency, assessment district, fee district or any
other similar governmental charges for or in connection with Buyer's purchase or
improvement of the Property, other than the fees and costs in connection with
the approval and recording of Parcel Map 14757, provided, however, Buyer shall
be responsible for its prorata share of any prepaid expenses such as property
taxes.
7.1.2 NO OBLIGATION FOR OTHER IMPROVEMENTS. Seller is not
------------------------------------
obligated in any way to construct any improvements on the Property. Buyer shall
have the sole responsibility for processing approvals and construction all other
improvements on the Property. Unless expressly provided in this Agreement, all
expenses and responsibility associated with governmental approvals for the
development of the Property shall be the sole responsibility of Buyer.
7.2 COMPLIANCE WITH ENVIRONMENTAL LAWS AND INDEMNIFICATION FOR
NONCOMPLIANCE. Buyer specifically covenants and agrees to timely and fully
comply with Environmental Laws, and shall not allow the release of Hazardous
Materials on the Property (including, but not limited to, the Building,
surrounding property, the surface, subsurface, water and air) with Hazardous
Materials. Furthermore, Buyer shall not use, store, handle or treat Hazardous
Materials on the Subject Property except in full compliance with Environmental
Laws and only as necessary in furtherance of the Project and its operation.
Buyer shall indemnify, defend, and hold Seller and its officers, directors,
shareholders, partners, employees, Affiliates, and assigns (collectively the
"INDEMNIFIED PARTIES") harmless from and against all liability, obligations,
claims, damages, penalties, losses, causes of action, costs, and expenses
(including attorneys' fees, expert witness fees, consulting and other
professional fees) imposed upon incurred by or asserted against the Indemnified
Parties as a result of any violation or asserted violation of or failure to
timely or fully comply with Environmental Laws or as a result of any release of
Hazardous Materials on the Property, adjacent property owned by Seller or its
Affiliates, or other property (including, but not limited to, improvements,
surface, subsurface water and air) or any allegations related thereto.
This indemnification shall exclude Hazardous Materials that exist on the
Property prior to the Close of Escrow, or those Hazardous Materials which are
found within the first seven years after the Close of Escrow and that are shown
by clear and convincing evidence to have existed on the Property prior to the
Close of Escrow.
For the purposes of this Agreement, "Environmental Laws" shall mean and
refer to all federal, state and local laws, rules, regulations, ordinances,
guidelines, permit conditions, orders, consent decrees and other requirements
relating to health, safety, hazardous substances, industrial hygiene and
environmental conditions or protections applicable to the Property and
6
<PAGE>
the Project's wild life and fish, if any, and their habitats. Such laws and
regulations include, but are not limited to, the Resource Conservation and
Recovery Act, 42 U.S.C. (S)6901 et seq., as amended from time to time; the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S)9601 et seq., as amended from time to time; the Toxic Substances Control Act,
15 U.S.C. (S)2601 et seq., as amended from time to time; the Clean Water Act, 33
U.S.C. (S)466 et seq., as amended from time to time; the Clean Air Act, 42
U.S.C. (S)7401 et seq., as amended from time to time; the Emergency Planning and
Community Right-to-Know act, 42 U.S.C. (S)1101 et seq., as amended from time to
time; the Hazardous Materials Transportation act, 49 U.S.C. (S)1801 et seq., as
amended from time to time; the Federal Water Pollution Control Act, 33 U.S.C.
(S)1251 et seq., as amended from time to time; the Federal Insecticide,
Fungicide and Rodenticide Act, & U.S.C. (S)136 et seq., as amended from time to
time; the Oil Pollution Act of 1990, 33 U.S.C. (S)2701 et seq., as amended from
time to time; the Safe Drinking Water Act, 42 U.S.C. (S)300 et seq., et seq., as
amended from time to time; the Pollution Prevention Act 29 U.S.C. (S)651 et
seq., as amended from time to time; state and federal super lien and
environmental clean-up programs; U.S. Department of Transportation regulations;
Endangered Species Act, 16 U.S.C. (S)1531 et seq., as amended from time to time;
all applicable state and local statutes and ordinances with a scope or purpose
similar to the foregoing; and all regulations promulgated pursuant to said laws.
