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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-18858
KAISER VENTURES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-0594733
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3633 E. Inland Empire Blvd. Suite 850
Ontario, Ca 91764
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(Address of principal executive
offices and zip code)
Registrant's telephone number, including area code: (909) 483-8500
________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on which
Title of Each Class Registered
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Common Stock ($.03) par value Nasdaq Stock Market(SM)
________________________
Securities registered pursuant to Section 12(g) of the Act: None
________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [_]
The aggregate market value of the registrant's Common Stock, $.03 par value,
held by non-affiliates of the registrant was approximately $71,539,000 based
upon the average of the bid and ask prices of registrant's Common Stock on the
Nasdaq Stock Market(SM) at March 10, 2000, or $14.844 per share. (For purposes
of this calculation, shares of common stock held by each director, executive
officer, and by each person known by the registrant as owning 10% or more of the
outstanding common stock have been excluded. This determination of affiliate
status is not necessarily a conclusive determination for other purposes).
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ___
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At March 10, 2000, 6,355,153 shares of the registrant's Common Stock, $.03 par
value, were outstanding, including 136,919 shares deemed outstanding but
reserved for issuance to the general unsecured creditors of Kaiser Steel
Corporation.
Documents Incorporated By Reference: Portions of the Company's Proxy Statement
for the combined 1999/2000 Annual Meeting of Stockholders are to be held on May
10, 2000, incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS TO FORM 10-K
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PART I
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Item 1. BUSINESS..................................................... 1
Item 2. PROPERTIES................................................... 22
Item 3. LEGAL PROCEEDINGS............................................ 24
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS..................................................... 28
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS................................. 29
Item 6. SELECTED FINANCIAL DATA...................................... 31
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................... 32
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................. 41
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE...................... 41
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.................................................. 42
Item 11. EXECUTIVE COMPENSATION....................................... 42
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.............................................. 42
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 42
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K......................................... 43
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PART I
FORWARD-LOOKING INFORMATION
Except for the historical statements and discussions contained herein,
statements contained in this 10-K 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-K
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 remediation or construction related activities; the
discovery of unanticipated environmental conditions on any of the Company's
properties; the failure of the bankruptcy discharge granted to the Company to
address claims and litigation that relate to the pre-bankruptcy activities of
Kaiser Steel Corporation; and/or the success of any material litigation
involving the Company or its projects such as legal challenges to the completed
federal land exchange for the Eagle Mountain landfill project or the litigation
commenced by one of the Company's shareholders against the Company and current
and past members of the Company's Board of Directors. 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.
Item 1. BUSINESS
General
Kaiser Ventures Inc. ("Kaiser" or the "Company", including its wholly-owned
subsidiaries unless otherwise provided herein) is an asset development company
based in Southern California. The Company is the reorganized successor to
Kaiser Steel Corporation ("KSC") which was an integrated steel manufacturer that
filed for bankruptcy protection in 1987. Today, the Company's principal assets
include: (i) an approximately 53.71% ownership interest in Fontana Union Water
Company ("Fontana Union") with 50.88% of the total outstanding stock of Fontana
Union leased to Cucamonga County Water District ("Cucamonga") by the Company
pursuant to a take-or-pay lease with a scheduled term ending in 2092; (ii)
approximately 634 acres (gross) of the former KSC steel mill site (the "Mill
Site Property") most of which is currently in escrow under a sales contract;
(iii) a 50% ownership interest in the West Valley Materials Recovery Facility
and Transfer Station ("WVMRF"), a transfer station and recycling facility
located on land acquired from the Company; (iv) an approximate 75% ownership
interest in Mine Reclamation Corporation ("MRC"), the company seeking to permit
a rail-haul municipal solid waste landfill (the "Landfill Project"); and (v) the
9,144 acre idle iron ore mine in the California desert (the "Eagle Mountain
Site") which includes the associated 1100 acre town of Eagle Mountain ("Eagle
Mountain Townsite") and the property which is leased to MRC for the Landfill
Project. During 1999 the Company's approximately 11.73% interest in Penske
Motorsports, Inc. ("PMI") was converted into cash and stock of International
Speedway Corporation ("ISC") as a result of the acquisition of PMI by ISC. The
Company's stock position in ISC was sold subsequent to the acquisition.
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In addition, the Company's financial position is enhanced by approximately $35
million of federal net operating loss tax carryforwards ("NOLs"), as of December
31, 1999, which arose through the KSC bankruptcy reorganization. During 1999,
the Company used approximately $79 million in federal NOLs and all of its
California NOLs. The remaining federal NOLs expire between 2006 and 2013.
The Company's current primary business strategy is to convert its existing
under-utilized assets into equity in new businesses, joint ventures, long-term
leases, or to exchange its assets for an ownership interest in operating
companies. This strategy enables the Company to minimize its capital investment,
reduce its risk, and benefit from the operational expertise of its strategic
partners or lessees. This strategy is best illustrated by the successful
development of the Company's Fontana Union water rights into a long-term, take-
or-pay lease with Cucamonga, the Company's contribution of land into its WVMRF
venture, and its prior venture with PMI. While this is the Company's general
philosophy, the Company may choose to become more directly involved in a
particular project, such as the Landfill Project, when appropriate, or if the
Company believes its active participation will enhance long-term shareholder
value. The Company will continue to focus in the near-term primarily on its
existing projects and asset base. However, the Company will consider other new
opportunities particularly if they are related to or enhance the Company's
existing assets and projects. As particular assets or projects mature, the
Company regularly evaluates whether to retain, dispose or otherwise deal with
the assets.
In the past, the Company was engaged in a number of short-term interim
activities on the Mill Site Property including month-to-month property rentals
and the sale of existing slag and other materials at the site. These interim
activities have historically generated a material portion of the Company's
revenues and enabled the Company to remain profitable in each full fiscal year
since emerging from the KSC bankruptcy. However, as anticipated, the amount of
these short-term property rentals and other interim revenues diminished
significantly in 1999 as a result of the planned redevelopment of the Mill Site
Property.
Summary of Significant Developments in 1999
During 1999, a number of major events occurred which significantly affected
the Company. Therefore, readers are encouraged to read this Report in its
entirety in order to adequately understand the impact of these events on the
Company. However, management of the Company would like to particularly
highlight four areas: (1) the success of the Landfill Project including, (i)
the positive outcome of the appeal of the San Diego Superior Court's prior
adverse ruling relative to the Landfill Project's environmental impact report
("EIR"), (ii) completion of the federal land exchange that is necessary for the
Landfill Project, and (iii) securing the last major permit necessary to site and
operate the Landfill Project; (2) the approval of the entitlements for the 406
acre Kaiser Commerce Center, a substantial portion of the Mill Site Property,
and the Company subsequently entering into a contract for the sale of virtually
all the Mill Site Property; (3) the merger of PMI into ISC and the Company's
subsequent sale of the ISC stock received in the merger; and (4) the Company's
repurchase of approximately 41% of its issued and outstanding common stock.
(1) In regard to the Landfill Project, in May 1999, the California Fourth
Circuit Court of Appeal announced its decision to completely reverse the
prior adverse decision of the San Diego Superior Court on the Landfill
Project's EIR. The Court of Appeal's decision in effect certified the EIR
and reinstated the Riverside County approvals of the Landfill Project. The
California Supreme Court denied further review of the Landfill Project in
July 1999. In September 1999, the Interior Board of Land Appeals ("IBLA")
denied the appeal of two opponents to the Landfill Project that were
challenging the decision of the U.S. Bureau of Land Management ("BLM") to
engage in a land exchange with the Company. This ruling in favor of the
BLM and the Company paved the way for the federal land exchange that was
completed in October 1999. Litigation again challenging the land
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exchange has been commenced in federal court. In December 1999, the
Landfill Project received its last major permit when the California
Integrated Waste Management Board unanimously approved the granting of the
facilities permit for the Landfill Project. For more detailed information
on this matter, please see "Part I, Item 1. Business - Municipal Solid
Waste Management -Eagle Mountain Landfill Project."
(2) In April 1999, the San Bernardino County Board of Supervisors Commission
unanimously approved the Kaiser Commerce Center project, its related land
use and environmental documentation. In October 1999, the Company entered
into an agreement to sell approximately 592 acres of the Mill Site
Property, which includes the Kaiser Commerce Center and the East Slag Pile
Property, for $16 million plus the assumption of virtually all existing
and future environmental liabilities and obligations associated with the
Mill Site Property. Assuming that all due diligence is completed and that
all contingencies are satisfied or waived by the buyer, this transaction
is currently scheduled to close in the second quarter of 2000. For more
information on this matter, please see "Part I, Item 1. Business -Property
Redevelopment."
(3) In May 1999, ISC and PMI announced the planned acquisition of PMI by ISC.
The acquisition of PMI by ISC was completed in July 1999. As a result of
the merger, the Company received approximately $24 million in cash and
1,187,407 shares of ISC class A common stock for its 11.73% interest in
PMI. Subsequent to the merger, the Company sold all of its shares of ISC
common stock for a total of $64 million or approximately $53.52 per share.
For more information on this matter, please see "Part 1, Item 1. Business-
Investment in Penske Motorsports, Inc."
(4) On November 22, 1999, the Company purchased 2,730,950 and 1,693,551 shares
of its common stock from the New Kaiser Voluntary Employees' Beneficiary
Association (the "VEBA") and from the Pension Benefit Guaranty Corporation
(the "PBGC"), respectively. At the time of the purchase, the VEBA and the
PBGC were the Company's two largest shareholders. The Company paid $13.00
per share in cash. In addition, the VEBA and the PBGC received a
contingent payment right in connection with a qualifying sale of the Mill
Site if it generally occurs before December 31, 2000, and warrants to
purchase 460,000 and 285,260 shares of the Company's common stock,
respectively. The warrants expire on September 30, 2004 and have an
exercise price of $17.00 per warrant. For more information on this matter,
please see "Part II, Item 5. Market for the Company's Common Equity and
Related Stockholder matters - Purchase of Shares."
Water Resources
Background. The Company, through a wholly-owned subsidiary, Fontana Water
Resources, Inc. ("FWR"), currently owns 53.71% of Fontana Union, a mutual water
company, which was a primary local source of water for KSC's former steel making
operations. In March 2000, the Company increased its ownership interest in
Fontana Union from 50.88% to 53.71% by the acquisition of 424.4 shares of
Fontana Union at a price of approximately $1,540 per share. The price per share
paid in the transaction reflects a substantial minority interest discount and
the settlement of a dispute between FWR and the seller of the shares. Fontana
Union owns water rights to produce water from four distinct surface and
subsurface sources of water near Fontana, California, including: (i)
adjudicated surface and streambed flow rights from the Lytle Creek area of the
San Gabriel Mountains; (ii) adjudicated rights to the Chino Basin subsurface
aquifer; (iii) adjudicated rights to the Colton/Rialto Basin subsurface aquifer;
and (iv) unadjudicated rights to a subsurface aquifer accessed by a well at the
base of Lytle Creek (Well No. 22). Locally available water resources such as
owned by Fontana Union continues to be increasingly important and valuable in
Southern California.
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Kaiser's ownership of Fontana Union entitles the Company to receive, annually,
its proportionate share of Fontana Union's water which historically totals
approximately 34,000 acre feet per year (an acre foot equals approximately
325,000 gallons). In addition, when other shareholders of Fontana Union do not
take their annual proportionate shares of water, the unclaimed water for each
year from those shareholders is divided pro rata among those shareholders that
do take such water. Currently, the Company's pro rata interest in unclaimed
water raises its effective overall share to approximately 57.37%. Over time,
the Company expects this supplemental source of water to be reduced or
eliminated as minority shareholders, who do not currently utilize all their
water, begin to use, sell, or lease their water interests.
Lease to Cucamonga County Water District. In 1989, the Company leased its
shares of Fontana Union stock it then owned to Cucamonga, a local water district
with an "A-" credit rating from Moody's Investor Services. The recent purchased
shares in Fontana Union are not directly included in the lease with Cucamonga.
Under the terms of the 102-year take-or-pay lease (the "Cucamonga Lease"),
Cucamonga is entitled to receive all of the Company's proportionate share of
water from the foregoing sources. Currently, Cucamonga pays the Company for all
of the Company's share of water based upon fixed quantities of water at a rate
of 68.13% of the Metropolitan Water District of Southern California's (the
"MWD") charge for untreated, non-interruptible water as available through Chino
Basin Municipal Water District. Thus, on a quarterly basis, Cucamonga pays for
its proportionate share of the agreed upon annual quantities regardless of
fluctuations in actual water flows and actual receipt and use of water, except
in certain limited situations as discussed in more detail below. During 1999
and 1998, the Cucamonga Lease generated $5.2 million in revenues to the Company
each year.
Because of the 102-year lease agreement, which gives Cucamonga all of the
Company's ownership rights in Fontana Union for the leased shares, the Company
does not consolidate the accounts of Fontana Union for financial reporting
purposes. Substantially all risks and costs of producing the water are borne by
Cucamonga.
Under the Cucamonga Lease, the Company and Cucamonga agreed that the gross
annual quantity of Fontana Union water from all sources (except the annual Chino
Basin agricultural pool transfer for which the Company accrues revenues for its
share in the 4th quarter), is approximately 34,000 acre feet or approximately
8,500 acre feet per quarter. Fixing the average quantities of water stabilized
the Company's revenues and Cucamonga's payments. The water quantities under the
Cucamonga Lease were fixed based on the historical average of water available
from the applicable water sources according to over 80 years of records.
There are, however, limited circumstances in which the agreed upon quantities
of water paid for under the Cucamonga Lease can be adjusted. As an example, the
agreed upon quantity of water from one source of water, the Colton/Rialto wells,
can be temporarily reduced if the average water level in certain basin index
wells drops below a specified level. This occurred in 1996, resulting in a
temporary decrease in production. However, in the fourth quarter of 1996, the
wells again began pumping at their historical levels because the water level in
the index wells had sufficiently increased.
Another source of water leased by the Company to Cucamonga pursuant to the
Cucamonga Lease is the Company's proportionate share of water from what is known
as the Chino Basin agriculture pool transfers. These transfers represent that
portion of water allocated to agricultural users in the Chino Basin, which is
not used by such agricultural users in a particular water year. As a result,
the Company through Fontana Union is entitled to a share of this surplus water,
which Cucamonga pays for under the Cucamonga Lease. The historical average of
annual agricultural pool transfers to Fontana Union has fluctuated in recent
years. For the most recent water year, the 1998/99 water year, the agricultural
transfer was 3,610 acre feet. For the 1999/2000 water year, it is anticipated
that the agricultural pool transfer will be in the range of 3,400 to 3,800 acre
feet. See "Part 1, Item 7. Management's Discussion
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and Analysis of Financial Condition and Results of Operations" for a complete
discussion of the revenues derived pursuant to the Cucamonga Lease.
The Company's future lease revenue increases are primarily dependent upon any
adjustments in the MWD water rates and other fees upon which the lease rate is
calculated. The MWD rate established for untreated, non-interruptible water is
based on a number of factors, including the MWD need for funds to finance
capital improvements and to cover its fixed operational and overhead costs. The
MWD rate increases are often cyclical in nature depending upon such factors as
water availability, consumption, capital projects and available reserves. As
discussed in more detail below, in 1995 a dispute arose as to MWD's rate
increase and the amount payable to the Company under the terms of the Cucamonga
Lease. Past rate increases are not necessarily indicative of future rate
increases by MWD.
On July 1, 1995, MWD implemented changed rates and a new rate structure. As a
result of these changes, the Company asserted that all the changed rates and
items implemented by MWD, which must be paid in order to receive untreated, non-
interruptible water from MWD, are to be included in the calculation of the MWD
rate payable under the terms of the Cucamonga Lease. Cucamonga disputed the
Company's interpretation of the Cucamonga Lease which would result in a rate
increase greater than 2.7%, the 1995 rate of increase Cucamonga asserted was the
appropriate rate increase. Similarly, there is a dispute over the MWD rate and
thus the Cucamonga Lease rate for years 1996 through 1999. Because the Company
and Cucamonga were unable to resolve this dispute, in 1996 the Company
instituted litigation against Cucamonga in San Bernardino County Superior Court.
A trial on the matter was held in March 1998. The Court concluded that the
MWD Rate as defined in the Cucamonga Lease was discontinued effective July 1,
1995, as a result of the rate restructuring implemented by MWD. Therefore, the
terms of the Cucamonga Lease require the parties to seek to negotiate in good
faith a new substitute rate. If the parties are unable to agree on a substitute
rate, the matter is to be resolved by reference, a form of private trial similar
to arbitration. Before and after the trial, there were sporadic attempts to
resolve the litigation and negotiate a new substitute rate. However, since the
parties were not able to reach a resolution of the matter, the matter will be
determined as a result of a reference proceeding as required under the terms of
the Cucamonga Lease. The reference proceeding commenced during the week of
February 28, 2000. After the conclusion of all the testimony in the proceeding,
the court asked for further briefing and scheduled a final oral argument which
is currently scheduled for May 15, 2000. A decision from the judge is expected
within approximately 60 days thereafter.
Cucamonga has, to date, paid its obligations under the Cucamonga Lease on a
timely basis, but at a level that reflects the lower rates that the Company has
been disputing. Although the Company bills Cucamonga for the full amount it
asserts it is entitled to receive under the Cucamonga Lease, the Company has
elected to report water revenues in the amounts Cucamonga is currently paying.
Consequently, the court decision does not affect the Company's historical
financial statements. Similarly, it is not anticipated that the outcome of the
reference proceeding will affect the Company's historical financial statements,
but it may have an impact on the future revenues the Company receives from
Cucamonga.
MWD is in the process of again evaluating and considering a major rate
restructuring. While the Company understands that there are several proposed
rate restructuring alternatives, there has been no decision by MWD on the final
form of the rate restructuring. It is currently anticipated that MWD will
select and adopt a new rate structure during 2000.
Pursuant to the Cucamonga Lease, if any of the Fontana Union water sources
become sufficiently contaminated as to be unusable after treatment and/or
blending, Cucamonga is not obligated to pay for the quantities of available but
unusable water. The Company is aware of only one limited source of water that
has been affected by contamination. Two water wells owned by San Gabriel Water
Company but
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pumping Fontana Union Water have been closed because of contamination apparently
originating from the Mid-Valley Sanitary Landfill owned by San Bernardino
County. On October 9, 1998, the California Regional Water Quality Control
Board - Santa Ana Region, determined that the Mid-Valley Sanitary Landfill was
contaminating groundwater and it issued a clean-up and abatement order against
San Bernardino County. The closure of these two wells has, to date, not impacted
and is not currently anticipated to impact the payments received by the Company
pursuant to the Cucamonga Lease.
Due to these water quality and quantity concerns, during the first quarter of
1998, FWR, initiated litigation under the California Environmental Quality Act
("CEQA") against San Bernardino County and various land owners in connection
with the proposed expansion of the Mid-Valley Sanitary Landfill owned by San
Bernardino County. Cucamonga and others have settled the contamination issues
with San Bernardino County with the County taking responsibility for all
remediation costs. In 1999, construction began on facilities necessary to treat
the contamination at these two wells. These facilities are being constructed at
San Bernardino County's expense. Thus, many of the contamination issues have
been resolved. The remaining issues between the County and the Company have
been tentatively resolved, subject to final documentation and approval by the
San Bernardino County Board of Supervisors.
In addition, if any of Fontana Union's water rights are challenged by a third
party, the Company and Cucamonga are obligated to share the costs of defending
such challenge. Cucamonga also has an option to purchase the Company's Fontana
Union shares in the second half of the year 2042, at a price generally based
upon a multiple of 15 times the then current annual lease payment, as well as
the right to purchase all of the Company's Fontana Union shares for $1.00 in the
year 2092.
The Company employed a consulting organization in its search for a lessee of
its Fontana Union shares. The consulting agreement calls for a commission
payment of 5.42% of each payment received by the Company.
The Company continues to view the Cucamonga Lease as a mature, stable asset
with its primary variable being future MWD water rate changes. The Company, in
a continuing effort to maximize shareholder value, regularly evaluates various
alternatives with respect to the Cucamonga Lease. These alternatives include,
but are not limited to, retention, sale, securitization and monetization of the
Cucamonga Lease. The Fontana Union shares and the Cucamonga Lease are currently
pledged as collateral for the Company's revolving-to-term credit facility with
Union Bank.
Investment in Penske Motorsports, Inc.
Until July 26, 1999, the Company owned 1,627,923 shares, or approximately
11.73% of the common stock of PMI, a publicly traded company. PMI was a leading
promoter and marketer of professional motorsports in the United States as well
as an owner and operator of speedway facilities. 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 was built and successfully commenced
operations in June 1997; and (ii) the subsequent sale of the Speedway Business
Park, totaling approximately 54 acres, to PMI in December 1996.
On July 26, 1999, ISC acquired PMI. ISC is a leading promoter of motorsports
activities in the United States, promoting over 100 events annually. The
Company voted for the merger and elected to take the cash and stock election
afforded to PMI shareholders. Pursuant to this election, Kaiser received
approximately $24 million in cash and 1,187,407 shares of ISC Class A common
stock which resulted in a gain of $35.7 million. Subsequent to the merger, the
Company sold all of the shares it owned in ISC at an average price of
approximately $53.52 per share, realizing a gain of approximately $6.6 million.
The gross cash proceeds that the Company received in 1999 from the merger and
the subsequent sale of ISC stock totaled approximately $88 million.
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Beginning on April 1, 1996 and ending on March 31, 1999, the Company accounted
for its share of PMI's net income under the equity method of accounting. The
Company ceased using the equity method of accounting, effective April 1, 1999,
as a result of the announced PMI/ISC merger and its reduced ownership and
management role in ISC.
Property Redevelopment
Mill Site Property
Background. From 1942 through 1983, KSC operated a steel mill in Southern
California near the junction of the Interstate 10 and Interstate 15 freeways and
approximately three miles to the northeast of Ontario International Airport.
The Mill Site Property is located approximately 45 miles east of Los Angeles in
one of California's fastest growing regions, and is served by two major
railroads, the Burlington Northern Santa Fe and the Union Pacific (formerly
Southern Pacific). The original Mill Site Property consists of four distinct
parcels of land: the Central Mill Site (originally approximately 595 acres
(gross)), the South Mill Site (approximately 290 acres (gross)), the West End
Property (approximately 240 acres (gross)), and the Valley Boulevard Property
(approximately 42 acres (gross)). The property also includes approximately 35
acres used for the San Sevaine flood control channel. Approximately 534 acres
of the Central Mill Site Property are now the California Speedway. (See "Part
I, Item l. Business - Investment in PMI"), the NAPA lots, consisting of
approximately 31 acres have been sold and approximately 23 acres have been
contributed for the benefit of the WVMRF. As discussed in more detail below, the
balance of the Company's Mill Site Property, except for the Tar Pits parcel
(approximately 5 acres) and the Rancho Cucamonga parcel (approximately 37
acres), is currently in escrow to be sold.
Limited portions of the Mill Site Property have known environmental
contamination which require remediation. (See "Part I, Item 1. Business -
Property Development - The Mill Site Property - Mill Site Environmental
Matters.") In addition, a substantial volume of non-hazardous rock by-product
called slag, resulting from the historical iron and steel business, was
deposited on the West Slag Pile and East Slag Pile Properties. Although slag is
being removed and sold from the West Slag Pile Property by a third party,
thereby producing a current revenue stream for the Company, the amount of slag
is such that it is unlikely to be cleared in the next decade without cost to the
Company unless it can be used in conjunction with the redevelopment of the Mill
Site Property. However, it is anticipated that a substantial amount of the slag
can be used in the grading and construction process associated with the Kaiser
Commerce Center discussed in more detail below.
The Mill Site Property has its own water rights, originally 2,930 acre feet
per year, that are entirely distinct from the Company's interest in Fontana
Union. A portion of these water rights, 1,300 acre feet, was sold as a part of
a settlement of litigation and other claims with an adjoining landowner, and
another portion, 475 acre feet, was contributed with the property now owned by
The California Speedway Corporation. Thus, the Company now owns 1,155 acre feet
of annual water rights associated with the Mill Site Property of which 630 acre
feet are jointly owned with California Steel Industries ("CSI"). CSI has the
right of first use of the 630 acre feet, with payment to the Company, through
June 30, 2004, with the Company having the right of first use thereafter without
any payment to CSI.
Mill Site Redevelopment Plan. During 1999, the Company continued to undertake
appropriate steps to redevelop the bulk of its remaining Mill Site Property.
Redevelopment of the Mill Site Property requires various entitlements and
permits from San Bernardino County. The entitlement and permitting process
formally commenced in the second quarter of 1997, with the Company filing an
application for the "Kaiser Commerce Center" Specific Plan with San Bernardino
County for all of its property except for approximately 37 acres within the City
of Rancho Cucamonga, approximately 135 acres of property commonly referred to as
the East Slag Pile Property and the remaining NAPA Lot and MRF property which
were already entitled.
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The Specific Plan and related applications identified a wide variety of
potential uses for the property. Possible uses include a rail-served
distribution and commercial park, a multi-modal rail-truck distribution center,
warehousing, light manufacturing facilities, a commercial truck stop, as well as
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,
subject to the general limitations imposed by the final Specific Plan.
In April 1999, the Specific Plan, environmental impact report and other
related land use documents for the Kaiser Commerce Center obtained unanimous
approval from the San Bernardino County Board of Supervisors. In addition, a
conditional use permit for a proposed 73 acre truck stop was approved. With
receipt of the entitlements for the Kaiser Commerce Center and the activity in
the real estate market where the Kaiser Commerce Center is located, the property
became an attractive candidate for immediate development to parties other than
the Company.
Significant capital funds will be required to implement the infrastructure and
access improvements necessary for the Kaiser Commerce Center. In addition to
the typical grading, street, curb, gutter, water, sewer, electrical and other
improvements, access improvements will include reconfiguring an exiting road and
interstate interchange. The Company will seek other sources of funds, if
available, such as local tax increment financing as well as federal highway
improvement funds. In this regard, in June 1998, Congress awarded approximately
$1.5 million toward the planning costs of the improvements to the Etiwanda/I-10
Interchange. See "Part II, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information. In
addition to developing the Kaiser Commerce Center alone or with others, the
Company also pursued the possible sale of the Kaiser Commerce Center. As
discussed below, the Company has entered into an agreement to sell the Kaiser
Commerce and the East Slag Pile Property. If such transaction closes, the Buyer
will be responsible to pay or finance all of these infrastructure improvements.
Agreement to Sell Mill Site Property. In October 1999, the Company and its
wholly owned subsidiary, Kaiser Steel Land Development, Inc., entered into a
Purchase and Sale Agreement and Joint Escrow Instructions (the "Purchase
Agreement") with Ontario Partners I, LLC (the "Buyer") pursuant to which the
Company agreed to sell approximately 592 acres of its remaining Mill Site
Property for $16 million in cash plus the assumption of virtually all known and
unknown environmental obligations and risks associated with the property. The
sale includes the proposed Kaiser Commerce Center with its proposed truck stop
and the East Slag Pile Property, as well as ancillary items such as the water
rights associated with the property. As part of the transaction, the Buyer will
provide environmental insurance coverage and other financial assurance
mechanisms related to the known and unknown environmental obligations and risks
associated with the property being sold. In addition, the Purchase Agreement
provides that, to the extent possible, the Company's Consent Order with the
California Department of Toxic Substances Control ("DTSC") will be terminated
and that the Buyer will enter into a new consent order with the DTSC. A consent
order is essentially an agreement to investigate and remediate property. The
Buyer is currently negotiating a new consent order with the DTSC.
The Buyer is a new entity formed by LandBank Environmental Properties, LLC
("Landbank") and the Knowlton Group, a Salt Lake City based developer. LandBank,
a wholly owned subsidiary of the IT Group, specializes in the acquisition,
restoration and redevelopment of environmentally impaired real estate. It is
currently anticipated that a new entity will be formed in which LandBank, the
Knowlton Group and one or more other companies will become members and that such
new entity will ultimately be the buyer of the real estate if it closes. The
Buyer has discussed with several entities the possibility of participating in
the transaction, and it has currently identified Catellus Development
Corporation as its most likely additional development and financial partner.
The transaction is subject to extensive due diligence and a number of
contingencies. The Buyer has been engaged in, and continues to undertake,
extensive due diligence with respect to the property it may
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purchase, including, among other things, environmental, development,
construction and market matters. The Buyer may terminate the transaction for any
reason prior to the close of its due diligence period. The Purchase Agreement
has been amended to allow Buyer additional time in which to conduct its due
diligence and to complete its negotiations with the DTSC. The contingency period
has been extended into the second quarter of 2000. If the Buyer is satisfied
with the results of its due diligence and all other contingencies are resolved,
such as the negotiation of the final terms of certain exhibits to the Purchase
Agreement, the transaction is currently scheduled to close during the second
quarter of 2000. Given the due diligence to be undertaken by the Buyer and the
contingencies involved, there can be no assurance that the transaction will be
ultimately consummated or, if consummated, that it will close under the current
terms set forth in the Purchase Agreement. For more complete and detailed
information see Exhibits 10.37 through 10.37.6 to this 10-K Report.
Other Sales of Mill Site Property. In addition to entering into an agreement
in 1999 to sell the bulk of the Company's Mill Site Property, with the exception
of the 5 acre Tar Pits Parcel, the Company has sold, or is in negotiation for
the sale of the remaining approximately 37 acres of the Mill Site not being sold
to Ontario Ventures I, LLC. On November 5, 1999, one of the NAPA Lots of
approximately 7.8 acres was sold for a gross cash sales price of $1,699,000, or
$5.00 per square foot. On the same day, a sliver of land of approximately .36
of an acre was sold to an adjoining landowner for approximately $68,000 or $4.30
per square foot. The Company accepted a promissory note for the $68,000
purchase price. The remaining NAPA Lot of approximately 5.2 acres was sold in
December 1999 for a cash sales price of $1,110,000, or $4.90 per square foot.
The Company is negotiating the sale of the remaining 37 acres, known as the
Rancho Cucamonga property. There is no assurance that the negotiations for this
property will ultimately lead to a sale of the property.
Sewer Services. The Company operates a sewage treatment facility that serves
property historically owned by the Company or KSC. The Company currently
provides sanitary sewer services from its sewage treatment plant located on the
northeastern end of the South Mill Site Property to California Steel Industries,
Inc., the Budway facility, the WVMRF, the California Speedway and is anticipated
to serve the balance of the Mill Site Property. In 1999, total revenue of
$326,000 was derived from the sewer treatment facility with the Company
receiving $95,000 of such revenue from The California Speedway Corporation
pursuant to a Sewer Services Agreement.
The California Speedway Corporation currently also has the option to purchase
the Company's sewer treatment.
Upgrades of the sewer treatment facility may be required to accommodate the
development of the Mill Site Property and future regulatory changes.
Mill Site Environmental Matters
The operation of a steel mill by the Company's predecessor, KSC, resulted in
known contamination of limited portions of the Company's Mill Site Property,
including limited portions of the property previously sold by the Company. The
Company is subject to a 1988 consent order (the "Consent Order") with the DTSC,
which requires the Company to investigate and remediate hazardous materials on
the Mill Site Property. Under the Consent Order, as amended, the phased
remediation is scheduled to be completed by July 2005. The Consent Order, as
amended, provides for a general outline of the known tasks and the timing of
performing such tasks. Any particular item of investigation and/or remediation
can be modified with the consent of the DTSC. As discussed above, under the
terms of the proposed sale for virtually all the Company's remaining Mill Site
Property, it is expected that the Consent Order will be terminated and the Buyer
will enter into a new consent order with the DTSC. Thus, the Buyer will
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become responsible for all future investigation and remediation of the Mill Site
Property if the Mill Site Property is sold under its current terms.
During 1999 and in early 2000, as in prior years, the Company undertook a
number of activities with regard to environmental matters. These activities
included, but were not limited to: remediation of affected soils and materials
on approximately 7 acres of the West End Property; conducting tests for a
proposed solidification and capping remediation alternative for the Tar Pits;
investigation and closure of the West Slag Pile Property; completion of the
investigation and closure on the Household Recycling property (which is being
contributed to the WVMRF); and completion of the investigation and remediation
issues associated with the sewer treatment facility.
In addition, in February 1998, the Company obtained approval for a corrective
action management unit ("CAMU") (now called a consolidated waste cell or "CWC")
from the DTSC. The CWC is in the northeast portion of the East Slag Pile
Property on land that was previously used by a bankrupt former tenant of KSC for
a waste pickling facility and is used for the on-site disposal of affected soils
and materials from the balance of the Mill Site Property. The CWC has been
constructed and remains open to potentially receive affected soils and materials
that may be uncovered during the grading of the Kaiser Commerce Center that is
acceptable for deposit into the CWC. Upon termination of the use of the CWC, the
CWC will be capped and closed in compliance with the DTSC's policies. The CWC is
a less expensive alternative than transporting the affected soils and materials
to an off-site disposal facility.
While the Company has monitored certain groundwater wells in the past, the
DTSC requested and the Company intends to implement, a supplemental groundwater
investigation study. The principal purpose of the study upon its implementation
is to confirm the conclusion of historic tests that the groundwater does not
require any remedial action for hazardous substances. A draft supplemental
groundwater study was submitted to the DTSC in 1997 for its review and comment.
The Company and the DTSC have been meeting on and exchanging comments on the
supplemental groundwater investigation plan and its implementation. However,
with the possible sale of virtually all the Mill Site Property, the discussions
between the DTSC and the Company have been limited as the Buyer is engaged in
discussions on the method and scope of the groundwater investigation as a part
of its negotiations with the DTSC for a new consent order.
As a part of the supplemental study of groundwater, in late 1996, the Company
drilled the first two test wells on the California Speedway ("TCS") property.
Results from these two test wells do indicate that groundwater at the location
of the test wells is not contaminated with hazardous substances and will not
require remediation. Additional periodic testing of these wells is required.
The Company will also be required to begin testing groundwater monitoring wells
associated with the CWC within the next several months.
In addition, the Company previously settled certain obligations of groundwater
contamination with the California Regional Water Quality Control Board
concerning a plume (containing total dissolved solids, sulfate and organic
carbon) to which the historic steel operations contributed. The settlement
required a $1.5 million cash payment by the Company, which was made in February
1994, and the contribution of 1,000 acre feet of water annually for 25 years to
a water quality improvement project. These water rights are unrelated to those
leased to Cucamonga. Approximately 20 years ahead of schedule, the Company
contributed the full 25,000 acre feet required under the terms of the settlement
agreement with the California Regional Water Quality Control Board. This
contribution of water completed all of the Company's obligations under the terms
of the settlement agreement.
The Company's cost for investigation, remediation, site cleanup, and all other
environmental related activities for 1999 totaled approximately $ 1.8 million.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of this Form 10-K Report for additional
information.
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While there continue to be a number of smaller Mill Site Property
environmental projects, the major outstanding environmental issues to be
addressed, based on currently known information, are: (i) the approximately 5
acre parcel containing the tar pits, which is located adjacent to the WVMRF
property; (ii) the East Slag Pile waste management unit (sometimes referred to
as the East Slag Pile landfill); (iii) groundwater related items, including
additional groundwater monitoring; and (iv) the completion of the above
described CWC.
The Company estimates, based upon current information, that its future
remediation and other environmental costs for the balance of its land and
related matters will be between approximately $16 million and $26.4 million
depending both upon the ultimate extent of the environmental remediation and
clean-up involved and upon which approved remediation alternatives are
eventually selected. This range assumes: (a) a capping alternative can be used
for the East Slag Pile waste management unit on the East Slag Pile Property; (b)
a capping alternative can be used for the tar pits parcel; (c) that the CWC can
accept substantially all the affected soils and materials currently scheduled
for deposit into the CWC and any newly discovered affected soils and materials;
and (d) no significant groundwater remediation is required. To date, the CWC has
been able to accept substantially all the affected soils and materials
originally contemplated to be deposited into the CWC although there is no
assurance that the DTSC will allow future deposits of affected soils and
materials into the CWC. As of December 31, 1999, the total short-term and long-
term environmental remediation liability reflected on the Company's balance
sheet was approximately $26.4 million, the high end of the current probable
range of future remediation and other environmental costs. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Part II, Item 7 of the Form 10-K Report.
Although additional environmental investigations will be conducted on the
Company's 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. Further, the Company has provided certain
financial assurances to the DTSC in connection with anticipated remediation
activities, the primary one being the current dedication of approximately $4.8
million of Kaiser's Union Bank Credit facility. See Part II, "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
If the Kaiser Commerce Center and East Slag Pile Property are sold as
discussed above, the Buyer is assuming, with limited exceptions, all known and
unknown environmental obligations associated with the purchased property as well
as certain liabilities associated with property previously sold by the Company.
The Company is also involved, from time-to-time, in legal proceedings
concerning environmental matters. See "Part I, Item 3. Legal Proceedings."
Eagle Mountain Townsite
The Eagle Mountain Townsite, which is owned debt free by the Company and now
covers approximately 1,100 acres, consists of more than 300 houses (of which
approximately 100 have been renovated for current occupancy), a water supply and
sewage treatment system, an office building, machine shops, school facilities
and other structures. The land exchange with the BLM that was completed in
October 1999, expanded the Eagle Mountain townsite from approximately 460 acres
to approximately 1,100 acres (see page 18 "Federal Land Exchange and Land
Exchange Litigation" in this Form 10-K Report
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When the Eagle Mountain iron ore mine was operational, the Eagle Mountain
Townsite provided housing for mine employees and their families. Except for
many buildings and relating piping having asbestos containing materials, there
is no known material environmental remediation required at Eagle Mountain.
The Company's wholly-owned subsidiary, Kaiser Eagle Mountain, Inc., owns and
operates the Eagle Mountain Townsite. The Company currently leases a portion of
the Eagle Mountain Townsite to a private company, which operates a minimum
security prison for the State of California. The lease for the private prison
currently goes through June 30, 2001. In order to redevelop the Eagle Mountain
Townsite, the Company filed a Specific Plan with the County of Riverside. The
Townsite Specific Plan was included in the processing of the Landfill Project's
land use and environmental documentation and approvals. Implementation of the
Townsite Specific Plan was in abeyance until resolution of the Landfill Project
EIR appeal.
Other Redevelopment Opportunities
Other Property Ownership and Development. The Company owns a number of real
estate parcels and mineral deposits in the California desert, including the
Morris Lode Properties, an active iron ore mine leased to a third party (the
"Silver Lake Mine"), and improved and unimproved property at Lake Tamarisk, an
unincorporated community located approximately eight miles from the Eagle
Mountain site. The Company has decided to seek appropriate offers for the sale
of these miscellaneous assets.
Municipal Solid Waste Management
The West Valley MRF
West Valley MRF, LLC. California law currently requires all municipalities to
recycle or divert 50% of their solid waste streams from landfills. In addition,
counties are required to demonstrate to the State of California that they have
at least 15 years of available landfill capacity. In order to meet these
requirements, municipalities can arrange for transportation of solid waste to an
independent or municipally-owned materials recovery facility, commonly referred
to as a "MRF", which will separate recyclable materials for either storage or
sale to a variety of users. The residue waste from the recycling process is
disposed of at landfills. In response to this potential market opportunity, in
1997 the Company and Burrtec Waste Industries, Inc. ("Burrtec"), a local
municipal and commercial solid waste hauler, through wholly owned subsidiaries,
formed West Valley MRF, LLC.