ARTICLE 8
ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES
8.1 BUYER'S ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES
8.1.1 Purchase "As Is". Buyer is relying solely upon its own
---------------
inspections, investigations and analyses of the Property, including but not
limited to the Phase 1 study done under Article 6.1.1, in entering into this
Agreement and is not relying in any way upon any representations, statements,
agreements, warranties, studies, reports, descriptions, guidelines or other
information or material furnished by Seller or its representatives, whether oral
or written, express or implied, of any nature whatsoever regarding any such
matters. Buyer has made such independent investigations and analyses as Buyer
deems necessary or appropriate concerning Buyer's proposed use, development and
sale of the Property. Buyer is buying the property on an "as is-all faults"
basis. No patent or latent condition affecting the Property in any way
(including without limitation, the effects of Hazardous Materials, unless the
hazardous materials are reported in the Phase 1 study done under Article 6.1.1
or otherwise shown within seven years of the Close of Escrow by clear and
convincing evidence to have been present on the property before the Close of
Escrow) (collectively, the "PROPERTY CONDITIONS"), shall give rise to any right
of damages, specific performance rescission or other claims by Buyer against
Seller. Buyer hereby assumes the risk of any and all liabilities, claims,
demands, suits, judgments, losses, damages, expenses (including, without
limitation, attorney's fees) and other obligations arising out of or incurred in
connection with the effect of the Property Conditions (collectively, the
"ASSUMED RISKS") and hereby releases, waives, discharges, covenants not to sue,
indemnifies and agrees to hold harmless Seller, and all officers, directors,
shareholders, employees, agents, affiliates, partners, insurers, successors and
assigns of Seller, and each of them, from any and all liabilities or obligations
concerning the assumed Risks. Seller shall have no obligation to correct any
conditions or alleged defects discovered by Buyer in the course of its
investigations or inspections or thereafter with respect
7
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to the Property except for Hazardous Materials are reported in the Phase 1 study
done under article 6.1.1 or otherwise shown within seven years of the Close of
Escrow by clear and convincing evidence to have been present on the Property
before the Close of Escrow. Notwithstanding the above, Seller shall only be
obligated to remediate any Hazardous Materials on the Property pre-existing the
Closing Date, except those attributable to Buyer, its agents, and their
activities, to industrial standards and not residential standards. In connection
therewith, upon Seller's request at any time, buyer agrees that it will execute,
acknowledge and deliver to the DTSC a "Covenant to Restrict Use of Property"
which is a deed restriction which provides generally that the Property could not
be used for the following purposes: (i) a residence, including any mobile home
or factory-built housing, constructed or installed for use as permanently
occupied residential human habitation, (ii) a long-term care hospital for
humans, provided that nothing therein shall restrict use of the property for any
infirmary, medical aid station or emergency medical care facility where there is
no intent for any patient to remain in such facility for more than 24 hours,
(iii) a traditional public or private school for persons under 21 years of age,
provided that nothing therein shall restrict the use of the property for any
specialized training programs related to then-existing facilities on the
Property, or (iv) a day-care center for children and containing such other terms
and conditions typically required by the DTSC provided such terms and conditions
do not materially adversely interfere with the final development of the
Property.
8.1.2 BUYER'S AUTHORITY. Buyer and the individuals executing this
-----------------
agreement for Buyer have the legal power, right and authority to enter into this
Agreement and to consummate the transaction contemplated hereby.
8.2 SELLER'S ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES. Seller
and the individuals executing this Agreement for Seller have the legal
right and authority to enter into this Agreement and to consummate the
transaction contemplated hereby. Seller makes no other representations or
warranties either express or implied.
8.3 HAZARDOUS MATERIALS
8.3.1 HAZARDOUS MATERIALS DEFINED. For the purposes of this
---------------------------
agreement, "Hazardous Materials" shall mean and refer to any material or
substance which is (i) defined or listed as a "hazardous waste", "extremely
hazardous waste", "restrictive hazardous waste", "hazardous substance",
"hazardous material", "hazardous chemical", "extremely hazardous substance",
"toxic substance", "toxic pollutant", "pollutant", "pollution", "regulated
substance", "pesticide", "contaminant", "hazardous air pollutant", or words of
similar import, or considered a waste, condition of pollution, or nuisance,
pursuant to the laws of California and/or the United States, (ii) gasoline,
diesel fuel, oil, used oil, petroleum, or a petroleum product or fraction
thereof, (iii) asbestos and asbestos-containing construction materials as
defined by federal or state law, by weight, of asbestos, (iv) substances known
by the State of California or the United States to cause cancer and/or
reproductive toxicity, (v) toxic, corrosive, flammable, infectious, radioactive,
mutagenic, explosive or otherwise hazardous substances which are or become
regulated by any governmental agency or instrumentality of the United States, or
any state or any political subdivision thereof, (vi) polychlorinated biphenyls
(PCBs), (vii) urea formaldehyde foam insulation, (viii) all hazardous air
pollutants or materials known to cause serious health effects (including,
without limitation, volatile hydrocarbons, pesticides, herbicides and industrial
solvents) and/or (ix) substances which constitute a material health,
8
<PAGE>
safety or environmental risk to any Person or property. It is the intent of the
parties hereto to construe the term "Hazardous Materials" in its broadest sense.