West Valley MRF, LLC was formed to construct and operate the WVMRF, a material
recovery and transfer facility. Effective June 19, 1997, a wholly-owned
subsidiary of the Company, Kaiser Recycling Corporation ("KRC") and West Valley
Recycling & Transfer, Inc. ("WVRT"), Burrtec's wholly owned subsidiary, entered
into a Members Operating Agreement ("MOA") which is substantially the equivalent
of a joint venture agreement but for a limited liability company. Other
ancillary and related agreements to the MOA were also entered into as of June
19, 1997. Pursuant to the terms of the MOA, KRC contributed approximately 23
acres of the mill site on which Phase 1 of the WVMRF was constructed and WVRT
contributed all of the goodwill of Burrtec's recycling business that was
operated out of Riverside County entitling West Valley MRF, LLC to all revenues
generated from such business after the closing date. Under the terms of the
MOA, KRC and the Company remain responsible for any pre-existing environmental
conditions and WVRT is responsible for environmental issues that may arise
related to the future deposit or release, if any, of hazardous substances. The
MOA also addresses a number of other terms and conditions. The Company and
Burrtec have each given their separate Performance Guaranty Agreement pursuant
to which they respectively guaranty the prompt performance of their respective
subsidiary's obligations under the MOA and in the case of Burrtec, also under
the Operations and Maintenance Agreement which deals with the daily operation of
the WVMRF by WVRT.
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Financing, Construction and Operation of the WVMRF. Phase 1 of the WVMRF,
which includes a 62,000 square foot building, sorting equipment, and related
facilities for waste transfer and recycling services, was constructed and
initially equipped, at a total cost of approximately $10.3 million, in the last
half of 1997. The WVMRF is currently operating at its capacity in that it
receives and processes approximately 2,000 tons per day of non-hazardous
commercial and municipal solid waste. Waste is primarily received from
jurisdictions for which Burrtec has hauling contracts, from the City of Ontario,
and from a large public waste hauler.
Most of the financing for Phase I was obtained through the issuance and sale
of $9,500,000 in California Pollution Control Financing Authority (the
"Authority") Variable Rate Demand Solid Waste Disposal Revenue Bonds Series
1997A (the "Bonds"). This was a tax-exempt financing transaction secured by a
pledge and lien on the loan payments made by West Valley MRF, LLC and funds that
may be drawn on an irrevocable direct pay letter of credit issued by Union Bank
of California, N.A. ("Union Bank"). The Bonds are backed by a letter of credit
issued by Union Bank. Pursuant to a Guaranty Agreement with Union Bank, the
Company and KRC are liable for fifty percent (50%) of the principal and interest
on the Bonds in the event of a default by West Valley MRF, LLC. Burrtec and its
affiliates in effect are also liable under a separate Guaranty Agreement with
Union Bank for the other fifty percent (50%) of the principal and interest on
the Bonds in the event of a default by Borrower.
The interest rate for the Bonds varies weekly and averaged, for 1999, less
than 3.25%. The Bonds have a stated maturity date of June 1, 2012, although the
West Valley MRF, LLC is required, pursuant to an agreement with Union Bank, to
annually redeem a portion of the Bonds on a stated schedule.
West Valley MRF, LLC and Union Bank have also executed a Reimbursement
Agreement, which among other things, sets the terms and conditions whereby the
West Valley MRF, LLC is: (i) required to repay Union Bank in the event of a
draw under the letter of credit; (ii) grants the Union Bank certain security
interests in the property of West Valley MRF, LLC; (iii) establishes the
redemption schedule for the Bonds; and (iv) sets forth certain financial and
other covenants West Valley MRF, LLC must comply with during the term of the
Bonds. The Company and KRC have also provided to Union Bank an Environmental
Guaranty Agreement pursuant to which they are jointly and severally liable for
any liability that may be imposed on Union Bank for pre-existing environmental
conditions on the Borrower's property acquired from KRC that the Borrower fails
to timely address. See also "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Since the WVMRF is currently at its Phase 1 capacity of 2,000 tons per day,
the WVMRF is expanding to its permitted capacity of approximately 3,500 tons per
day at an estimated cost of approximately $9.5 million. This expansion, which
is anticipated to be completed in the fall of 2000, will increase the processing
facility by an additional 80,000 square feet and will provide for additional
materials recovery sorting capacity. Phase II of the WVMRF will be financed
from cash on hand and from a construction loan from Union Bank. WVMRF is
seeking again to secure approval of tax exempt bonds issued by the Authority for
permanent financing. There is no guarantee that such financing will be made
available for the Phase II expansion project.
Competition. Although other entities have proposed to develop MRF's that
would serve the same broad geographic area as that of the WVMRF, the Company
believes that none of them has yet completed the permitting process. However, a
MRF is proposed in the City of Pomona (approximately 10 miles from the WVMRF),
which is nearing the completion of its permitting process. If the Pomona MRF is
built, it would be a competitor in a portion of the WVMRF's market. In addition,
Burrtec owns and operates a MRF in Agua Mansa, California located approximately
15 miles from the WVMRF that could compete in very limited areas for waste that
might otherwise go to the WVMRF. To date, the MRF in Agua Mansa has had little
impact on the WVMRF's market for customers.
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Eagle Mountain Landfill Project
Background. Many of Southern California's current landfills are located in
urban areas and are old, unlined, lack current environmental safeguards and are
often considered nuisances by their neighbors. Furthermore, it is becoming
increasingly expensive and difficult to permit and open new landfills or to
expand existing landfills in urban areas due to political opposition and
stringent government regulations. The Company believes that Southern California
will begin to face a shortage of safe, permitted landfill capacity within the
next 5 to 10 years.
The Eagle Mountain Site. The Company's 9,144 acre Eagle Mountain site,
located in the remote California desert approximately 200 miles east of Los
Angeles, consists of three large open pit mines, the Eagle Mountain Townsite and
a 52-mile private rail line that accesses the site. The Company has leased
approximately 4,654 acres of the idled mine site and the rail line to MRC for
development of a rail-haul solid-waste landfill (the "Landfill Project"). As
discussed in more detail below, effective as of January 1, 1995, the Company,
through a wholly-owned subsidiary, Eagle Mountain Reclamation, Inc. ("EMR"),
became a 70% shareholder in MRC and, through subsequent investments in MRC, is
currently an approximately 75% shareholder in MRC.
In anticipation of Southern California's ultimate need for new environmentally
safe landfill capacity, MRC in 1988 began the planning and permitting for a
20,000 ton per day rail-haul, non-hazardous solid waste landfill at Kaiser's
Eagle Mountain Site. As discussed in more detail below, the permitting process
was effectively completed in December 1999, when the Landfill Project received
its last major permit. The Company believes that the Eagle Mountain site has
many unique attributes which make it particularly well-suited for a rail-haul,
solid waste landfill including, but not limited to, its remote location, arid
climate, available and suitable materials for the proposed liner system and
daily cover, and rail access.
Current plans for operation of the landfill anticipate that non-hazardous
household solid waste will initially be delivered to MRF's and transfer
facilities throughout Southern California by municipalities and independent
waste haulers. Recyclable and hazardous materials will be separated at these
facilities, and the remaining non-hazardous solid waste will be transported,
primarily by rail, in closed and locked containers to the Eagle Mountain
landfill. MRC currently anticipates that the landfill's initial operations,
depending upon the level of disposal fees, could commence with a minimum of
approximately 4,000 tons of solid waste per day.
Founding, Ownership and Restructuring of MRC. MRC was formed in 1982 by waste
industry professionals to address the anticipated solid waste disposal problem
in Southern California. In order to utilize Kaiser's Eagle Mountain Site, the
Company, through its subsidiary Kaiser Eagle Mountain, Inc., entered into a
lease with MRC in 1988 for the development of the Landfill Project (the "MRC
Lease"). In 1990, a subsidiary of Browning Ferris Industries ("BFI"), purchased
a 50% interest in MRC. BFI provided a majority of MRC's funding subsequent to
its initial investment, which resulted in BFI becoming the majority owner of
MRC.
As of August 1, 1994, the ownership of MRC was restructured as part of BFI's
withdrawal from MRC. As part of the restructuring, BFI returned to MRC all of
its common and preferred stock in MRC and paid off all of MRC's outstanding bank
indebtedness leaving MRC substantially debt free. In addition, BFI provided MRC
with funds in excess of $5,000,000 to be used to fund ongoing development
activities.
MRC was further restructured effective January 1, 1995, when the Company
through Eagle Mountain Reclamation ("EMR"), a wholly-owned subsidiary separate
from the subsidiary that owns the land at Eagle Mountain, acquired common stock
in MRC representing a 70% ownership interest. This transaction was effective as
of January 1, 1995. In exchange for the ownership interest, the MRC Lease
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was amended to eliminate MRC's obligation to pay minimum rent. MRC forgave all
current contingent non-recourse obligations the Company would have had to repay
MRC out of future royalties.
Operation and Financing of MRC. With the acquisition of the equity interest
in MRC in 1995, the Company, through MRC, has taken a more active role in making
rail-haul landfills a reality, permitting the Landfill Project and in assisting
MRC, as appropriate, in raising the funds necessary to operate conduct its
business. The completion of the Landfill Project is dependent upon, among other
things, MRC's continuing ability to raise additional equity capital.
Although neither the Company nor any subsidiary of the Company has any
obligation to invest funds in MRC, the Company has continued, to date, to make
investments in MRC. Through a series of private placements with existing MRC
shareholders, from July 1995 through the end of 2000, a total of $20.9 million
will have been raised by MRC, with Kaiser contributing approximately $15.8
million of that amount. It is anticipated that the Company may make additional
investments in MRC and may pursue other opportunities that the Company believes
are necessary or appropriate to make rail-haul landfills a reality.
In order to bring the Landfill Project to full realization MRC continues to
pursue other alternatives and financing from prospective investors as well as
other means of raising funds or commitments such as the sale of capacity rights,
air space or disposal agreements.
MRC Lease. In connection with the reorganization of MRC, the MRC Lease was
amended effective July 29, 1994, and again amended effective January 1, 1995,
with the Company's acquisition of a 70% interest in MRC. Under the terms of the
MRC Lease, as amended to date, MRC is responsible for substantially all project
costs and activities, including landfill design, permitting, construction and
operation. MRC has also agreed to indemnify the Company against claims arising
from MRC's activities, including any environmental damage that may be caused to
the leased property by MRC's operations. The MRC Lease also provides, among
other things that: (i) the Company must give MRC notice of any proposed sale of
its interest in the Eagle Mountain property, and MRC has a right of first
refusal to purchase such interest under certain circumstances; (ii) the Company
and MRC may not participate in another project that employs a railroad in
connection with the storage or disposal of solid waste in counties surrounding
the landfill; and (iii) MRC has certain rights to terminate the MRC Lease
including: (a) upon the Company's default under the terms of the MRC Lease; (b)
upon 180 days notice at any time during the six month period immediately
following the receipt of all the necessary permits for the Landfill Project; and
(c) at any time upon two year's notice.
The MRC Lease was again amended as of January 1, 1996. The amendment reduced
the amount of land that MRC leases from the Company by approximately 50%. MRC
continues to lease from the Company all the real property necessary for the
Project.
The Company maintains and may exercise all rights it has under the MRC Lease,
including the right to re-acquire the land leased to MRC through its subsidiary,
Kaiser Eagle Mountain, Inc., for the Landfill Project. In the event the Company
re-acquires the Landfill Project, depending upon the circumstances, such as upon
MRC's default due to lack of funds, the non-BFI shareholders, at the time of the
July 1994 amendment to the MRC Lease, shall have the right to continue in the
project in some manner.
Lease Economics. Until January 1, 1995, MRC paid to the Company a minimum
monthly rent. However, in conjunction with the Company's acquisition of its
equity interest in MRC, the MRC Lease was amended effective January 1, 1995, to
eliminate the minimum monthly rent. The elimination of the minimum monthly rent
did not change the future royalty payments due the Company upon the commencement
of landfill operations.
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Once the landfill is operational, under the current terms of the MRC Lease,
the Company will receive, as landlord of the Eagle Mountain Site, the greater of
(i) a royalty of $2.00 per ton of waste received; or (ii) a royalty payment
calculated as a designated percentage of the landfill tipping fees charged by
MRC. The future royalty payment paid to the Company by MRC is based on MRC's
gross collections, which are basically equivalent to the tipping fees to be
charged by MRC at the landfill. In calculating gross collections, MRC may
deduct certain items, including any federal or state fees, the host fees paid to
Riverside County and other charges imposed or required to be collected at the
landfill. Certain other revenues are also excluded from the definition of gross
collections, including any MRC revenue from salvage, recycling or reclamation
operations or from the disposal of waste from certain areas near the Landfill
Project. In addition to the royalty payment, the Company will receive an
additional $0.15 royalty for every ton of waste transported to the landfill on
the Company's 52-mile rail line.
The following table illustrates the royalty payment formula set forth in the
MRC Lease.
<TABLE>
<CAPTION>
Monthly Average % Fee Net # Days
Royalty = Daily X Payable to X Tipping X in
Payment Tonnage Kaiser Fee Per Ton Operation
Average
Daily Tonnage/1/ Tipping Fee Percentage Payable to Kaiser
------------------------------- -------------------------------------------------------------------
<S> <C>
0 - 3,500 10.0% on all tonnage during applicable month
3,501 - 4,999 10.0% on first 3,500 tons; 15.0% on balance during
applicable month
5,000 - 8,999 15.0% on all tonnage during applicable month
9,000 - 20,000 18.5% on all tonnage during applicable month
</TABLE>
-------------------------------
/1/ Determined over the number of operating days in a calendar month.
The Company's revenues under the MRC Lease will be directly affected by the
amount of tonnage accepted at the Landfill Project and the applicable tipping
fees charged for such tonnage. The amount of tonnage depends upon MRC's ability
to obtain contracts with municipalities and waste haulers for the receipt,
transfer and disposal of solid waste. MRC has not, to date, obtained any
contract for the transfer or disposal of solid waste, although MRC is
undertaking limited marketing efforts to seek such contracts. However, there
are no assurances that MRC will be able to secure contracts for sufficient waste
tonnage to make the Landfill Project successful.
Disposal costs consist principally of tipping fees and transportation costs
associated with the hauling of waste to the landfill. Tipping fees currently
vary widely among landfills, partly as a result of real and perceived landfill
capacity shortages in areas, pending closure deadlines and partly as a result of
increased costs of construction, operation and/or closure. Tipping fees do not
include transportation costs, which may vary significantly depending upon such
factors as distance to the landfill and method of handling the waste. It is
unknown at this time if disposal costs in Southern California will sufficiently
increase as to make the Eagle Mountain landfill attractive to those controlling
the disposal of waste. See the discussion on disposal fees below.
Government Regulation/Permitting. The design, operation and closure of solid
waste landfills are subject to stringent federal, state and local environmental
regulations. These regulations, among other things, require upgraded or new
composite landfill liners, leachate collection and treatment, groundwater and
methane gas monitoring, stricter siting and location criteria, closure
requirements and financial assurances (such as a surety bond) from the owner or
operator. The Eagle Mountain landfill is designed to meet or exceed these and
all other applicable requirements.
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<PAGE>
In order to construct and operate the Landfill Project, MRC is required to
obtain and maintain numerous government permits and approvals relating to such
matters as land use compatibility, groundwater protection, air quality
emissions, habitat protection, and rodent, pest and litter controls. The
process for obtaining these permits and approvals is often difficult, expensive
and time-consuming, particularly because the siting of landfills is a highly
political issue and often draws opposition from environmental groups and local
residents.
By way of background, before any significant regulatory permit may be granted
relating to the construction and operation of the Landfill Project, an EIR/EIS
must be certified and approved by the appropriate regulatory agencies. In
October 1992, the Riverside County Board of Supervisors approved the EIR for the
Landfill Project and MRC's local land use applications. Legal challenges to the
certification of the EIR were mounted in late 1992 by a number of individuals, a
conservation group and Eagle Crest Energy Company ("ECEC"), formerly known as
Eagle Mountain Energy Company, which is a potential competitor for the use of a
portion of the Landfill Project site.
In July 1994, the San Diego County Superior Court issued its decisions on the
challenges to the EIR for the Landfill Project. The Court announced that it had
eight (8) areas of concern in which the EIR was deficient, thus requiring
corrective action. As a result of the Court's determinations, the Court set
aside and declared void the Riverside County Board of Supervisors' EIR
certification and all Riverside County approvals rendered in connection with the
EIR certification. The Court ordered activities related to the development of
the landfill suspended and directed the preparation of a new final environmental
impact report in compliance with applicable law and the Court's conclusions.
MRC and the Company disagreed with many of the Court's conclusions and initially
took steps to appeal the decisions, but later withdrew their appeal to focus
their efforts on re-permitting the Landfill Project.
Approval by Riverside County of the Landfill Project. In March 1995, MRC
initiated the necessary re-permitting process by filing its land use
applications with Riverside County and has worked with the County and BLM in the
preparation of a new EIR/EIS. The draft EIR/EIS was made available to the
public in July 1996, with the comment period on the draft EIR/EIS closing in
September 1996. The BLM held public hearings on the draft EIR/EIS and received
extensive public comment. In addition, by the close of the public comment
period in September 1996, numerous written comments were received. The new
final EIR/EIS was released to the public in January 1997, and received final
approval from the Riverside Board of Supervisors, by a vote of 4-1, on September
9, 1997.
In addition, the Development Agreement for the Landfill Project and related
land use matters were also approved by the Board of Supervisors.
The Landfill Project is approved to receive up to 20,000 tons per day (6 days
a week) of non-hazardous municipal solid waste. However, MRC is limited during
the first ten years of operations to 10,000 tons per day of non-County waste
plus the waste generated from within the County. After ten years, MRC may
request an increase in daily tonnage up to the maximum of 20,000 tons, but such
increase must be reviewed by and receive the approval of an independent
scientific panel as discussed in more detail below.
EIR Litigation and Appeal. After the September 1997 approval of the new
environmental impact report for the Landfill Project, (the "Project EIR"), the
litigation with respect to the Project EIR resumed. In February 1998, Judge
Judith McConnell of the same San Diego County Superior Court issued its final
ruling with respect to the litigation before her on the new Project EIR. Judge
McConnell, in her final ruling, found that the new Project EIR remained
inadequate in evaluating the Landfill Project's impacts in two general areas:
(i) the threatened desert tortoise; and (ii) impacts to Joshua Tree National
Park. MRC, the Company, and Riverside County appealed the Superior Court's
decision. Project opponents did not appeal any matter.
17
<PAGE>
On May 7, 1999, the Court of Appeal announced its decision to completely
reverse the San Diego Superior Court's prior adverse decision. The Court of
Appeal's decision in effect certified the Project EIR and reinstated Riverside
County's approval of the Landfill Project. The Court of Appeal concluded that
there was substantial evidence to support the decision of the Riverside County
Board of Supervisors to approve the Landfill Project in September 1997, and that
the San Diego Superior Court had improperly substituted its judgment in
concluding that the Project EIR was defective. In June 1999, opponents to the
Landfill Project requested that the California Supreme Court review and overturn
the Court of Appeal's decision. In July 1999, the California Supreme Court
declined to review the Court of Appeal's decision.
In connection with the Landfill Project's EIR litigation, project opponents
also filed a motion with the San Diego Superior Court seeking the award of
approximately $450,000 in attorneys' fees against MRC, the Company and Riverside
County. Total fees and costs ultimately awarded to landfill opponents was
approximately $300,000. The award of attorneys' fees has been appealed. A
decision on the attorneys' fees appeal is anticipated by the end of 2000.
Federal Land Exchange and Land Exchange Litigation. On October 13, 1999, the
Company's wholly owned subsidiary, Kaiser Eagle Mountain, Inc., completed a land
exchange with the BLM. Completion of the land exchange was a necessary step for
completion of the permitting of the Landfill Project.
By way of background, since the commencement of permitting of the Landfill
Project, the Company has been seeking to transfer to the BLM approximately 2,800
acres of Kaiser-owned property along its railroad right-of-way, which was
identified as prime desert tortoise habitat, in exchange for fee ownership of
approximately 3,500 acres of land within the Landfill Project area. Subsequent
to the approval of the new joint EIR/EIS, the BLM originally issued a record of
decision approving the land exchange, but such decision was ultimately withdrawn
while the BLM together with Riverside County completed a new joint EIR/EIS as
discussed above. In September 1997, the BLM issued a record of decision
approving the proposed land exchange as well as the grant of new rights-of-way
to replace existing rights-of-way. A number of protests to the land exchange
were received, which protests were denied by the BLM in December 1998. As
anticipated in January 1999, the same two opponents in the EIR litigation
discussed above filed an appeal with the Interior Board of Land Appeals ("IBLA")
challenging the BLM's decision to proceed with the land exchange. On September
30, 1999, the IBLA issued its decision upholding the decision of the BLM to
engage in the proposed land exchange with the Company. This positive decision
paved the way for completion of the land exchange on October 13, 1999.
Specifically, as a result of the land exchange the Company received fee
ownership of various non-fee mining interests currently held by the Company near
the large open pits and the termination of a contingent reversionary interest
associated with the Eagle Mountain Townsite. The new rights-of-way had been
granted to the Company earlier since they were not stayed by the earlier appeal
of the land exchange.
With the land exchange completed, the Eagle Mountain site consists of
approximately 9,144 acres with 5,635 acres held in fee (which includes the Eagle
Mountain Townsite) and approximately 3,509 acres held as various mining claims.
Subsequent to the completion of the land exchange, two lawsuits were filed
challenging the land exchange and requesting its reversal. To date, no
immediate injunctive relief has been sought. These two lawsuits generally
involve the same parties that were the plaintiffs in the unsuccessful state CEQA
litigation and the unsuccessful appeals before the IBLA. It is anticipated that
these two lawsuits filed in the Federal District Court located in Riverside,
California will be consolidated. For additional information on this federal land
exchange litigation see "Part 1, Item 3. Legal Proceedings."
Permitting. With the positive appellate decision on the new Project EIR land,
MRC resumed seeking the final technical permits for the landfill Project. On
September 15, 1999, the California Regional Water Quality Control Board- Lower
Colorado Basin Region, unanimously approved the waste discharge
18
<PAGE>
requirements permit for the Landfill Project. The grant of this permit was
appealed to the California Water Resources Board by one of the opponents to the
Landfill Project. A stay on the issuance of the permit was also being sought.
This appeal and the stay request were denied in December 1999.
On December 15, 1999, the California Integrated Waste Management Board voted
unanimously to approve and concur in the issuance of the solid waste facilities
permit. With the receipt of this facilities permit, the Landfill Project had
received all 20 of the major permits and approvals required for siting,
constructing, and operating the Landfill Project. MRC is now in a position to
commence the detailed final engineering design of the Landfill Project and to
increase its marketing efforts for the Landfill Project.
The Development Agreement. As a part of the process of considering the
Landfill Project, the Company and MRC negotiated a Development Agreement with
Riverside County. In summary, the Development Agreement to be executed among
Riverside County, MRC, the Company, and two of the Company's subsidiaries,
Kaiser Eagle Mountain, Inc. and Eagle Mountain Reclamation, Inc., provides the
mechanism by which MRC acquires long-term vested land use rights for a landfill
and generally governs the relationship among the parties to the Agreement. The
Development Agreement also addresses such items as the duties and
indemnification obligations to Riverside County; the extensive financial
assurances to be provided to Riverside County; the reservation and availability
of landfill space for waste generated within Riverside County; and events of
default and remedies as well as a number of other items.
In addition, the financial payments to, or for the benefit of Riverside County
and others, are detailed in the Development Agreement and in the Purchase and
Sale Agreement, which is a part of the Development Agreement. The Purchase and
Sale Agreement requires a per ton payment on non-County waste determined from a
base rate which is the greater of $2.70 per ton or ten percent (10%) of the
landfill tip fee up to 12,000 tons of non-County waste. The 10% number
increases to 12 1/2% for all non-County waste once non-County waste exceeds
12,000 tons per day. The per ton payment to the County also increases as volume
increases. The per ton payments on non-County Waste to Riverside County are
summarized as follows:
======================================================================
Average Tons Per Day of
Non-County Waste Payment to Riverside County
======================================================================
0 - 7,000 Greater of 10% (12.5% once volume exceeds
12,000 tpd) or $2.70 ("Base")
7,000 - 10,000 Base plus $.80
10,000 - 12,000 Base + $1.30
12,000 - 16,000 Base + $2.30
16,000 - 20,000 Base + $3.30
======================================================================
Other major payments include: (i) partial funding for up to four rail
crossings with $1 million due at the commencement of construction of the
landfill and an additional $1 million over the course of landfill operations;
(ii) financial assistance for the host community, Lake Tamarisk, comprised of
$500,000 due at the commencement of construction of the landfill plus an
additional approximately $1.5 million due over the course of landfill
operations; and (iii) funding for non-California Environmental Quality Act
reduction air emission programs of $600,000 over the course of operations.
The initial term of the Development Agreement is fifty years. However, the
term can be extended to November 30, 2088. In order to obtain an increase in
the initial 50-year term of the Development Agreement and/or an increase in the
initial 10,000 tons per day limit on out-of-County waste, an independent
scientific panel will be convened to review such a request. The scientific
panel will be made
19
<PAGE>
up of five independent scientists and engineers selected by the University of
California Riverside (the "University") with the approval of the Company and
MRC. If the University and the Company/MRC are unable to agree on the panel
members, two members are to be selected by the University, two by the
Company/MRC and the fifth member is to be selected by the other four members.
Alternative procedures are in place in the event the University does not
participate in the selection of the panel members for any reason. The panel will
conduct its review within eight months of any request for capacity expansion.
The panel, in effect, is to limit its review to confirming that MRC has
substantially complied with all development approvals, the environmental
mitigation measures and all regulatory permits and that the potential
environmental impacts of the landfill are the same as identified in the EIR.
Various appeal procedures are available depending upon the initial and final
findings of the panel.
Environmental Trust Fund. Pursuant to the terms of the Development Agreement
and other related documents, $.90 of the per ton payment made to Riverside
County by MRC on out-of-County municipal solid waste will be deposited into an
environmental trust. In addition, MRC directly pays $.90 per ton into the
environmental trust for in-County waste deposited into the landfill. Funds in
the environmental trust are to be used within Riverside County for: (a) the
protection, acquisition, preservation, and restoration of parks, open space,
biological habitat, scenic, cultural, and scientific resources; (b) the support
of environmental education and research; (c) the mitigation of the Project's
environmental impacts; and (d) the long term monitoring of the above mentioned
items.
Finally, MRC has agreed to pay $.10 per ton of municipal solid waste deposited
into the landfill to the National Parks Foundation for the benefit of the
National Park Service.
Competition. The solid waste disposal industry is highly competitive with a
few large, integrated waste management firms and a significant number of
smaller, independent operators. The number of competitors have diminished, but
their size has greatly increased as a result of mergers and acquisitions of
waste hauler and management companies.
Assuming the Landfill Project is ultimately constructed, the success of the
Landfill Project depends largely upon MRC's ability to secure solid waste
disposal contracts from municipalities and waste haulers in this highly
competitive environment. The ability of MRC to secure such waste disposal
contracts is predicated upon a number of factors including, but not limited to,
MRC's ability to (i) charge disposal fees comparable to those of its
competitors; (ii) provide financial and environmental safeguards against
potential liability; (iii) provide sufficient long-term capacity; and (iv)
commence operations prior to the expansion of existing landfills or the opening
of other large capacity, rail-haul landfills. Currently, there are over 15
major existing municipal solid waste landfills in Southern California serving
the same geographic area as that proposed by the Landfill Project (primarily Los
Angeles, Orange, Riverside and San Bernardino Counties). While a number of
Southern California landfills have closed and are scheduled to close in the next
several years as they reach capacity, several of them, including El Sobrante
Landfill in Riverside County, Mid-Valley Sanitary Landfill in San Bernardino
County, and Sunshine Canyon in Los Angeles County have received all or a portion
of needed approvals for major expansions in the past couple of years. Other
landfills such as Puente Hills in Los Angeles County are in the process of
applying to expand the permitted capacities of their existing facilities.
The Company is also currently aware of at least two other enterprises seeking
to develop rail-haul, solid waste disposal facilities which would be located in
Southern California and would compete directly with the Landfill Project. These
proposed cut-and-fill landfills include: (i) a landfill to be developed in a
desert site in San Bernardino County by Rail Cycle of Los Angeles, a joint
venture between Waste Management, Inc. (now owned by USA Waste) and the Santa Fe
Railway Company, Inc.; and (ii) Mesquite Regional Landfill owned by Goldfields
Mining Corporation and its subsidiary Arid Operations, Inc., to be developed in
Imperial County. However, for the reasons discussed below, only the Mesquite
Regional Landfill project is currently believed by management of the Company to
be a viable California rail-hail competitor.
20
<PAGE>
The Rail Cycle project is contingent upon the approval of a business tax by
the voters, which has failed once. In addition, the Rail Cycle project and
certain associated personnel also have been the subject of a criminal grand jury
investigation which has altered the prospects of this particular project as
currently being a viable competitor.
The Mesquite Regional Landfill project has reported that it has received all
of its major permits and should soon be able to commence construction and is a
viable rail-haul competitor. In addition, the Mesquite Landfill Project is
targeting many of the same customers that MRC also believes are potential
customers for the Landfill Project
Competition also extends to rail-haul landfills in the states of Arizona, Utah
and Washington. In Utah, East Carbon Development Corp. operates a rail-haul
landfill capable of receiving waste from Southern California and it is actively
marketing its services to waste generators in Southern California. In addition,
BFI, the former majority shareholder of MRC, operates a landfill in La Paz
County, Arizona, with planned rail access, which will compete for Southern
California waste.
To a lesser extent, the Landfill Project will also compete with alternatives
to landfills, such as recycling and "alternative technology" projects.
Disposal Fees. While the Company believes that it will take several years for
MRC's projected disposal fees to be aligned at competitive levels with other
urban landfills, it also currently believes that the advantages afforded by the
Eagle Mountain site should enable it, in the long-term, to compete effectively
with both existing and other proposed landfills. Several years ago there was a
general reduction in disposal or "tipping fees" in several areas of Southern
California. The reduction in tipping fees was accelerated with the bankruptcy
of Orange County, California. As a means of generating revenue, Orange County
reduced its tipping fee to out-of-county trash from $38.50 to as low as $18.00
per ton depending upon the length of the time commitment. Trash generated
within Orange County still pays approximately $38.50 per ton tipping fee.
Riverside County also adopted a two-tier tipping fee structure. The tipping fee
would generally be $30.00 for direct haul to a landfill and $25.00 if the waste
is processed through a transfer station or materials recycling facility. Facing
the loss of waste from its system, San Bernardino County dropped its tipping fee
from $35.50 per ton to $28.50 per ton for fifteen (15) year commitments.
In addition, the Los Angeles Sanitation District with its Puente Hills
landfill is a low cost provider of landfill space by charging a tipping fee of
approximately $19.55 per ton.
Marketing. As a result of the litigation successes, completion of the federal
land exchange, and the Landfill Project's receipt of its last major permit, MRC
is accelerating its efforts to make rail-haul landfills a reality and to market
the Landfill Project. MRC has had meetings with several governmental agencies
about the possibility of participating in the Landfill Project through the
purchase of air or capacity rights or other similar arrangements. These
entities include, but are not limited to, the Los Angeles Sanitation District.
In fourth quarter of 1999, The Los Angeles Sanitation District publicly stated
that it has an interest in pursuing a possible transaction, including a possible
purchase transaction, with respect to the Landfill Project and/or with respect
to the competing Mesquite Regional Landfill project. However, even though there
are periodic discussions with the Los Angeles Sanitation District and others,
there is no assurance that any discussions will ultimately lead to an agreement
with regard to the Landfill Project or as to the timing or terms of any
agreement if one is ultimately negotiated.
Risk Factors. As discussed throughout this 10-K Report, there are numerous
risks associated with rail-haul landfills, MRC and the Landfill Project which
must be overcome to achieve the financing, permitting, construction, opening,
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
21
<PAGE>
and the controversies that generally surround landfill projects, legal
challenges in addition to the current legal challenges are likely. The success
of the Landfill Project also depends upon the development of the anticipated
shortage in landfill capacity in Southern California over the next several
years.
In addition, MRC and the Landfill Project will encounter intense competition
in the pricing and rendering of services from various sources in all phases of
its solid waste disposal operations. In the solid waste transportation and
disposal phase, competition is encountered for the most part from regional
disposal facilities, as well as from municipalities (which may be able to
provide such services at lower direct charges to customers than can MRC). There
is no assurance that rail-haul landfills will be a viable alternative to other
means of disposing municipal solid waste. Furthermore, as previously discussed,
the Mesquite Regional Landfill is a viable competitor which could materially
adversely impact the chances of success of the Landfill Project. There is no
assurance that the Company is currently able or will be able to compete
effectively with current and anticipated landfill space, pricing competition or
that other forms of competition will not result.
There is also a risk that sufficient and suitable financing may not be made
available to MRC in order to allow it to continue to pursue the Landfill
Project.
Finally, the waste management industry has become subject to extensive,
expensive and evolving regulation by federal, state and local authorities which
becomes increasing stringent. The Company and MRC will make a continuing effort
to anticipate regulatory, political and legal developments that might impact the
Landfill Project, but they may not be able to do so.
Given all these risks, there is no assurance that MRC and the Landfill Project
will be viable or will be constructed or that once constructed, it will be
commercially viable and profitable.
Employees
As of March 10, 2000, Kaiser had 14 full-time and 9 part-time employees. In
addition, as of March 10, 1999, MRC, the Company's subsidiary, had 5 full-time
employees.
Item 2. PROPERTIES
Office Facilities
The Company's principal offices are located at 3633 East Inland Empire
Boulevard, Suite 850, Ontario, California 91764. The Company leases
approximately 5,500 square feet in Ontario, California, pursuant to a lease
agreement expiring in August 2002. The Company also maintains offices on the
Mill Site Property and at the Eagle Mountain site. MRC leases an office in Palm
Desert, California for a term that was extended in 1999 to August 2000, and
maintains an office at the Eagle Mountain site.
Eagle Mountain, California
The Kaiser Eagle Mountain idle iron ore mine and the adjoining Eagle Mountain
Townsite are located in Riverside County, approximately ten miles northwest of
Desert Center, California. Desert Center is located on Interstate 10 between
Indio and Blythe. The heavy duty maintenance shops and electrical power
distribution system have been kept substantially intact since the 1982 shutdown.
The Company also owns several buildings, a water distribution system, a sewage
treatment facility, and related infrastructure. The Eagle Mountain Townsite
includes more than 300 single family homes, approximately 100 of which have been
renovated and are currently in use. Most of the houses in use are leased to
Management and Training Corporation ("MTC") for use in conjunction with a
permitted 500-bed community-custody facility operated under a contract with the
California Department of Corrections.
22
<PAGE>
Utilization of the remaining houses and related facilities will require
additional renovation activities plus approval by Riverside County of a Townsite
Specific Plan.
In and around the Eagle Mountain area the Company has various possessory
mining claims of approximately 3,509 acres and holds approximately 5,635 acres
in fee simple (which includes the Eagle Mountain Townsite). See "Part I, Item 1.
Business - Eagle Mountain Landfill Project".
The Company owns six deep water wells, of which two are currently being used,
and two booster pump stations that serve the Eagle Mountain mine and townsite.
Railroad
To transport ore from the Eagle Mountain mine to the mill site (see below),
KSC constructed a 52-mile heavy duty rail line connecting the mine to the main
Southern Pacific rail line at Ferrum, California. The Company owns in fee
approximately 10% of the 52-mile railroad right-of-way. The major remaining
portion of the railroad right-of-way consists of various private leases and an
operating right-of-way from the BLM. The railroad is included in the lease to
MRC for the Landfill Project. See "Part I, Item 1. Business."
Fontana, California
With the acquisition of approximately 534 acres by The California Speedway
Corporation for the construction of TCS and related facilities, the contribution
and reservation of property for the West Valley MRF and the sale of the NAPA
Lots, the Company now owns approximately 634 acres (gross) near Fontana,
California. All of the Company's property is debt free. All the Company's
remaining property (except the Rancho Cucamonga parcel of approximately 37 acres
and the Tar Pits parcel of approximately 5 acres) is in escrow to be sold
pursuant to a Purchase and Sale Agreement and Joint Escrow Instructions with
Ontario Ventures I, LLC. (See "Part 1, Item 1. Business - Property
Development"). Located on the Mill Site Property is extensive infrastructure,
including, water and sewage treatment facilities, and one vacant major
industrial building. All other major buildings previously on the Mill Site
Property have been demolished as part of the redevelopment of the Mill Site
Property. The Company has historically had a number of short-term lease
arrangements with unaffiliated entities for portions of this Mill Site Property.
There are no tenants on the Mill Site Property except for one tenant whose right
to occupancy expires within four months and the company located on the West Slag
Pile Property that processes slag and pays the Company a royalty.
There is one active deep water well on the property, with capacity
significantly in excess of the current water needs for the property. This well
is currently used only for irrigation purposes by TCS. See "Part I, Item 1.
Business." The Company originally had adjudicated water rights to extract 2,930
acre-feet of water per year for use on the property. However, the Company as
part of the transaction with PMI and the Company's agreement to sell a portion
of these water rights to CSI, an adjoining landowner, in connection with the
settlement of certain disputes and litigations with such company, the Company
owns the following water rights associated with the Mill Site Property: (i) 525
annual acre feet; (ii) 475 annual acre feet as tenants in common with The
California Speedway Corporation which has the right of first use; and (iii) 630
acre feet as tenants in common with CSI, with CSI having the first right of use,
with payment to the Company, through June 30, 2004 and the Company having the
first right of use thereafter without any payment to CSI. Pursuant to a
settlement agreement reached with the California Regional Water Quality Control
Board in 1993, the Company is obligated to contribute 1,000 acre feet of water
per year for 25 years for the purposes of a regional de-salter project. In
1995, the Company contributed 18,000 acre feet of water in storage, which
satisfied the Company's obligation under the settlement agreement for the first
18 years. In 1998, the Company contributed an additional 7,000 acre feet of
water in storage. Thus, the Company's obligations are now fully satisfied.
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<PAGE>
Further, the DTSC has determined that limited portions of the property require
environmental remediation. The Company is working with the DTSC to remediate
the impacted areas. As discussed in "Part I, Item 1. Business - Property
Redevelopment - Mill Site Environmental Matters," the Company undertook a number
of remediation activities in 1999. See "Part 1, Item 1. Business."
Lake Tamarisk, California
Lake Tamarisk is an unincorporated community located two miles northwest of
Desert Center, California and approximately 8 miles from the Eagle Mountain
mine. This community has 150 improved lots situated around two recreational
lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home
park, the community has an average year-round population in excess of 150. Lake
Tamarisk Development Corporation ("LTDC"), a wholly owned subsidiary of the
Company, owns 77 improved lots including one residential structure. LTDC also
owns a 240 acre parcel of unimproved land across the highway from the main
entrance to Lake Tamarisk.
Other Real Estate Properties
The Company owns numerous small land parcels and iron ore deposits in the high
desert area of Southern California and in Huerfano and Archuleta Counties in
Colorado, including the Silver Lake Mine west of Baker, California and
approximately 190 acres near Afton Canyon, California.
Fontana Union Water Company
The Company, through a wholly owned subsidiary, currently owns 8,057.03 shares
or approximately 53.71% of the outstanding stock of Fontana Union, a California
mutual water company. These shares entitle the Company (or its lessee) to
receive, at cost, its proportionate share of Fontana Union's water. Fontana
Union owns surface and groundwater rights in the Fontana, California area with
annual average production of approximately 34,000 acre-feet (plus approximately
3,500-4,000 acre feet relating to the annual Chino Basin agricultural pool
transfer). All of the Company's shares of Fontana Union stock are currently
leased to Cucamonga, except for approximately 424.4 of the Fontana Union shares
purchased in March 2000. The lease of such shares to Cucamonga is currently
pledged as collateral for the Company's $30,000,000 revolving-to-term credit
facility. See "Part I, Item 1. Business - Water Resources." and "Item 3. Legal
Proceedings."