8.3.2 ASSUMPTION OF RISKS, RELEASE AND INDEMNITY. Buyer for
------------------------------------------
itself and its successors and assigns (the "BUYER'S RELATED PARTIES") hereby (i)
agrees that Buyer is relying solely on its investigation, including but not
limited to the Phase 1 study done under Article 6.1.1, of the Property covering
the effect of any Hazardous Materials that may be on or beneath the Property or
threaten now or in the future to subject the Buyer or others to liability,
whether disclosed by such investigations or not (collectively, the "HAZARDOUS
MATERIALS EFFECTS"), (ii) assumes the risk of any and all liabilities, claims,
demands, suits, injunctive proceedings, administrative actions, judgments,
losses, damages, expenses (including, without limitation, attorneys' fees) and
other obligations arising out of or incurred in connection with the Hazardous
Materials effects, if any, (including without limitation, the effects of
Hazardous Materials, unless the Hazardous Materials are reported in the Phase 1
study done under Article 6.1.1 or otherwise shown within seven years of the
Close of Escrow by clear and convincing evidence to have been present on the
property before the close of escrow) (collectively, the "Assumed Risks") (iii)
releases, waives, discharges, covenants not to sue seller and all officers,
directors, shareholders, employees, agents, affiliates, partners, insurers,
successors and assigns of seller (collectively the "RELEASED PARTIES"), and each
of them for any and all liabilities or obligations concerning the Assumed Risks
except for any acts of Seller in placing Hazardous Materials on the Property,
(iv) agrees to defend, indemnify and hold harmless Seller and the other Released
Parties, and each of them, from any and all liabilities, obligations or costs
(including attorneys' fees) concerning the Assumed Risks and (v) waives the
benefits of California civil Code Section 1542 which provides as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
ARTICLE 9
THE CLOSE OF ESCROW
9.1 CLOSE OF ESCROW. Escrow Agent shall close the Escrow (the
"CLOSE OF ESCROW") on or before the closing date WHEN AND ONLY WHEN each of the
following conditions has been, or upon such closing shall be, satisfied or
waived.
9.1.1 SUPPLEMENTS TO PRELIMINARY REPORT. If any title exceptions
---------------------------------
are recorded against the Property before the Close of Escrow in addition to the
Permitted Exceptions or instruments disclosed in this Agreement, Buyer shall
have approved such exceptions within fifteen (15) days after receipt of a
supplemental report showing such exceptions or this Agreement shall terminate.
9.1.2 TITLE POLICY. Escrow Agent shall be unconditionally
------------
committed to procure from the Title Company, at Seller's expense, a CLTA joint
protection policy of title insurance (the "TITLE POLICY") with a liability limit
in the amount of the purchase price and insuring fee title vested in Buyer free
and clear of any liens, encumbrances and interests except: (i) general, special
and supplemental taxes, bonds and assessments (including without
9
<PAGE>
limitation any Special taxes); (ii) the permitted exceptions; (iii) those
rights, interests and easements reserved by Seller in Seller's Grant Deed; (iv)
the matters described in the printed form portion of the Title Policy; and (v)
any items caused by the acts or omissions of Buyer or permitted to be placed of
record by Buyer as of the close of escrow.
9.1.3 BUYER'S PERFORMANCE, REPRESENTATIONS AND WARRANTIES.
---------------------------------------------------
Buyer shall have duly performed each and every undertaking and agreement to be
performed by it hereunder and under the terms and conditions of the Agreement,
and Buyer's representations and warranties shall be true and correct in all
material respects at and as of the Close of Escrow. Buyer shall provide Seller
an Officer's certificate, certifying the above.