Item 3. LEGAL PROCEEDINGS
The Company, in the normal course of its business, is involved in various
claims and legal proceedings. A number of litigation matters previously
reported have settled and such settlements did not have a material adverse
impact on the Company's financial statements. Except for those matters
described below, management believes these matters will not have a material
adverse effect on Kaiser's business or financial condition. Significant legal
proceedings, including those which may have a material adverse effect on the
Company's business or financial condition, are summarized as follows:
Litigation
Eagle Mountain Landfill Project Litigation. This litigation involved legal
challenges to the EIR for the Landfill Project certified by the Riverside County
Board of Supervisors in October 1992. These cases were heard in the San Diego
County Superior Court in 1994. The Court's decisions required MRC to prepare a
new EIR, which was completed and certified in September 1997. The original
litigation against the EIR was resumed before Judge Judith McConnell of the San
Diego County Superior Court. In February 1998, the San Diego County Superior
Court announced its final decision and concluded that the new EIR was still
deficient in two principal respects. The Court's two remaining areas of concern
involve
24
<PAGE>
the threatened desert tortoise and Joshua Tree National Park. The Superior
Court's decision was appealed.
On May 7, 1999, a unanimous three-judge panel of the California Court of
Appeal, 4th Appellate District, Division 1, completely overturned the prior
adverse decision of the San Diego Superior Court on the Landfill Project's
environmental impact report. The California Supreme Court on July 21, 1999,
denied the opponents request that the Court of Appeal's decision be reviewed and
overturned. Accordingly, landfill opponents have effectively exhausted their
challenges under the California Environmental Quality Act.
Related to the EIR litigation was the award of approximately $300,000 of
attorneys' fees to project opponents prior to the announcement of the Court of
Appeal decision. This matter has also been appealed, and all briefs have been
filed. A decision in the matter is anticipated by year end.
Separately, opponents to the Landfill Project appealed to the California Water
Board the issuance of the waste discharge requirements permit for the Landfill
Project unanimously approved in September 1999 by the California Regional Water
Quality Control Board, Lower Colorado River Basin. A stay of the issuance of the
permit was also sought. The appeal and the stay request were denied in December
1999.
In October 1999, the Company's wholly owned subsidiary, Kaiser Eagle Mountain,
Inc., completed a land exchange with the U. S. Bureau of Land Management
("BLM"). This completed land exchange has been challenged in two separate
federal lawsuits.
By way of background, for some time the Company had planned to transfer to the
BLM approximately 2,800 acres of Kaiser-owned property along its railroad right-
of-way, which was identified as prime desert tortoise habitat, in exchange for
fee ownership of approximately 3,500 acres of land within the Landfill Project
area. In September 1997, the BLM approved the proposed land exchange. A number
of protests to the land exchange were received, which protests were denied by
the BLM in December 1998. As anticipated, in January 1999, the same two
opponents in the EIR litigation discussed above filed an appeal with the
Interior Board of Land Appeals ("IBLA") challenging the BLM's decision to
proceed with the land exchange. On September 30, 1999, the IBLA issued its
decision upholding the decision of the BLM to engage in the proposed land
exchange with the Company. This positive decision paved the way for completion
of the land exchange.
In December 1999, the first case was filed challenging the land exchange -
Donna Charpied; Laurence Charpied; et al. v. United States Department of the
Interior; Bureau of Land Management; et al, (United States District Court for
the Central District of California, Riverside Division, Case No. EDCV 99-0454
RT(MCx)). In January 2000, a second case was filed - National Parks and
Conservation Association v. Bureau of Land Management, et al. (United States
District Court for the Central District of California, Riverside Division, Case
No. EDCV-00-0041 VAX (JWJx)). It is anticipated that both cases will be
consolidated into one hearing. The same general opponents that lost the appeal
before the IBLA have brought these latest legal challenges. In sum, plaintiffs
argue that the land exchange should be reversed because the BLM failed to comply
with the National Environmental Policy Act and the Federal Land Management
Policy Act. The Company believes the challenges are without merit.
For additional information on the Landfill Project litigation, see
"Introduction - Business Update - Waste Management - Eagle Mountain" of this 10-
K Report.
Cucamonga Litigation. In 1996, the Company initiated legal action against
Cucamonga. The dispute involved amounts owed to the Company under the terms of
its lease of Fontana Union Water stock to Cucamonga. The dispute arose out of a
change made by the Metropolitan Water District in its water rates and rate
structure effective July 1, 1995. After a trial on the matter, the San
Bernardino County Superior
25
<PAGE>
Court ruled that the lease rate had been discontinued effective July 1, 1995.
Thus, the parties are required to negotiate in good faith a substitute lease
rate as provided under the terms of the lease with Cucamonga. Since the parties
have been unable to negotiate a new substitute rate, the Cucamonga Lease
requires that the matter will be resolved in a reference proceeding. A reference
proceeding is in effect a private trial. During the week of February 28, 2000,
all the testimony in the reference proceeding was presented. The judge requested
further briefing and a final oral argument which is currently scheduled for May
15, 2000. The decision in the matter is anticipated within approximately 60 days
following the closing agrument. For more detailed information, please see "Part
I, Item 1. Water Resources - Lease to Cucamonga County Water District."
Mushegain Litigation Settlement. During the third quarter of 1999, a
settlement was reached with regard to the litigation brought by a landowner that
had rented out his property to a tenant that performed work during the
construction of the California Speedway. The landowner alleged that debris,
including possible hazardous substances, were deposited in and on the
landowner's property by the former tenant and that the source of some of the
debris was from the demolition activities on the California Speedway property.
The tenant acknowledged responsibility for the conditions created on the
property but effectively became bankrupt. The landowner then sought
contribution from The California Speedway Corporation and the Company. Given
the time and expense involved in the case, the parties ultimately reached a
settlement. The Company's final allocation of the settlement has yet to be
determined, but it will not exceed $500,000. Mary Mushegain v. The California
Speedway, et. al (United States District Court, Central District of California,
Case No. CV 98-6786).
City of Richmond Litigation. During the third quarter of 1999, the City of
Richmond, located in Northern California, joined the Company in federal
litigation it commenced against several entities, alleging that the City was
entitled to recover past and future environmental clean-up costs associated with
property owned by the City of Richmond. Apparently, the property currently
owned by Richmond includes portions of World War II era shipyard construction
and demolition facilities. It is alleged that the Company's predecessor
demolished ships for approximately a two-year period in the 1940's and thus,
contributed to the contamination of the property. Litigation was commenced
against the City of Richmond in the U.S. Bankruptcy Court for the District of
Colorado to hold the City of Richmond and certain officials in contempt for
violating the bankruptcy order. Subsequent to the commencement of the contempt
proceeding, a settlement was reached whereby the City of Richmond was allowed a
late unsecured general creditor claim in the KSC bankruptcy estate. The amount
in stock and cash to be paid by the bankruptcy estate is currently estimated to
be less than $150,000. City of Richmond, et al v. Levin Enterprises, Inc., et
al. (United States District Court, Northern District of California, Case No. C-
97-3213 CRB).
7-7 PRP Site. The U.S. Environmental Protection Agency has alleged that the
Company, along with a number of other entities, is responsible for clean-up and
oversight costs associated with the remediation of one of more sites located in
Ohio formally owned or operated by 7-7, Inc. 7-7, Inc. was a remediation
contractor. 7-7, Inc. was retained by the Company in connection with certain
remediation projects. Since, the Company believes it could be found to be a de
minimis potentially responsible party, the Company along with a number of other
entities entered into a consent order with the EPA. The Company's liability, if
any, is currently estimated to be less than $150,000.
Asbestos Suits. The Company along with KSC are currently named in
approximately forty (40) active asbestos lawsuits. The Company and KSC have
been previously named in other asbestos suits but for various reasons those
suits are not currently being pursued. Most of the plaintiffs alleged that they
worked in shipyards in the Oakland/San Francisco, California area in the 1940's
and that KSC was in some manner associated with one or more shipyards or has
successor liability from another "Kaiser" entity. Most of these lawsuits are
third party premises claims claiming injury resulting from exposure to asbestos
and involve multiple defendants. The Company anticipates that it will be named
as a defendant in additional asbestos lawsuits. Virtually of the complaints are
non-specific. As such it is not practical at
26
<PAGE>
this time to determine the true nature and extent of the claims against the
Company and KSC. To date, several, but not all, of the plaintiffs have agreed
that they will not personally pursue the Company, but they have been granted the
right to pursue the Company's insurance coverage, to the extent there is
coverage. The Company currently believes that it does have insurance coverage
for at least a portion of the claims and has tendered these suits for defense.
The Company also currently believes that it has various defenses to these
claims, including the discharge granted to it in connection with KSC's
bankruptcy reorganization. The KSC bankruptcy estate, through KSC Recovery has
been incurring defense costs, which should in large part be reimbursed by
insurance. However, there currently is a dispute as to the amount of insurance
coverage. The Company and KSC Recovery are engaged in settlement negotiations
with insurance carriers with regard to the coverage dispute. Asbestos litigation
is an evolving area of the law and the factual discovery with respect to many of
these lawsuits has not been completed.
City of Ontario Litigation. There has been no material change in this matter
since the 1998 10-K Report. By way of background, on February 27, 1996, the
City of Ontario, California served on the Company a complaint filed in San
Bernardino County Superior Court (City of Ontario v. Kaiser Ventures Inc., et
al.; Case No. RCV 17334). In sum, the complaint alleges that a plume or plumes
containing organic carbon, dissolved solids and mercury originating from the
Company's Mill Site Property due to activities of KSC and/or a former tenant of
the Mill Site Property have impacted one of the City of Ontario's water wells.
Ontario seeks reimbursement for remedial costs, replacement of the allegedly
impacted well and replacement or improvement or refurbishment of related
facilities.
The Company challenged Ontario's ability to bring this litigation given the
KSC bankruptcy and the discharge granted to the Company. In April 1996, Ontario
brought a declaratory judgment action in the U.S. District Court for the
District of Colorado in Bankruptcy (the "U.S. Bankruptcy Court") against the
Company, (City of Ontario v. Kaiser Ventures Inc., Adversary Proceeding No. 96-
1215 MSK). In the U.S. Bankruptcy Court action, Ontario in effect sought a
determination that the matters and damages alleged in its California lawsuit
were not discharged as a part of the KSC bankruptcy proceedings.
The Company and the City reached a settlement concerning the matter before the
U.S. Bankruptcy Court which was approved by the U.S. Bankruptcy Court in
October. Under the terms of the settlement, the Company has agreed to waive its
bankruptcy-related defenses to the City's prosecution of claims for groundwater
contamination caused by mercury or other priority pollutants. In return, the
City agreed to dismiss the California litigation as to all claims related to
total dissolved solids, total dissolved carbons and sulfates, and to be bound by
the 1993 Settlement Agreement between Kaiser and the California Regional Water
Quality Control Board. The City has informed the Company that its well tests do
not currently indicate the presence of mercury. However, the City continues to
assert that the Company is responsible for the impact of total dissolved solids
at the well. The City has not yet filed an amended complaint. The Company and
the City of Ontario are continuing to engage in informal discovery and
discussions. The Company currently believes it has numerous defenses in the
litigation.
Willow Creek Shareholder Litigation. On December 20, 1999, the Company was
served with a complaint challenging and seeking damages in connection with a
transaction completed on November 22, 1999, pursuant to which the Company
purchased a substantial portion of its common stock from The New Kaiser
Voluntary Employees' Beneficiary Association ("VEBA") and the Pension Benefit
Guaranty Corporation ("PBGC"). The litigation was initiated by a shareholder of
the Company, but the matter was not a class action lawsuit. On March 9, 2000,
this federal lawsuit was voluntarily dismissed, without prejudice, by the
plaintiffs. However, it is the Company's understanding that the plaintiffs
intend to file a new lawsuit in California State Court in the near future.
Willow Creek Capital Partners, L.P. a Delaware limited partnership; and Willow
Creek Offshore, v. Kaiser Ventures Inc. et al. (United States District Court,
Northern District of California, Case No. C99 5188 SBA).
27
<PAGE>
Bankruptcy Claims
The Company's predecessor, KSC, was in reorganization under Chapter 11 of the
United States Bankruptcy Code from February 1987 until November 1988. Pursuant
to the KSC Plan of Reorganization (the "KSC Plan"), the Company established a
subsidiary, KSC Recovery, which was engaged in the process of pursuing certain
legal actions on behalf of the former creditors of KSC and handling the
remaining administrative duties of the KSC bankruptcy estate, including claims
resolution. All litigation and bankruptcy administration costs are borne by KSC
Recovery, which maintains a cash reserve from previous litigation and other
recoveries to fund anticipated ongoing litigation and administration costs. All
major remaining claims in the bankruptcy estate were settled in 1995, with
completion of one major settlement occurring in 1996. Resolution of these
claims allowed for a distribution of cash and stock to most of the unsecured
creditors of the KSC bankruptcy estate in the second quarter of 1996.
Consistent with KSC Recovery's role solely as an agent of the former KSC
creditors, the Company's consolidated statements of operations and cash flows do
not reflect any of KSC Recovery's activities. Because of the minimum activities
of the KSC bankruptcy estate, the Bankruptcy Court terminated its supervision
over the estate in October 1996. However, the bankruptcy estate was reopened in
1999 to address certain litigation matters.
From time-to-time, various other environmental and similar types of claims,
such as the environmental and asbestos litigation mentioned above, that relate
to KSC pre-bankruptcy activities are asserted against KSC Recovery and the
Company. In connection with the KSC Plan, the Company, as the reorganized
successor to KSC, was discharged from all liabilities that may have arisen prior
to confirmation of the KSC Plan, except as otherwise provided by the KSC Plan
and by law. Although the Company believes that in general all pre-petition
claims were discharged under the KSC Plan, in the event any of these claims or
other similar claims are ultimately determined to survive the KSC bankruptcy, it
could have a material adverse effect on the Company.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
28
<PAGE>
PART II
Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock commenced trading on the NASDAQ Stock Marketsm in
the fourth quarter of 1990 under the symbol "KSRI." In June 1993, Kaiser
changed its name to Kaiser Resources Inc. and symbol to "KRSC." Most recently,
the Company changed its name, in June 1995, to Kaiser Ventures Inc., but its
trading symbol remained the same. The following table sets forth the range of
the high and low reported bid price of the Company's Common Stock for the
periods indicated, as reported on the NASDAQ Stock Marketsm.
Low High
--- ----
1999:
Fourth quarter.............................. $11.88 $16.75
Third quarter............................... $12.13 $14.13
Second quarter.............................. $ 8.13 $14.00
First quarter............................... $ 8.00 $10.00
1998:
Fourth quarter.............................. $ 8.25 $11.38
Third quarter............................... $ 8.00 $12.13
Second quarter.............................. $ 9.88 $14.25
First quarter............................... $ 9.50 $12.75
As of March 10, 2000, there were approximately 2,200 holders of record of the
Company's Common Stock.
As of March 10, 2000, the Company held 136,919 shares that are deemed
outstanding but reserved for issuance to the former general unsecured creditors
of KSC pursuant to the KSC Plan.
The Company has neither declared nor paid any cash dividends on its Common
Stock since emerging from the KSC bankruptcy in November 1988. Any future
decisions by the Company to pay cash on other dividends will depend upon its
growth, profitability, financial condition and other factors the Board of
Directors may deem relevant. No assurance can be given that the Company will
pay dividends at any time in the future.
Purchase of Shares
On November 22, 1999, the Company purchased 2,730,950 and 1,693,551 shares of
its common stock from The New Kaiser Voluntary Employees' Beneficiary
Association ("VEBA") and The Pension Benefit Guaranty Corporation ("PBGC"),
respectively. The shares were repurchased in accordance with a separate Stock
Purchase Agreement entered into between each seller and the Company. The
Company paid $13.00 per share in cash. In addition, VEBA and PBGC have the
opportunity to receive a contingent real estate payment calculated in accordance
with an agreed upon formula if there is a bulk sale of the Company's real estate
generally before December 31, 2000 ("Contingent Payment Agreement").
Furthermore, warrants for 460,000 and 285,260 shares of the Company's stock were
issued to VEBA and PBGC, respectively ("Stock Purchase Warrants"). The warrants
have a term of five years and an exercise price of $17.00 per share. VEBA and
the PBGC each have demand registration rights for the shares issued upon
exercise of the warrants as long as the registration can be accomplished through
the use of a Form S-3 or a comparable form, subject to the terms and conditions
of a Registration Rights Agreement.
29
<PAGE>
If all currently contemplated real estate transactions are closed under
their current terms as of the date of this Report, VEBA and PBGC would receive
an additional cash payment of approximately $1.10 per share. The Company has
reserved the right to distribute to the Company's shareholders the same amount
of cash that would be received by VEBA and PBGC pursuant to the Contingent
Payment Agreement without adjustment of the warrant price.
The Company used cash on hand to fund the purchase of the stock, including
the cash resulting from the merger between PMI and ISC, and subsequent sale of
ISC common stock.
The foregoing summary description of each Stock Purchase Agreement,
Contingent Payment Agreement, Stock Purchase Warrants, Registration Rights
Agreement, and the exhibits thereto (collectively the "Transaction Documents"),
and the transactions contemplated therein, does not purport to be complete and
is qualified in its entirety by reference to each of the Transaction Documents
which are exhibits to this 10-K Report.
Annual Meeting
A combined 1999/2000 meeting of the Company's shareholders is currently
scheduled for May 10, 2000, beginning at 9:00 a.m. (California time) in Ontario,
California.
[Intentionally Left Blank]
30
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, related notes and other
financial information included herein.
<TABLE>
<CAPTION>
Selected Statement of Income Data
for the years ended December 31: 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues....................................... $ 51,626,000 $ 9,873,000 $10,006,000 $ 15,331,000 $ 11,053,000
Costs and expenses................................... 15,898,000 7,315,000 7,815,000 7,066,000 7,938,000
------------ ------------ ----------- ------------ ------------
Income from operations............................... 35,728,000 2,558,000 2,191,000 8,265,000 3,115,000
Net interest expense................................. 498,000 1,083,000 672,000 819,000 665,000
------------ ------------ ----------- ------------ ------------
Income before income tax provision................... 35,230,000 1,475,000 1,519,000 7,446,000 2,450,000
Taxes currently payable.............................. 8,364,000 12,000 43,000 92,000 --
Deferred tax expense (benefit)....................... (3,211,000) 126,000 74,000 840,000 721,000
Deferred tax expense credited to equity.............. 6,048,000 105,000 554,000 3,945,000 335,000
------------ ------------ ----------- ------------ ------------
Net income........................................... $ 24,029,000 $ 1,232,000 $ 848,000 $ 2,569,000 $ 1,394,000
============ ============ =========== ============ ============
Earnings per share
Net Income
Basic............................................. $ 2.35 $ .12 $ .08 $ .24 $ .13
Diluted........................................... $ 2.31 $ .11 $ .08 $ .24 $ .13
Basic Weighted average
number of shares outstanding......................... 10,226,000 10,664,000 10,536,000 10,486,000 10,456,000
Diluted Weighted average
number of shares outstanding......................... 10,386,000 10,840,000 10,740,000 10,730,000 10,654,000
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data
as of December 31: 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and
short-term investments............................ $ 14,686,000 $ 3,409,000 $ 4,330,000 $ 8,482,000 $ 10,937,000
Working capital...................................... 5,170,000 (2,487,000) (4,685,000) (1,240,000) 2,821,000
Total assets......................................... 103,445,000 142,942,000 139,265,000 134,067,000 126,803,000
Long-term debt....................................... --- 13,750,000 8,982,000 8,102,000 5,342,000
Long-term environmental
remediation reserves.............................. 23,868,000 24,465,000 24,673,000 26,466,000 32,176,000
Stockholders' equity................................. 60,890,000 87,838,000 86,204,000 81,448,000 68,697,000
Shares outstanding................................... 6,317,000 10,685,000 10,591,000 10,488,000 10,471,000
Book value per share................................. $ 9.64 $ 8.22 $ 8.14 $ 7.77 $ 6.56
</TABLE>
(1) The deferred tax expense credited to equity represents taxes that are
recorded by the Company for financial reporting purposes, but are not
payable due to the Company's utilization of Net Operating Loss ("NOL")
benefits from losses arising prior to and through the KSC bankruptcy.
Although the amount of this benefit is not included in net income,
stockholders' equity is increased in an amount equal to the NOL tax benefit
reported. NOL carryforwards at December 31, 1999, were approximately $35
million for federal income tax purposes.
(2) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128,
Earnings Per Share. For further discussion of earnings per share and the
impact of Statement No. 128, see the notes to the consolidated financial
statements beginning on page 62.
31
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Section 1: Operating Results
Kaiser Ventures Inc. ("Kaiser" or the "Company") is an asset development
company pursuing project opportunities and investments in water resources,
property redevelopment and solid waste management. The Company's long-term
emphasis is on the further development of its principal assets: (i) an
approximately 53.71% ownership interest in Fontana Union Water Company ("Fontana
Union"), a mutual water company; (ii) approximately a 75% ownership interest in
Mine Reclamation Corporation ("MRC"), the developer of the Eagle Mountain
Landfill Project (the "Landfill Project"); (iii) a 50% ownership interest in the
West Valley MRF ("WVMRF"), a transfer station and recycling facility located on
land acquired from the Company; (iv) approximately 634 acres (gross) of the
former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property") which is currently undergoing redevelopment; and (v) the 9,144 acre
idle iron ore mine in the California desert (the "Eagle Mountain Site"), which
includes the associated 1,100 acre town of Eagle Mountain ("Eagle Mountain
Townsite") and the land leased to MRC for the Landfill Project. During 1999
Penske Motorsports Inc. ("PMI") merged with International Speedway Corporation
("ISC"). As a result of the merger, the Company received cash and common stock
in ISC. The Company sold all of its ISC common stock during 1999. The Company is
also pursuing other related longer-term growth opportunities on the balance of
its Mill Site Property, including the redevelopment of industrial and commercial
parcels of land near TCS and the WVMRF.
Summary of Significant Developments in 1999
During 1999, a number of events occurred which affected the Company.
Therefore, readers are encouraged to read this Report it in its entirety in
order to adequately understand the impact of these events on the Company.
However, management of the Company would like to particularly highlight four
areas: (1) the success of the Landfill Project including, (i) the positive
outcome of the appeal of the San Diego Superior Court's prior adverse ruling
relative to the Landfill Project's environmental impact report ("EIR"), (ii)
completion of the federal land exchange that is necessary for the Landfill
Project, and (iii) securing the last major permit necessary to site and operate
the Landfill Project; (2) the approval of the entitlements for the 406 acre
Kaiser Commerce Center, a substantial portion of the Mill Site Property, and the
Company subsequently entering into a contract for the sale of virtually all the
Mill Site Property; (3) the merger of PMI into ISC and the Company's subsequent
sale of the ISC stock received in the merger; and (4) the Company's repurchase
of approximately 41% of its issued and outstanding stock.
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. Property redevelopment revenues primarily reflect
revenues from long-term redevelopment activities at the Mill Site Property,
including water and waste water treatment revenues; housing rental income,
aggregate and 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 (i.e., PMI) and, starting in 1997, a limited liability
company (i.e., West Valley MRF) which the Company accounts for under the equity
method.
32
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
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, royalty revenues from the
sale of recyclable revert materials and other miscellaneous short-term
activities. Revenues from these activities are declining rapidly as the
development of the remaining Mill Site property proceeds.
Summary of Revenue Sources
Due to the developmental nature of certain Company projects and the
Company's recognition of revenues from bankruptcy-related and other non-
recurring items, historical period-to-period comparisons of total revenues may
not be meaningful for developing an overall understanding of the Company.
Therefore, the Company believes it is important to evaluate the trends in the
components of its revenues as well as the recent developments regarding its
long-term ongoing and interim revenue sources. See "Part I, Item 1. Business"
for a discussion of recent material events affecting the Company's revenue
sources.
Results of Operations
Analysis of Results for the Years Ended December 31, 1999 and 1998
An analysis of the significant components of the Company's resource
revenues for the years ended December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 1998 % Inc. (Dec)
---- ---- ------------
<S> <C> <C> <C>
Ongoing Operations
Water resource.......................................... $ 5,228,000 $5,201,000 1%
Property redevelopment.................................. 1,480,000 1,487,000 --%
Gain on merger of PMI into ISC.......................... 35,713,000 --- N/A
Gain on sale of ISC common stock........................ 6,575,000 --- N/A
Income (loss) from equity method
investments
Penske Motorsports Inc............................... (329,000) 1,903,000 N/A
West Valley MRF, LLC................................. 910,000 40,000 2175%
Mill Site land sales.................................... 1,622,000 --- N/A
----------- ---------- ---------
Total ongoing operations............................... 51,199,000 8,631,000 493%
----------- ---------- ---------
Interim Activities....................................... 427,000 1,242,000 (66%)
----------- ---------- ---------
Total resource revenues................................ $51,626,000 $9,873,000 423%
=========== ========== =========
Revenues as a Percentage of Total Resource Revenues:
Ongoing operations................................... 99% 87%
Interim activities................................... 1% 13%
----------- ----------
Total resource revenues............................. 100% 100%
=========== ==========
</TABLE>
Resource Revenues. Total resource revenues for 1999 were $51,626,000,
compared to $9,873,000 for 1998. Revenues from ongoing operations increased 493%
during the year to $51,199,000 from $8,631,000 in 1998, while revenues from
interim activities declined 66% to $427,000 from $1,242,000 in 1998. Revenues
from ongoing operations as a percentage of total revenues increased to 99% in
1999 from 87% in 1998. This significant increase reflects the unusual non-
recurring on-going revenues recorded during 1999.
33
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $5,228,000 during 1999 compared to $5,201,000
for 1998. The slight increase in water revenues primarily reflects an increase,
effective January 1, 1999, in the Company's effective interest in Fontana Union
from 57.33% to 57.37%, due to a decline in the number of Fontana Union
shareholders taking water. 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 report revenues on the basis of amounts Cucamonga is currently
paying. The total amount of lease payments in dispute as of December 31, 1999 is
approximately $2,575,000. In addition, MWD has stated that it may further refine
its rate structure in the future.
Property redevelopment revenues were $1,480,000 for 1999 compared to
$1,487,000 for 1998. The slight decrease from 1998 is primarily a result of
lower other revenue sources.
Income (loss) from equity method investments decreased to $581,000 for 1999
from $1,943,000 for 1998. The decrease of $1,362,000 reflects the discontinuance
of recording equity income from PMI ($2,082,000) effective April 1, 1999 due to
the merger between ISC and PMI that was announced in May 1999, and an increase
in the reported first quarter net loss of PMI ($150,000) being partially offset
by an increase in equity income from the WVMRF ($870,000).
During the third quarter of 1999, ISC consummated its merger with PMI,
purchasing the 88% of PMI's common stock it did not already own for $50.00 per
share. Kaiser received, under the cash and stock election of 30% and 70%
respectively, $24.4 million in cash and 1,187,407 shares of ISC Class A common
stock. As a result of the merger the Company recognized a gain of $35.7 million.
Subsequent to the merger of PMI into ISC, the Company commenced an orderly
liquidation of its position in the common stock of ISC. By the middle of
November 1999, the Company had completed the sale of its ISC common stock
resulting in a gain of $6.6 million. The Company's average sales price for a
share of ISC common stock was $53.52 during this orderly sale.
Interim Activities. Revenues from interim activities for 1999 were $427,000
compared to $1,242,000 for 1998. The 66% decrease in revenues from interim
activities in 1999 is primarily attributable to lower revenues from tenant
rental and services and from sales of metallics and scrap at the Mill Site
Property due to the continuing real estate redevelopment activities ($843,000)
being partially offset by higher tenant service and miscellaneous revenue at
Eagle Mountain ($28,000).
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for 1999
increased to $11,112,000 from $3,468,000 in 1998. The principal reason for this
increase was the pending bulk sale of virtually all the Mill Site Property to
Ontario Ventures I, LLC, which required the Company to record a write-down to
net realizable value of $8,350,000 during 1999. Operations and maintenance costs
for 1999 were $863,000 compared to $1,260,000 for 1998. The 32% decrease in 1999
operations and maintenance costs was primarily due to lower salaries at the Mill
Site ($51,000) and lower maintenance and supply costs for buildings and
equipment at both the Mill Site Property and Eagle Mountain ($346,000).
Administrative support expenses for 1999 decreased 14% to $1,899,000 from
$2,208,000 for 1998. This decrease was primarily due to: (a) lower outside legal
and professional costs ($230,000); (b) the reduction of certain reserves for bad
debt ($112,000); and (c) lower employee compensation expenses ($60,000) being
partially offset by restructuring charges relating to planned layoffs at the
Mill Site ($100,000).
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KAISER VENTURES INC. AND SUBSIDIARIES
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 1999 increased 24% to $4,786,000 from $3,847,000 for
1998. The increase was due to higher compensation and related expenses
($424,000) and higher professional and outside consulting expenses ($514,000).
All of the increase in professional and outside consulting expenses was related
to the VEBA/PBGC share repurchase that was completed in November 1999.
Net Interest Expense. Net interest expense for 1999 was $498,000 compared
to $1,083,000 in 1998. The decrease was due primarily to higher interest income
from higher cash/investment balances from the proceeds of the merger of PMI into
ISC and subsequent sale of ISC common stock ($777,000) slightly offset by higher
interest expense ($192,000) associated with the additional long term debt from
January 1999 thru early December 1999, when all of the outstanding debt was
paid-off.
Income and Income Tax Provision. The Company recorded income before income
tax provision of $35,230,000 for 1999, a 23-fold increase from the $1,475,000
recorded in 1998. A provision for income taxes of $11,201,000 was recorded in
1999 as compared with $243,000 in 1998. In 1999 approximately 75% of the tax
provision is currently payable as the Company reported income in excess of its
California NOLs. Historically, over 90% of the tax provision was not currently
payable, as was the case in 1998, due primarily to utilization of the Company's
net operating loss carryforwards ("NOLs") for both federal and California
purposes. Consequently, pretax income is an important indicator of the Company's
performance.
Net Income. For 1999, the Company reported net income of $24,029,000, or
$.2.35 per share, a 19-fold increase from the $1,232,000, or $.12 per share,
reported for 1998.
Analysis of Results for the Years Ended December 31, 1998 and 1997
An analysis of the significant components of the Company's resource
revenues for the years ended December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1998 1997 % Inc. (Dec)
---- ---- ------------
<S> <C> <C> <C>
Ongoing Operations
Water resource............................................. $5,201,000 $ 5,143,000 1%
Property redevelopment..................................... 1,487,000 1,213,000 23%
Income from equity method investments...................... 1,943,000 2,003,000 (3%)
---------- ----------- -------
Total ongoing operations.................................. 8,631,000 8,359,000 3%
---------- ----------- -------
Interim Activities
Lease, service and other................................... 1,242,000 1,647,000 (25%)
---------- ----------- -------
Total interim activities.................................. 1,242,000 1,647,000 (25%)
---------- ----------- -------
Total resource revenues................................... $9,873,000 $10,006,000 (1%)
========== =========== =======
Revenues as a Percentage of Total Resource Revenues:
Ongoing operations......................................... 87% 84%
Interim activities......................................... 13% 16%
---------- -----------
Total resource revenues................................... 100% 100%
========== ===========
</TABLE>
Resource Revenues. Total resource revenues for 1998 were $9,873,000,
compared to $10,006,000 for 1997. Revenues from ongoing operations increased 3%
during the year to $8,631,000 from $8,359,000 in 1997, while revenues from
interim activities declined 25% to $1,242,000 from $1,647,000 in 1997.
35
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KAISER VENTURES INC. AND SUBSIDIARIES
Revenues from ongoing operations as a percentage of total revenues increased to
87% in 1998 from 84% in 1997.
Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $5,201,000 during 1998 compared to $5,143,000
for 1997. The slight increase in water revenues primarily reflects: (a) an
increase, as of July 1, 1998, in the lease rate being paid by Cucamonga from
$351.75 to $354.00 per acre foot; and (b) an increase, effective January 1,
1998, in the Company's effective interest in Fontana Union from 55.66% to
57.33%, due to a decline in the number of Fontana Union shareholders taking
water. 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 report
revenues on the basis of amounts Cucamonga is currently paying. The total amount
of lease payments in dispute as of December 31, 1998 is approximately
$1,895,000. In addition, MWD has stated that it may further refine its rate
structure in the future.
Property redevelopment revenues were $1,487,000 for 1998 compared to
$1,213,000 for 1997. The 23% increase from 1997 is primarily a result of higher
sewer treatment plant and other revenues.
Income from equity method investments decreased slightly to $1,943,000 for
1998 compared to $2,003,000 for 1997. The $60,000 decrease is primarily the
result of: (a) the reduction in the management fee which the Company had
received from PMI through March 31, 1997 ($163,000) partially offset by
increases in the Company's share of the reported net income of PMI for the year
($63,000), of which the Company recorded its 11.53% weighted average share, and
equity income from the operation of the WVMRF ($40,000). The Company's equity
interest in PMI increased during the fourth quarter of 1998, from 11.51% to
11.73% as a result of a stock repurchase plan implemented by PMI. As previously
disclosed, the Company is recording its investment in PMI on the equity method
and began recording its share of PMI's net income concurrent with conversion of
the Company's preferred stock into common stock at the end of the first quarter
of 1996.
Interim Activities. Revenues from interim activities for 1998 were
$1,242,000 compared to $1,647,000 for 1997. The 25% decrease in revenues from
interim activities in 1998 is primarily attributable to: (a) lower revenues from
tenant rental and services and from sales of metallics and scrap at the Mill
Site Property due to the continuing real estate redevelopment activities
($356,000); and (b) lower tenant service and miscellaneous revenue at Eagle
Mountain ($50,000).
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for 1998
decreased to $3,468,000 from $3,654,000 in 1997. Operations and maintenance
costs for 1998 were $1,260,000 compared to $1,311,000 for 1997. The 4% decrease
in 1998 operations and maintenance costs was primarily due to lower maintenance
and supplies for buildings and equipment at both the Mill Site Property and
Eagle Mountain ($96,000) plus lower security costs at the Mill Site Property
($45,000), partially offset by higher property tax expense ($25,000) and outside
labor and professional expenses at both the Mill Site Property and Eagle
Mountain ($67,000). Administrative support expenses for 1998 decreased 6% to
$2,208,000 from $2,343,000 for 1997. This decrease was primarily due to: (a)
lower insurance expense ($122,000); (b) lower outside legal and professional
costs ($79,000); and (c) lower employee compensation expenses ($38,000) being
partially offset by higher depreciation expense mainly related to the recently
completed sewer plant improvements at the Mill Site Property ($109,000).
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 1998 decreased 8% to $3,847,000 from $4,161,000 for
1997. The decrease was due to lower
36
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
compensation and related expenses ($393,000) and lower insurance expense
($40,000) being partially offset by higher professional and outside consulting
expenses ($117,000).
Net Interest Expense. Net interest expense for 1998 was $1,083,000 compared
to $672,000 in 1997. The increase was due primarily to: (a) higher interest
expense ($122,000) associated with the $4,650,000 in additional long term debt
($9,750,000 in additional borrowings under the Company's Union Bank
revolving-to-term credit facility less the $5,102,000 payoff of the Lusk note
which occurred in June 1998); (b) lower capitalized interest relating to the
development of the Mill Site Property ($180,000); (c) an increase in the
amortization of deferred loan fees ($88,000); and (d) lower interest income from
lower cash/investment balances ($17,000).
Income and Income Tax Provision. The Company recorded income before income
tax provision of $1,475,000 for 1998, and 3% decrease from the $1,519,000
recorded in 1997. A provision for income taxes of $243,000 was recorded in 1998
as compared with $671,000 in 1997. Over 90% of the tax provisions for 1998 and
1997 are not currently payable due primarily to utilization of the Company's net
operating loss carryforwards ("NOL's"). Consequently, pretax income is an
important indicator of the Company's performance.
Net Income. For 1998, the Company reported net income of $1,232,000, or
$.12 per share, a 45% increase from the $848,000, or $.08 per share, reported
for 1997.
Section 2: Financial Position
Cash, Cash Equivalents and Short-Term Investments. The Company defines cash
equivalents as highly liquid debt instruments with original maturities of 90
days or less. Cash and cash equivalents increased $11,277,000 to $14,686,000 at
December 31, 1999 from $3,409,000 at December 31, 1998. Included in cash and
cash equivalents is $3,474,000 and $2,545,000 held solely for the benefit of MRC
at December 31, 1999 and 1998, respectively. The increase in cash and cash
equivalents is due primarily to: (a) proceeds from the sale of ISC common stock
($63,552,000); (b) proceeds of the merger of PMI into ISC ($24,419,000) (c)
borrowings under the Company's Union Bank revolving-to-term credit facility
($3,000,000); (d) the sale of Mill Site Property ($2,662,000); (e) equity
fundings by the MRC minority partners ($997,000); (f) distribution from the West
Valley MRF, LLC ($450,000); and (g) the issuance of common stock relating to the
exercise of stock options ($379,000). These increases were partially offset by:
(a) repurchase of common stock from two major shareholders ($57,519,000); (b)
payoff of the Company's Union Bank revolving-to-term credit facility
($16,750,000); (c) cash used by operations ($4,610,000); (d) capital
expenditures ($3,570,000); and (e) environmental remediation costs ($1,808,000).
It should be noted that the large amount of cash used by operations was
primarily due to a partial payment of $4,900,000 for income taxes during the
year.
Working Capital. During 1999, current assets increased $11,208,000 to
$17,056,000 while current liabilities increased $3,551,000 to $11,886,000. The
increase in current assets resulted primarily from the $11,277,000 increase in
cash and cash equivalents and a $285,000 increase in current deferred tax assets
being partially offset by a $361,000 decline in accounts receivable. The
increase in current liabilities resulted primarily from an increase in income
taxes payable ($3,501,000) and an increase in accrued liabilities ($1,176,000)
being partially offset by a decrease in anticipated 2000 environmental
remediation expenditures ($1,305,000). Included in current liabilities for 1999
is $651,000 in accounts payable and accrued liabilities relating to MRC. As a
result, working capital increased during 1999 by $7,657,000 to $5,170,000 at
December 31, 1999.
Real Estate. Real estate decreased $8,865,000 during 1999 due to the write-
down of the Mill Site Property to net realizable value ($8,350,000) and the two
sales of the Napa Lots ($1,040,000) being partially offset by continuing
redevelopment of the Mill Site properties ($525,000).
37
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Investments. As a result of the PMI/ISC merger in July 1999, the Company's
investment in PMI was converted into $24.4 million of cash and $57.0 million (or
1,187,407 shares) of ISC Class A common stock valued at $47.98 per share.
Subsequent to the merger, the Company liquidated its investment in ISC common
stock over a period of three months at an average price of $53.52 per share.
There was a $460,000 increase in the Company's investments in WVMRF during 1999.
The increase is due to the Company's recording of its equity share of WVMRF's
income during 1999 of $910,000 being partially offset by the receipt of a
distribution of $450,000.
Other Assets. The increase in other assets ($3,484,000) is primarily
related to: (a) capitalized landfill permitting and development costs incurred
by MRC ($3,159,000); (b) capital improvements at the Mill Site and Eagle
Mountain ($286,000); and (c) creation of a long term deferred tax asset
($577,000) being partially offset by an increase in accumulated depreciation as
of December 31, 1999 ($430,000) and the amortization of deferred loan fees
($121,000).
Environmental Remediation. As is discussed extensively in "Part I, Item 1.
Business - Property Redevelopment, Mill Site Environmental", 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
$16 million and $26.4 million, depending both upon the ultimate extent of the
environmental remediation and clean-up effort involved and which approved
remediation alternatives are eventually selected.