9.2 TERMINATION BASED ON FAILURE TO CLOSE BY CLOSING DATE. If Escrow
fails to close by the Closing Date for any reason other than Buyer's or
Seller's default, then, except for Buyer's obligations to indemnify Seller, the
respective rights, duties and obligations of Buyer and Seller under this
Agreement shall forthwith terminate without further liability. The Parties
shall immediately thereafter sign such instructions and other instruments as may
be necessary to effect the cancellation of this Escrow, and each party shall pay
its respective share (if any) of escrow cancellation charges. Upon
cancellation, Escrow Agent shall immediately return the funds, less applicable
escrow cancellation charges, and documents to the parties that furnished them
and Seller shall return the Deposit to Buyer less any cancellation fees.
Notwithstanding the provisions of this Paragraph, the Parties may extend the
Closing Date by their mutual written agreement in which event the provisions of
this Paragraph shall apply to the extended closing date with the same force and
effect as the Closing Date.
9.3 PRORATIONS. Property taxes, special assessments, utility
charges and other similar amounts with respect to the Property shall be prorated
as of the Closing Date by the Escrow Agent, in accordance with the Escrow
Agent's standard practices and as shall be mutually agreed upon by Buyer and
Seller prior to the Close of Escrow. All such adjustments shall be against the
cash portion of the Purchase Price.
9.4 SELLER'S FEES AND COSTS. Seller will pay (i) the fee for the Title
Policy, (ii) one-half of Escrow Agent's escrow fee and (iii) usual Seller's
document-drafting and recording charges.
9.5 BUYER'S FEES AND COSTS. Buyer will pay (i) County Documentary
transfer tax in the amount Escrow Agent determines to be required by law and
(ii) one-half of Escrow Agent's escrow fee, and (ii) usual Buyer's document-
drafting and recording charges.
ARTICLE 10
REMEDIES
10.1 SELLER'S LIQUIDATED DAMAGES. IF ESCROW FAILS TO CLOSE DUE TO BUYER'S
DEFAULT UNDER THIS AGREEMENT, SELLER WILL BE DAMAGED AND WILL BE ENTITLED TO
COMPENSATION FOR THOSE DAMAGES. SUCH DAMAGES WILL, HOWEVER, BE EXTREMELY
DIFFICULT AND IMPRACTICAL TO ASCERTAIN. IF ESCROW FAILS TO CLOSE DUE TO BUYER'S
DEFAULT UNDER THIS AGREEMENT, THE SUM REPRESENTED BY THE DEPOSIT MADE UNDER
PARAGRAPH 2.2 AND THE
10
<PAGE>
EXTENSION PAYMENT MADE UNDER PARAGRAPH 3.3.2, IF ANY, SHALL BE DEEMED TO
CONSTITUTE A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE PROVISIONS OF
SECTION 1671 OF THE CALIFORNIA CIVIL CODE AND SELLER'S SOLE AND EXCLUSIVE
REMEDY IN THE EVENT OF THE FAILURE TO CLOSE ESCROW RESULTING FROM BUYER'S
DEFAULT SHALL BE LIMITED TO SUCH AMOUNT PROVIDED, HOWEVER, THAT THE PARTIES
AGREE THAT, IN NO EVENT, SHALL THIS LIQUIDATED DAMAGES PROVISION APPLY TO ANY
BREACH OF BUYER'S OBLIGATIONS UNDER ANY OTHER INDEMNITY PROVISIONS OF
THIS AGREEMENT. BY INITIALING THIS PROVISION IN THE SPACES BELOW, SELLER AND
BUYER EACH SPECIFICALLY AFFIRM THEIR RESPECTIVE AGREEMENTS CONTAINED IN THIS
ARTICLE 9.
BUYER'S INITIALS ___________ SELLER'S INITIALS __________________
10.2 DAMAGES AGAINST SELLER. Buyer, by its execution of this
Agreement, acknowledges and agrees that if Seller defaults under any provisions
of this Agreement, including the provisions of article 6.1, Seller shall return
the Deposit to Buyer, less any escrow cancellation fees. In addition, Seller
will extend the lease for Buyer's temporary facilities for six months from the
date of the cancellation of escrow. Other than the return of the Deposit and
the extension of the lease, Buyer's sole and exclusive remedy is the payment of
actual damages, in an amount not to exceed One Hundred Thousand Dollars
($100,000.00) and hereby waives any actions against Seller or the Property for
specific performance and consequential damages. Buyer covenants and agrees
that, under no circumstances, will it file or record a lis pendens against the
Property.