As of December 31, 1999, the total short-term and long-term environmental
liabilities including remediation reflected on the Company's balance sheet were
approximately $26.4 million, the high end of the probable range of future
remediation and other environmental costs, which declined from the $28.3 million
as of December 31, 1998. The decrease is a result of the $1.9 million in
remediation and other environmental costs incurred during 1999 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. In addition, under the terms of the proposed
sale of virtually all the Mill Site Property, all environmental liabilities,
with limited exceptions, assumed by the buyer of the property.
Long-term Debt. As of December 31, 1999, the Company had no long-term debt
as a result of the payoff of $16,750,000 of previous borrowings under the
Company's $30,000,000 revolving-to-term credit facility with Union Bank during
December 1999.
Other Long-term Liabilities. The decrease in other long-term liabilities is
primarily due to: (a) the reclassification of $1,305,000 of the environmental
remediation reserve from a current to a long term liability which was offset by
$1,902,000 in environmental remediation activities undertaken during 1999; (b) a
decrease in deferred tax liabilities ($2,349,000); and (c) a decrease in accrued
liabilities ($469,000).
Minority Interest and Other Liabilities. As of December 31, 1999, the
Company has recorded $4,772,000 of minority interest relating to the
approximately 25% ownership interest in MRC the Company does not own.
Contingent Liabilities. The Company has contingent liabilities that are
described in the notes to the financial statements.
38
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Impact of the Year 2000 Issue. The Company successfully achieved compliance
with the Year 2000 requirements and Year 2000 related issues had no material
adverse effect on the Company's results of operations, liquidity or financial
condition. However, no assurance can be given that unforeseen problems may not
occur in the future that may have a material adverse effect on the Company's
results of operations, liquidity or financial condition.
Section 3: Business Outlook
The statements contained in this Business Outlook are based upon current
operations and expectations. In addition to the forward-looking statements and
information contained elsewhere in this 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 102-year take-or-pay lease with Cucamonga,
and the 50% equity ownership of the West Valley MRF, are essentially complete
and the Company is recognizing significant revenues and income from these
investments. The Company anticipates revenues from these projects and
investments to increase moderately over time as certain key economic factors
impacting these projects and investments increase. In addition, the Company
continues to evaluate these completed projects and investments in light of how
to best provide maximum value to its shareholders.
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 (now called Inland Empire Utilities Agency (the
"Lease Rate") upon which the lease payments are currently 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 8% per
year during the past 25 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 2-4 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. In March 1998, the San
Bernardino Superior Court ruled that the Lease Rate had been discontinued as of
July 1, 1995. Therefore, the terms of the Cucamonga Lease require the parties to
seek to negotiate in good faith a new substitute rate. If the parties are unable
to agree on a substitute rate, the matter is to be resolved by reference, a form
of private trial similar to arbitration. Before and after the trial, there were
sporadic attempts to resolve the litigation and negotiate a new substitute rate.
However, since the parties were not able to reach a resolution of the matter,
the matter will be determined as a result of a reference proceeding as required
under the terms of the Cucamonga Lease. The reference proceeding commenced
during the week of February 28, 2000. After the conclusion of all the testimony
in the proceeding, the court asked for further briefing and scheduled a final
oral argument which is currently scheduled for May 15, 2000. A decision from the
judge is expected within 60 days thereafter.
With regard to the Company's investment in Fontana Union, the Company
purchased, in March 2000, an additional 424.4 shares of Fontana Union from
Western Water Company for approximately $653,000 or $1,540 per share. The price
per share reflects a substantial minority discount and also reflects the
resolution of a legal dispute between the seller of the shares and the Company.
The purchase of these additional shares, which are not covered by the take-or-
pay lease with Cucamonga, will assist in protecting the Company's effective
interest in Fontana Union, which is utilized in calculating the revenue under
the take-or-pay lease with Cucamonga.
39
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
In regard to the WVMRF, the most significant factor affecting the Company's
future equity income from the WVMRF is the expansion of the facility's capacity
from 2,000 to 3,500 tons per day. This expansion, which is anticipated to be
completed in the fall of 2000, will increase the processing facility by an
additional 80,000 square feet and will provide for additional materials recovery
sorting capacity. The success of this expansion will depend heavily on the
continuing closures of local landfills and the future construction, if any, of
competing facilities.
The Company has historically spent a significant amount of capital in the
development of its two other major project and investment opportunities: the re-
permitting of the Eagle Mountain Landfill by MRC, the Company's 75% owned
subsidiary, and the redevelopment of approximately 634 acres (gross) of the
Company's Mill Site Property. As a result of the litigation successes,
completion of the federal land exchange, and the Landfill Project's receipt of
its last major permit, MRC is accelerating its efforts to make rail-haul
landfills a reality and to market the Landfill Project. MRC has had meetings
with several governmental agencies about the possibility of participating in the
Landfill Project through the purchase of air or capacity rights or other similar
arrangements. These entities include, but are not limited to, the Los Angeles
Sanitation District. In fourth quarter of 1999, The Los Angeles Sanitation
District publicly stated that it has an interest in pursuing a possible
transaction, including a possible purchase transaction, with respect to the
Landfill Project and/or with respect to the competing Mesquite Regional Landfill
project. However, even though there are periodic discussions with the Los
Angeles Sanitation District and others, there is no assurance that any
discussions will ultimately lead to an agreement with regard to the Landfill
Project or as to the timing or terms of any agreement if one is ultimately
negotiated.
In regard to the redevelopment of approximately 634 acres (gross) of the
Mill Site Property, the Company completed the entitlement and permits process
for a substantial portion of the property in April 1999, for a variety of
possible commercial, industrial and recreational uses. In the fourth quarter of
1999, the Company entered into a contract to sell substantially all of its
remaining Mill Site Property. Due to the extensive amount of due diligence and
the number of contingencies involved, it is currently estimated that, if this
transaction is consummated, it will close in the second quarter of 2000. Based
on this potential sale the Company is not currently spending significant capital
on the Mill Site. Should this transaction ultimately fail to be consummated, it
is anticipated that the Company would spend approximately $2.5 million for
required environmental remediation and approximately $500,000 for real estate
entitlement and improvement expenditures over the remainder of 2000. The $2.5
million to be spent in 2000 for required environmental remediation is a
component of the $16-26 million estimate to complete all remaining required
remediation for the Mill Site Property. As previously disclosed, the Company has
recorded a write-down to net realizable value on the Mill Site property in
anticipation of this or a similar transaction closing, thus the Company will not
recognize a significant gain on the sale of the Mill Site Property.
Although neither the Company nor any subsidiary of the Company has any
obligation to invest funds in MRC, the Company has, to date, continued to make
investments in MRC. Through a series of private placements with existing MRC
shareholders, from July 1995 through December 31, 1999, a total of $18.5 million
has been raised by MRC, with Kaiser contributing approximately $14.0 million of
that amount. The Company's 1999 advances approximated $3.0 million out of a
total funding of $4.0 million. The Company has also approved advances to MRC
totaling $1.8 million for 2000, which together with the minority shareholders
advances are anticipated to fund MRC through December 31, 2000.
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 $30,000,000 revolving-to-term credit
facility (less $4,850,000 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 2000, a total of approximately $5.4 million for capital
projects and
40
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
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 December 31, 1999, are
estimated to be approximately $35 million for federal purposes. These federal
NOLs expire in varying amounts over a period from year 2000 to 2013.
If within a three-year period, 50% or more of the stock of the Company
changes ownership, the future annual use of NOLs may be limited. The annual
limitation would be calculated as the product of: (i) the highest long-term tax-
exempt rate for a designated period prior to the ownership change; and (ii) the
market value of the Company at such time.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Please see Item 14 of this Form 10-K Report for financial statements and
supplementary data.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
41
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is incorporated by reference from the
Executive Compensation Section of the Company's Proxy Statement for its combined
1999/2000 Annual Meeting of Stockholders (the "2000 Proxy Statement"), a
definitive copy of which will be filed within 120 days of December 31, 1999.
Item 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from the
Executive Compensation Section of the 2000 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by this item is incorporated by reference from the
Security Ownership of Principal Shareholders and Management Section of the 2000
Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the
2000 Proxy Statement.
42
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements and financial schedules are filed as a
part of this report:
(1) Financial Statements Page
-------------------- ----
Report of Independent Auditors................................. 56
Consolidated Balance Sheets.................................... 57
Consolidated Statements of Income.............................. 59
Consolidated Statements of Cash Flows.......................... 60
Consolidated Statements of Changes in Stockholders' Equity..... 61
Notes to Consolidated Financial Statements..................... 62
(2) Financial Statement Schedules
-----------------------------
II Valuation and Qualifying Accounts and Reserves............ 82
All other schedules are omitted because they are not required, are
inapplicable, or the information is included in the Consolidated Financial
Statements or Notes thereto.
(b) Reports on Form 8-K.
The following reports on Form 8-K have been filed during the last quarter
of the period covered by this Form 10-K Report to the date of this report.
(1) 8-K Report dated November 22, 1999, and filed with the Securities and
Exchange Commission on November 23, 1999, regarding the purchase of
2,730,950 and 1,693,551 shares of the Company's common stock from the
New Kaiser Employees' Beneficiary Association and Pension Benefit
Guaranty Corporation, respectively, and the terms of such transaction.
(2) 8-K Report dated December 15, 1999, and filed on December 22, 1999,
regarding the Eagle Mountain Landfill Project securing its final major
permit, disclosing litigation filed by one of the Company's
stockholders' over the Company's stock repurchase transition and
disclosing litigation over the Company's completed federal land
exchange.
(c) Exhibits. The following exhibits are filed as part of this Form 10-K:
43
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX
(* Indicates compensation plan, contract or arrangement)
Exhibit
Number Document Description
------------ -------------------------------------------------------------
2.1 Second Amended Joint Plan of Reorganization as Modified, as
filed with the United States Bankruptcy Court for the
District of Colorado on September 9, 1988, incorporated by
reference from Exhibit 2.1 of the Company's Form 10-K Report
for the year ended December 31, 1988.
2.2 Second Amended Joint Plan of Reorganization Modification, as
filed with the United States Bankruptcy Court on September
26, 1988, incorporated by reference from Exhibit 2.2 of the
Company's Form 10-K Report for the year ended December 31,
1988.
2.3 United States Bankruptcy Court Order dated October 4, 1988,
confirming the Second Amended Joint Plan of Reorganization as
Modified, incorporated by reference from Exhibit 2.3 of the
Company's Form 10-K Report for the year ended December 31,
1988.
2.4 Stock Purchase Agreement between Kaiser Ventures Inc. and the
New Kaiser Voluntary Employees' Beneficiary Association dated
November 22, 1999, incorporated by reference from Exhibit 2.1
of the Company's Form 8-K dated November 22, 1999.
2.5 Stock Purchase Agreement between Kaiser Ventures Inc. and
Pension Benefit Guaranty Corporation dated November 22, 1999,
incorporated by reference from Exhibit 2.2 of the Company's
Form 8-K dated November 22, 1999.
3.1 Restated Certificate of Incorporation of Kaiser Steel
Corporation filed with the Secretary of State of Delaware on
November 17, 1988, incorporated by reference from Exhibit
D(i) to the Company's Form 8-A dated November 21, 1988.
3.1.1 Certificate of Amendment to Restated Certificate of
Incorporation of Kaiser Steel Resources, Inc. filed with the
Delaware Secretary of State on October 2, 1990, incorporated
by reference from the Company's Form 8-K Report dated
September 18, 1990.
3.1.2 Certificate of Amendment to Restated Certificate of
Incorporation of Kaiser Steel Resources, Inc. changing the
Corporation's name to Kaiser Resources Inc., filed with the
Delaware Secretary of State on June 14, 1993, incorporated by
reference from Exhibit 4.1.2 of the Company's Form 10-K
Report for the year ended December 31, 1993.
3.1.3 Certificate of Amendment to Restated Certificate of
Incorporation of Kaiser Resources Inc. changing the
Corporation's name to Kaiser Ventures Inc., filed with the
Delaware Secretary of State on June 19, 1995.
3.2 Amended and Restated Bylaws of Kaiser Ventures Inc.,
effective January 6, 2000.
44
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ ---------------------------------------------------------------
4.1. Stock Purchase Warrant between Kaiser Ventures Inc. and the
New Kaiser Voluntary Employees' Beneficiary Association
dated November 22, 1999, incorporated by reference from
Exhibit 4.1 of the Company's Form 8-K dated November 22,
1999.
4.2 Stock Purchase Warrant between Kaiser Ventures Inc. and
Pension Benefit Guaranty Corporation dated November 22,
1999, incorporated by reference from Exhibit 4.2 of the
Company's Form 8-K dated November 22, 1999.
10.1 Lease Entered Into Between Kaiser Eagle Mountain, Inc., and
Mine Reclamation Corporation, dated November 30, 1988,
incorporated by reference from Exhibit 10.1 of the Company's
Form 10-K Report for the year ended December 31, 1988.
10.1.1 First Amendment dated December 18, 1990, to Lease dated
November 30, 1990 between Kaiser Eagle Mountain, Inc. and
Mine Reclamation Corporation, incorporated by reference from
the Company's Form 8-K Report dated December 18, 1990.
10.1.2 Second Amendment dated July 29, 1994, to Lease dated
November 30, 1990, between Kaiser Eagle Mountain, Inc. and
Mine Reclamation Corporation, incorporated by reference from
Exhibit 4 of the Company's Form 10-Q Report for the period
ending June 30, 1994.
10.1.3 Third Amendment dated January 29, 1995, but effective as of
January 1, 1995, to Lease dated November 30, 1990, between
Kaiser Eagle Mountain, Inc. and Mine Reclamation
Corporation, incorporated by reference from Exhibit 10.1.3
of the Company's Form 10-K Report for the year ended
December 31, 1994.
10.1.4 Fourth Amendment dated effective January 1, 1996, between
Kaiser Eagle Mountain, Inc. and Mine Reclamation
Corporation, incorporated by reference from Exhibit 10.1.4
of the Company's Form 10-K Report for the year ended
December 31, 1995.
10.1.5 Indemnification Agreement dated September 9, 1997 among
Riverside County, Mine Reclamation Corporation, Kaiser Eagle
Mountain, Inc. Eagle Mountain Reclamation, Inc. and Kaiser
Ventures Inc, incorporated by reference from Exhibit 10.1 of
the Company's Form 10-Q Report for the period ended
September 30, 1997.
10.1.6 Development Agreement to be executed upon consummation of
federal land exchange among Riverside County, Mine
Reclamation Corporation, Kaiser Eagle Mountain, Inc. Eagle
Mountain Reclamation, Inc. and Kaiser Ventures Inc.,
incorporated by reference from Exhibit 10.2 of the Company's
Form 10-Q Report for the period ended September 30, 1997.
10.2 Eagle Mountain Lease Between Management and Training
Corporation and Kaiser Steel Corporation, dated November 16,
1987, incorporated by reference from Exhibit 10.4 of the
Company's Form 10-K Report for the year ended December 31,
1988.
45
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ --------------------------------------------------------------
10.2.1 First Amendment dated July 1, 1990, to Lease between
Management and Training Corporation and Kaiser Steel
Resources, Inc., incorporated by reference from Exhibit
10.3.1 of the Company's Form 10-K Report for the year ended
December 31, 1990.
10.2.2 Second Amendment dated November 16, 1992, to Lease dated
November 16, 1987 between Management and Training
Corporation and Kaiser Steel Resources, Inc., incorporated
by reference from Exhibit 10.3.2 of the Company's Form S-2
Registration No. 33-56234).
10.2.3 Third Amendment to Eagle Mountain Lease between Management
and Training Corporation and Kaiser Steel Resources, Inc.
dated November 16, 1997, incorporated by reference from
Exhibit 10.3.3 of the Company's Form 10-K Report for the
year ended December 31, 1998.
10.2.4 Fourth Amendment to Eagle Mountain Lease between Management
and Training Corporation and Kaiser Ventures Inc. dated
February 1, 1999, incorporated by reference from Exhibit
10.3.4 of the Company's Form 10-K Report for the year ended
December 31, 1998.
10.3* Amended and Restated Employment Agreement between Kaiser
Ventures Inc. and Richard E. Stoddard dated as of January
15, 1998, incorporated by reference from Exhibit 10.4 of the
Company's Form 10-K Report for the year ended December 31,
1998.
10.3.1* First Amendment to the Amended and Restated Employment
Agreement between Richard E. Stoddard and Kaiser Ventures
Inc. dated as of January 6, 2000.
10.4* Employment Agreement between Kaiser Ventures Inc. and Gerald
A. Fawcett dated as of January 18, 1999, incorporated by
reference from Exhibit 10.5 of the Company's 10-K Report for
the year ended December 31, 1998.
10.5* Employment Agreement between Kaiser Ventures Inc. and Terry
L. Cook dated effective June 17, 1996, incorporated be
reference from Exhibit 10.2 of the company's Form 10-Q
Report for quarter ended June 30, 1996.
10.5.1* First Amendment to Employment Agreement, between Kaiser
Ventures Inc. and Terry L. Cook dated as of January 6, 2000.
10.6* Transition Employment Agreement between Kaiser Ventures
Inc., and Lee R. Redmond dated as of January 6, 2000.
10.7* Employment Agreement between Kaiser Ventures Inc. and Paul
E. Shampay dated as of January 6, 2000.
10.8* Employment Agreement between Kaiser Ventures Inc. and
Anthony Silva dated as of January 15, 1998, incorporated by
reference from Exhibit 10.9 of the Company's Form 10-K
Report for the year ended December 31, 1998.
46
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ --------------------------------------------------------------
10.8.1* First Amendment to Employment Agreement between Kaiser
Ventures Inc. and Anthony Silva dated as of January 6, 2000.
10.9* Employment Agreement between Kaiser Ventures Inc. and James
F. Verhey dated as of June 17, 1996, incorporated by
reference Exhibit 10.10 of the Company's Form 10-Q Report
for the quarter ended June 30, 1996.
10.9.1* First Amendment to Employment Agreement between Kaiser
Ventures Inc and James F. Verhey dated as of January 15,
1998, incorporated by reference from Exhibit 10.10.1 of the
Company's Form 10-K Report for the year ended December 31,
1998.
10.9.2* Second Amendment to Employment Agreement between Kaiser
Ventures Inc. and James F. Verhey dated as of October 1,
1999.
10.9.3* Third Amendment to Employment Agreement between Kaiser
Ventures Inc. and James F. Verhey dated as of January 6,
2000.
10.10 Lease Agreement between American Trading Estate Properties
(now known as Lord Baltimore Properties), Landlord and
Kaiser Resources Inc., Tenant, dated June 6, 1994,
incorporated by reference from Exhibit 10.8 of the Company's
Form 10-K Report for the year ended December 31, 1994.
10.10.1 Second Amendment to Lease Agreement between Lord Baltimore
Properties and Kaiser Ventures Inc. dated September 27,
1999.
10.11 Environmental Agreement, State of California, Health and
Welfare Agency, Department of Health Services, Consent Order
Health and Safety Code Sections 205, 25355.1(a)(B),
25355.5(a)(C), dated August 22, 1988, incorporated by
reference from Exhibit 10.14 of the Company's Form 10-K
Report for the year ended December 31, 1988.
10.11.1 Amendment issued as of November 13, 1997 by the California
Environmental Protection Agency to Consent Order dated
August 22, 1988 issued by the State Department of Health
Services to Kaiser Steel Corporation, incorporated by
reference from Exhibit 10.12.1 of the Company's Form 10-K
Report for the year ended December 31, 1998.
10.12 Environmental Agreement, California Regional Water Quality
Control Board, Santa Ana Region, Cleanup and Abatement Order
No. 87-121, dated August 26, 1987, incorporated by reference
from Exhibit 10.15 of the Company's Form 10-K Report for the
year ended December 31, 1988.
10.12.1 Environmental Agreement, California Regional Water Quality
Control Board, Santa Ana Region, Cleanup and Abatement Order
No. 91-40, dated March 11, 1991, incorporated by reference
from Exhibit 10.11.1 of the Company's Form S-2 (Registration
No. 33-56234).
47
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ ---------------------------------------------------------------
10.12.2 Settlement Agreement between Kaiser Resources Inc. and
California Regional Water Quality Control Board, Santa Ana
Region, dated October 21, 1993, incorporated by reference
from Exhibit 10.11.2 of the Company's Form 10-K Report for
the year ended December 31, 1993.
10.13 Lease of Corporate shares of Fontana Union Water Company
coupled with Irrevocable Proxy between Kaiser Resources Inc.
and Cucamonga County Water District dated July 1, 1993,
incorporated by reference from Exhibit 1 to Form 10-Q dated
June 30, 1993.
10.14 Assignment from Kaiser Steel Resources, Inc. to KSC
Recovery, Inc., dated December 29, 1989, incorporated by
reference from Exhibit 10.20 of the Company's Form 10-K
Report for the year ended December 31, 1989.
10.15* Amended, Restated and Substituted Kaiser Steel Resources,
Inc. 1989 Stock Plan, incorporated by reference from the
Company's Proxy Statement for the Special Meeting of
Stockholders held on October 2, 1990.
10.16* Kaiser Steel Resources, Inc. 1992 Stock Option Plan, as
amended, incorporated by reference from Exhibit 10.16 of the
Company's Form S-2 (Registration No. 33-56234).
10.17* Kaiser Ventures Inc. 1995 Stock Plan incorporated by
reference from Exhibit 10.15 of the Company's 10-K Report
for the year ended December 31, 1995.
10.17.1* First Amendment to Kaiser Ventures Inc. 1995 Stock Option
Plan, incorporated by reference from Exhibit 4.1.1 of the
Company's Form S-8 Registration Statement (Registration No.
333-17843).
10.18 Third Amended Plan of Reorganization of Fontana Union Water
Company dated September 26, 1990, incorporated by reference
from Exhibit 10.18 of the Company's Form S-2 (Registration
No. 33-56234).
10.19 Settlement Agreement among Fontana Union Water Company,
Kaiser Steel Resources, Inc., San Gabriel Valley Water
Company and Cucamonga County Water District dated February
7, 1992, incorporated by reference from Exhibit 10.19 of the
Company's Form S-2 (Registration No. 33-56234).
10.20 Organization Agreement, dated November 22, 1995 by and among
PSH Corp., Kaiser Ventures Inc. and Penske Motorsports, Inc.
(f/k/a Penske Speedway Holdings Corp.), incorporated by
reference from Exhibit 10.23 of the Company's 8-K Report
dated November 22, 1995.
10.20.1 First Amendment to Organization Agreement dated March 21,
1996, by and among PSH Corp., Kaiser Venture Inc., and
Penske Motorsports, Inc. incorporated by reference from
Exhibit 10.20.1 of the Company's Form 10-K Report for the
year ended December 31, 1995.
48
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ ---------------------------------------------------------------
10.21 Water Rights Agreement, dated November 21, 1995 by and among
Kaiser Ventures Inc., Kaiser Inc. and The California
Speedway Corporation (successor by merger to Speedway
Development Corporation), incorporated by reference from
Exhibit 10.22 of the Company's Form 10-K Report for the year
ended December 31, 1995.
10.22 Access Agreement, dated as of November 22, 1995 by and among
Kaiser Ventures Inc., Kaiser Land Development, Inc. and The
California Corporation, incorporated by reference from
Exhibit 10.23 of the Company's Form 10-K Report for the year
ended December 31, 1995.
10.23 Sewer Services Agreement, dated as of November 21, 1995
between Kaiser Ventures Inc. and The California Speedway
Corporation (successor by merger to Speedway Development
Corporation), incorporated by reference from Exhibit 10.24
of the Company's Form 10-K Report for the year ended
December 31, 1995.
10.24 Purchase Agreement and Escrow Instructions (without
exhibits) dated October 8, 1996, among Kaiser Ventures Inc.,
The California Speedway Corporation and Penske Motorsports,
Inc., incorporated by reference from Exhibit 10.1 of the
Company's Form 10-Q Report for the quarter ended September
30, 1995.
10.25 Revolving Credit and Term Loan Agreement between Fontana
Water Resources, Inc. and Union Bank, dated September 30,
1994, (Excluding the exhibits), incorporated by reference
from Exhibit 10.21 of the Company's Form 10-K Report for the
year ended December 31, 1994.
10.25.1 First Amendment of Credit and Term Loan Agreement between
Fontana Water Resources, Inc. and Union Bank, dated January
30, 1997, incorporated by reference from Exhibit 10.29.1 of
the Company's Form 10-K Report for the year ended December
31, 1996.
10.25.2 Guaranty executed by Kaiser Resources Inc. in favor of Union
Bank, dated September 30, 1994, incorporated by reference
from Exhibit 10.21.1 of the Company's Form 10-K Report for
the year ended December 31, 1994.
10.25.3 First Amendment to Guaranty by Kaiser Ventures Inc. in favor
of Union Bank dated January 30, 1997, incorporated by
reference from Exhibit 10.29.3 of the Company's 10-K Report
for the year ended December 31, 1996.
10.25.4 Third Amendment to Guaranty by Kaiser Ventures Inc. in favor
of Union Bank dated September 22, 1999.
10.25.5 First Amendment to Pledge and Security Agreement; Second
Amendment to Guaranty; First Amendment to Stock Pledge
Agreement; and Guarantor Consent by Kaiser Ventures Inc. in
favor of Union Bank dated August 14, 1997, incorporated by
reference form Exhibit 10.29.4 of the Company's 10-K Report
for the year ended December 31, 1998.
49
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ ---------------------------------------------------------------
10.25.6 Second Modification of Deed of Trust and Assignment of
Leases and Rents dated as of August 14, 1997 by Fontana
Water Resources, Inc. and Union Bank of California,
incorporated by reference form Exhibit 10.29.5 of the
Company's10-K Report for the year ended December 31, 1998.
10.25.7 Third Modification of Deed of Trust and Assignment of Leases
and Rents dated as of September 22, 1999, by Fontana Water
Resources, Inc. and Union Bank of California.
10.25.8 Second Amendment to Revolving Credit and Term Loan Agreement
dated August 14, 1997 by Fontana Water Resources, Inc. and
Union Bank of California, incorporated by reference form
Exhibit 10.29.6 of the Company's10-K Report for the year
ended December 31, 1998.
10.25.9 Third Amendment to Revolving Credit and Term Loan Agreement
dated September 22, 1999, by Fontana Water Resources, Inc.
and Union Bank of California.
10.26 Settlement Agreement among Kaiser Resources Inc., KSC
Recovery, Inc., Kaiser Coal Corporation, the UMWA Combined
Benefit Fund and the UMWA 1992 Benefit Plan dated December
1, 1994, incorporated by reference from Exhibit 10.22 of the
Company's 10-K Report for the year ended December 31, 1994.
10.27 Promissory Note of McLeod Properties, Fontana LLC, dated
September 30, 1997 payable to the order of Kaiser Ventures
Inc., incorporated by reference from Exhibit 10.3 of the
Company's 10-Q Report for the period ended September 30,
1997.
10.27.1 Guaranty Agreement of Budway Enterprises, Inc. and V.M.
McLeod dated September 30, 1997, incorporated by reference
from Exhibit 10.3.1 of the Company's 10-Q Report for the
period ended September 30, 1997.
10.27.2 Subordinated Deed of Trust, Assignment of Leases and Rents
and Security Agreement dated September 30, 1997 given by
McLeod Properties, Fontana LLC for the benefit of the Kaiser
Ventures Inc., incorporated by reference from Exhibit 10.3.2
of the Company's 10-Q Report for the period ended September
30, 1997.
10.28 Members Operating Agreement dated June 19, 1997 between
Kaiser Recycling Corporation and West Valley Recycling &
Transfer, Inc., incorporated by reference from Exhibit 10.1
of the Company's 10-Q Report for the period ended June 30,
1997.
10.28.1 Performance Guaranty and Indemnification Agreement (KRC
Obligations) dated June 19, 1997 given by Kaiser Ventures
Inc. for the benefit of West Valley MRF, LLC and West Valley
Recycling & Transfer, Inc., incorporated by reference from
Exhibit 10.1.1 of the Company's 10-Q Report for the period
ended June 30, 1997.
50
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ ---------------------------------------------------------------
10.29 Loan Agreement dated as of June 1, 1997 between West Valley
MRF, LLC and California Pollution Control Financing
Authority, incorporated by reference from Exhibit 10.2 of
the Company's 10-Q Report for the period ended June 30,
1997.
10.30.1 Indenture Agreement dated as of June 1, 1997 between
California Pollution Control Financing Authority and BNY
Western Trust Company for the benefit of $9,500,000
California Pollution Control Financing Authority Variable
Rate Demand Solid Waste Disposal Revenue Bonds (West Valley
MRF, LLC Project) Series 1997A, incorporated by reference
from Exhibit 10.2.1 of the Company's 10-Q Report for the
period ended June 30, 1997.
10.31 Remarketing Agreement dated as of June 1, 1997, and among
West Valley MRF, LLC and Westhoff, Cone & Holmstedt and
Smith Barney, Inc. with regard to $9,500,000 California
Pollution Control Financing Authority Variable Rate Demand
Stock Waste Disposal Revenue Bonds (West Valley MRF, LLC
Project) Series 1997A, incorporated by reference from
Exhibit 10.3 of the Company's 10-Q Report for the period
ended June 30, 1997.
10.32 Reimbursement Agreement dated as of June 1, 1997 between
West Valley MRF, LLC and Union Bank of California, N.A.,
incorporated by reference from Exhibit 10.4 of the Company's
10-Q Report for the period ended June 30, 1997.
10.32.1 Guaranty and Mandatory DSR Agreement dated as of June 1,
1997 given by Kaiser Ventures Inc. and Kaiser Recycling
Corporation for the benefit of Union Bank of California,
N.A., incorporated by reference from Exhibit 10.4.1 of the
Company's 10-Q Report for the period ended June 30, 1997.
10.33 Environmental Compliance Agreement dated as of June 19, 1997
between West Valley MRF, LLC and Union Bank of California,
N.A., incorporated by reference from Exhibit 10.5 of the
Company's 10-Q Report for the period ended June 30, 1997.
10.33.1 Environmental Guaranty Agreement dated as of June 19, 1997
given by Kaiser Ventures Inc. and Kaiser Recycling
Corporation for the benefit of Union Bank of California,
N.A., incorporated by reference from Exhibit 10.5.1 of the
Company's 10-Q Report for the period ended June 30, 1997.
10.34 Registration Rights Agreement among Kaiser Venture Inc. and
the New Kaiser Voluntary Employees' Beneficiary Association
and Pension Benefit Guaranty Corporation dated November 22,
1999, incorporated by reference from Exhibit 10.1 of the
Company's Form 8-K dated November 22, 1999.
10.35 Contingent Payment Agreement between Kaiser Ventures Inc and
the New Kaiser Voluntary Employees' Beneficiary Association
dated November 22, 1999, incorporated by reference from
Exhibit 10.2 of the Company's Form 8-K dated November 22,
1999.
51
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT INDEX - (Continued)
Exhibit
Number Document Description
------------ ---------------------------------------------------------------
10.36 Contingent Payment Agreement between Kaiser Ventures Inc and
Pension Benefit Guaranty Corporation dated November 22,
1999, incorporated by reference from Exhibit 10.3 of the
Company's Form 8-K dated November 22, 1999.
10.37 Purchase and Sale Agreement and Joint Escrow Instructions
among Kaiser Ventures Inc., Kaiser Steel Land Development,
Inc. and Ontario Ventures I, LLC dated October 19, 1999,
incorporated by reference from Exhibit 10.1 of the Company's
10-Q Report for the period ended September 30, 1999.
10.37.1 Fourth Amendment to Purchase and Sale Agreement and Joint
Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
Land Development, Inc. and Ontario Ventures I, LLC dated
November 30, 1999.
10.37.2 Fifth Amendment to Purchase and Sale Agreement and Joint
Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
Land Development, Inc. and Ontario Ventures I, LLC dated
February 4, 2000.
10.37.3 Sixth Amendment to Purchase and Sale Agreement and Joint
Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
Land Development, Inc. and Ontario Ventures I, LLC dated
March 6, 2000.
10.37.4 Seventh Amendment to Purchase and Sale Agreement and Joint
Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
Land Development, Inc. and Ontario Ventures I, LLC dated
March 10, 2000.
10.37.5 Eighth Amendment to Purchase and Sale Agreement and Joint
Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
Land Development, Inc. and Ontario Ventures I, LLC dated
March 13, 2000.
10.37.6 Ninth Amendment to Purchase and Sale Agreement and Joint
Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
Land Development, Inc. and Ontario Ventures I, LLC dated
March 14, 2000.
21 The Company has ten active subsidiaries. Fontana Water
Resources, Inc., Kaiser Eagle Mountain, Inc., Kaiser Steel
Corporation, Kaiser Steel Land Development, Inc., Kaiser
Waste Treatment, Inc., Kaiser Recycling Corporation, Kaiser
Reclamation, Inc., and KSC Recovery, Inc. are incorporated
under the laws of the State of Delaware. Lake Tamarisk
Development Corporation and Mine Reclamation Corporation are
incorporated under the laws of the State of California. KSC
Recovery, Inc.'s activities are limited to those permitted
by the Second Amended Joint Plan of Reorganization as
modified (Exhibit 2.1 of this Report).
23 Consent of Ernst & Young LLP.
24 Power of Attorney (included in the signature page).
27 Financial Data Schedule.
52
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 15, 2000 KAISER VENTURES INC.
By: /s/ Richard E. Stoddard
------------------------------------------
Name: Richard E. Stoddard
------------------------------------------
Title: President, Chief Executive Officer
------------------------------------------
and Chairman of the Board
-----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
(Power of Attorney)
53
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Each person whose signature appears below constitutes and appoints RICHARD
E. STODDARD and JAMES F. VERHEY as his true and lawful attorneys-in-fact and
agents, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this Form 10-K and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Signature Title Date
--------- ------ ----
1. Principal Executive Officer
/s/ Richard E. Stoddard President, Chief Executive March 15, 2000
--------------------------- Officer and Chairman of the
Richard E. Stoddard Board (Principal Executive
Officer)
2. Principal Financial and
Accounting Officer
/s/ James F. Verhey Executive Vice President, March 15, 2000
-------------------------- and Chief Financial Officer
James F. Verhey (Principal Financial and
Accounting Officer)
54
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Signature Title Date
--------- ----- ----
4. Directors
/s/ Ronald E. Bitonti Director March 15, 2000
-------------------------------
Ronald E. Bitonti
/s/ Todd G. Cole Director March 15, 2000
------------------------------------
Todd G. Cole
/s/ Gerald A. Fawcett Vice Chairman March 15, 2000
------------------------------------
Gerald A. Fawcett
/s/ Reynold C. MacDonald Director March 15, 2000
------------------------------------
Reynold C. MacDonald
/s/ Charles E. Packard Director March 15, 2000
------------------------------------
Charles E. Packard
/s/ Marshall F. Wallach Director March 15, 2000
------------------------------------
Marshall F. Wallach
55
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT AUDITORS
------------------------------
Board of Directors
Kaiser Ventures Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Kaiser
Ventures Inc. and Subsidiaries (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of income, cash flows, and stockholders'
equity for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Kaiser Ventures Inc. and Subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Riverside, California
January 25, 2000
56
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of December 31
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents........................................... $ 14,686,000 $ 3,409,000
Accounts receivable and other, net of allowance for
doubtful accounts of $90,000 and $303,000,
respectively....................................................... 1,978,000 2,339,000
Deferred tax assets................................................. 285,000 ---
Note receivable..................................................... 107,000 100,000
------------ ------------
17,056,000 5,848,000
------------ ------------
Investment in Common Stock of Penske Motorsports, Inc.................. --- 45,784,000
------------ ------------
Investment in Fontana Union Water Company.............................. 16,108,000 16,108,000
------------ ------------
Investment in West Valley MRF.......................................... 3,009,000 2,549,000
------------ ------------
Real Estate
Land and improvements............................................... 8,543,000 15,621,000
Real estate held for sale........................................... 38,820,000 40,607,000
------------ ------------
47,363,000 56,228,000
------------ ------------
Other Assets
Note receivable..................................................... 700,000 714,000
Deferred tax assets................................................. 577,000 ---
Landfill permitting and development................................. 15,800,000 12,641,000
Buildings and equipment (net)....................................... 2,805,000 2,949,000
Other assets........................................................ 27,000 121,000
------------ ------------
19,909,000 16,425,000
------------ ------------
Total Assets........................................................... $103,445,000 $142,942,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
57
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of December 31
<TABLE>
<CAPTION>
1999 1998
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable....................................... $ 887,000 $ 708,000
Income taxes payable................................... 3,501,000 ---
Accrued liabilities.................................... 4,998,000 3,822,000
Environmental remediation.............................. 2,500,000 3,805,000
------------ ------------
11,886,000 8,335,000
------------ ------------
Long-term Liabilities
Deferred gain on sale of real estate................... 724,000 656,000
Accrued liabilities.................................... 1,305,000 1,774,000
Deferred tax liabilities............................... --- 2,349,000
Long-term debt......................................... --- 13,750,000
Environmental remediation.............................. 23,868,000 24,465,000
------------ ------------
25,897,000 42,994,000
------------ ------------
Total Liabilities......................................... 37,783,000 51,329,000
------------ ------------
Minority Interest......................................... 4,772,000 3,775,000
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.03 per share, authorized
13,333,333 shares; issued and outstanding
6,316,853 and 10,685,257, respectively................ 189,000 321,000
Capital in excess of par value......................... 48,745,000 74,741,000
Retained earnings...................................... 11,956,000 12,776,000
------------ ------------
Total Stockholders' Equity................................ 60,890,000 87,838,000
------------ ------------
Total Liabilities and Stockholders' Equity................ $103,445,000 $142,942,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
58
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Resource Revenues
Ongoing Operations
Water resource.................................................... $ 5,228,000 $ 5,201,000 $ 5,143,000
Property redevelopment............................................ 1,480,000 1,487,000 1,213,000
Gain on merger of PMI into ISC.................................... 35,713,000 --- ---
Gain on sale of ISC common stock.................................. 6,575,000 --- ---
Income (loss) from equity method investments
Penske Motorsports Inc........................................ (329,000) 1,903,000 2,003,000
West Valley MRF, LLC.......................................... 910,000 40,000 ---
Gain on Mill Site land sales...................................... 1,622,000 --- ---
----------- ----------- -----------
Total ongoing operations.................................... 51,199,000 8,631,000 8,359,000
----------- ----------- -----------
Interim Activities
Lease, service and other.......................................... 427,000 1,242,000 1,647,000
----------- ----------- -----------
Total resource revenues..................................... 51,626,000 9,873,000 10,006,000
----------- ----------- -----------
Resource Operating Costs
Operations and maintenance......................................... 863,000 1,260,000 1,311,000
Administrative support expenses.................................... 1,899,000 2,208,000 2,343,000
Write-down to net realizable value................................. 8,350,000 --- ---
----------- ----------- -----------
Total resource operating costs.............................. 11,112,000 3,468,000 3,654,000
----------- ----------- -----------
Income from Resources............................................... 40,514,000 6,405,000 6,352,000
Corporate general and administrative expenses...................... 4,786,000 3,847,000 4,161,000
----------- ----------- -----------
Income from Operations.............................................. 35,728,000 2,558,000 2,191,000
Net interest expense............................................... 498,000 1,083,000 672,000
----------- ----------- -----------
Income before Income Tax Provision.................................. 35,230,000 1,475,000 1,519,000
Income tax provision
Currently payable................................................. 8,364,000 12,000 43,000
Deferred tax expense (benefit).................................... (3,211,000) 126,000 74,000
Deferred tax expense credited to equity........................... 6,048,000 105,000 554,000
----------- ----------- -----------
Net Income.......................................................... $24,029,000 $ 1,232,000 $ 848,000
=========== =========== ===========
Basic Earnings Per Share............................................ $ 2.35 $ .12 $ .08
=========== =========== ===========
Diluted Earnings Per Share.......................................... $ 2.31 $ .11 $ .08
=========== =========== ===========
Basic Weighted Average Number of Shares Outstanding................. 10,226,000 10,664,000 10,536,000
Diluted Weighted Average Number of Shares Outstanding............... 10,386,000 10,840,000 10,740,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
59
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income................................................. $ 24,029,000 $ 1,232,000 $ 848,000
Provision for income tax which is credited to equity....... 6,048,000 105,000 554,000
Income from equity method investments...................... (581,000) (1,943,000) (1,840,000)
Deferred tax expense (benefit)............................. (3,211,000) 126,000 74,000
Depreciation and amortization.............................. 511,000 552,000 389,000
Gain on merger of PMI into ISC............................. (35,713,000) --- ---
Gain on sale of ISC common stock........................... (6,575,000) --- ---
Write-down to net realizable value......................... 8,350,000 --- ---
Accelerated vesting of stock options....................... 54,000 --- ---
Gain on sale of Mill Site Property......................... (1,622,000) --- ---
Allowance for doubtful accounts............................ (213,000) 4,000 13,000
Changes in assets:
Receivable and other..................................... 574,000 196,000 865,000
Changes in liabilities:
Current liabilities...................................... 294,000 (361,000) 684,000
Income taxes payable..................................... 3,501,000 --- ---
Long-term accrued liabilities............................ (56,000) 111,000 ---
------------ ----------- -----------
Net cash flows from operating activities................... (4,610,000) 22,000 1,587,000
------------ ----------- -----------
Cash Flows from Investing Activities
Minority interest and other liabilities.................... 997,000 897,000 1,260,000
Proceeds from the sale of Mill Site Property............... 2,662,000 --- 1,500,000
Collection of note receivable.............................. 75,000 456,000 174,000
Capital expenditures....................................... (3,570,000) (4,480,000) (7,174,000)
Environmental remediation expenditures..................... (1,808,000) (2,547,000) (1,496,000)
Proceeds from the sale of ISC common stock................. 63,552,000 --- ---
Proceeds of the merger of PMI into ISC..................... 24,419,000 --- ---
Distribution from West Valley MRF.......................... 450,000 --- ---
Other investments.......................................... --- --- (759,000)
------------ ----------- -----------
Net cash flows from investing activities................... 86,777,000 (5,674,000) (6,495,000)
------------ ----------- -----------
Cash Flows from Financing Activities
Issuance of common stock................................... 379,000 133,000 196,000
Repurchase of common stock................................. (57,519,000) --- ---
Borrowings under revolver-to-term credit facility.......... 3,000,000 9,750,000 2,000,000
Principal payments on revolver-to-term credit facility and
note payable.............................................. (16,750,000) (5,102,000) (1,240,000)
Payment of loan fees....................................... --- (50,000) (200,000)
------------ ----------- -----------
Net cash flows from financing activities................... (70,890,000) 4,731,000 756,000
------------ ----------- -----------
Net Changes in Cash and Cash Equivalents.................... 11,277,000 (921,000) (4,152,000)
Cash and Cash Equivalents at Beginning of Year.............. 3,409,000 4,330,000 8,482,000
------------ ----------- -----------
Cash and Cash Equivalents at End of Year.................... $ 14,686,000 $ 3,409,000 $ 4,330,000
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
60
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Capital In
Common Stock 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
Increase in investment in
Penske Motorsports, Inc.
due to issuance of stock... --- --- 2,937,000 --- 2,937,000
Provision for income tax,
credited to equity......... --- --- 554,000 --- 554,000
Issuance of shares of
common stock............... 103,126 3,000 414,000 --- 417,000
Net Income..................... --- --- --- 848,000 848,000
---------- --------- ------------ ------------ ------------
Balance at December 31, 1997...... 10,591,240 318,000 74,342,000 11,544,000 86,204,000
---------- --------- ------------ ------------ ------------
Provision for income tax,
credited to equity......... --- --- 105,000 --- 105,000
Issuance of shares of
common stock............... 94,017 3,000 294,000 --- 297,000
Net Income..................... --- --- --- 1,232,000 1,232,000
---------- --------- ------------ ------------ ------------
Balance at December 31, 1998...... 10,685,257 321,000 74,741,000 12,776,000 87,838,000
---------- --------- ------------ ------------ ------------
Repurchase of common stock..... (4,424,501) (133,000) (32,537,000) (24,849,000) (57,519,000)
Issuance of shares of
common stock............... 56,097 1,000 439,000 --- 440,000
Accelerated vesting of stock
options....................... --- --- 54,000 --- 54,000
Provision for income tax,
credited to equity......... --- --- 6,048,000 --- 6,048,000
Net Income..................... --- --- --- 24,029,000 24,029,000
---------- --------- ------------ ------------ ------------
Balance at December 31, 1999...... 6,316,853 $ 189,000 $ 48,745,000 $ 11,956,000 $ 60,890,000
========== ========= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
61
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. NATURE OF BUSINESS
On November 16, 1988, the Company began operations as Kaiser Steel Resources,
Inc. upon the successful completion of the reorganization of Kaiser Steel
Corporation ("KSC") under Chapter 11 of the Bankruptcy Code. The Company has
changed its name twice since reorganization in June 1993 and 1995, to Kaiser
Resources Inc. and to Kaiser Ventures Inc. ("Kaiser" or the "Company"),
respectively.
The Company's business focuses on the long-term development of its principal
assets including water resources, land and waste management assets. The
development of these assets is financed primarily through joint venture and
long-term lease arrangements. Ongoing operations refer to those revenue
resources which the Company is developing over the long-term while interim
activities refer to those revenue resources which are temporary or short-term in
nature and which are earned while the Company is evaluating the appropriate
long-term use of the asset or property.
At December 31, 1999, 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) approximately a
75% interest in Mine Reclamation Corporation ("MRC"), the developer of the Eagle
Mountain Landfill Project (the "Landfill Project"); (iii) a 50% joint venture
interest in the West Valley MRF ("WVMRF"), a transfer station and recycling
facility located on land acquired from the Company; (iv) approximately 632 acres
of the former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property") which is currently undergoing redevelopment and all of which, except
40 acres is currently in escrow to be sold; and (v) the 9,144 acre idle iron ore
mine in the California desert (the "Eagle Mountain Site"), which includes the
associated 1,100 acre town of Eagle Mountain ("Eagle Mountain Townsite") and the
land leased to MRC for the Landfill Project. During 1999 Penske Motorsports
Inc. ("PMI") merged with International Speedway Corporation ("ISC"). As a
result of the merger, the Company received cash and common stock in ISC. The
Company sold all of its ISC common stock during 1999.
The Company's consolidated financial statements include the following
significant entities: Fontana Water Resources, Inc., Kaiser Steel Land
Development, Inc., Eagle Mountain Reclamation, Inc., Lake Tamarisk Development
Corporation, Kaiser Eagle Mountain, Inc., Kaiser Recycling Corporation, and Mine
Reclamation Corporation. See Note 2 below for additional information concerning
the Company's subsidiaries.
Ongoing Operations
The Company's revenues from ongoing operations are generally derived from the
development of the Company's long-term projects. Revenues from water resources
represent payments under the lease of the Company's interest in Fontana Union to
Cucamonga County Water District ("Cucamonga"). Property redevelopment revenues
primarily reflect revenues from long-term development activities at the Mill
Site property, including water and waste water treatment revenues; housing
rental income, aggregate and 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 (i.e., PMI from April 1, 1996 through March
31, 1999) and, starting in 1998, a joint venture (i.e., West Valley MRF) which
the Company accounts for under the equity method.
62
<PAGE>
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, royalty revenues from the sale of
recyclable revert materials and other miscellaneous short-term activities.
Revenues from these activities are declining rapidly as the development of the
remaining Mill Site property proceeds.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The stated value of the assets and liabilities of the Company were carried
forward from those of KSC except as adjusted in reorganization.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all wholly-owned subsidiaries and majority owned investments, except as
specified below. Intercompany accounts and transactions have been eliminated.
Fontana Union Water Company ("Fontana Union"). The Company, through its
wholly-owned subsidiary Fontana Water Resources, Inc. ("FWR"), owns 50.88% of
Fontana Union, a mutual water company, which entitles the Company to its
proportionate share of Fontana Union water. The Company has effectively
transferred its control in Fontana Union to Cucamonga pursuant to a 102-year
lease of its Fontana Union shares ("Cucamonga Lease") which the Company entered
into in March 1989, and which was amended in 1989, 1992 and 1993. Therefore,
Kaiser receives no direct benefit from nor has any direct exposure to the
operations or financial performance of Fontana Union. Consequently, Kaiser's
investment in Fontana Union is recorded on the cost method with revenues from
the Cucamonga Lease being recorded on a current basis pursuant to the terms and
conditions of the Lease. (See Note 4.)
KSC Recovery, Inc. ("KSC Recovery"). The Company's wholly-owned subsidiary,
KSC Recovery, Inc., which is governed and controlled by a Bankruptcy Court
approved Plan of Reorganization, acts solely as an agent for KSC's former
creditors in pursuing bankruptcy related adversary litigation and administration
of the KSC bankruptcy estate. Kaiser exercises no significant control or
influence over nor does Kaiser have any interest in the operations, assets or
liabilities of KSC Recovery except as provided by the terms of the approved Plan
of Reorganization. In addition, KSC Recovery's cash on hand and potential
future recoveries funds all costs and expenses of KSC Recovery. It is
anticipated that the bankruptcy estate of KSC Recovery expects to make all final
distributions within the next 18 to 24 months. Consequently, activity of KSC
Recovery is not included in Kaiser's financial statements; however, KSC Recovery
is a member of the Kaiser consolidated group for tax purposes and is therefore,
included in the consolidated tax return.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of 90 days or less to be cash equivalents. The Company
maintains its cash balances with high quality financial institutions and are
insured by the Federal Deposit Insurance Corporation up to $100,000 at each
institution.
63
<PAGE>
Real Estate
In accordance with Financial Accounting Standards Board ("FASB") Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (FASB 121), the Company records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
On October 29, 1999 the Company announced that it has entered into an
agreement with Ontario Ventures I, LLC to sell the bulk of its remaining Fontana
Mill Site Property for $16 million in cash plus the assumption of virtually all
known and unknown environmental obligations and liabilities associated with the
Mill Site Property. The Buyer is a new entity formed by LandBank and The
Knowlton Group, a Salt Lake City based developer. LandBank is a national leader
in the acquisition, restoration and redevelopment of environmentally impaired
real estate. The transaction is subject to extensive due diligence and a number
of contingencies. If the buyer is satisfied with the results of its due
diligence investigation and all other contingencies are resolved, the
transaction would close during the first half of 2000. Due to this pending
sale, the Company during 1999, recorded an impairment loss of $8,350,000 on its
Mill Site Property as required under FASB 121.
Interest and property taxes related to real estate under development are
capitalized during periods of development.
Investment in Penske Motorsports, Inc.
The Company accounted for its investment in Penske Motorsports, Inc. ("PMI")
under the equity method of accounting because the Company exercised significant
influence over the operations of PMI through its representation on the Board of
Directors and PMI Board Committees from April 1, 1996 through March 31, 1999.
As a result of the PMI/ISC merger in July 1999, the Company's investment in PMI
was converted into $24.4 million of cash and $57.0 million (or 1,187,407 shares)
of ISC Class A common stock valued at $47.98 per share which resulted in a gain
of $35.7 million. Subsequent to the merger of PMI into ISC, the Company
commenced an orderly liquidation of its position in the common stock of ISC. By
the middle of November 1999, the Company had completed the sale of its ISC
common stock resulting in a gain of $6.6 million. The Company's average sales
price for a share of ISC common stock was $53.52 during this orderly
liquidation.
Investment in West Valley MRF, LLC
The Company accounts for its investment in West Valley MRF, LLC under the
equity method of accounting because of the Company's 50% ownership interest.
Buildings and Equipment
Buildings and equipment are stated on the cost basis. Depreciation is
provided on the straight-line method over the estimated useful lives of the
respective assets.
Revenue Recognition
Revenues are recognized when the Company has completed the earnings process
and an exchange transaction has taken place.
64
<PAGE>
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of temporary timing differences between the financial
statement and tax bases of assets and liabilities at the applicable enacted tax
rates.
Earnings Per Share
The Company follows Statement No. 128, Earnings per Share (FASB 128) in
calculating basic and diluted earnings per share. Basic earnings per share
excludes the dilutive effects of options, warrants and convertible securities,
while diluted earnings per share includes the dilutive effects of claims on the
earnings of the Company.
Stock Options
The Company uses the intrinsic value method to account for its stock
compensation arrangements pursuant to the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents. The carrying amount approximates fair value
because of the short-term maturity of these instruments.
Receivables. The carrying amount approximates fair value because of the
short-term maturity of these instruments.
Long-Term Debt. The carrying approximates fair value based on the current
rates offered to the Company for debt of the same remaining maturities.
65
<PAGE>
Note 3. ACCOUNTS RECEIVABLE AND OTHER
Accounts receivable as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cucamonga County Water District................. $1,680,000 $1,807,000
Other........................................... 388,000 835,000
---------- ----------
2,068,000 2,642,000
Allowance for doubtful accounts (90,000) (303,000)
---------- ----------
Total..................................... $1,978,000 $2,339,000
========== ==========
</TABLE>
Note 4. 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. In
1996, the Company instituted litigation against Cucamonga due to a dispute
concerning the amount payable to the Company pursuant to the terms of the
Cucamonga Lease. The dispute centers on the Company's assertion that either the
MWD Rate in the Cucamonga Lease was discontinued on July 1, 1995, or that the
Lease Rate should be interpreted to include all the changed rates and items
implemented by Metropolitan Water District of Southern California ("MWD") since
July 1, 1995. A five-day trial on the matter was held in March 1998. The Court
ruled, in favor of the Company, that the rate on which the Cucamonga Lease had
been based was discontinued effective July 1, 1995. Therefore the terms of the
Cucamonga Lease require the parties to negotiate in good faith a new substitute
MWD rate. To date, the parties have been unable to negotiate a substitute Lease
Rate; consequently, the matter is being submitted to a reference process, which
is a private trial much like arbitration. The reference proceeding commenced
during the week of February 28, 2000. After the conclusion of all the testimony
in the proceeding, the court asked for further briefing and scheduled a final
oral argument which is currently scheduled for May 15, 2000. A decision from
the judge is expected within 60 days thereafter. 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 MWD rate under the lease with Cucamonga, the
Company has elected to report revenues on the basis of amounts Cucamonga is
currently paying. The total amount of lease payments in dispute as of December
31, 1999 is approximately $2,575,000.
Note 5. INVESTMENT IN PENSKE MOTORSPORTS, INC.
Until the close of business July 26, 1999, the Company owned 1,627,923 shares,
or approximately 11.73 % 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. Until the close of business on July 26, 1999, PMI was
traded on the NASDAQ National Market under the symbol "SPWY".
On July 26, 1999, ISC acquired all of the outstanding common stock of PMI.
ISC is a leading promoter of motorsports activities in the United States,
currently promoting more than 100 events annually. The Company voted for the
merger and elected to take the cash and stock election afforded to
66
<PAGE>
PMI shareholders. Thus, under the cash and stock election, Kaiser received
approximately $24 million in cash and 1,187,407 shares of ISC Class A common
stock valued at approximately $57 million as of the date of the merger resulting
in a gain of $35.7 million. Subsequent to the merger of PMI into ISC, the
Company commenced an orderly liquidation of a portion of its position in the
common stock of ISC. By the middle of November 1999, the Company had completed
the sale of its ISC common stock resulting in a gain of $6.6 million. The
Company's average sales price for a share of ISC common stock was $53.52 during
this orderly liquidation.
Note 6. INVESTMENT IN WEST VALLEY MRF, LLC
Effective June 19, 1997, Kaiser Recycling Corporation ("KRC") and West Valley
Recycling & Transfer, Inc. ("WVRT"), a subsidiary of Burrtec Waste Industries,
Inc. ("Burrtec"), which are equal members of West Valley MRF, LLC, (a California
Limited Liability Company) entered into a Members Operating Agreement which is
substantially the equivalent of a joint venture agreement but for a limited
liability company. The construction and start up of the WVMRF was completed
during December 1997.
Pursuant to the terms of the Members Operating Agreement, KRC contributed
approximately 23 acres of Mill Site property on which the WVMRF was constructed
while WVRT contributed all of Burrtec's recycling business that was operated
within Riverside County, thereby entitling WVMRF to receive all revenues
generated from this business after the closing date.
Most of the financing for the projected cost of the WVMRF of approximately
$10,300,000, including reimbursement of most of the previously incurred
development costs of Burrtec and the Company, was obtained through the issuance
and sale of $9,500,000 in California Pollution Control Financing Authority (the
"Authority") Variable Rate Demand Solid Waste Disposal Revenue Bonds (West
Valley MRF, LLC Project) Series 1997A (the "Bonds"). The Bonds are secured by
an irrevocable letter of credit issued by Union Bank of California, N.A. ("Union
Bank"). The Bonds have a stated maturity date of June 1, 2012, although West
Valley MRF, LLC is required, pursuant to its agreement with Union Bank, to
annually redeem a portion of the Bonds on a stated schedule. Pursuant to a
Guaranty Agreement with Union Bank, the Company and Burrtec are each liable for
fifty percent (50%) of the principal and interest on the Bonds in the event of a
default by the West Valley MRF, LLC.
The Company is accounting for its investment in West Valley MRF, LLC under the
equity method.
On an unaudited basis, gross revenues for the WVMRF for 1999 and 1998 were
$17.6 and $12.1, respectively. The Company's share of undistributed equity in
the earnings of WVMRF during 1999 and 1998 was $910,000 and $40,000,
respectively. The condensed unaudited balance sheets of West Valley MRF, LLC as
of December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current Assets............................................ $ 3,699,000 $ 2,051,000
Property and Equipment (net).............................. 10,806,000 11,240,000
Other Assets.............................................. 2,168,000 2,340,000
----------- -----------
Total Assets......................................... $16,673,000 $15,631,000
=========== ===========
Current Liabilities....................................... $ 1,610,000 $ 1,715,000
Other Liabilities......................................... 249,000 421,000
CPCFA Bonds Payable....................................... 9,200,000 9,400,000
Stockholders' Equity...................................... 5,614,000 4,095,000
----------- -----------
Total Liabilities and Stockholders' Equity........... $16,673,000 $15,631,000
=========== ===========
</TABLE>
67
<PAGE>
Note 7. MINE RECLAMATION CORPORATION
The Company, in January 1995, acquired a 70% interest in Mine Reclamation
Corporation ("MRC"), the developer of the Eagle Mountain Landfill Project.
Concurrent with this acquisition, MRC and the Company amended the MRC Lease to
terminate the minimum monthly rent payments by MRC to the Company.
Consequently, the Company has not received any rent payments from MRC since
1994, nor will it in the future until commencement of operations at the Landfill
Project. The transaction which was insignificant to the operating results,
financial position and total assets of the Company has been treated as a
purchase, and the assets acquired and liabilities assumed were recorded at their
fair market values.
Through a series of private placements with existing MRC shareholders, from
July 1995 through December 31, 1999, a total of $18.5 million has been raised by
MRC, with Kaiser contributing approximately $14 million of that amount. The
Company's 1999 advances approximated $3.0 million out of a total funding of $4.0
million. As a result of these equity fundings, the Company's ownership interest
in MRC as of December 31, 1999, is approximately 75%. The Company has also
approved advances to MRC totaling $1.8 million for 2000, which together with the
minority shareholders advances will fund MRC through December 31, 2000.
The environmental impact report ("EIR") for the Eagle Mountain Landfill
Project received approvals from the Riverside County Planning Commission and
Board of Supervisors in 1997. This EIR was subsequently challenged and the San
Diego Superior Court ruled that the EIR was defective in two general areas. The
Company and MRC ultimately appealed the adverse ruling. In May 1999, the
California Court of Appeal completely reversed the prior adverse ruling
reinstating the EIR and Riverside County land use approvals. However, depending
upon the course of action ultimately selected by MRC and the Company with regard
to the landfill project, there could be a material adverse impact to the
financial statements of the Company, including a possible write down of the
Company's investment in MRC to the lower of cost or fair market value.
Note 8. NOTES RECEIVABLE
As of December 31, 1999, the Company has two notes receivable from McLeod
Properties, Fontana LLC (Budway Trucking, Inc.) totaling $807,000, of which
$107,000 has been included in current assets and the balance of $700,000, is
classified as a long term asset. The outstanding balance of the notes bears
interest at 10% per annum with quarterly payments of $26,700 plus accrued
interest with the remaining balance due October, 2004. The Company has agreed
to subordinate its notes receivable to a construction/permanent loan in order to
facilitate the construction of a building on the property. (See Note 15, Sale
of Mill Site Property.)
Note 9. BUILDINGS AND EQUIPMENT (Net)
Buildings and equipment (net) as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Buildings and structures................................ $ 2,095,000 $ 2,095,000
Machinery and equipment................................. 3,427,000 3,141,000
----------- -----------
5,522,000 5,236,000
Accumulated depreciation................................ (2,717,000) (2,287,000)
----------- -----------
Total............................................ $ 2,805,000 $ 2,949,000
=========== ===========
</TABLE>
68
<PAGE>
Note 10. ACCRUED LIABILITIES - CURRENT
The current portion of accrued liabilities as of December 31 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
---- -----
<S> <C> <C>
Environmental insurance settlement costs.......................... $1,313,000 $1,313,000
Compensation and related employee costs........................... 1,371,000 545,000
Other............................................................. 2,314,000 1,964,000
---------- ----------
Total........................................................ $4,998,000 $3,822,000
========== ==========
</TABLE>
Note 11. ENVIRONMENTAL REMEDIATION RESERVE
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 $16 million and $26.4
million, as determined on an undiscounted basis, depending both upon the
ultimate extent of the environmental remediation and clean-up involved and upon
which approved remediation alternatives are eventually selected.
As of December 31, 1999, the total short-term and long-term environmental
remediation liabilities reflected on the Company's balance sheet was
approximately $26.4 million, which is the high end of the probable range of
future remediation and other environmental costs. Below is a table showing the
activity in the remediation liability accounts for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning Estimated Liability $28,270,000 $30,727,000
Remediation Costs Incurred (1,902,000) (2,457,000)
----------- -----------
Ending Estimated Liability 26,368,000 28,270,000
Less: Current Portion (2,500,000) (3,805,000)
----------- -----------
Long-term Portion $23,868,000 $24,465,000
=========== ===========
</TABLE>
See Note 19, "Commitments and Contingencies" for further information.
Note 12. LONG-TERM DEBT
The Company, through FWR, has a $30,000,000 revolving-to-term credit facility
with Union Bank at floating interest rates and collateralized by the Company's
shares of Fontana Union and the lease of those shares to Cucamonga. The
borrowing base available under the credit facility is limited to the discounted
present value of an eight-year projection of future payments under the Cucamonga
Lease, as defined in the credit facility agreement. The net available funds
under the $30,000,000 revolving-to-term credit facility (less $4,850,000
reserved for financial assurances required by the DTSC and relating to
environmental remediation on the Mill Site Property and $1,000,000 in an unused
outstanding standby letter of credit) was $24,150,000 as of December 31, 1999.
The credit facility's five year revolving period ends October 1, 2001 with the
maturity date on the term loan being September 30, 2006.
As of December 31, 1999, the Company had no outstanding borrowings under the
Company's $30,000,000 revolving-to-term credit facility with Union Bank.
69
<PAGE>
Total interest expense incurred in 1999, 1998, and 1997 was $1,272,000
$1,083,000, and $980,000, respectively.
Note 13. STOCKHOLDERS' EQUITY
Equity Transactions
During 1999, 1998 and 1997 the Company recorded transactions directly to
stockholders' equity other than changes resulting from net income or equity
transactions with shareholders. These transactions include deferred tax expense
credited to equity due to the utilization of the Company's reorganization NOL
carryforwards, the accelerated vesting of stock options and the increase in
equity due to PMI's purchase of North Carolina Motor Speedway ("NCMS") in May
1997. These amounts for the years ended December 31, 1999, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Deferred tax expense credited to equity............ $ 6,048,000 $ 105,000 $ 554,000
Accelerated vesting of stock options............... 54,000 --- ---
Investment increase in Penske Motorsports, Inc.... --- --- 2,937,000
------------- ------------ ------------
$ 6,102,000 $ 105,000 $ 3,491,000
============= ============ ============
</TABLE>
Common Stock Outstanding
At December 31, 1999 and 1998, Kaiser Ventures Inc. common stock has a par
value of $0.03 and 13,333,333 authorized shares, of which 6,316,853 and
10,685,257 were outstanding, respectively.
In November 1988, 10,000,000 shares of common stock (after giving effect for a
3 for 1 reverse stock split that took place in 1990) were issued pursuant to the
KSC Plan of Reorganization. As of December 31, 1999, 136,919 of these shares
are being held for the benefit of the former general unsecured creditors of the
predecessor company pending the resolution of disputed bankruptcy claims. The
final resolution of these claims will result in the final allocation of the held
shares among the unsecured creditor group, which presents no liability to the
Company. For financial reporting purposes these shares have been considered
issued and outstanding.
In November 1999, the Company purchased 2,730,950 and 1,693,551 shares of its
common stock from the New Kaiser Voluntary Employees' Beneficiary Association
(the "VEBA") and from the Pension Benefit Guaranty Corporation (the "PBGC"),
respectively. VEBA and the PBGC were the Company's two largest shareholders.
The Company paid $13.00 per share in cash. In addition, the VEBA and the PBGC
will have certain limited participation rights in the future success of the
Company. First, if there is a qualifying sale of the Company's Mill Site
Property generally prior to December 31, 2000, they would receive their pro rata
portion of any proceeds in excess of a certain threshold. (This contingent
payment would equal approximately $1.10 per share if the previously announced
transaction for the sale of the Company's remaining Mill Site property to
Ontario Ventures I, LLC were to close on its current terms.) In addition, VEBA
and the PBGC received five-year warrants to purchase 460,000 and 285,260 shares
of the Company's common stock, respectively. The warrants have an exercise
price of $17.00 per warrant.
Stock Option and Stock Grant Programs
In October 1990, the Company's stockholders approved the Amended, Restated and
Substituted Kaiser Steel Resources, Inc. 1989 Stock Plan (the "1989 Stock
Plan"). The 1989 Stock Plan provided for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock or
deferred stock awards. Certain options granted under the 1989 Stock Plan are
still outstanding. During
70
<PAGE>
1999 the Company incurred $54,000 of compensation expense associated with the
accelerated vesting of certain stock options. The Company incurred no
compensation expense during 1998 and 1997.
In June 1995, the Company's stockholders approved the 1995 Stock Plan. The
1995 Stock Plan provides for the grant of incentive stock options, non-qualified
stock options, restricted stock and other stock related incentives. In June
1996, the 1995 Stock Plan was amended to reserve up to 859,102 shares for
issuance upon exercise of stock options, grants of stock and other stock related
incentives. As a result of the increase in the 1995 Stock Plan reserve, the
Company had 859,102 reserved shares as of December 31, 1999. Grants are
generally established at fair market value of the Company's common stock on the
date of the grant and the exercise thereof may extend for up to 10 years with
various vesting schedules.
In addition, under the 1995 Stock Plan, each director when first elected to
the Board shall automatically be granted options for 5,000 common stock shares.
Each non-employee director who is re-elected or serving an unexpired term as a
member of the Board at an annual meeting of holders of stock of the Company will
be automatically granted an additional 1,500 stock options. These options have
an exercise price equal to the fair market value of the Company's common stock
on the date of the grant.
A summary of the status of the stock option grants under the Company's stock
plans as of December 31, 1999, 1998 and 1997 and activities during the years
ending on those dates is presented below:
<TABLE>
<CAPTION>
1999 1999 1999
------------------------ ------------------------ ------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
Year........................ 1,502,961 $ 11.33 1,471,161 $ 11.28 1,431,161 $ 11.35
Granted........................ 46,000 9.00 53,000 10.67 44,000 8.05
Exercised...................... (60,000) 6.33 (21,200) 6.17 (4,000) 5.83
Forfeited...................... (158,000) 13.96 --- --- --- ---
---------- ---------- ----------
Outstanding at end of year..... 1,330,961 $ 11.17 1,502,961 $ 11.33 1,471,161 $ 11.28
========== ========== ==========
Options exercisable at year
========== $ 11.22 ========== $ 11.41 ========== $ 11.08
End......................... 1,289,461 836,837 676,987
========== ========== ==========
Weighted-average fair value
of options granted during
the year.................... $ 2.54 $ 2.27 $ 1.55
</TABLE>
71
<PAGE>
The following table summarizes information about fixed stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ------------------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Exercise Prices Life (years) Options Excercise Price Options Excercise Price
- ------------------------ ----------- ------- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C>
$3.00 to 7.50 4.6 124,061 5.61 121,811 $ 5.61
$7.51 to 17.58 5.4 1,206,900 11.74 1,167,650 $11.81
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for the
Company's stock-based compensation plans other than for compensation and
performance-based stock awards. Had compensation cost for the Company's stock
option plan been determined based upon the fair value at the grant date for the
awards under the plan consistent with the methodology prescribed under Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, ("FAS 123"), the effect on the Company's net income and earnings
per share would have been adjusted to the pro forma amounts as indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Earnings
As reported $ 24,029,000 $ 1,232,000 $ 848,000
Pro forma $ 23,650,000 $ 757,000 $ 263,000
Earnings per share (Basic)
As reported $ 2.35 $ 0.12 $ 0.08
Pro forma $ 2.31 $ 0.07 $ 0.02
Earnings per share (Diluted)
As reported $ 2.31 $ 0.11 $ 0.08
Pro forma $ 2.28 $ 0.07 $ 0.02
</TABLE>
The Company employed the Black-Scholes option-pricing model in order to
calculate the above reduction in net income and earnings per share. The effect
on net earnings for 1999, 1998 and 1997 is not necessarily representative of the
effect in future years. The following table describes the assumptions utilized
by the Black-Scholes option-pricing model and the resulting fair value of the
options granted:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Volatility .415 .313 .255
Risk-free interest rate 6.00% 6.00% 6.38%
Expected life in years 2.28 2.05 2.10
Forfeiture rate 0.00% 0.00% 0.00%
Dividend yield 0.00% 0.00% 0.00%
</TABLE>
In 1988, the Company granted stock options totaling 533,333 shares with a
nominal exercise price to certain of its officers as part of the emergence from
bankruptcy reorganization. These options became 50% vested at the date of grant
with the remaining options ratably vesting through June 1, 1991. As of December
31, 1999, 52,000 of these options remain vested and unexercised.
72
<PAGE>
Note 14. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Numerator:
<S> <C> <C> <C>
Net Income.............................................. $24,029,000 $ 1,232,000 $ 848,000
Numerator for basic earnings per share
-income available to common stockholders. ........... $24,029,000 $ 1,232,000 $ 848,000
Numerator for diluted earnings per share
-income available to common stockholders. ........... $24,029,000 $ 1,232,000 $ 848,000
Denominator:
Denominator for basic earnings per share
-weighted-average shares............................... 10,226,000 10,664,000 10,536,000
Effect of dilutive options.............................. 160,000 176,000 204,000
----------- ----------- -----------
Denominator for diluted earnings per share
-adjusted weighted-average shares and
assumed conversions.................................... 10,386,000 10,840,000 10,740,000
=========== =========== ===========
Basic earnings per share................................ $ 2.35 $ .12 $ .08
=========== =========== ===========
Diluted earnings per share.............................. $ 2.31 $ .11 $ .08
=========== =========== ===========
</TABLE>
For additional disclosures regarding the outstanding employee stock options
see Note 13.
The following table discloses the number of vested and outstanding options
during 1999, 1998 and 1997 that were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares and, therefore, the effect would be
antidilutive.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Number of antidilutive options......... 325,000 478,000 364,000
Range of option prices
for the antidilutive options.... ... $12.55 - 17.58 $11.25 - 17.58 $11.25 - 17.58
</TABLE>
Note 15. SALE OF MILL SITE PROPERTY
During 1999, the Company sold approximately 13 acres of its Napa Lots, a
portion of the Mill Site Property, in two all cash transactions; 7.8 acres to
Maas-Hansen Steel for $1,699,000, or $5.00 per square foot, and 5.2 acres to DT
Sari for $1,110,000, or $4.90 per square foot.
Also during 1999, the Company sold approximately one-third of an acre of its
Mill Site Property to McLeod Properties, Fontana LLC (Budway Trucking, Inc.) for
$68,000, or $4.30 per square foot, as additional acreage for use in its rail-
truck intermodal distribution facility for Budway Trucking, Inc. The transaction
closed on November 3, 1999 at which time the Company received a note receivable
for the entire purchase price. The Company has agreed to subordinate its new
note receivable to an existing permanent loan that was used to construct the
building on the property. As was the case with the 1997
73
<PAGE>
sale to Budway Trucking, the gain of $68,000 is deferred and recognized under
the cost recovery method, once proceeds received from the buyer exceed the
Company's basis in the property sold.
Effective October 19, 1999, the Company announced that it has entered into an
agreement with Ontario Ventures I, LLC to sell the bulk of its remaining Fontana
Mill Site Property for $16 million in cash plus the assumption of virtually all
known and unknown environmental obligations and liabilities associated with the
Mill Site Property. The Buyer is a new entity formed by LandBank and The
Knowlton Group, a Salt Lake City based developer. LandBank is a national leader
in the acquisition, restoration and redevelopment of environmentally impaired
real estate. The transaction is subject to extensive due diligence and a number
of contingencies. If the buyer is satisfied with the results of its due
diligence investigation and all other contingencies are resolved, the
transaction would close during the second quarter of 2000.
During 1997, the Company sold approximately 15.7 acres of its Mill Site
Property to McLeod Properties, Fontana LLC (Budway Trucking, Inc.) for
$2,943,000, or $4.30 per square foot, for use as a rail-truck intermodal
distribution facility for Budway Trucking, Inc. The transaction closed on
September 30, 1997 at which time the Company received $1,500,000 in cash and a
note receivable for $1,443,000. The Company has agreed to subordinate its note
receivable to a construction/permanent loan in order to facilitate the
construction of a building on the property. Although the Company considers the
sale to have been fully consummated during 1997, generally accepted accounting
principles require the gain of $656,000 to be deferred and recognized under the
cost recovery method, once proceeds received from the buyer exceed the Company's
basis in the property sold.
Note 16. SUPPLEMENTAL CASH FLOW INFORMATION
As a result of the merger between PMI and ISC in July 1999, the Company's
investment in PMI was converted into $24.4 million of cash and $57.0 million of
ISC Class A common stock.
The Company paid interest during 1999, 1998, and 1997 of $1,314,000,
$1,042,000, and $968,000, respectively.
Income taxes paid in 1999, 1998 and 1997 were $4,863,000, $48,000 and $92,000,
respectively.
During 1999, the Company issued $62,000 of common stock for payment of 1997
bonuses. During 1998, the Company issued $142,000 of common stock for payment of
1997 bonuses. During 1997, the Company issued $360,000 of common stock for
payment of 1996 bonuses and 1997 compensation.
During 1999, the Company carried back a note receivable for $68,000 from
McLeod Properties, Fontana LLC (Budway Trucking, Inc.) from the sale of
approximately one-third of an acre of Mill Site Property.
During 1997 the Company carried back a note receivable for $1,443,000 from
McLeod Properties, Fontana LLC (Budway Trucking, Inc.) from the sale of 15.7
acres of Mill Site Property.
During 1997, in connection with the contribution of the land to the West
Valley MRF, LLC, the Company reclassified $1,485,000 of land to the investment
in West Valley MRF, LLC.
As a result of the acquisition by PMI of 70% of the common stock of North
Carolina Motor Speedway during 1997, the Company increased its investment in PMI
by $3,128,000 and recorded corresponding increases in deferred income taxes and
stockholders equity of $191,000 and $2,937,000, respectively.
74
<PAGE>
During 1997, the Company capitalized interest and property taxes on
property real estate under development of $187,000. There was no capitalization
of interest or property taxes during 1999 and 1998.
Note 17. INCOME TAXES
The income tax provisions for the years ended December 31, 1999, 1998 and
1997 are composed of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current tax expense (credit):
Federal........................................... $ 1,582,000 $ --- $ 5,000
State............................................. 6,782,000 12,000 38,000
----------- ----------- -----------
8,364,000 12,000 43,000
----------- ----------- -----------
Deferred tax expense (credit) credited to equity:
Federal........................................... 6,048,000 105,000 554,000
State............................................. --- --- ---
----------- ----------- -----------
6,048,000 105,000 554,000
----------- ----------- -----------
Deferred tax expense (credit):
Federal........................................... (1,000,000) --- ---
State............................................. (2,211,000) 126,000 74,000
----------- ----------- -----------
(3,211,000) 126,000 74,000
----------- ----------- -----------
$11,201,000 $ 243,000 $ 671,000
=========== =========== ===========
</TABLE>
In accordance with FASB 109, the tax benefits of all deductible temporary
differences and loss carryforwards that existed at the date of a reorganization
must be credited directly to additional paid-in capital when the initial
recognition of these benefits occurs subsequent to the reorganization.
Deferred tax liabilities (assets) are comprised of the following as of
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Land held for development............................ $ --- $ 2,604,000
Investment in Fontana Union.......................... 6,392,000 6,392,000
Investment in PMI.................................... --- 13,501,000
Depreciation......................................... 116,000 73,000
--------------- ---------------
6,508,000 22,570,000
--------------- ---------------
Land held for development............................ (1,103,000) ---
Environmental remediation............................ (523,000) (1,384,000)
Investment in MRC.................................... (1,823,000) (1,823,000)
Accounts receivable reserve.......................... (107,000) (187,000)
State Taxes.......................................... (2,306,000) (6,000)
Other................................................ (1,817,000) (2,221,000)
Loss carryforwards................................... (14,055,000) (39,599,000)
--------------- ---------------
(21,734,000) (45,220,000)
--------------- ---------------
Less: Deferred tax asset valuation allowance........ 14,364,000 24,999,000
--------------- ---------------
$ (862,000) $ 2,349,000
=============== ===============
</TABLE>
The net change in the valuation allowance during 1999, 1998 and 1997 was a
reduction of $10,635,000, $759,000, and $1,731,000, respectively.
75
<PAGE>
A reconciliation of the effective income tax rate to the federal statutory
rate, for financial reporting purposes, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate......................................... 34.0% 34.0% 34.0%
Increase resulting from state tax, net of federal benefit...... 12.7 8.1 6.1
Federal Alternative Minimum Tax................................ 4.5 --- ---
Other.......................................................... --- 1.5 3.6
Additional recognition of pre-reorganization benefits.......... 17.2 3.6 30.2
Decrease in post-reorganization valuation allowance............ (40.5) --- ---
Non taxable equity earnings.................................... 3.9 (30.7) (29.8)
----- ----- -----
31.8% 16.5% 44.1%
===== ===== =====
</TABLE>
The consolidated Net Operating Loss ("NOL") carryforwards available
for federal income tax purposes as of December 31, 1999, are approximately
$35,000,000 and will expire over a period from year 2006 through 2013. There
may be certain limitations as to the future annual use of NOLs if 50% or more of
the stock of the Company changes ownership.
Note 18. LEASED ASSETS AND SIGNIFICANT CUSTOMERS
Long-Term Leases
The Company has long-term lease agreements with Cucamonga pursuant to the
Cucamonga Lease (Note 4), and Management Training Corporation ("MTC"). Minimum
lease payments expected to be received by the Company through the next five
years are as follows:
<TABLE>
<CAPTION>
Year Ending Cucamonga
December 31 Lease MTC Lease Total
----------- ----- --------- -----
<S> <C> <C> <C>
2000 $5,228,000 $764,000 $5,992,000
2001 $5,228,000 $764,000 $5,992,000
2002 $5,228,000 $382,000 $5,610,000
2003 $5,228,000 $ --- $5,228,000
2004 $5,228,000 $ --- $5,228,000
</TABLE>
The amounts for the Cucamonga Lease are based upon: (a) the quantities of
water as of December 31, 1999, and as provided for under the Lease; and (b) the
current disputed lease rate paid by Cucamonga, (which is less than the lease
rate the Company bills Cucamonga by approximately $660,000 on an annual basis).