ARTICLE 11
GENERAL PROVISIONS
11.1 TIME OF THE ESSENCE AND STRICT CONSTRUCTION. Time is of the
essence pursuant to this Agreement for the performance and observance of all
obligations of Seller and Buyer hereunder and all provisions of this Agreement
shall be strictly construed.
11.2 NOTICE AND DEMANDS. All notices or demands required or
permitted pursuant to this Agreement shall be in writing, signed by the party
giving the same, and shall be deemed properly given and received when personally
served or upon the earlier of (i) receipt or (ii) rejection, if sent by
registered or certified mail, postage prepaid or by nationally recognized
overnight courier service, such as Federal Express, and addressed to the
intended recipient at its address as set forth below or at any other address of
which such party gives the other party notice in accordance with the provisions
of this Section 11.1.
If to Buyer: Budway Enterprises Inc.
4700 Gregg Road
Pico Rivera, CA 90660
Attention: Rick McLeod
11
<PAGE>
If to Seller: Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
Attention: Lee R. Redmond, III,
Sr. Vice President - Real Estate
With a copy to: Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
Attention: Terry L. Cook,
Sr. Vice President and General Counsel
11.3 CAPTIONS FOR CONVENIENCE. The headings and captions of this
Agreement are for convenience and reference only and shall not be considered in
interpreting the provisions hereof.
11.4 SEVERABILITY. Any provision in this Agreement which is
illegal, invalid or unenforceable in any jurisdiction, shall, as to such
jurisdiction, be ineffective to the extent of such illegality, invalidity or
unenforceability without invalidating the remaining provisions hereof or
affecting the legality, validity or enforceability of such provision in any
other jurisdiction. Seller and Buyer shall negotiate in good faith to replace
any illegal, invalid or unenforceable provision of this Agreement with a legal,
valid and enforceable provision that, to the extent possible, will preserve the
economic bargain of this agreement, or shall otherwise amend this Agreement,
including the provision relating to choice of law, to achieve such result.
11.5 GOVERNING LAW. This Agreement shall be interpreted and
enforced according to the laws of the State of California.
11.6 NO ORAL AMENDMENT OR MODIFICATION. No provision of this
Agreement may be amended or modified except to the extent any such amendment or
modification is expressly set forth in a written instrument executed by the
party against whom the amendment or modification is sought.
11.7 RELATIONSHIP OF SELLER AND BUYER. Nothing contained in this
Agreement shall be deemed or construed as creating the relationship of principal
and agent, partnership, or joint venture and no provision in this Agreement and
no act of Seller or Buyer shall be deemed to create any relationship other than
that of Seller and Buyer. Without limiting the generality of the foregoing, all
obligations of Seller and Buyer with respect to third parties shall be
independent.
11.8 ATTORNEYS' FEES. If it becomes necessary for Seller or Buyer
to bring an action (including any form of dispute resolution), either at law or
in equity, to enforce or interpret the provisions of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
attorneys' fees and other professional fees and costs of all types, as a part of
any judgment therein, in addition to any other award which may be granted.
11.9 AMENDED AND SUCCESSOR STATUTES AND REGULATIONS. All references
in this Agreement to a statute or regulation or section of same, shall include
future amendments and successor statutes, regulations, or sections thereof, as
applicable, and all references in this
12
<PAGE>
Agreement to any local, state or federal government commission, department or
agency or instrumentality or court shall include their successors.
11.10 ENTIRE AGREEMENT. This agreement and the exhibits and
schedules, if any, attached hereto contains all of the agreements and
understanding with respect to the matters covered hereby, and no prior
agreements, oral or written, or understandings, representations, or warranties
of any nature or kind what so ever pertaining to such matters shall be effective
for any purpose unless expressly incorporated into the provisions of this
Agreement or the exhibits attached hereto.
11.11 EXHIBITS AND SCHEDULES. All exhibits and schedules which are
referred to in this Agreement are incorporated into this Agreement as though
fully set forth herein.