The net book values of Fontana Union and Eagle Mountain at December 31,
1999 were $16,108,000 and $8,862,000, respectively. Only a portion of Eagle
Mountain is being utilized for the MTC Lease.
Significant Customers
The Company received substantial portions of its revenue from the following
customers:
Year Ended Cucamonga
December 31 Lease MTC Lease
----------- ----- ---------
1999 $5,228,000 $764,000
1998 $5,201,000 $729,000
1997 $5,143,000 $714,000
76
<PAGE>
Note 19. COMMITMENTS AND CONTINGENCIES
Environmental Contingencies
As discussed in Note 11 above, 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
$16 million and $26.4 million, depending upon which approved remediation
alternatives are eventually selected.
Although ongoing environmental investigations are being conducted on the
Company's 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 and 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. 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
anticipated remediation activities, the primary one being the dedication of
approximately $4.8 million of Kaiser's Union Bank Credit facility.
While the Company has monitored certain groundwater wells in the past, the
DTSC requested and the Company will implement a supplemental groundwater
monitoring system. The Company has settled obligations of groundwater
contamination with the California Regional Water Quality Control Board. The
settlement required a $1,500,000 cash payment by the Company, which was made in
February 1994, and the contribution of 1,000 acre feet of water annually for 25
years to a water quality project. These water rights are unrelated to those
leased to Cucamonga. In 1995, the Company contributed 18,000 acre feet of its
water in storage thus satisfying the first 18 years of its obligation. In
September 1998, the Company contributed an additional 7,000 acre feet of its
water in storage. This additional contribution of water completed all of the
Company's obligations under the terms of the settlement agreement approximately
20 years ahead of schedule. The Company remains contingently liable for any
impacts the groundwater plume may have on water wells owned by third parties.
The City of Ontario, California has 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 if it
should arise.
Pension Plans
The Company currently sponsors a voluntary qualified 401(k) savings plan
and a nonqualified pension plan, available to all full-time employees.
Participants may make contributions of up to 15% of their compensation with the
Company matching one-half of each participant's contribution up to 6% of
compensation. The non-qualified plan mirrors the qualified 401(k) plan.
Total expense relative to these plans for the years ended December 31,
1999, 1998, and 1997 was $156,000, $191,000, and $223,000, respectively.
Letters of Credit
At December 31, 1999, the Company had guaranteed letters of credit
outstanding on its behalf to third parties totaling $158,000. These letters of
credit were issued for reclamation activities performed at two idled coal
properties, on behalf of and at the expense of the KSC bankruptcy estate.
77
<PAGE>
Note 20. LEGAL PROCEEDINGS
The Company, in the normal course of its business, is involved in various
claims and legal proceedings. A number of litigation matters previously
reported have settled and such settlements did not have a material adverse
impact on the Company's financial statements. Except for those matters
described below, management believes these matters will not have a material
adverse effect on Kaiser's business or financial condition. Significant legal
proceedings, including those, which may have a material adverse effect on the
Company's business or financial condition, are summarized as follows:
Litigation
Eagle Mountain Landfill Project Litigation. This litigation involved legal
challenges to the EIR for the Landfill Project certified by the Riverside County
Board of Supervisors in October 1992. These cases were heard in the San Diego
County Superior Court in 1994. The Court's decisions required MRC to prepare a
new EIR, which was completed and certified in September 1997. The original
litigation against the EIR was resumed before Judge Judith McConnell of the San
Diego County Superior Court. In February 1998, the San Diego County Superior
Court announced its final decision and concluded that the new EIR was still
deficient in two principal respects. The Court's two remaining areas of concern
involve the threatened desert tortoise and Joshua Tree National Park. The
Superior Court's decision was appealed.
On May 7, 1999, a unanimous three-judge panel of the California Court of
Appeal, 4th Appellate District, Division 1, completely overturned the prior
adverse decision of the San Diego Superior Court on the Landfill Project's
environmental impact report. The California Supreme Court on July 21, 1999,
denied the opponents request that the Court of Appeal's decision be reviewed and
overturned. Accordingly, landfill opponents have effectively exhausted their
challenges under the California Environmental Quality Act.
Related to the EIR litigation was the award of approximately $300,000 of
attorneys' fees to project opponents prior to the announcement of the Court of
Appeal decision. This matter has also been appealed, and all briefs have been
filed. A decision in the matter is anticipated by year end.
In October 1999, the Company's wholly owned subsidiary, Kaiser Eagle
Mountain, Inc., completed a land exchange with the U. S. Bureau of Land
Management ("BLM"). This completed land exchange has been challenged in two
separate federal lawsuits.
It is anticipated that both cases will be consolidated into one hearing.
The same general opponents that lost the appeal before the IBLA have brought
these latest legal challenges. In sum, plaintiffs argue that the land exchange
should be reversed because the BLM failed to comply with the National
Environmental Policy Act and the Federal Land Management Policy Act. The Company
will vigorously defend against such litigation. Donna Charpied; Laurence
Charpied; et al. v. United States Department of the Interior; Bureau of Land
Management; et al, (United States District Court for the Central District of
California, Riverside Division, Case No. EDCV 99-0454 RT(MCx)) and National
Parks and Conservation Association v. Bureau of Land Management, et al. (United
States District Court for the Central District of California, Riverside
Division, Case No. EDCV-00-0041 VAX (JWJx)).
Cucamonga Litigation. In 1996, the Company initiated legal action against
Cucamonga. The dispute involved amounts owed to the Company under the terms of
its lease of Fontana Union Water stock to Cucamonga. The dispute arose out of a
change made by the Metropolitan Water District in its water rates and rate
structure effective July 1, 1995. After a trial on the matter, the San
Bernardino County Superior Court ruled that the lease rate had been discontinued
effective July 1, 1995. Thus, the parties are required to negotiate in good
faith a substitute lease rate as provided under the terms of the lease with
Cucamonga. Since the parties have been unable to negotiate a new substitute
rate, the Cucamonga Lease requires that
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the matter will be resolved in a reference proceeding. A reference proceeding is
in effect a private trial. During the week of February 28, 2000, all the
testimony in the reference proceeding was presented. The judge requested further
briefing and a final oral argument which is currently scheduled for May 15,
2000. The decision in the matter is anticipated within approximately 60 days
following the closing agreement.
Mushegain Litigation Settlement. During the third quarter of 1999, a
settlement was reached with regard to the litigation brought by a landowner that
had rented out his property to a tenant that performed work during the
construction of the California Speedway. The landowner alleged that debris,
including possible hazardous substances, were deposited in and on the
landowner's property by the former tenant and that the source of some of the
debris was from the demolition activities on the California Speedway property.
The tenant acknowledged responsibility for the conditions created on the
property but effectively became bankrupt. The landowner then sought
contribution from The California Speedway Corporation and the Company. Given
the time and expense involved in the case, the parties ultimately reached a
settlement. The Company's final allocation of the settlement has yet to be
determined, but it will not exceed $500,000. Mary Mushegain v. The California
Speedway, et. al (United States District Court, Central District of California,
Case No. CV 98-6786).
City of Richmond Litigation. During the third quarter of 1999, the City of
Richmond, located in Northern California, joined the Company in federal
litigation it commenced against several entities, alleging that the City was
entitled to recover past and future environmental clean-up costs associated with
property owned by the City of Richmond. Apparently, the property currently
owned by Richmond includes portions of World War II era shipyard construction
and demolition facilities. It is alleged that the Company's predecessor
demolished ships for approximately a two-year period in the 1940's and thus,
contributed to the contamination of the property. Litigation was commenced
against the City of Richmond in the U.S. Bankruptcy Court for the District of
Colorado to hold the City of Richmond and certain officials in contempt for
violating the bankruptcy order. Subsequent to the commencement of the contempt
proceeding, a settlement was reached whereby the City of Richmond was allowed a
late unsecured general creditor claim in the KSC bankruptcy estate. The amount
in stock and cash to be paid by the bankruptcy estate is currently estimated to
be less than $150,000. City of Richmond, et al v. Levin Enterprises, Inc., et
al. (United States District Court, Northern District of California, Case No. C-
97-3213 CRB).
7-7 PRP Site. The U.S. Environmental Protection Agency has alleged that the
Company, along with a number of other entities, is responsible for clean-up and
oversight costs associated with the remediation of one of more sites located in
Ohio formally owned or operated by 7-7, Inc. 7-7, Inc. was a remediation
contractor. 7-7, Inc. was retained by the Company in connection with certain
remediation projects. Since, the Company believes it could be found to be a de
minimis potentially responsible party, the Company along with a number of other
entities entered into a consent order with the EPA. The Company's liability, if
any, is currently estimated to be less than $150,000.
Asbestos Suits. The Company along with KSC are currently named in
approximately forty (40) active asbestos lawsuits. The Company and KSC have
been previously named in other asbestos suits but for various reasons those
suits are not currently being pursued. Most of the plaintiffs alleged that they
worked in shipyards in the Oakland/San Francisco, California area in the 1940's
and that KSC was in some manner associated with one or more shipyards or has
successor liability from another "Kaiser" entity. Most of these lawsuits are
third party premises claims claiming injury resulting from exposure to asbestos
and involve multiple defendants. The Company anticipates that it will be named
as a defendant in additional asbestos lawsuits. Virtually of the complaints are
non-specific. As such it is not practical at this time to determine the true
nature and extent of the claims against the Company and KSC. To date, several,
but not all, of the plaintiffs have agreed that they will not personally pursue
the Company, but they have been granted the right to pursue the Company's
insurance coverage, to the extent there is coverage. The Company currently
believes that it does have insurance coverage for at least a portion of the
claims and has tendered these suits for defense. The Company also currently
believes that it has
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various defenses to these claims, including the discharge granted to it in
connection with KSC's bankruptcy reorganization. The KSC bankruptcy estate,
through KSC Recovery has been incurring defense costs, which should in large
part be reimbursed by insurance. However, there currently is a dispute as to the
amount of insurance coverage. The Company and KSC Recovery are engaged in
settlement negotiations with insurance carriers with regard to the coverage
dispute. Asbestos litigation is an evolving area of the law and the factual
discovery with respect to many of these lawsuits has not been completed.
City of Ontario Litigation. There has been no material change in this
matter since the 1998 10-K Report. By way of background, on February 27, 1996,
the City of Ontario, California served on the Company a complaint filed in San
Bernardino County Superior Court (City of Ontario v. Kaiser Ventures Inc., et
al.; Case No. RCV 17334). In sum, the complaint alleges that a plume or plumes
containing organic carbon, dissolved solids and mercury originating from the
Company's Mill Site Property due to activities of KSC and/or a former tenant of
the Mill Site Property have impacted one of the City of Ontario's water wells.
Ontario seeks reimbursement for remedial costs, replacement of the allegedly
impacted well and replacement or improvement or refurbishment of related
facilities.
The Company challenged Ontario's ability to bring this litigation given the
KSC bankruptcy and the discharge granted to the Company. In April 1996, Ontario
brought a declaratory judgment action in the U.S. District Court for the
District of Colorado in Bankruptcy (the "U.S. Bankruptcy Court") against the
Company, (City of Ontario v. Kaiser Ventures Inc., Adversary Proceeding No. 96-
1215 MSK). In the U.S. Bankruptcy Court action, Ontario in effect sought a
determination that the matters and damages alleged in its California lawsuit
were not discharged as a part of the KSC bankruptcy proceedings.
The Company and the City reached a settlement concerning the matter before
the U.S. Bankruptcy Court which was approved by the U.S. Bankruptcy Court in
October. Under the terms of the settlement, the Company has agreed to waive its
bankruptcy-related defenses to the City's prosecution of claims for groundwater
contamination caused by mercury or other priority pollutants. In return, the
City agreed to dismiss the California litigation as to all claims related to
total dissolved solids, total dissolved carbons and sulfates, and to be bound by
the 1993 Settlement Agreement between Kaiser and the California Regional Water
Quality Control Board. The City has informed the Company that its well tests do
not currently indicate the presence of mercury. However, the City continues to
assert that the Company is responsible for the impact of total dissolved solids
at the well. The City has not yet filed an amended complaint. The Company and
the City of Ontario are continuing to engage in informal discovery and
discussions. The Company currently believes it has numerous defenses in the
litigation.
Willow Creek Shareholder Litigation. On December 20, 1999, the Company was
served with a complaint challenging and seeking damages in connection with a
transaction completed on November 22, 1999, pursuant to which the Company
purchased a substantial portion of its common stock from The New Kaiser
Voluntary Employees' Beneficiary Association ("VEBA") and the Pension Benefit
Guaranty Corporation ("PBGC"). The litigation was initiated by a shareholder of
the Company, but the matter was not a class action lawsuit. On March 9, 2000,
this federal lawsuit was voluntarily dismissed, without prejudice, by the
plaintiffs. However, it is the Company's understanding that the plaintiffs
intend to file a new lawsuit in California State Court in the near future.
Willow Creek Capital Partners, L.P. a Delaware limited partnership; and Willow
Creek Offshore, v. Kaiser Ventures Inc. et al. (United States District Court,
Northern District of California, Case No. C99 5188 SBA).
Bankruptcy Claims
The Company's predecessor, KSC, was in reorganization under Chapter 11 of
the United States Bankruptcy Code from February 1987 until November 1988.
Pursuant to the KSC Plan of Reorganization (the "KSC Plan"), the Company
established a subsidiary, KSC Recovery, which was engaged in the process of
pursuing certain legal actions on behalf of the former creditors of KSC and
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handling the remaining administrative duties of the KSC bankruptcy estate,
including claims resolution. All litigation and bankruptcy administration costs
are borne by KSC Recovery, which maintains a cash reserve from previous
litigation and other recoveries to fund anticipated ongoing litigation and
administration costs. All major remaining claims in the bankruptcy estate were
settled in 1995, with completion of one major settlement occurring in 1996.
Resolution of these claims allowed for a distribution of cash and stock to most
of the unsecured creditors of the KSC bankruptcy estate in the second quarter of
1996. Consistent with KSC Recovery's role solely as an agent of the former KSC
creditors, the Company's consolidated statements of operations and cash flows do
not reflect any of KSC Recovery's activities. Because of the minimum activities
of the KSC bankruptcy estate, the Bankruptcy Court terminated its supervision
over the estate in October 1996. However, the bankruptcy estate was recently
reopened to address certain litigation matters.
From time-to-time, various other environmental and similar types of claims,
such as the environmental and asbestos litigation mentioned above, that relate
to KSC pre-bankruptcy activities are asserted against KSC Recovery and the
Company. In connection with the KSC Plan, the Company, as the reorganized
successor to KSC, was discharged from all liabilities that may have arisen prior
to confirmation of the KSC Plan, except as otherwise provided by the KSC Plan
and by law. Although the Company believes that in general all pre-petition
claims were discharged under the KSC Plan, in the event any of these claims or
other similar claims are ultimately determined to survive the KSC bankruptcy, it
could have a material adverse effect on the Company.
[Intentionally Left Blank]
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Note 21. QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1999
Resource revenues............................. $1,274,000 $1,865,000 $40,932,000 $ 7,555,000
Income (loss) from operations................. $ (223,000) $ 304,000 $39,254,000 $(3,607,000)
Income (loss) before income tax provision..... $ (542,000) $ (30,000) $39,150,000 $(3,348,000)
Net (loss) income............................. $ (327,000) $ (26,000) $29,307,000 $(4,925,000)
Earnings (loss) per share
Basic........................................ $ (.03) $ .00 $ 2.77 $ (.39)
Diluted...................................... $ (.03) $ .00 $ 2.73 $ (.39)
1998
Resource revenues............................. $1,673,000 $3,066,000 $ 2,416,000 $ 2,718,000
Income (loss) from operations................. $ (371,000) $1,113,000 $ 586,000 $ 1,230,000
Income (loss) before income tax provision..... $ (586,000) $ 854,000 $ 332,000 $ 875,000
Net (loss) income............................. $ (339,000) $ 491,000 $ 189,000 $ 891,000
Earnings (loss) per share
Basic........................................ $ (.03) $ .05 $ .02 $ .08
Diluted...................................... $ (.03) $ .05 $ .02 $ .07
1997
Resource revenues............................. $1,837,000 $3,221,000 $ 2,977,000 $ 1,971,000
Income (loss) from operations................. $ (112,000) $1,288,000 $ 1,149,000 $ (134,000)
Income (loss) before income tax provision..... $ (295,000) $1,051,000 $ 873,000 $ (110,000)
Net (loss) income............................. $ (174,000) $ 604,000 $ 493,000 $ (75,000)
Earnings (loss) per share
Basic........................................ $ (.02) $ .06 $ .05 $ (.01)
Diluted...................................... $ (.02) $ .06 $ .05 $ (.01)
</TABLE>
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KAISER VENTURES INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Balance at Charged to Deductions
Beginning Costs and from Balance at
Classification of Period Expenses (A) Reserves End of Period
- ------------------------------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1999
----------------------------
Allowance for losses in collection
of current accounts receivable..... $ 303,000 $ --- $ 213,000 $ 90,000
========== ============ ========== =============
Year Ended December 31, 1998
----------------------------
Allowance for losses in collection
of current accounts receivable..... $ 299,000 $ 31,000 $ 27,000 $ 303,000
========== ============ ========== =============
Year Ended December 31, 1997
----------------------------
Allowance for losses in collection
of current accounts receivable..... $ 286,000 $ 54,000 $ 41,000 $ 299,000
========== ============ ========== =============
</TABLE>
(A) Although the Company is continuing to bill Cucamonga at what it believes is
the correct Metropolitan Water District of Southern California ("MWD") rate
under the lease with Cucamonga, the Company has elected to report revenues on
the basis of amounts Cucamonga is currently paying. The amounts for 1996 and
1997 above have been restated to remove the disputed amounts which had
previously been included in accounts receivable and the account receivable
reserve. The total amount of lease payments in dispute for the years ended
December 31, 1999, 1998, and 1997 are approximately $680,000, $658,000, and
$488,000, respectively.
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EXHIBIT 3.2
Amended and
Restated Bylaws
of
Kaiser Steel Resources, Inc.
Effective: January 6, 2000
These Amended and Restated Bylaws correctly set forth the bylaws, as
amended, and supersede the existing bylaws of the Corporation and all amendments
thereto, including, but not limited to, the Amended and Restated Bylaws
effective March 22, 1989, and all amendments thereto.
Article I
Offices
Section 1.1 Principal Office. The principal office for the transaction of
the business of the Corporation shall be at, 3633 E. Inland Empire Boulevard,
Suite 850, Ontario, California 91764. The Board of Directors is hereby granted
full power and authority to change said principal office from one location to
another.
Section 1.2 Other Offices. Branch or subordinate offices may at any time
be established by the Board of Directors at any place or places within or
without the State of Delaware.
Article II
Meetings of Stockholders
Section 2.1 Place of Meetings. All meetings of stockholders shall be held
either at the principal office of the Corporation or at any other place
designated by the Board of Directors.
Section 2.2 Annual Meeting. The annual meeting of stockholders shall be
held at such time and on such date as the Board of Directors shall determine. At
the meeting, directors shall be elected, and any other proper business
transacted.
Section 2.3 Special Meetings. Special meetings of stockholders, for any
purpose whatsoever, may be called at any time by the Chief Executive Officer, if
any, or by the President if there is no Chief Executive Officer, or shall be
called by the Secretary or any Assistant Secretary upon written request (stating
the purpose for which the meeting is to be called) of a majority of the Board of
Directors.
Section 2.4 Notice of Meetings. Except as provided in Section 2.5 below,
written notice (in the manner described in Section 5.2 below) of annual and
special meetings shall be sent to each stockholder entitled thereto not less
than ten (10) days nor more than sixty (60) days before the date of the meeting,
whether annual or special, and shall specify the place, the day and the hour of
such meeting, and the purpose or purposes of the meeting. The notice of any
meeting at which directors are to be elected shall include the name of any
nominee or nominees who at the time of the notice, the Board intends to present
for election.
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If any notice addressed to a stockholder at the address of that stockholder
appearing on the books of the Corporation is returned to the Corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the stockholder at that address, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the stockholder on written
demand of the stockholder at the principal executive office of the Corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the Secretary, Assistant Secretary or any
transfer agent of the Corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
Section 2.5 Advance Notice Requirements for Stockholder Proposals and
Director Nominations. At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, nominations for the
election of directors or other business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors; (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, or for a stockholder to nominate candidates for
election as directors at an annual or special meeting of the stockholders, the
stockholder must have given timely notice thereof in writing and in proper form
to the Secretary of the Corporation. To be timely, a stockholder's notice must
be delivered, or mailed to and received at the principal executive offices of
the Corporation: (y) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary date of the immediately
preceding annual meeting of stockholders, not less than 60 days nor more than 90
days prior to such anniversary date; and (z) in the case of an annual meeting
that is not called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the case of
a special meeting of the stockholders called for the purpose of electing
directors, not later than the close of business on the tenth day on which notice
of the date of the meeting was mailed or public disclosure of the date of the
meeting was made, whichever occurs first. To be in proper form a stockholder's
notice to the Secretary shall set forth as to each matter: (i) the name and
address of the stockholder who intends to make the nominations or propose the
business and, as the case may be, of the person or persons to be nominated or of
the business to be proposed; (ii) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and, if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) if applicable, a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee or each matter of business to be proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, or the matter been
proposed, or intended to be proposed by the Board of Directors; and (v) if
applicable, the consent of each nominee to serve as director of the Corporation
if so elected. Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at any annual meeting or special meeting called for
the purpose of electing directors except in accordance with the procedures set
forth in this Section 2.5. The Chairman of the annual meeting shall, if the
facts warrant, determine and declare to the meeting that the nomination of any
person or other business was not properly brought before the meeting and in
accordance with the provisions of this Section 2.5, and if he or she should so
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determine, he or she shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted or the nomination of
any person acknowledged.
Section 2.6 Adjourned Meetings and Notice Thereof. Any stockholders'
meeting, whether annual or special, and whether or not a quorum is present, may
be adjourned from time to time by the vote of a majority of the shares
represented at the meeting in person or by proxy, but in the absence of a quorum
no other business may be transacted at any such meeting. At the adjourned
meeting, the Corporation may transact any business that might have been
transacted at the original meeting.
When any stockholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as aforesaid, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
Section 2.7 Voting. At all meetings of stockholders, every holder of
stock entitled to vote shall have the right to one vote for each share of such
stock outstanding in his name on the stock records of the Corporation. Such vote
may be viva voce or by ballot. When a quorum is present, when an action, other
---- ----
than the election of directors, is to be taken by a vote of stockholders, it
shall be authorized by a majority of the stockholders' voting power present in
person or represented by proxy, unless a greater vote is required by the
Certificate of Incorporation, these Bylaws or by law. Directors shall be elected
by a plurality of the votes cast at any election. No stockholder will be
permitted to cumulate votes at any election of directors.
Section 2.8 Quorum. The presence in person or by proxy of the holders of
a majority of the stock shall constitute a quorum for the transaction of
business except as otherwise provided by law or the Certificate of
Incorporation. The stockholders present at a duly called or held meeting at
which a quorum is initially present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum; provided that any action taken is approved by at least a majority
of the shares required to constitute a quorum. Regardless of whether a quorum is
present, a stockholders' meeting may be adjourned as provided in Section 2.6
above.
Section 2.9 Conduct of Business. The Chairman of the Board, or in the
absence of the Chairman of the Board, the Vice Chairman of the Board or in the
absence of the Vice Chairman of the Board, the President shall call the meeting
of stockholders to order, and shall act as chairman of the meeting. The
chairman of any meeting of stockholders shall determine the order of business
and the procedures at the meeting, including such matters as the regulation of
the manner of voting and the conduct of business. The Secretary of the
Corporation shall act as Secretary of all meetings of the stockholders, but in
the absence of the Secretary at any meeting of the stockholders, the presiding
officer may appoint any person to act as secretary of the meeting.
Section 2.10 Action Without Meeting. Any action, except election of
directors, which under the provisions of the General Corporation Law of Delaware
may be taken at a meeting of the stockholders, may be taken without a meeting if
authorized by the written consent of stockholders holding at least a majority of
the voting power; provided, if any greater proportion of voting power is
required for such action at a meeting, then such greater proportion of written
consents shall be required.
Section 2.11 Proxies. Every person entitled to vote or execute consents
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such
3
<PAGE>
person or his duly authorized agent and filed with the Secretary of the
Corporation; provided that no such proxy shall be valid after the expiration of
three (3) years from the date of its execution, unless the stockholder executing
it specifies therein a longer period of time. A proxy shall be deemed executed
if the stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. A proxy shall be irrevocable if it states that
it is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or by delivering a proxy
in accordance with applicable law bearing a later date to the Secretary of the
Corporation.
Section 2.12 List of Stockholders. The Secretary of the Corporation or
other officer or agent who is in charge of the stock ledger of the Corporation
shall prepare and make, at least ten (10) days before every meeting of the
stockholders, a complete list of the stock-holders entitled to vote at the
meeting, or any adjournment of the meeting, arranged in alphabetical order, and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, at the
principal business office of the Corporation. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the stockholders entitled to vote in person or by proxy at any meeting
of the stockholders and the number of shares held by each of them.
Section 2.13 Questions Concerning Elections. The Board of Directors may,
in advance of the meeting, or the presiding officer may, at the meeting, appoint
one or more inspectors to act at a stockholders' meeting or any adjournment. If
appointed, the inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine challenges and questions arising in
connection with the right to vote, count and tabulate votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders.
Article III
Directors
Section 3.1 Powers. Subject to limitations of the Certificate of
Incorporation, of the Bylaws, and the General Corporation Law of Delaware as to
action to be authorized or approved by the stockholders, and subject to the
duties of directors as prescribed by the Bylaws, all corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be controlled by, the Board of Directors. Without prejudice
to such general powers, but subject to the same limitations, it is hereby
expressly declared that the directors shall have the following powers, to wit:
First - To select and remove all the other officers, agents and employees
of the Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Certificate of Incorporation or the Bylaws
and fix their compensation.
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Second - To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefore not
inconsistent with law, with the Certificate of Incorporation or the Bylaws,
as they may deem best.
Third - To fix and locate from time to time one or more subsidiary offices
of the Corporation within or without the State of Delaware, as provided in
Article I, Section 2, hereof; and to adopt, make and use a corporate seal,
and to prescribe the forms of certificates of stock, and to alter the form
of such seal and of such certificates from time to time, as in their
judgment they may deem best, provided such seal and such certificates shall
at all times comply with the provisions of law.
Fourth - To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be lawful, in consideration of
cash, services rendered, personal property, real property, leases of real
property, or a combination thereof.
Fifth - To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefore, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefore.
Sixth - To appoint one or more committees, each consisting of one or more
Directors (including the appointment of one or more Directors as
alternates) and to delegate to the executive committee and any other
committee any of the powers and authority of the Board in the management of
the business and affairs of the Corporation, including the authority to
authorize the issuance of stock, except that no committee shall have the
power to amend the Certificate of Incorporation, adopt an agreement of
merger or consolidation, recommend to the stockholders the sale, lease or
exchange of all or substantially all the Corporation's property and assets,
recommend to the stockholders a dissolution, fill vacancies on the Board or
revocation of a dissolution, nor amend the Bylaws of the Corporation. Any
executive committee shall be composed of two or more directors. Each
committee and its members shall serve at the pleasure of the Board of
Directors, which may at any time change the members and powers of, or
discharge the committee. Unless the Board by resolution designates the
chairman of the committee, each committee shall elect its own chairman,
which shall be a member of such committee. The Chief Executive Officer, if
any, shall be an ex offio member of each committee.
Section 3.2 Number and Qualification of Directors. The business of the
Corporation shall be managed by or under the direction of a Board of Directors
consisting of not less than three (3) nor more than eleven (11) directors, each
of whom shall be at least 18 years of age, but who need not be shareholders nor
residents of the State of Delaware. The number of directors of the Corporation
shall be fixed from time to time by resolution of the Board of Directors;
provided, however, that the number of directors shall not be reduced so as to
shorten the term of any director in office.
Section 3.3 Election and Term. Subject to the provisions of the
Certificate of Incorporation, as amended, the directors shall be elected at each
annual meeting of stockholders, but if any such annual meeting is not held, or
the directors are not elected thereat, the directors may be elected at any
special meeting of stockholders held for that purpose and all directors shall
hold office until their respective successors are elected and qualified.
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Section 3.4 Resignation. A Director may resign by written notice to the
Corporation or the Board of Directors. A director's resignation is effective
upon its receipt or a later time set forth in the notice of resignation. If the
resignation of a director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes effective.
Section 3.5 Removal. One or more directors may be removed with cause by
vote of the holders of a majority of the shares entitled to vote at an election
of directors cast at a meeting of the stockholders called for that purpose.
Section 3.6 Vacancies. Newly created directorships resulting from an
increase in the number of directors, or vacancies occurring in the Board of
Directors for any reason, may be filled by a vote of the majority of the
directors then in office, although less than a quorum exists. A director
elected to fill a vacancy caused by resignation, death or removal shall be
elected to hold office for the unexpired term of his predecessor.
Section 3.7 Place of Meeting. All meetings of the Board of Directors
shall be held at the principal business office of the Corporation or at any
other place designated at any time by resolution of the Board or by written
consent of all members of the Board.
Section 3.8 Regular Meetings. Regular meetings of the Board of Directors
or any committee of the Board shall be held without notice at such places and
times as the Board or committee determines at least thirty (30) days before the
meeting.
Section 3.9 Special Meetings. Special meetings of the Board of Directors
for any purpose or purposes shall be called at any time by the Chief Executive
Officer, if any, and if there is no Chief Executive Officer, the President or,
if he or she is absent or unable or refuses to act, by two directors. Special
meetings of Board committees may be called by the chairman of the committee or a
majority of committee members pursuant to this Section 3.9.
Written notice of the time and place of special meetings shall be delivered
personally to the directors or sent to each director, but the notice need not
specify the business to be transacted at, nor the purpose of the meeting. Each
Director shall receive two (2) days notice prior to the date of any special
meeting if the notice is given by mail, or 24 hours notice of the special
meeting if notice is given by any other means specified in Section 5.2. If
notice of a special meeting is given by mail and it is given less than four (4)
days prior to the date of the meeting, a confirming notice shall also be given
by one of the other means allowed pursuant to Section 5.2.
Section 3.10 Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting of a directors' meeting, either regular or special,
shall be given absent directors in the manner specified in Section 3.9 or in any
other manner constituting actual notice.
Section 3.11 Quorum. At all meetings of the Board or a committee of the
Board a majority of the authorized number of directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, except to
fill vacancies in the Board of Directors as hereinbefore provided, and except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors or the committee,
as applicable.
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Section 3.12 Adjournment. A quorum of the directors may adjourn any
directors' meeting to meet again at a stated day and hour; provide, however,
that in the absence of a quorum a majority of the directors present at any
directors' meeting, either regular or special, may adjourn from time to time.
Section 3.13 Fees and Compensation. Directors shall receive such
compensation for their services as directors as shall be determined from time to
time by resolution of the Board of Directors. Any director who serves the
Corporation in any other capacity as an officer, agent, employee or otherwise
shall not receive compensation therefore unless otherwise specifically
authorized by the Board of Directors.
Section 3.14 Telephonic Participation. Members of the Board of Directors
or any committee may participate in a Board or Board committee meeting by means
of conference telephone or similar communication equipment through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section 3.14 constitutes presence in
person at such meeting.
Section 3.15 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or the Bylaws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
members of the Board or of such committee. Such written consent shall be filed
with the minutes of proceedings of the Board or committee.
Section 3.16 Indemnification of Directors, Officers and Employees.
(a) Indemnification in Action Other Than Action By or In the Right of the
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Corporation. The Corporation shall indemnify any person who was or is a
------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a pleas of nolo contendere or its
---- ----------
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceedings, had reasonable cause to believe that
his conduct was unlawful.
(b) Indemnification in Action By or In the Right of the Corporation. The
---------------------------------------------------------------
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
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corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) Indemnification in Action Where Successful. Notwithstanding the other
------------------------------------------
provisions of this Section 3.16, to the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsection (a) or (b) of this Section 14, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. Any officer or director shall be entitled to retain legal
counsel of his or her choosing for representation in any action subject to
indemnification.
(d) Indemnification in Specific Case. Any indemnification under subsection
--------------------------------
(a) and (b) of this Section 3.16 (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon receiving
written notice of any claim, action, suit, or proceeding asserted against
any officer or director which may be subject to this indemnification and a
written request by such officer or director for indemnification and a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) or (b) of this Section
3.16. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceedings, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directors, by independent legal counsel in a written opinion, or (3) by the
stockholders. The right to indemnification set forth herein shall be
binding and shall inure to the benefit of each officer or director and his
or her successors, estate, heirs, and legal representatives.
(e) Advance of Expenses. Expenses incurred in defending or investigating a
-------------------
threatened or pending action, suit or proceedings shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Section 3.16, provided, however, if there is no actual
or potential conflict of interest, the Company may select one legal
counsel, reasonably acceptable to the director, officer, employee or agent
for all directors, officers, employees, and/or agents similarly situated.
(f) Indemnification Provisions in Bylaws Not Exclusive. The
--------------------------------------------------
indemnification and advancement of expenses provisions of this Section 3.16
shall not be deemed exclusive of or limit in any way any other rights to
which those seeking indemnification or
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advancement of expenses may be entitled under any other provisions of the
Bylaws, separate agreement, vote of stockholders or disinterested
directors, by statute, common law, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and notwithstanding any other provision to the contrary in these
Bylaws, the Corporation may enter into agreements with the directors,
officers, employees, consultants and other agents of the Corporation which
provide rights to indemnification and the advancement of expenses to such
persons to the fullest extent now or hereafter permitted by applicable law.
(g) Insurance. The Board of Directors may authorize the Corporation to
---------
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such
liability under the provisions of these Bylaws or the General Corporation
Law of the State of Delaware.
(h) Constituent Corporations. For purposes of this Section 3.16,
------------------------
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify
its directors, officers, and employees or agents, so that any person who is
or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Section 3.16 with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(i) Good Faith Defined. For purposes of this Section 3.16, a person shall
------------------
be deemed to have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
or, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the
Corporation, or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation another
enterprise by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care by the Corporation or another
enterprise assuming he has no actual knowledge to the contrary that his
reliance on the information provided to him by any of the sources set forth
herein is erroneous. The term "another enterprise" as used in this Section
3.16 shall mean any other corporation or any partnership, joint venture,
trust or other enterprise of which such person is or was serving at the
request of the Corporation as a director, officer, employee or agent. The
provisions of this Section 3.16 shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth herein.
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(j) Indemnification by the Court. Notwithstanding any contrary
----------------------------
determination in a specific case under this Section 3.16 and
notwithstanding the absence of any determination hereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction
in the State of Delaware for indemnification to the extent otherwise
permissible under this Section 3.16. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because
he has met the applicable standards of conduct set forth in the Section
3.16. Notice of any application for indemnification pursuant to this
Section 3.16 shall be given to the Corporation promptly upon the filing of
such application.
(k) Continuance of Rights. The indemnification and advancement of expenses
---------------------
provided by or granted pursuant to these Bylaws shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such persons.
(l) Severability. In the event any sentence or paragraph of this Section
------------
3.16 is declared by a court of competent jurisdiction to be void, such
sentence or paragraph shall be deemed severed from the remainder of this
Section 3.16 and the balance of the Section shall remain in effect.
Section 3.17 Advisory Directors. The Board of Directors from time to
time may elect one or more persons to be advisory directors who shall not by
such appointment be members of the Board of Directors. Advisory directors shall
be available from time to time to perform special assignments specified by the
Chief Executive Officer, if any, or the President, to attend meetings of the
Board of Directors upon invitation and to furnish consultation to the Board of
Directors. The period during which the title shall be held may be prescribed by
the Board of Directors. If no period is prescribed, the title shall be held at
the pleasure of the Board of Directors.
Article IV
Officers
Section 4.1 Officers. The officers of the Corporation, who need not be
directors, shall be a President, a Secretary, and a Chief Financial Officer.
The Corporation may also have, at the discretion of the Board of Directors, a
Chief Executive Officer, one or more Executive Vice Presidents, Senior Vice
Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers, and
one or more other officers, as may be appointed in accordance with the
provisions of Section 4.3. In addition, the Board of Directors may appoint a
Chairman and Vice Chairman of the Board. One person may hold two or more
offices.
Section 4.2 Election. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 4.3 or
Section 4.6, shall be chosen by the Board of Directors, subject to the rights,
if any, of an officer under any contract of employment.
Section 4.3 Subordinate Officers. The Board of Directors may appoint such
other officers as the business of the Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from time to time
determine.
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Section 4.4 Removal. Any officer may be removed, either with or without
cause, by a majority of the directors at the time in office, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board of Directors, by an officer upon whom such power of removal may be
conferred by the Board of Directors. The removal of an officer shall be without
prejudice to his or her contractual rights, if any.
Section 4.5 Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President, or to the
Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 4.6 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for regular appointments to such office.
Section 4.7 Chairman and Vice Chairman of the Board. The Chairman of the
Board, if such office is filled, shall be a Director and shall preside at all
stockholders' and Board of Directors' meetings. The Board of Directors may also
appoint a Vice Chairman of the Board of Directors who shall perform the duties
of the Chairman of the Board in the absence of the Chairman of the Board of
Directors.
Section 4.8 Chief Executive Officer. The Chief Executive Officer, if
any, or the President, as designated by the Board, shall be the chief executive
officer of the Corporation and shall have the general powers of supervision and
management of the business and affairs of the Corporation usually vested in the
chief executive officer of a corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. In addition, the
Chief Executive Officer shall carry out such duties and responsibilities as may
be assigned to him from time to time by the Board of Directors. If no
designation of chief executive officer is made, the President shall be the chief
executive officer. The Chief Executive Officer may delegate to the other
officers such of his or her authority and duties at such time and in such manner
as he or she deems advisable.
Section 4.9 President. The President shall be the chief operating
officer of the Corporation and shall, subject to the supervision and control of
the Board of Directors and the Chief Executive Officer, if such position is
filled, have general supervision, direction and control of the operating affairs
of the Corporation. The President shall have such other powers and duties as
shall be prescribed by the Board of Directors, the Chief Executive Officer, if
any, or the Bylaws. The President may delegate to the officers of the
Corporation other than the Chairman of the Board or the Chief Executive Officer,
if any, such of his or her authority and duties at such time and in such manner
as he or she deems appropriate.
Section 4.10 Vice Presidents. In the absence or disability of the
President, the Vice Presidents in order of their rank (executive, senior) as
fixed by the Board of Directors or, if not ranked, the Vice Presidents
designated by the Board of Directors, shall perform all the duties of the
President, and when so acting shall have all the powers of, and be subject to
all restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the Board of Directors, the Chief Executive Officer, if
any, the President, or the Bylaws.
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Section 4.11 Secretary. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal business office or such other place as the
Board of Directors may order, of all meetings of directors and stockholders,
with the time and place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those present at
directors' meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the office of the
Corporation or at the principal business office of the Corporation's transfer
agent, if a transfer agent shall be appointed, a stock ledger, or a duplicate
stock ledger, showing the names of the stockholders and their addresses; the
number and classes of shares held by each; the number and date of certificates
issued for the same; and the number and date of cancellation of every
certificate surrendered for cancellation. The Secretary shall cause to be kept
at the principal business office of the Corporation a copy of its Certificate of
Incorporation, a copy of its Bylaws and all amendments thereto, and a statement
setting out the name of the custodian of such stock ledger or duplicate stock
ledger and the present and complete post office address, including street and
number, if any, where such stock ledger or duplicate stock ledger is kept.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
Section 4.12 Chief Financial Officer. The Chief Financial Officer shall
also be the treasurer of the Corporation, and he or she shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus and
surplus arising from reduction of capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any director.
The Chief Financial Officer shall deposit, or cause to be deposited, all
moneys and other valuables in the name and to the credit of the Corporation with
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the President and directors, whenever they request
it, an account of all of his transactions as Treasurer and of the financial
condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or the Bylaws.
Article V
Miscellaneous
Section 5.1 Record Date and Closing of Transfer Books. The Board of
Directors may fix a time in the future as a record date for the determination of
the stockholders entitled to notice of and to vote at any meeting of
stockholders or entitled to receive any dividend or distribution, or any
allotment of rights, or to exercise right in respect of any other lawful action.
The record date so fixed shall be not more than sixty (60) days nor less than
ten (10) days prior to the date of such meeting nor more than sixty (60) days
prior to any other action. When a record date is so fixed, only stockholders of
record on that date are entitled to notice of and to vote at the meeting or to
receive the dividend, distribution or allotment of rights, or to exercise the
rights, as the case may be, notwithstanding any transfer of any
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shares on the books of the Corporation after the record date, except as
otherwise provided in the Certificate of Incorporation or by agreement or in the
General Corporation Law of Delaware. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, however, the Board may fix a new record date for the
adjourned meeting. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of a share for all
purposes, including notices, voting, consents, dividends and distributions, and
shall not be bound to recognize any other person's equitable or other claim to
interest in such share, regardless of whether it has actual or constructive
notice of such claim or interest.
Section 5.2 Delivery of Notices. All written notices to stockholders,
directors and Board committee members shall be given personally or by mail
(registered, certified or other first class mail, with postage pre-paid),
addressed to such person at the address designated by him or her for that
purpose or, if none is designated, at his or her last known address. Written
notices to Directors or Board committee members may also be delivered at his or
her office on the Corporation's premises, if any, or by overnight carrier,
telegram, telex, telecopy, radiogram, cablegram, facsimile, computer
transmission or similar form of communication, addressed to the address referred
to in the preceding sentence. Notices given pursuant to this Section 5.2 shall
be deemed to be given when dispatched, or, if mailed, when deposited in a post
office or official depository under the exclusive care and custody of the United
States postal service. Notices given by overnight carrier shall be deemed
"dispatched" at 9:00 a.m. on the day the overnight carrier is reasonably
requested to deliver the notice. The Corporation shall have no duty to change
the written address of any director, Board committee member or stockholder
unless the Secretary receives written notice of such address change.
Section 5.3 Waiver of Notice. Whenever notice is required to be given
under the Certificate of Incorporation, these Bylaws or applicable law, a
written waiver, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
where the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 5.4 Checks, Drafts, Evidences of Indebtedness. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the Corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors or by a Committee of the
Board if so authorized.
Section 5.5 Contracts, How Executed. The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name and on behalf of the Corporation, and such authority
may be general or confined to specific instances; provided, however, unless the
Board of Directors otherwise directs by resolution, the Chief Executive Officer,
if any, and the President, and any Vice President, shall have the authority
normally incident to their respective office, to execute and deliver contracts
on behalf of the Corporation in the ordinary course of business. The Board of
Directors may ratify or confirm the execution of any contract or instrument.
Section 5.6 Certificates of Stock. A certificate or certificates for
shares of the capital stock of the Corporation shall be issued to each
stockholder when any such shares are fully paid up. All such certificates shall
be signed by the Chairman of the Board or a Vice Chairman of the Board, or the
President or a Vice President and by the Treasurer or an Assistant Treasurer, or
the Secretary or an
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Assistant Secretary. Any or all of such signatures may be a facsimile. Every
certificate authenticated by a facsimile of a signature must be countersigned by
a transfer agent or transfer clerk, and be registered by an incorporated bank or
trust company, either domestic or foreign, as registrar of transfers, before
issuance.
Section 5.7 Representation of Shares of Other Corporations. The Chairman
of the Board, the President, any Vice President, the Chief Financial Officer,
the Secretary or Assistant Secretary of this corporation, or any other person
authorized by the Board of Directors or the resident or a Vice President, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this Corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
Section 5.8 Certification and Inspection of Bylaws. The original or a
copy of these bylaws, as amended or otherwise altered to date, certified by the
Secretary, shall be kept at the Corporation's principal executive office and
shall be open to inspection by the stockholders of the Corporation, at all
reasonable times during office hours.
Section. 5.9 Construction; Definitions. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
General Corporation Law of Delaware shall govern the construction of these
Bylaws. Without limiting the generality or this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
Article VI
Amendments
Section 6.1. Amendment or Alteration. Subject to the provisions of the
Certificate of Incorporation, as amended, these Bylaws may be made, adopted,
amended, altered or repealed by vote of the holders of a majority of the
outstanding shares of Common Stock or, subject to such right of the holders of
Common Stock, by the Board of Directors.
14
<PAGE>
EXHIBIT 10.3.1
First Amendment
to the
Amended and Restated Employment Agreement
of
Richard E. Stoddard
This FIRST AMENDMENT TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT OF
RICHARD E. STODDARD ("First Amendment") is made and entered into as of January
6, 2000, by and between RICHARD E. STODDARD ("Employee") and KAISER VENTURES
INC. ("Kaiser").
Recitals
A. Employee is currently employed by Kaiser as Chairman of the Board,
Chief Executive Officer and President and has an existing Amended and Restated
Employment Agreement with Kaiser dated effective January 15, 1998 (the
"Employment Agreement"); and
B. Employee and Kaiser have mutually agreed to the modification of
certain provisions of the Employment Agreement and therefore Employee and Kaiser
desire to amend the Employment Agreement solely as provided herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment of Paragraph 11 of Employment Agreement. Paragraph 11 of the
Employment Agreement is hereby amended as follows:
(a) Subparagraph 11.b. Subparagraph 11.b. of the Employment
-----------------
Agreement is hereby deleted in its entirety and the following new
subparagraph 11.b. is substituted therefore:
"b. any acquisition of common stock by a person or "group"
(as defined in section 13(d) of the Securities Exchange Act of
1934), resulting in the "beneficial ownership" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) by that
person or group of more than 35% of the capital stock of
Kaiser."
(b) Subparagraph 11.c. Subparagraph 11.c of the Employment Agreement
-----------------
is hereby deleted in its entirety an the following new subparagraph 11.c.
is substituted therefore:
"c. following the date of this Amendment there has been an
aggregate of net assets with a cumulative value that exceeds the
greater of (i) $30,000,000 or (ii) 30% of the net equity of
Kaiser at the time of the distribution (whether by dividend or
repurchase of stock) distributed to any one or more Kaiser
shareholders."
(c) Addition of Subparagraphs 11.d. and 11.e. Paragraph 11 of the
----------------------------------------
Employment Agreement is amended by the addition of the following new
subparagraphs:
"d. During any period of two consecutive years, the
individuals who at the beginning of such period constitute the
Board of Directors of
1
<PAGE>
the Company, cease for any reason, to constitute at least a
majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of each new director has
been approved at the time of such election or nomination by a
vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period; or
e. The Board of Directors or any designated committee
determines, in its sole discretion, that any person (such as
that term is used in Sections 13(d) and 14(d) of the Exchange
Act) directly or indirectly exercises a controlling influence
over the management or policies or the Company."
2. Amendment of Paragraph 12 of the Employment Agreement. Subparagraph
12.c. of the Employment Agreement is hereby deleted in its entirety, except for
that portion of the paragraph commencing with "then, at Employee's option---"
and ending with the words "Paragraph 13 below," and the following new portion of
Subparagraph 12.c. is substituted therefor:
"c. Any failure to provide Employee with compensation and
benefits in the aggregate on terms that are materially less
favorable than those enjoyed by Employee under this Agreement
immediately prior to a Material Change, or the subsequent taking
of any action that would materially reduce Employee's
compensation and benefits in effect at the time of the Material
Change."
3. Amendment of Paragraph 13 of the Employment Agreement. Paragraph 13 of
the Employment Agreement is hereby amended as follows:
(a) Subparagraph 13.a. The phrase "as measured by the preceding
-----------------
year's bonus" in subparagraph 13.a. is hereby deleted in its entirety and
the following new phrase is substituted therefore in Subparagraph 13.a.:
"as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive a bonus)."
(b) Subparagraph 13.b. The word "one" in Subparagraph 13.b. is
-----------------
hereby deleted and replaced with the word "two" and the phrase "averaged
over the two (2) immediately preceding years" is replaced with the phrase
"as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive a bonus)."
(c) Subparagraph 13.c. The word "will" in Subparagraph 13.c is hereby
-----------------
deleted and replaced with the word "with," such that the end of
Subparagraph 13.c reads "in proportion to shares owned together with all
other shareholders."
(d) Additional Paragraph. Paragraph 13 of the Employment Agreement
--------------------
is hereby amended by the addition of the following paragraph at the end of
the current Paragraph 13.
"For purposes of this Agreement, "average percentage bonus
over the past five years" shall mean the average percentage
bonus received by Employee for the five years preceding the year
of termination (or for such lesser period in which bonus
payments were received) as applied to the Employee's current
annual base salary."
2
<PAGE>
3. Amendment of Paragraph 15. Paragraph 15 of the Employment Agreement
is hereby deleted in its entirety and the following new Paragraph 15
is substituted therefore:
Termination Without Cause. In the event Kaiser elects to terminate
-------------------------
Employee's employment without cause (as defined below) during the term of
this Agreement, then Kaiser agrees to pay Employee an amount equal to two
year's annual base salary (based on Employees then current annual base
salary) and continue to provide and pay its portion of all of Employee's
health, welfare, insurance and other benefits for a period of twenty-four
(24) months following the date of termination, including Kaiser's portion
of any retirement and deferred compensation plan such as Kaiser's 401(k)
plan. During such twenty-four (24) month period, Employee shall be
entitled to exercise his stock options as to any then vested, including any
options vesting within that two year period, as provided in the next
sentence, notwithstanding any other applicable provision contained in any
option agreement. In addition to the foregoing related to stock options,
with respect to any restricted stock or other stock related incentives,
Employee shall continue to vest in such securities for a period of two
years following termination. If Employee is terminated before or after a
Material Change as provided in Paragraph 12, Employee shall receive the
additional severance compensation provided in Paragraph 13.
4. Amendment of Paragraph 16. Paragraph 16 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."
5. Amendment of Paragraph 18. Paragraph 18 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."
6 Ratification of Employment Agreement as Amended. The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this First Amendment is hereby ratified
and approved in all respects
7 Governing Law. This First Amendment shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.
"Employee" Kaiser"
Richard E. Stoddard Kaiser Ventures Inc.
/s/ Richard E. Stoddard By: /s/ James F. Verhey
- ------------------------------ -------------------------------------
Richard E. Stoddard James F. Verhey, Executive Vice
President & Chief Financial Officer
By: /s/ Todd G. Cole
-------------------------------------
Todd G. Cole, Chairman of the
Human Relations Committee
3
<PAGE>
EXHIBIT 10.5.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
OF
TERRY L. COOK
This FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT OF TERRY L. COOK ("First
Amendment") is made and entered into as of January 6, 2000, by and between Terry
L. Cook ("Employee") and Kaiser Ventures Inc. ("Kaiser").
Recitals
A. Employee is currently employed by Kaiser as Senior Vice President,
General Counsel and Corporate Secretary and has an existing Employment Agreement
with Kaiser dated effective June 17, 1996 (the "Employment Agreement").
B. Effective as of January 6, 2000, Kaiser has expanded Employee's duties
and responsibilities by appointing him Executive Vice President - Administration
in addition to his duties as General Counsel and Corporate Secretary of Kaiser.
C. Employee and Kaiser desire to amend the Employment Agreement as
provided herein to reflect the change in Employee's duties, an increase in his
annual base salary and the modification of certain other provisions of the
Employment Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment of Section 1 of Employment Agreement. Section 1 of the
Employment Agreement is hereby amended in its entirety to read as follows:
Employment, Positions and Duties. Kaiser hereby continues the
--------------------------------
employment of Employee upon the terms and conditions set forth in the
Employment Agreement as amended herein. Employee's positions with
Kaiser shall be Executive Vice President - Administration, General
Counsel and Corporate Secretary. Employee shall have the
responsibilities and duties normally incident to such positions,
including, but not limited to, those duties and responsibilities set
forth in Exhibit "A" attached hereto and incorporated herein by this
reference and such other duties and responsibilities as may be
reasonably assigned to him from time-to-time by Kaiser's President or
Chief Executive Officer. Employee agrees to devote his full business
time and attention to the discharge of his duties and responsibilities
under this Agreement.
2. Amendment of Section 3 of Employment Agreement. Section 3 of the
Employment Agreement is hereby amended in its entirety to read as follows:
Base Salary. Employee's initial annual base salary shall be One
-----------
Hundred Ninety Five Thousand Dollars ($195,000) per year. In the
event that any restricted stock is issued to Employee as a part of his
annual base salary, the value of such restricted stock at the time of
its grant shall be counted as base salary in the calculation of any
bonus that may be awarded to Employee. For all other purposes, any
such stock shall be treated as salary for the calculation of any
benefits based upon an employee's salary as may be required by law or
any benefit plan.
1
<PAGE>
Prior to the first meeting of the Board of Directors in any calendar
year, the Human Relations Committee of the Board will review
Employee's salary and report its recommendations for any revision to
the full Board at such meeting.
3. Amendment of Schedule "A" to Employment Agreement. Schedule "A" to the
Employment Agreement is hereby amended in its entirety to read as set forth in
the Revised Schedule "A" attached hereto and incorporated herein by this
reference.
4. 1. Amendment of Paragraph 11 of Employment Agreement. Paragraph 11
of the Employment Agreement is hereby amended as follows:
(a) Subparagraph 11.b. Subparagraph 11.b. of the Employment Agreement
-----------------
is hereby deleted in its entirety and the following new subparagraph 11.b.
is substituted therefore:
"b. any acquisition of common stock by a person or "group" (as
defined in section 13(d) of the Securities Exchange Act of 1934),
resulting in the "beneficial ownership" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) by that person or group of
more than 35% of the capital stock of Kaiser."
(b) Subparagraph 11.c. Subparagraph 11.c of the Employment Agreement
-----------------
is hereby deleted in its entirety an the following new subparagraph 11.c.
is substituted therefore:
"c. following the date of this Amendment there has been an
aggregate of net assets with a cumulative value that exceeds the
greater of (i) $30,000,000 or (ii) 30% of the net equity of Kaiser at
the time of the distribution (whether by dividend or repurchase of
stock) distributed to any one or more Kaiser shareholders."
(c) Addition of Subparagraphs 11.d. and 11.e. Paragraph 11 of the
----------------------------------------
Employment Agreement is amended by the addition of the following new
subparagraphs:
"d. During any period of two consecutive years, the individuals
who at the beginning of such period constitute the Board of Directors
of the Company, cease for any reason, to constitute at least a
majority thereof, unless the election, or the nomination for election
by the Company's shareholders, of each new director has been approved
at the time of such election or nomination by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of the period; or
e. The Board of Directors or any designated committee
determines, in its sole discretion, that any person (such as that
term is used in Sections 13(d) and 14(d) of the Exchange Act)
directly or indirectly exercises a controlling influence over the
management or policies or the Company."
5. Amendment of Paragraph 12 of the Employment Agreement. Subparagraph
12.c. of the Employment Agreement is hereby deleted in its entirety, except for
that portion of the paragraph commencing with "then, at Employee's option---"
and ending with the words "Paragraph 13 below," and the following new portion of
Subparagraph 12.c. is substituted therefor:
2
<PAGE>
"c. Any failure to provide Employee with compensation and
benefits in the aggregate on terms that are materially less favorable
than those enjoyed by Employee under this Agreement immediately prior
to a Material Change, or the subsequent taking of any action that
would materially reduce Employee's compensation and benefits in effect
at the time of the Material Change."
6. Amendment of Paragraph 13 of the Employment Agreement. Paragraph 13 of
the Employment Agreement is hereby amended as follows:
(a) Subparagraph 13.a. The phrase "as measured by the preceding
-----------------
year's bonus" in subparagraph 13.a. is hereby deleted in its entirety and
the following new phrase is substituted therefore in Subparagraph 13.a.:
"as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive a bonus)."
(b) Subparagraph 13.b. The phrase in Subparagraph 13.b. "averaged
-----------------
over the two (2) immediately preceding years" is hereby deleted and
replaced with the phrase "as measured by Employee's average percentage
bonus over the past five years (or such lesser period of time during which
Employee was eligible to receive a bonus)."
(c) Subparagraph 13.c. The word "will" in Subparagraph 13.c is hereby
-----------------
deleted and replaced with the word "with," such that the end of
Subparagraph 13.c reads "in proportion to shares owned together with all
other shareholders."
(d) Additional Paragraph. Paragraph 13 of the Employment Agreement is
--------------------
hereby amended by the addition of the following paragraph at the end of the
current Paragraph 13.
"For purposes of this Agreement, "average percentage bonus over
the past five years" shall mean the average percentage bonus received
by Employee for the five years preceding the year of termination (or
for such lesser period in which bonus payments were received) as
applied to the Employee's current annual base salary."
7. Amendment of Paragraph 16. Paragraph 16 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."
8. Amendment of Paragraph 18. Paragraph 18 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."
9. Ratification of Employment Agreement as Amended. The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this First Amendment is hereby ratified
and approved in all respects
10. Governing Law. This First Amendment shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.
3
<PAGE>
"Employee" "Kaiser"
Terry L. Cook Kaiser Ventures Inc.
/s/ Terry L. Cook By: /s/ Richard E. Stoddard
- ---------------------- -------------------------------------
Terry L. Cook Richard E. Stoddard, Chairman of the
Board, Chief Executive Officer and
President
By: /s/ Todd G. Cole
-------------------------------------
Todd C. Cole, Chairman,
Human Relations Committee
4
<PAGE>
Revised
=======
SCHEDULE "A"
============
TERRY L. COOK
Executive Vice President - Administration, General Counsel and Corporate
Secretary
These positions report to the Board of Directors, Chief Executive Officer
and Chief Operating Officer, as appropriate.
Responsibilities. Legal services, business insights, and technical assistance
in the following areas, among others:
. General legal and business advice;
. All contractual relations, including joint ventures, leases,
partnership agreements, purchase and sale agreements, collection of
receivables, tenant disputes, etc.;
. Due diligence investigations and legal evaluation of acquisition
targets, plus assistance in preparation, review and closing of
acquisition agreements;
. Legal risk analysis;
. Corporate legal strategy;
. Personnel administration and related issues;
. All SEC compliance matters (other than financial statements and
related information which you will coordinate with the Chief Financial
Officer), including preparation of reports on Forms 10-K, 10-Q, 8-K,
Form 3 & 4 filings, oversight of Company policies on insider trading
and confidential information, proxy materials, and shareholder
meetings;
. Advise the Board of Directors regarding procedures, legal issues, and
legal positions;
. Corporate governance matters, such as corporate minutes, Board of
Director resolutions and special matters, by-laws and articles of
incorporation, annual corporate filings, tradenames, maintenance of
corporate subsidiaries, etc. for both Kaiser and MRC;
. Supervision of litigation matters;
. Development of defense strategies involved in defending Kaiser against
lawsuits;
. Regulatory and agency issues;
. Resolution of outstanding bankruptcy reorganization matters;
. Providing legal assistance to subsidiaries of Kaiser, as appropriate;
. Participate in major negotiations involving all phases of corporate
transactions;
. Corporate, public and media relations;
. Community and agency relations;
. Charitable and political donations;
. Overall lobbying strategy;
. Supervision of environmental compliance and remediation;
. Contract administration; and
. Tenant, vendor and consultant matters.
5
<PAGE>
EXHIBIT 10.6
TRANSITION EMPLOYMENT AGREEMENT
===============================
This TRANSITION EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by and between LEE R. REDMOND III ("Executive") and KAISER VENTURES INC. (the
"Company") as of January 6, 2000.
Recitals
A. Executive is currently employed with the Company pursuant to the terms
of that certain Employment Agreement between the Company and Executive dated
effective June 17, 1996 (the "1996 Employment Agreement").
B. The Company and Executive have mutually agreed to wind-down
Executive's time commitment to the Company, eventually resulting in Executive
terminating his employment with the Company. The Company and Executive have
agreed to terminate and supercede the 1996 Employment Agreement by this
Agreement.
NOW, THEREFORE, based upon the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Executive and the Company agree as follows:
1. Acknowledgment of Recitals. Executive and the Company agree and
acknowledge that the facts set forth in the Recitals above are true and correct
and are incorporated herein by this reference.
2. Employment Position and Duties. During Executive's employment by the
Company, Executive shall continue to serve as the Company's Sr. Vice President
of Real Estate and shall perform the duties and be responsible for the items
described on Exhibit "A" attached hereto and incorporated herein by this
reference, subject to the limitations that may reasonably arise due to his
reduced time commitment to the Company.
3. Time Commitment by Executive.
(a) Effective as of January 15, 2000, through the earlier of: (i)
April 30, 2000; or (ii) upon the close of the real estate transaction between
the Company and Ontario Ventures I, LLC pursuant to that certain Purchase and
Sale Agreement and Escrow Instructions dated October 19, 1999, as it may be
amended (the "Ontario Ventures Sale", Executive's time commitment to the Company
shall be reduced to one-half time ("Half-Time Work Period"). During the period
of Executive's half-time commitment to the Company, Executive shall be in and
conduct work out of the Company's corporate offices a minimum of two (2) days
per week, generally on Tuesday and Thursday of each week, or such other mutually
acceptable arrangement for sixteen (16) hours of work in and conducted out of
the Company's corporate offices. Executive need not be in and conduct work out
of the Company's corporate offices for the balance of his reduced time
commitment unless reasonably required to perform his duties.
(b) Effective as of May 1, 2000, through the earlier of: (i) August
31, 2000; or (ii) the close of the Ontario Ventures Sale or the close of a sale
of substantially all the Company's mill site real estate to a party other than
Ontario Ventures I, LLC ("New Party Sale"), Executive's time commitment to the
Company shall be reduced to one-quarter time ("Quarter Time Work Period").
During the period of Executive's Quarter Time commitment to the Company,
Executive shall be in and conduct work out of the Company's corporate offices a
minimum of two (2) half
Page 1-7
<PAGE>
days, generally on Tuesday and Thursday of each week, or at the Company's
option, one full day, either a Tuesday, Wednesday or Thursday of each week, or
such other mutually acceptable arrangement for eight (8) hours of work in and
conducted out of the Company's corporate offices. Executive need not be in and
conduct work out of the Company's offices for the balance of his one-quarter
time commitment unless reasonably required to perform his duties.
(c) Upon the earlier of: (i) August 31, 2000; or (ii) the closing of
the Ontario Ventures Sale or a New Party Sale, Executive employment with the
Company shall terminate. Upon the termination of employment, Executive agrees
that he shall perform consulting services for the Company through December 31,
2000 as more particularly described in Paragraph 8 below.
When not working for the Company, Executive shall be free to engage in
other employment and business, provided such do not interfere with Executive's
work for the Company as provided in this Agreement.
4. Executive's Base Compensation. While an employee of the Company, the
Company shall pay Executive based upon his current annual salary of $173,099 as
follows:
(a) Through January 15, 2000, Executive shall be paid based upon his
current annual salary;
(b) During the Half-Time Work Period, Executive shall be paid based
upon fifty percent (50%) of his current annual salary;
(c) During the Quarter-Time Work Period, Executive shall be paid
based upon twenty five percent (25%) of his current annual salary.
All payments to Executive (including salary, bonus and severance
payments) shall be made in accordance with the Company's normal payroll
procedures and shall be less all appropriate deductions, such as social
security, federal and state income tax withholding, medical and life insurance
premiums.
5. Benefits. Executive will continue to receive his regular auto
allowance benefit through the Half-Time Work Period, but such benefit shall
terminate upon commencement of the Quarter-Time Executive Work Period. Unless
Executive is terminated for cause, as defined in the Agreement, or unless
Executive voluntarily terminates his employment, Executive will continue to
receive medical, dental, life and disability insurance benefits at the Company's
expense through the earlier of: (i) one year after termination of employment or
(ii) August 31, 2001, subject to Executive's payment of any necessary premium
participation (currently $90.00 per month) or deductible as applicable to other
employees of the Company; provided, however, Executive shall have the ability to
terminate receipt of any benefit upon written notice to the Company. It may be
necessary for Executive to elect to receive health benefits pursuant to COBRA.
If a COBRA election is necessary, the Company will pay the necessary COBRA
premiums less Executive's normal monthly premium participation for one year.
After January 15, 2000 Executive will not accrue any vacation. Upon termination
of employment, Executive will not be able to participate in the Company's
401(k), Money Purchase Pension Plan, and Supplemental Executive Retirement Plan.
All benefits will terminate upon Executive voluntarily terminating his
employment or upon Executive's termination for cause.
6. Bonuses. Executive shall be paid a cash bonus of $86,500 on or about
January 7, 2000 as his 1999 year end bonus. If the Ontario Ventures Sale or a
New Party Sale is closed on or before May 31, 2000, Executive shall be paid an
additional bonus of $57,500. After May 31, 2000,
Page 2-7
<PAGE>
provided there is a closing of the Ontario Ventures Sale or a New Party Sale,
the bonus shall be reduced by one-seventh (1/7) per month through the month of
the closing, if a closing occurs. For example, if the Ontario Ventures Sale
closes in September 2000, Executive's bonus would be reduced by four-sevenths
(4/7) for the months of May, June, July and August, resulting in a bonus due
Executive of $24,642.80. After December 31, 2000, Executive shall be paid no
additional bonus.
7. Severance. Upon Executive's termination of employment, except for
cause as defined in this Agreement, and except for his voluntary termination of
employment, Executive shall be paid the following as severance benefits:
(a) any accrued and unused vacation as of January 15, 2000, as per
Kaiser's corporate records; plus
(b) $243,307.04 (representing one year's annual base salary plus an
amount representing the average percentage bonus over five (5) years ending for
the 1999 bonus year, plus one year's car allowance) if, and only if, the Ontario
Ventures Sale or a New Party Sale is closed on or prior to August 31, 2000; or
(c) $121,653.52 (representing 50% of the full severance payment
specified in subparagraph 7(b) above) if, and only if, the Ontario Ventures Sale
or a New Party Sale is closed after August 31, 2000, but on or before December
31, 2000.
If the Ontario Ventures Sale or a New Party Sale does not close on or
before December 31, 2000, Executive shall be paid no cash severance by the
Company, except for any accrued and unused vacation.
8. Consulting. After August 31, 2000, if there has been no closing on
the Ontario Ventures Sale or a New Party Sale, Executive shall, provided the
Company is in compliance with the terms of this Agreement, make himself
available through December 31, 2000, for reasonable periods of time as a
consultant to the Company. Executive shall be paid at such hourly or daily
rate, plus reimbursement of expenses, as the Company and Executive may agree
upon.
9. Death Benefits. In the event of Executive's death, the Company shall
pay to Executive's personal representative or his estate, Executive's salary and
benefits through the end of the month in which the death occurs. Executive's
estate or personal representative shall have at least one (1) year after the
date of Executive's death while in the employment of the Company in which to
exercise all vested Stock Options.
10. Disability Benefits. In the event of the disability of Executive for
any reason, the Company shall continue to pay to Executive his salary and
benefits as provided herein, less short-term disability payments until long-term
disability payments are made to Executive, but in no event shall such salary and
benefit payments continue for longer than six (6) months from the date of
disability.
11. Stock Options. Executive holds options to purchase common stock of
the Company as listed in Exhibit "B" attached hereto and incorporated herein by
this reference (collectively the "Stock Options"). All of Executive's Stock
Option are vested. All Stock Options held by Executive shall be exercisable for
a period of two years after Executive's termination of employment with the
Company (i.e., the last possible exercise date would be August 31, 2002, if
Executive's employment does not terminate earlier than its scheduled date of
August 31, 2000). The Company makes no representation to Executive that any of
the Stock Options qualify as "Incentive Stock Options".
Page 3-7
<PAGE>
12. 401(k) Loan. At the time of the termination of Executive's
employment, Executive and the Company shall determine the manner in which
Executive desires to repay his existing 401(k) loan. Executive acknowledges
that the failure to repay the 401(k) loan will result in the principal amount of
the loan being deemed a distribution to Executive. In such an event, Executive
acknowledges and understands that he will be responsible for the payment of all
income taxes and penalties on the amount of such distribution.
13. Indemnification. The Company shall continue to indemnify Executive in
accordance with the standards, terms and limitations of: (i) the Company's
Restated Certificate of Incorporation as in effect on the date hereof to the
same extent as if Executive had remained an officer of the Company; (ii) the
Company's Bylaws in effect on the date hereof to the same extent as if Executive
had remained an officer; and (iii) the Indemnification Agreement dated effective
June 27, 1994 between the Company and Executive.
14. Surrender of Company Property. Upon termination of his employment,
Executive shall immediately return to the Company equipment, materials, credit
cards, and other items belonging to the Company.
15. General Release. Upon the termination of Executive's employment, he
and the Company shall execute and deliver the general release and agreement
attached hereto as Exhibit "C".
16. Independent Judgment Made by Executive. Executive represents and
acknowledges that in executing this Agreement he does not rely and has not
relied upon any representation or statement of the Company or by any of the
Company's employees, agents, representatives, or attorneys with regard to the
subject matter, basis or effect of this Agreement.
17. Conduct. Executive agrees that he will not speak disparagingly of any
of the Company, its employees and duties, and the Company agrees it will not
speak disparagingly about Executive. If requested by Executive, the Company
will provide Executive a reference letter as mutually determined by the
Company's President and Chief Executive Officer and Executive.
18. General Confidentiality.
a. Executive's Obligations. Executive agrees that (a) except as
-----------------------
provided in this Agreement Executive shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Executive shall
use such Proprietary Information solely for the purpose of meeting his
obligations under this Agreement and not in connection with any other business
or activity. "Proprietary Information" means all oral, written or recorded
information about or related to the Company or any of its Affiliates or its or
their technology, assets, liabilities, or business, whether acquired before or
after the date hereof, and regardless of the manner in which it is acquired,
together with any documents or other materials prepared by Executive which
contain or reflect such information. After termination of employment upon
demand of the Company, Executive agrees to return or destroy any and all
materials containing any Proprietary Information.
b. The Company's Obligations. The Company agrees that it shall
-------------------------
maintain and provide information regarding Executive in accordance with
generally accepted industry and business practices.
c. Limitations on Confidential Obligations and Use Restrictions. The
------------------------------------------------------------
restrictions in Paragraph 18(a) above do not apply to information which the
Executive can demonstrate (i) is
Page 4-7
<PAGE>
then in the public domain by acts not attributable to Executive or (ii) is
hereafter received on an unrestricted basis by such Executive from a third party
source who, to Executive's knowledge after due inquiry, is not and was not bound
by confidentiality obligations to the Company or any Affiliate thereof. In
addition, Executive and the Company are permitted to disclose any Proprietary
Information that is necessary in the defense or prosecution of any legal action.
d. Actions if Disclosure Required. If Executive is required by law
------------------------------
to make any disclosure otherwise prohibited hereunder, such party shall use its
best efforts to provide the other with prompt prior notice where possible so
that (a) the other party (with the reasonable cooperation of the party required
to make such disclosure) may seek an appropriate protection order or other
remedy and/or (b) the parties can seek in good faith to agree on the appropriate
scope and approach to disclosure. If a protective order or other remedy is not
obtained, the party required to make such disclosure may furnish only that
portion of information protected hereby which it is legally compelled to
disclose and shall use its reasonable efforts to obtain confidential treatment
for all information so disclosed.
e. Injunction. Each party agrees that remedies at law may be
----------
inadequate to protect against breach of this Paragraph 18, and hereby agrees to
the granting of injunctive relief without proof of actual damage.
19. Expenses. It is further agreed for the above consideration that
Executive and the Company will bear their own costs, expenses and attorneys'
fees in connection with the negotiation and execution on this Agreement and all
the events and circumstances which form the basis for execution of this
Agreement.
20. Opportunity to Consult with Attorney. Executive hereby warrants that
prior to the execution of this Agreement, he was given the opportunity to
consult with an attorney of his own choosing and review the contents and legal
effect of this Agreement with an attorney and is executing this Agreement
voluntarily, with full and complete knowledge of the legal and binding effect of
this Agreement.
21. No Admission of Liability. This Agreement shall not in any way be
construed as an admission by either the Company or Executive that they
respectively have acted wrongfully or have any rights whatsoever against each
other except as expressly provided herein.
22. Severability. The provisions of this Agreement are severable, and if
any part of it is found to be unenforceable, all other provisions shall remain
fully valid and enforceable.
23. Termination for Cause. If the Company elects to terminate Executive's
employment for cause (as defined below), Executive's employment will terminate
on the date fixed for termination by the Company and thereafter the Company will
not be obligated to pay Executive any additional compensation, other than the
compensation due and owing up to the date of termination and as may be required
by law. After such termination, Executive shall be entitled, for a period of
one hundred twenty (120) days, to exercise any stock options or other stock
related incentives that are vested as of the date of termination.
24. Definition of "Cause." "Cause" for the purposes of this Agreement
shall mean any of the following:
a. Willful breach by Executive of any provision of this Agreement,
provided, however, if the breach is not a material breach, the Company shall
give Executive written notice of such breach and Executive shall have thirty
(30) days in which to cure such breach. No written
Page 5-7
<PAGE>
notice or cure period shall be required in the event of a willful and material
breach of this Agreement by Executive;
b. Gross negligence or dishonesty in the performance of Executive's
duties or responsibilities hereunder;
c. Engaging in conduct or activities or holding any position that
materially conflicts with the interest of, or materially interferes with
Executive's duties and responsibilities to the Company or its Affiliates; or
d. Engaging in conduct which is materially detrimental to the
business of the Company or its Affiliates.
25. Voluntary Termination. In the event of Executive's voluntary
termination of employment, the Company shall not be obligated to pay Executive
any additional compensation, other than the compensation due and owing as
through the date of termination and as may be required by law. After such
termination, Executive shall be entitled for a period of one hundred twenty
(120) days to exercise any stock options or other stock related incentives that
are vested as of the date of termination.
26. Entire Agreement. This Agreement, the exhibits hereto, and all other
documents referred to herein, (including, but not limited to, the agreements for
the Stock Options and the stock option or stock plans covering the Stock
Options, the Indemnification Agreement, the Company's 401(k) Plan, the Company's
Money Purchase Plan, and the Company's Supplemental Executive Retirement Plan)
sets forth the entire agreement between the parties hereto, with respect to the
subject matters covered by this Agreement, and the prevailing party shall be
reimbursed for all reasonable costs incurred in such legal action, including
reasonable attorneys' fees in such action.
27. Employment Agreement Termination. The 1996 Employment Agreement is
terminated and superceded by this Agreement.
28. Headings. The headings throughout this Agreement are for convenience
and reference only and they shall not be construed to add to or limit the
meaning of any provision of this Agreement.
29. Definition of the Company. For purpose of this Agreement, all
references to the Company shall be deemed to include all affiliates and
subsidiaries of the Company.
30. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
31. Arbitration of Disputes. If Executive and the Company cannot resolve a
dispute (whether arising in contract or tort or any other legal theory, whether
based on federal, state or local statute or common law and regardless of the
identities of any other defendants) that in any way relates to or arises out of
this Agreement, the termination of Executive's employment relationship with the
Company or any Affiliate thereof, (without limiting the generality of any other
Paragraph herein), then such dispute shall be settled as follows:
a. The Company and Executive agree to jointly select a judicial
officer who is affiliated with the Judicial Arbitration and Mediation Service,
or such other equivalent organization as the Company and Executive may mutually
select, to act as the trier of fact and judicial officer in such dispute
resolution;
Page 6-7
<PAGE>
b. If the Company and Executive are unable to agree upon a
particular judicial officer, then the decision shall be made by the chief
executive officer of the Judicial Arbitration and Mediation Service, after
consulting with the Company and Executive;
c. The Company and Executive shall have the same rights of discovery
as if the dispute were being resolved in the Superior Court of the State of
California. However, the judicial officer shall, on his own motion, or the
request of either the Company and Executive, have the authority to extend or
reduce the time periods therefor; and,
d. The judicial officer serving hereunder shall be designated as a
referee under the provisions of Title VIII, Chapter 6 of the California Code of
Civil Procedure (Sections 638 through 645. 1, inclusive). Payment for the
services of the judicial officer and the rights and procedure of appeal, and/or
other review of the decision, shall be made as provided in such sections.
The judicial officer shall have the right to grant injunctive relief,
specific performance and other equitable remedies.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year written above notwithstanding the actual date
of signature.
PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN OR UNKNOWN
CLAIMS.
Executed at Ontario, California. Executed at Ontario, California.
Dated: Dated:
------------------------------- ------------------------
"Executive" "COMPANY"
Lee R. Redmond III Kaiser Ventures Inc.
By: /s/ Lee R. Redmond By: /s/ Richard E. Stoddard
---------------------------------- ----------------------------
Richard E. Stoddard
President & CEO
Dated:
-------------------------
By: /s/ Todd G. Cole
----------------------------
Todd G. Cole, Chairman,
Human Relations Committee
Page 7-7
<PAGE>
Exhibit "A"
===========
LEE R. REDMOND III
Senior Vice President - Real Estate
This position reports to the Chief Executive Officer and the Chief
Operating Officer of the Corporation.
Responsibilities
This position has responsibility for all facets of the development and
redevelopment of the primary real estate assets in Fontana, and ultimately the
development for the Eagle Mountain Townsite and Lake Tamarisk. This involves
primary oversight of all interim land use activities, property management
functions, coordination with joint venture partners involved in the real estate,
and a lead role in overall development, remediation, permitting, infrastructure
development, financing and marketing.
. Participate in the investigation and decision making process in using
our land to enter new business opportunities.
. Primary responsibility for dealing with County, City and State
regulatory agencies, i.e., County Planning Department, City and County
redevelopment agencies and the DTSC.
. Assist senior management in analyzing, evaluating and pursuing
business and growth opportunities.
A-1
<PAGE>
Exhibit "B"
===========
Stock Options
Grant Date Exercise $ # Of Shares
---------- ---------- -----------
06/10/94 11.625 26,000
01/15/96 12.000 25,000
06/17/96 10.500 75,000
B-1
<PAGE>
Exhibit "C"
===========
General Release Agreement
This GENERAL RELEASE AGREEMENT ("Agreement") is made and entered into the
____ day of _________, 2000, by and between KAISER VENTURES INC. (the "Company")
and LEE R. REDMOND III ("Executive").
1. Executive represents that he has not filed any complaints, or charges
or lawsuits against the Company with any governmental agency or any court, and
that he will not do so at any time hereinafter; provided, however, this shall
not limit Executive from commencing legal action in arbitration for the sole
purpose of enforcing Executive's rights under this Agreement and the Transition
Employment Agreement between Executive and the Company dated as of January 6,
2000 (the "Employment Agreement"), and the other agreements referenced in
Paragraph 26 of the Employment Agreement, or from seeking unemployment
compensation.
2. General Release by Executive. As a material inducement to this
Agreement, Executive, individually, and his successors, assigns, heirs, and
agents, and each and all of them, agree to fully and forever release and
discharge the Company, its subsidiaries, and affiliates, and each of their
respective officers, directors, stockholders, employees, agents, and attorneys
(collectively "Releasees"), or any of them, from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including whatsoever, known or unknown,
suspected or unsuspected, including, but not limited to, rights under federal,
state or local laws prohibiting age or other forms of discrimination, claims
growing out of any legal restrictions on the Company's right to terminate its
employees, including, but not limited to, Executive's employment with the
Company, the termination of or separation from that employment ("Claim" or
"Claims"), which Executive now has, owns or holds, or claims to have, own or
hold, or which Executive at any time heretofore had, owned or held, or claims to
have, own or had, or which Executive at any time hereinafter may have, own or
hold, or claim to have, own or hold against each or any of the Releasees.