11.12 CONFIDENTIALITY. If either Party gives notice to the other
Party that certain of its information is being furnished or for which access is
being given to the other Party on a confidential basis, then, to the extent that
such information is disclosed or made available to it, the other Party shall
thereafter treat and maintain the same as confidential information and shall not
use it or disclose it to others without the prior consent of the party giving
notice; provided, however, that this provision shall not apply to (a) disclosure
or use as is necessary to perform the provisions of this agreement (but only on
a confidential basis which is satisfactory to the party giving notice) and (b)
disclosure or use which is required or compelled by law. Notwithstanding the
foregoing, this section 10.12 shall not apply to any information which the Party
to which the information has been furnished can show (i) has been published or
become part of the public domain other than by the conduct of such Party, its
officers, employees or agents; (ii) has been furnished or made known to such
Party by third parties (other than those acting directly or indirectly on behalf
of such Party) as a matter of legal right and without restriction on disclosure
or (iii) was lawfully in such Party's possession before the disclosure by the
disclosing Party.
11.13 SUCCESSORS AND ASSIGNS. Buyer may not, voluntarily or by
operation of law, assign or otherwise transfer any of its rights or obligations
under this Agreement without obtaining the prior written consent of Seller,
which consent shall not be withheld unreasonably. Seller will allow an
assignment to a McLeod family trust, family partnership or limited liability
company, so long as the Buyer shall remain obligated hereunder, either as a
direct signatory or as a guarantor Seller may, at any time, assign or otherwise
transfer its rights and obligations under this Agreement without the consent of
Buyer. Such assignment shall not release Seller from its obligations hereunder.
subject to the restrictions and prohibitions on assignment each and all of the
covenants and conditions of this agreement shall inure to the benefit of and
shall be binding upon the successors in interest of seller, and, subject to the
restrictions on transfers herein provided, the successors, heirs,
representatives and assigns of Buyer.
11.14 EMINENT DOMAIN. If, prior to the Close of Escrow, all or any
portion of the Property is taken or appropriated by any public or quasi-public
authority under the power of eminent domain or such an eminent domain action is
threatened pursuant to a resolution of intention to condemn filed by any public
entity, and if such taking will materially and adversely affect the Property,
then Buyer may terminate this agreement without further liability hereunder and
receive a refund of its Deposit and documents deposited herein. If Buyer does
not timely terminate this Agreement or if a partial taking of the Property which
13
<PAGE>
does not materially and adversely affect the Property occurs, then this
Agreement shall remain in full force and effect and upon the Closing Date Buyer
shall receive from Seller any award paid for that portion of the Property taken
or the right to an award if not paid as of the Closing Date. Buyer must elect
to terminate or maintain the Agreement by notice in writing to Seller with
twenty (20) days after written notice by Seller of a threatened taking or it
shall be deemed that Buyer has elected not to terminate this Agreement. Buyer
may also have the right to seek an award of condemnation for any future loss of
revenue Budway may have.
11.15 COUNTERPARTS. This agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their respective duly authorized representative as of the day and
year first above written.
SELLER: BUYER:
Kaiser Ventures Inc. Budway Enterprises Inc.
a Delaware corporation a California corporation
By:/s/ Lee R. Redmond III By: /s/ Rick McCloud
____________________________ ---------------------------
Lee R. Redmond III its Vice President
Senior Vice President - ---------------------------
Real Estate
14
<PAGE>
EXHIBITS
Exhibit "A" Propoerty Description (Article 1.1)
Exhibit "B" Note (Article 2.2.3)
Exhibit "C" Deed of Trust (Article 2.2.3)
Exhibit "D" Grant Deed (Article 3.2.1)
Exhibit "E" Declaration of Construction Covenants, Use Restrictions, Lien
Rights and Repurchase Option (Article 2.2.4)
Exhibit "F" Form of Guaranty, Guarantee of V.M. McLeod (Article 2.2.5)
15
<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 MARCH
31, 1997 FORM 10-Q REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,599,000
<SECURITIES> 0
<RECEIVABLES> 3,328,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,927,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 133,001,000
<CURRENT-LIABILITIES> 12,850,000
<BONDS> 8,042,000
0
0
<COMMON> 316,000
<OTHER-SE> 81,179,000
<TOTAL-LIABILITY-AND-EQUITY> 133,001,000
<SALES> 0
<TOTAL-REVENUES> 1,837,000
<CGS> 0
<TOTAL-COSTS> 833,000
<OTHER-EXPENSES> 1,116,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 183,000
<INCOME-PRETAX> (295,000)
<INCOME-TAX> (121,000)
<INCOME-CONTINUING> (174,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (174,000)
<EPS-PRIMARY> ($.02)
<EPS-DILUTED> ($.02)
</TABLE>