Notwithstanding the foregoing, Executive reserves all rights arising out of any
breach of this Agreement, the Employment Agreement and the other agreements,
referenced herein as described in Paragraph 26 of the Employment Agreement.
3. Scope of Executive's Release. Executive understands and agrees that
the foregoing Paragraph 2 is a release and discharge of all claims (except for
those relating to any breach by the Company of this Agreement, the Employment
Agreement and the other agreements referenced herein as described in Paragraph
26 of the Employment Agreement) including, but not limited to:
(a) all causes of action of any nature or kind including, but not
limited to, all claims or charges of wrongful discharge, infliction of emotional
distress, breach of contract, or discrimination or harassment on the basis of
race, sex, age, religion, national origin, handicap, marital status or any other
protected classification under federal, state and/or local law; and
C-1
<PAGE>
(b) all claims of every nature and kind, known or unknown, suspected
or unsuspected. Executive acknowledges that he may hereafter discover facts
different from, or in addition to, or those which he knows or believes to be
true with respect to his employment with the Company or this Agreement, and
agrees that this Agreement and the release contained herein shall be and remain
effective and binding in all respects notwithstanding such difference or
additional facts or the discovery thereof.
4. Waiver of Certain Rights. Executive expressly waives or relinquishes
all rights and benefits afforded by section 1542 of the Civil Code of the State
-----------------------
of California, and does so understanding and acknowledging the significance of
- -------------
such specific waiver of Section 1542. Section 1542 of the Civil Code of the
-----------------
State of California states 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 his must have materially affected his settlement with the
debtor."
Thus, notwithstanding the provisions of Section 1542, and for the purpose
of implementing a full and complete release and discharge of the Releasees,
Executive expressly acknowledges that this Agreement is intended to include in
its effect, without limitation, all Claims which Executive does not know or
suspect to exist in his favor, at the time of execution hereof, and that this
Agreement and contemplates the extinguishment of any such Claim or Claims,
except as expressly reserved in Paragraphs 2 and 3 above.
5. General Release by the Company. Subject to the terms and conditions of
this Agreement, the Company, its successors, assigns, subsidiaries, affiliates
and each of their respective officers, directors, stockholders, employees,
agents and attorneys, and each and all of them, agree to fully and forever
release and discharge Executive, individually, and his successors, heirs and
agents, and attorneys (collectively "Executive Releasees"), or any of them, from
any and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including whatsoever, known or
unknown, suspected or unsuspected, ("Claim" or "Claims"), which the Company now
has, owns or holds, or claims to have, own or hold, or which the Company at any
time heretofore had, owned or held, or claims to have, own or had, or which the
Company at any time hereinafter may have, own or hold, or claim to have, own or
hold against each or any of the Executive Releasees. Notwithstanding the
foregoing, the Company reserves all rights arising out of any breach by
Executive of this Agreement, the Employment Agreement, the Indemnification
Agreement, and any other agreement referenced herein as described in Paragraph
26 of the Employment Agreement, or as a result of any criminal or fraudulent
misconduct by Executive.
6. Waiver of Certain Rights by the Company. The Company expressly waives
or relinquishes all rights and benefits afforded by section 1542 of the Civil
-----
Code of the State of California, and does so understanding and acknowledging the
- -------------------------------
significance of such specific waiver of Section 1542. Section 1542 of the Civil
-----
Code of the State of California states 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,
C-2
<PAGE>
which if known by his must have materially affected his settlement with the
debtor."
Thus, notwithstanding the provisions of Section 1542, and for the purpose
of implementing a full and complete release and discharge of the Releasees, the
Company expressly acknowledges that this Agreement is intended to include in its
effect, without limitation, all Claims which the Company does not know or
suspect to exist in its favor, at the time of execution hereof, and that this
Agreement and contemplates the extinguishment of any such Claim or Claims,
except as expressly reserved in Paragraph 15 above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
"Executive" the "Company"
Kaiser Ventures Inc.
By:___________________________ By:________________________
Lee R. Redmond III Richard E. Stoddard
CEO & President
C-3
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
OF
PAUL E. SHAMPAY
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered as of January
6, 2000 by and between Paul E. Shampay ("Employee") and Kaiser Ventures Inc.
("Kaiser").
Recitals
A. Employee is currently employed by Kaiser as Corporate Controller.
B. Effective as of January 6, 2000, Kaiser expanded Employee's duties and
responsibilities and has appointed him as Vice President, Finance.
C. The intent of this Agreement is to set forth the current agreement and
understanding of Employee and Kaiser with regard to Employee's continued
employment by Kaiser and to supercede any prior employment agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment, Positions and Duties. Kaiser hereby continues the
employment of Employee upon the terms and conditions set forth in this
Agreement. Employee's position with Kaiser shall be Vice President, Finance.
Employee shall have the responsibilities and duties normally incident to such
position, including, but not limited to, those duties and responsibilities set
forth in Exhibit "A" attached hereto and incorporated herein by this reference
and such other duties and responsibilities as may be reasonably assigned to him
from time-to-time by Kaiser's Executive Vice President or Chief Executive
Officer. Employee agrees to devote his full business time and attention to the
discharge of his duties and responsibilities under this Agreement.
2. Term. Employee's employment under the terms of this Agreement shall
commence as of January 15, 2000, and shall continue until terminated as provided
herein; provided, however, upon Employee's termination, Employee shall receive
the severance compensation provided herein.
3. Base Salary. Employee's initial annual base salary shall be Ninety
One Thousand Dollars ($91,000).
Prior to the first meeting of the Board of Directors in any calendar year,
the Human Relations Committee of the Board will review Employee's salary and
report its recommendations for any revision to the full Board at such meeting.
4. Annual Bonus. In addition to his base salary, Employee shall be
entitled to participate in the bonus program of Kaiser applicable to senior
executives as it may be amended from time to time. The timing, size and/or
amount of any bonus awarded to Employee during the term of this Agreement will
be determined annually in accordance with the process set forth in Paragraph 3
above for the annual base salary review and based upon the bonus program
developed from time to time by the Compensation and Benefits Committee and
approved by the Board of Directors.
1
<PAGE>
5. Stock Options and Other Stock Related Incentives. Employee shall be
eligible for the grant of incentive stock options, non-qualified stock options
and other forms of stock related incentives from time-to-time in the discretion
of the Stock Option Committee of the Board of Directors. The timing, size and
amount of any future stock options or other stock related incentives will be
determined generally in accordance with the process used to determine the award
of any bonus to Employee. The grant and exercise of the stock options and other
stock related incentives shall generally be subject to and governed by the terms
of Kaiser's 1995 Stock Plan as it may be amended or any similar or successor
option plan. However, the Stock Option Committee may award stock options,
restricted stock or other stock related incentives outside the 1995 Stock Plan
in its discretion.
6. Other Benefits. Employee will be entitled to participate in all
benefits provided by Kaiser to its employees and to senior executives in
accordance with and subject to Kaiser's polices and procedures as they may exist
from time-to-time, including, but not limited to, medical and dental insurance,
life insurance, disability insurance, 401(k) savings plan, any pension plan,
deferred compensation plan, education and seminar reimbursement, car allowance,
and reimbursement of reasonable expenses for company business. These benefits
shall include life insurance for the benefit of Employee with a face amount of
not less than Employee's annual base salary, except that Kaiser may self-insure
if insurance is not available on a commercially reasonable basis. Employee shall
be entitled to three (3) weeks of paid vacation per year until Employee has been
employed at Kaiser for five (5) years at which time Employee shall be entitled
to four (4) weeks of paid vacation per year.
7. Restricted Stock. Any restricted stock issued by Kaiser in lieu of
cash payments in connection with Employee's base salary or any bonus, shall be
subject to the terms and conditions of a stock restriction agreement which may
provide, among other things, for the forfeiture of such stock in phases if
Employee should voluntarily terminate his employment with Kaiser within a
certain period of time or upon Employee's termination for "cause", as defined
herein.
8. Death Benefits. In the event of Employee's death, Kaiser shall pay to
Employee's personal representative or his estate, Employee's salary and benefits
through the end of the month in which the death occurred plus a ratable portion
of Employee's anticipated bonus for the year through the date of Employee's
death. Employee's anticipated bonus shall be measured by the bonus awarded for
the most recent fiscal year. If a bonus has been earned by Employee for the
preceding fiscal year but has not yet been paid prior to the death of Employee,
Employee's estate or personal representative shall be paid the full amount of
the earned but unpaid bonus. The proceeds from any such life insurance shall be
for the sole benefit of Employee's designated beneficiaries or if there are no
designated beneficiaries, Employee's estate. Upon an Employee's death, all
restricted stock issued to Employee for past services (e.g. bonus stock), shall
immediately vest and all restricted stock initially issued for anticipated
future services (e.g. salary stock) will vest ratably through the date of death.
Employee's estate or personal representative shall have at least one (1) year
after the date of Employee's death while in the employment of the Company in
which to exercise all vested Stock Options.
9. Disability Benefits. In the event of the disability of Employee for
any reason, Kaiser shall continue to pay to Employee his salary and benefits
less short-term disability payments until long-term disability payments are made
to Employee but in no event shall such salary and benefit payments continue for
longer than six (6) months from the date of disability. In addition, upon
permanent disability, the vesting of all retirement and deferral compensation
plans and all outstanding options, restricted stock or other stock related
incentives shall continue to occur for a period of two (2) years after the date
of disability in the same manner as if Employee were still employed by Kaiser
during that period.
2
<PAGE>
10. Deductions. Applicable federal and state income taxes, social
security contributions (FICA), Medicare contributions, medical insurance
premiums and any other appropriate or customary deductions shall be withheld
from any compensation paid to Employee by Kaiser.
11. Material Change. Upon the occurrence of a Material Change as
hereafter defined which occurs on or after October 1, 1999, and subject to
Paragraph 14 below, all options to acquire shares of Kaiser stock, restricted
stock or any other stock related incentive previously granted to Employee shall
immediately and be deemed to have fully vested one (1) day prior to the
effective date of the Material Change, notwithstanding any other applicable
vesting schedule. Upon the occurrence of a Material Change, Employee shall be
entitled, for a period of two years, to exercise his stock options as to any of
such shares. This provision shall take precedence over any contrary provision
in any standard stock option agreement. For purposes of this Agreement, the term
Material Change shall refer to and mean the occurrence of any one of the
following events after the date of this Agreement:
a. any sale, merger or other acquisition of all or substantially all
of Kaiser with or by another entity where the shareholders of Kaiser at the time
of the sale, merger or other acquisition do not own or control at least 51% of
the voting power of such entity immediately after the time of the sale, merger
or other acquisition.
b. any acquisition of common stock by a person or "group" (as
defined in section 13(d) of the Securities Exchange Act of 1934), resulting in
the "beneficial ownership" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) by that person or group of more than (i) 25% of the
capital stock of Kaiser accompanied by a change of more than 50% of the
directors of Kaiser within one year after such event or (ii) 35% of the capital
stock of Kaiser with or without such change.
c. following October 1, 1999 until January 6, 2000, there has been
an aggregate of net assets with a cumulative value that exceeds the greater of
(i) $20,000,000 or (ii) 20% of the net equity of Kaiser at the time of the
distribution (whether by dividend or repurchase of stock) distributed to any one
or more Kaiser shareholders, and on or after January 6, 2000, there has been an
aggregate of net assets with a cumulative value that exceeds the greater of (i)
$30,000,000 or (ii) 30% of the net equity of Kaiser at the time of the
distribution (whether by dividend or repurchase of stock) distributed to any one
or more Kaiser shareholders.
d. During any period of two consecutive years, the individuals who
at the beginning of such period constitute the Board of Directors of the
Company, cease for any reason, to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company's shareholders, of
each new director has been approved at the time of such election or nomination
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
e. The Board of Directors or any designated committee determines, in
its sole discretion, that any person (such as that term is used in Sections
13(d) and 14(d) of the Exchange Act) directly or indirectly exercises a
controlling influence over the management or policies or the Company.
12. Constructive Termination After A Material Change. Upon the occurrence
of a Material Change, Employee shall be deemed to have been constructively
discharged upon the occurrence of any of the following events within six months
(6) before or eighteen (18) months after the Material Change:
3
<PAGE>
a. The assignment to Employee of duties materially and adversely
inconsistent with Employee's positions immediately prior to a Material Change.
This includes a change in reporting responsibilities, authority including title,
or responsibilities; provided, however, a lateral transfer within Kaiser or to
an Affiliate shall not be deemed a constructive termination;
b. Any requirement that Employee permanently relocate to an office
more than 50 miles from the then location to which he is assigned; and
c. Any failure to provide Employee with compensation and benefits in
the aggregate on terms that are materially less favorable than those enjoyed by
Employee under this Agreement immediately prior to a Material Change, or the
subsequent taking of any action that would materially reduce Employee's
compensation and benefits in effect at the time of the Material Change.
then, at Employee's option, exercisable within ninety (90) days of the
date Employee knew, or should have known exercising reasonable care, of the
occurrence of any of the foregoing events and the expiration of any applicable
cure period, Employee shall have the right to terminate his employment by
written notice to Kaiser, and on the date of such termination Kaiser will pay
Employee the compensation and benefits described in Paragraph 13 below.
13. Compensation Payable Upon Actual or Constructive Termination Related
to a Material Change. In the event Employee is terminated for any reason except
for death, permanent disability or for cause, as defined below, within six (6)
months before or eighteen (18) months after a Material Change or upon the
Constructive Termination of Employee before or after a Material Change as
defined and provided in Paragraph 12 above, Kaiser shall pay to Employee the
following compensation as severance benefits in addition to the severance
compensation that Employee shall receive pursuant to Paragraph 15 regardless of
any Material Change:
a. if the termination is effective after March 31 of any year, an
amount equal to the pro rata portion of the bonus that Employee would have been
eligible to earn for the year of termination as measured by the Employee's
average percentage bonus over the past five years (or such lesser period of time
during which Employee was eligible to receive a bonus);
b. an amount equal to one year's average annual bonus (cash and
stock, but not including stock options or stock grants outside of the annual
bonus) as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive bonus); and
c. Employee shall have the right to participate proportionately in
stock buyback or dividend distribution in proportion to shares owned together
with all other shareholders.
All amounts due Employee shall be payable in one lump sum or, at Employee's
option, over such period of time not to exceed twelve (12) months. Employee
shall have no duty to seek other employment during this period of time and there
shall be no offset for any compensation paid to Employee from any other source;
provided, however, if Employee is paid a consulting fee or receives compensation
from Kaiser or an Affiliate of Kaiser for services actually rendered during a
one (1) year period from the date of termination, unless otherwise agreed in
writing, such amount shall be offset against the payments made or due Employee.
For purposes of this Agreement, "average percentage bonus over the past
five years" shall mean the average percentage bonus received by Employee for the
five years preceding the year of
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<PAGE>
termination (or for such lesser period in which bonus payments were received) as
applied to the Employee's current annual base salary.
14. Possible Reduction in Certain Benefits.
(a) Except as provided in Paragraph 14(b) below, Employee shall in no
circumstances receive "payments in the nature of compensation" from Kaiser which
would result in "excess parachute payments" (as that term is defined in Sections
280G and 4999 of the Internal Revenue Code of 1954, as amended, or any
equivalent or analogous term as shall in the future be defined in any law or
regulation governing the amount of severance compensation that may be paid
without penalty to an officer of a company upon a change in control of Kaiser).
In the event either Employee or Kaiser shall be advised in writing by his or its
counsel that Employee would receive excess parachute payments if all payments
under all contacts between Employee and Kaiser were made, such opinion shall be
confidentially disclosed to the other party. If it is mutually determined that
such payments would trigger the excess parachute payments provisions, Employee
shall receive only such compensation and benefits under his contracts with
Kaiser (not to exceed those permitted without constituting excess parachute
payments) which he, in his sole discretion, has designated in written notice to
Kaiser. Employee shall have a minimum of thirty (30) days in which to make such
written designation. In the event of a disagreement between the counsel of the
respective parties as to whether a payment would result in excess parachute
payments, such counsel shall jointly designate an independent tax counsel (whose
fees shall be paid by Kaiser) within 10 days who shall promptly make a
conclusive determination of the matter.
(b) Notwithstanding anything else to the contrary, in the event
Employee is terminated pursuant to Paragraph 13 above, Employee shall have the
right, in his sole discretion, to elect to receive all or any part of the
compensation payable to him upon termination (or which would have been due under
Section 11 but for a previous election under Section 14(a)) without regard to
whether any such amounts may constitute "excess parachute payments." If Employee
fails to provide the Company a written designation within thirty (30) days, he
shall be presumed to have elected to receive all compensation and benefits due
him without regard to whether any such compensation or benefits shall constitute
"excess parachute payments."
(c) Nothing in this Paragraph 14 shall be construed or deemed to be a
forfeiture of any compensation or benefits that Employee may elect not to
accelerate due to any concern about the receipt of "excess parachute payments."
15. Termination Without Cause. In the event Kaiser elects to terminate
Employee's employment without cause (as defined below) during the term of this
Agreement, then Kaiser agrees to pay Employee an amount equal to one year's
annual base salary (based on Employees then current annual base salary) and
continue to provide and pay its portion of all of Employee's health, welfare,
insurance and other benefits for a period of twelve (12) months following the
date of termination, including Kaiser's portion of any retirement and deferred
compensation plan such as Kaiser's 401(k) plan. After such termination, Employee
shall be entitled, for a period of two years to exercise his stock options as to
any then vested, including any options vesting within one year of termination as
provided in the next sentence, notwithstanding any other applicable provision
contained in any option agreement. In addition to the foregoing related to stock
options, with respect to any restricted stock or other stock related incentives,
Employee shall continue to vest in such securities for a period of one-year
following termination. If Employee is terminated before or after a Material
Change as provided in Paragraph 12, Employee shall receive the additional
severance compensation provided in Paragraph 13.
5
<PAGE>
16. Termination for Cause. If Kaiser elects to terminate Employee's
employment for cause (as defined below), Employee's employment will terminate on
the date fixed for termination by Kaiser and thereafter Kaiser will not be
obligated to pay Employee any additional compensation, other than the
compensation due and owing up to the date of termination and as may be required
by law. After such termination, Employee shall be entitled, for a period of one
hundred twenty (120) days, to exercise any stock options or other stock related
incentives that are vested as of the date of termination.
17. Definition of "Cause." "Cause" for the purposes of this Agreement
shall mean any of the following:
a. Willful breach by Employee of any provision of this Agreement,
provided, however, if the breach is not a material breach, Kaiser shall give
Employee written notice of such breach and Employee shall have thirty (30) days
in which to cure such breach. No written notice or cure period shall be required
in the event of a willful and material breach of this Agreement by Employee;
b. Gross negligence or dishonesty in the performance of Employee's
duties or responsibilities hereunder;
c. Engaging in conduct or activities or holding any position that
materially conflicts with the interest of, or materially interferes with
Employee's duties and responsibilities to Kaiser or its Affiliates; or
d. Engaging in conduct which is materially detrimental to the
business of Kaiser or its Affiliates.
18. Voluntary Termination. Employee's employment by Kaiser may be
terminated at any time upon the parties' mutual written agreement or voluntarily
by either party upon prior written notice to the other. In the event of a mutual
written agreement, Employee's severance benefits shall be as set forth in such
agreement. In the event of Employee's voluntary termination of employment,
Kaiser shall not be obligated to pay Employee any additional compensation, other
than the compensation due and owing as through the date of termination and as
may be required by law. After such termination, Employee shall be entitled for a
period of one hundred twenty (120) days to exercise any stock options or other
stock related incentives that are vested as of the date of termination.
19. Confidentiality.
a. Employee's Obligations. Employee agrees that (a) except as
----------------------
provided in this Agreement Employee shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Employee shall
use such Proprietary Information solely for the purpose of meeting his
obligations under this Agreement and not in connection with any other business
or activity. "Proprietary Information" means all oral, written or recorded
information about or related to Kaiser or any of its Affiliates or its or their
technology, assets, liabilities, or business, whether acquired before or after
the date hereof, and regardless of the manner in which it is acquired, together
with any documents or other materials prepared by Employee which contain or
reflect such information. After termination of employment upon demand of Kaiser,
Employee agrees to return or destroy any and all materials containing any
Proprietary Information.
6
<PAGE>
b. Kaiser's Obligations. Kaiser agrees that it shall maintain and
--------------------
provide information regarding Employee in accordance with generally accepted
industry and business practices.
c. Limitations on Confidential Obligations and Use Restrictions.
------------------------------------------------------------
The restrictions in Paragraph 19(a) above do not apply to information which the
Employee can demonstrate (i) is then in the public domain by acts not
attributable to such disclosing party or (ii) is hereafter received on an
unrestricted basis by such Employee from a third party source who, to Employee's
knowledge after due inquiry, is not and was not bound by confidentiality
obligations to Kaiser or any Affiliate thereof. In addition, Employee and Kaiser
are permitted to disclose any Proprietary Information as necessary in the
defense or prosecution of any legal action.
d. Actions if Disclosure Required. If Employee is required by law
-------------------------------
to make any disclosure otherwise prohibited hereunder, such party shall use its
best efforts to provide the other with prompt prior notice where possible so
that (a) the other party (with the reasonable cooperation of the party required
to make such disclosure) may seek an appropriate protection order or other
remedy and/or (b) the parties can seek in good faith to agree on the appropriate
scope and approach to disclosure. If a protective order or other remedy is not
obtained, the party required to make such disclosure may furnish only that
portion of information protected hereby which it is legally compelled to
disclose and shall use its reasonable efforts to obtain confidential treatment
for all information so disclosed.
e. Injunction. Each party agrees that remedies at law may be
-----------
inadequate to protect against breach of this Paragraph 19, and hereby agrees to
the granting of injunctive relief without proof of actual damage.
20. Indemnification. Kaiser agrees to indemnify employee in accordance
with the Indemnification Agreement between Employee and Kaiser dated January 15,
2000, a copy of which is attached hereto as Exhibit "B" and incorporated herein
by this reference.
21. Arbitration of Disputes. If Employee and Kaiser cannot resolve a
dispute (whether arising in contract or tort or any other legal theory, whether
based on federal, state or local statute or common law and regardless of the
identities of any other defendants) that in any way relates to or arises out of
this Agreement, the termination of Employee's employment relationship with
Kaiser or any Affiliate thereof, (without limiting the generality of any other
Paragraph herein), then such dispute shall be settled as follows:
a. Kaiser and Employee agree to jointly select a judicial officer
who is affiliated with the Judicial Arbitration and Mediation Service, or such
other equivalent organization as Kaiser and Employee may mutually select, to act
as the trier of fact and judicial officer in such dispute resolution;
b. If Kaiser and Employee are unable to agree upon a particular
judicial officer, then the decision shall be made by the chief executive officer
of the Judicial Arbitration and Mediation Service, after consulting with Kaiser
and Employee;
c. Kaiser and Employee shall have the same rights of discovery as if
the dispute were being resolved in the Superior Court of the State of
California. However, the judicial officer shall, on his own motion, or the
request of either Kaiser or Employee, have the authority to extend or reduce the
time periods therefor; and,
7
<PAGE>
d. The judicial officer serving hereunder shall be designated as a
referee under the provisions of Title VIII, Chapter 6 of the California Code of
Civil Procedure (Sections 638 through 645. 1, inclusive). Payment for the
services of the judicial officer and the rights and procedure of appeal, and/or
other review of the decision, shall be made as provided in such sections.
The judicial officer shall have the right to grant injunctive relief,
specific performance and other equitable remedies.
22. Miscellaneous.
a. Entire Agreement; Amendments. This Agreement and the exhibits
-----------------------------
attached hereto state the entire understanding and agreement between the parties
with respect to its subject matter supercedes the Employment Agreement between
Employee and Kaiser dated October 10, 1996 and may only be amended by a written
instrument duly executed by Employee and Kaiser.
b. Assignment. This Agreement and the rights and obligations of
-----------
Employee may not be sold, transferred, assigned, pledged or hypothecated by
Employee.
c. Non-Waiver. Failure to insist upon strict compliance with any
-----------
provision of this Agreement or the waiver of any specific event of non-
compliance shall not be deemed to be or operate as a waiver of such provision or
any other provision hereof or any other event of non-compliance.
d. Binding Effect. This Agreement shall be binding upon and inure
---------------
to the benefit of Kaiser, its successors and assigns and, Employee's heirs,
successors, and legal or personal representatives.
e. Headings. The headings throughout this Agreement are for
---------
convenience only and shall in no way be deemed to define, limit, or add to the
meaning of any provision of this Agreement.
f. Context. Whenever required by the context, the singular shall
--------
include the plural, the plural the singular, and one gender such other gender as
is appropriate.
g. Notices. All notices, request, demands, consents and other
--------
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when hand delivered or sent by certified United States
mail, postage prepaid, with return by certified requested, addressed to the
parties as follows:
Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
Attn: General Counsel
Paul Shampay
41764 Corte Lara
Temecula, CA 92592
h. Costs. In any action taken to enforce the provisions of this
------
Agreement, the prevailing party shall be reimbursed all reasonable costs
incurred in such legal action including reasonable attorney's fees in such
action.
8
<PAGE>
i. Severability. If any provision or clause of this Agreement, as
-------------
applied to any party or circumstances shall be adjudged by a court to be invalid
or unenforceable, said adjudication shall in no manner effect any other
provision of this Agreement, the application of such provision to any other
circumstances or the validity or enforceability of this Agreement.
j. Definition of Affiliate. The term "Affiliate" for purposes of
------------------------
this Agreement shall mean any person or entity now or hereafter in control,
controlled by or in common control with Kaiser. It shall also include any direct
or indirect subsidiary of such Corporation and any company in which Kaiser has
more than a ten percent (10%) ownership interest.
k. Acknowledgment Regarding ISO's. Employee acknowledges that he is
------------------------------
responsible for the tax consequences of all severance compensation he may
receive and that certain actions may need to be taken by Employee within limited
periods of time to preserve the tax status of any incentive stock options.
Kaiser makes no representation or warranty that any past or future grant of a
stock option to Employee qualifies as an incentive stock option.
l. Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement to be effective as of the day and year first written above not
withstanding the actual date of signature.
"Employee" "Kaiser"
Paul E. Shampay Kaiser Ventures Inc.
/s/ Paul E. Shampay By: /s/ James F. Verhey
- --------------------------------- -----------------------------------
Paul E. Shampay James F. Verhey,
Executive Vice President
By: /s/ Todd G. Cole
-----------------------------------
Todd G. Cole, Chairman,
Human Relations Committee
9
<PAGE>
SCHEDULE "A"
============
Paul E. Shampay
Vice President, Finance
This position will report to the Executive Vice President & CFO.
Responsibilities:
This position has the responsibility to manage all accounting, tax,
insurance and treasury functions for the Company, its subsidiaries and it joint
ventures; to assist the CFO in representing the Company with all outside
entities coming under the purview of corporate finance; to assist CFO and
General Counsel in ensuring that all SEC reporting requirements are mat in a
satisfactory and timely manner; to assist the CFO in managing the investor
relations function; to manage the Company's annual budget and capital plan
processes; to manage the Company's internal financial reporting; to manage the
Company's annual audits by the Outside Independent Accountants, to manage the
Company's insurance program; to manage all the human resource and employee
benefits functions; and to manage the Company's computer, communication and
office equipment systems and software. These duties include the following:
. Manage all aspects of the accounting and treasury functions of the
Company, its subsidiaries and joint ventures, employing Generally
Accepted Accounting Procedures.
. Manage the Company's annual budget and capital plan processes.
. Manage the annual audit and all audit procedures with outside
auditors.
. Assist CFO and General Counsel regarding all SEC reporting and
disclosure issues.
. Assist CFO in managing and oversee all financial aspects of SEC
compliance.
. Assist CFO in managing the Company's financial analysis and modeling
function.
. Assist CFO in managing the investor relations program, and
shareholder/investor communications.
. Assist CFO in managing all tax planning and reporting.
. Manage all Company debt/lender compliance and reporting requirements.
. Manage all insurance programs.
. Manage and oversee all human resource functions to include employee
benefits.
. Manage and oversee the Company's computer, communication and office
equipment systems and software.
10
<PAGE>
EXHIBIT 10.8.1
First Amendment
to the
Employment Agreement
of
Anthony Silva
This FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT OF ANTHONY SILVA ("First
Amendment") is made and entered into as of January 6, 2000, by and between
ANTHONY SILVA ("Employee") and KAISER VENTURES INC. ("Kaiser").
Recitals
A. Employee is currently employed by Kaiser as Vice President, Resource
Development and Environmental Services and has an existing Employment Agreement
with Kaiser dated effective January 15, 1998, (collectively the "Employment
Agreement"); and
B. Employee and Kaiser have mutually agreed to the modification of certain
provisions of the Employment Agreement and therefore Employee and Kaiser desire
to amend the Employment Agreement solely as provided herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment of Paragraph 11 of Employment Agreement. Paragraph 11 of the
Employment Agreement is hereby amended as follows:
(a) Subparagraph 11.b. Subparagraph 11.b. of the Employment Agreement
-----------------
is hereby deleted in its entirety and the following new subparagraph 11.b.
is substituted therefore:
"b. any acquisition of common stock by a person or
"group" (as defined in section 13(d) of the Securities
Exchange Act of 1934), resulting in the "beneficial
ownership" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) by that person or group of more than
35% of the capital stock of Kaiser."
(b) Subparagraph 11.c. Subparagraph 11.c of the Employment Agreement
-----------------
is hereby deleted in its entirety an the following new subparagraph 11.c.
is substituted therefore:
"c. following the date of this Amendment there has
been an aggregate of net assets with a cumulative value that
exceeds the greater of (i) $30,000,000 or (ii) 30% of the
net equity of Kaiser at the time of the distribution
(whether by dividend or repurchase of stock) distributed to
any one or more Kaiser shareholders."
(c) Addition of Subparagraphs 11.d. and 11.e. Paragraph 11 of the
----------------------------------------
Employment Agreement is amended by the addition of the following new
subparagraphs:
"d. During any period of two consecutive years, the
individuals who at the beginning of such period constitute
the Board of Directors of the Company, cease for any reason,
to constitute at least a majority thereof,
1
<PAGE>
unless the election, or the nomination for election by the
Company's shareholders, of each new director has been
approved at the time of such election or nomination by a
vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period; or
e. The Board of Directors or any designated committee
determines, in its sole discretion, that any person (such as
that term is used in Sections 13(d) and 14(d) of the Exchange
Act) directly or indirectly exercises a controlling influence
over the management or policies or the Company."
2. Amendment of Paragraph 12 of the Employment Agreement. Subparagraph
12.c. of the Employment Agreement is hereby deleted in its entirety, except for
that portion of the paragraph commencing with "then, at Employee's option---"
and ending with the words "Paragraph 13 below," and the following new portion of
Subparagraph 12.c. is substituted therefor:
"c. Any failure to provide Employee with compensation and
benefits in the aggregate on terms that are materially less
favorable than those enjoyed by Employee under this
Agreement immediately prior to a Material Change, or the
subsequent taking of any action that would materially reduce
Employee's compensation and benefits in effect at the time
of the Material Change."
3. Amendment of Paragraph 13 of the Employment Agreement. Paragraph 13 of
the Employment Agreement is hereby amended as follows:
(a) Subparagraph 13.a. The phrase "as measured by the preceding
-----------------
year's bonus" in subparagraph 13.a. is hereby deleted in its entirety and
the following new phrase is substituted therefore in Subparagraph 13.a.:
"as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive a bonus)."
(b) Subparagraph 13.b. The phrase in Subparagraph 13.b, "averaged
-----------------
over the two (2) immediately preceding years" is herein deleted and
replaced with the phrase "as measured by Employee's average percentage
bonus over the past five years" (or such lesser period of time during which
Employee was eligible to receive a bonus)."
(c) Subparagraph 13.c. The word "will" in Subparagraph 13.c is hereby
deleted and replaced with the word "with," such that the end of
Subparagraph 13.c reads "in proportion to shares owned together with all
other shareholders."
(d) Additional Paragraph. Paragraph 13 of the Employment Agreement is
--------------------
hereby amended by the addition of the following paragraph at the end of the
current Paragraph 13.
"For purposes of this Agreement, "average percentage
bonus over the past five years" shall mean the average
percentage bonus received by Employee for the five years
preceding the year of termination (or for such lesser period
in which bonus payments were received) as applied to the
Employee's current annual base salary." is substituted
therefore:
2
<PAGE>
4. Amendment of Paragraph 16. Paragraph 16 of the Employment
Agreement is hereby amended by deleting the reference to "ninety (90) days" and
substituting therefore "one hundred twenty (120) days."
5. Amendment of Paragraph 18. Paragraph 18 of the Employment
Agreement is hereby amended by the addition of the following phrase to the end
of the first sentence of Paragraph 18, "provided, however, Employee shall give a
minimum of ninety (90) days advance written notice."
6 Ratification of Employment Agreement as Amended. The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this First Amendment is hereby ratified
and approved in all respects
7 Governing Law. This First Amendment shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.
"Employee" "Kaiser"
Anthony Silva Kaiser Ventures Inc.
/s/ Anthony Silva By: /s/ Richard E. Stoddard
- ------------------------------- ----------------------------------------
Anthony Silva Richard E. Stoddard
President & Chief Executive Officer
By: /s/ Todd G. Cole
----------------------------------------
Todd G. Cole, Chairman of the
Human Relations Committee
3
<PAGE>
EXHIBIT 10.9.2
SECOND AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
OF
JAMES F. VERHEY
This SECOND AMENDMENT TO THE EMPLOYMENT AGREEMENT OF JAMES F. VERHEY
("Second Amendment") is made and entered as of October 1, 1999, by and between
James F. Verhey ("Employee") and Kaiser Ventures Inc. ("Kaiser").
Recitals
A. Employee is currently employed by Kaiser as Executive Vice President
and Chief Financial Officer and has an existing Employment Agreement with Kaiser
dated effective June 17, 1996, as amended by that certain First Amendment dated
effective January 15, 1998, between Kaiser and Employee (collectively the
"Employment Agreement").
B. Employee and Kaiser have mutually agreed to reduce Employee's time
commitment to Kaiser to approximately one-half time; and
C. Employee and Kaiser desire to amend the Employment Agreement solely as
provided herein to reflect their agreement with regard to the reduction in
Employee's time commitment to Kaiser.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment of Section 1 of Employment Agreement. Section 1 of the
Employment Agreement is hereby amended in its entirety to read as follows:
Employment, Positions and Duties. Kaiser hereby continues the
---------------------------------
employment of Employee upon the terms and conditions set forth in the
Employment Agreement as amended herein. Employee's positions with
Kaiser shall continue to be Executive Vice President and Chief
Financial Officer. Employee shall have the responsibilities and
duties normally incident to such positions, including, but not limited
to, those duties and responsibilities set forth in Exhibit "A"
attached hereto and incorporated herein by this reference and such
other duties and responsibilities as may be reasonably assigned to him
from time-to-time by Kaiser's President or Chief Executive Officer.
Employee agrees to devote fifty percent (50%) of his full business
time and attention to the discharge of his duties and responsibilities
under this Agreement with Employee generally being present at Kaiser's
corporate offices Monday through Thursday, every other week. Kaiser
and Employee acknowledge the need for flexibility in Employee's work
schedule so that Employee agrees to adjust his general schedule to
give priority to, assist in the preparation for, and attend important
meetings for Kaiser that may occasionally be scheduled at times other
than Employee's general work schedule.
1
<PAGE>
2. Amendment of Section 3 of Employment Agreement. Section 3 of the
Employment Agreement is hereby amended in its entirety to read as follows:
Base Salary. Except in connection with the payment of any severance
-----------
as provided herein, Employee's initial annual base salary shall be one
hundred five thousand ($105,000) per year.
Prior to the first meeting of the Board of Directors in any calendar
year, the Human Relations Committee of the Board will review
Employee's annual performance and salary on the same basis as other
executive officers and report its recommendations for any revision to
the full Board at such meeting.
Nothwithstanding anything contained in this Agreement to the contrary,
for the purposes of determining the amount of severance benefits to be
paid to Employee for any reason, Employee's base salary shall be
deemed to be his base salary as of September 30, 1999, and not the new
initial annual salary provided in this Section 3.
3. Confirmation of Participation in Bonus Program. Employee shall
continue to participate in Kaiser's executive bonus program as provided in
Section 4 of the Employment Agreement or in any other bonus or incentive program
for executive officers adopted by Kaiser. However, Kaiser and Employee
acknowledge that any amounts paid to Employee, under any such bonus or incentive
programs, may be based on Employee's current annual base salary.
4. Confirmation of Benefits. Employee's benefits such as health, life,
dental and other similar benefits shall remain the same as those available to
full time executive officers of Kaiser as provided in Section 6 of the
Employment Agreement as they may change from time to time (although the total
amount of the benefit may be correspondingly reduced if it is based upon annual
base salary) except that Employee shall not: (i) accrue vacation time after
September 30, 1999; and (ii) be paid a car allowance. However, this provision
shall not be construed to cause any reduce in the severance benefits payable to
Employee as provided in the Employment Agreement as amended by this Amendment.
5. Payment of Certain Expenses. In addition to the payment of normal and
reasonable business expenses typically reimbursed in the course of work for
Kaiser, Kaiser shall pay Employee's reasonable travel expenses to and from
Kaiser's corporate offices and reasonable hotel expenses while working at
Kaiser's corporate offices. Employee shall pay for all of his personal meals.
6. Ratification of Employment Agreement as Amended. The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this Second Amendment is hereby ratified
and approved in all respects
7. Governing Law. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of California.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.
"Employee"
James F. Verhey
/s/ James F. Verhey
------------------------------------
James F. Verhey
"Kaiser"
Kaiser Ventures Inc.
By: /s/ Richard E. Stoddard
--------------------------------
Richard E. Stoddard, Chairman of
the Board, Chief Executive
Officer and President
By: /s/ Todd G. Cole
-------------------------------
Todd G. Cole, Chairman of the
Human Relations Committee
3
<PAGE>
REVISED
SCHEDULE "A"
JAMES F. VERHEY
Executive Vice President & CFO
This position will report to the President and Chief Executive Officer.
Responsibilities:
This position has the responsibility to manage all accounting, finance,
tax, and treasury functions for the Company and its subsidiaries; to represent
the Company with all outside entities coming under the purview of corporate
finance; to ensure all reporting requirements are met in a satisfactory and
timely manner; to assist senior management in analyzing, evaluating and pursuing
new business and growth opportunities; to manage the Company's annual budget and
capital plan processes; to manage the Company's financial analysis and modeling
function; to manage the Company's insurance program; and to monitor all project
development activities from the financial perspective. These duties include the
following:
. Assist CEO in analyzing, evaluating and pursuing business and growth
opportunities.
. Seek out, secure and manage all financing for future growth
opportunities and acquisitions.
. Oversee investor relations program implementation,
shareholder/investor communications.
. Oversee implementation of real estate financing strategy.
. Manage and oversee financial aspects of SEC compliance.
. Oversee the treasury and controller functions. Oversee all audit
procedures, outside auditors, and report to the Chairman of the Audit
Committee.
. Manage all aspects of the accounting function of the Company,
employing Generally Accepted Accounting Procedures.
. Manage the Company's annual budget and capital plan processes.
. Manage the Company's financial analysis and modeling function.
. Manage all tax planning and reporting.
. Manage all debt and equity structuring.
. Manage all insurance programs.
. Manage and oversee the Kaiser Eagle Mountain, operations, insuring
both smooth functioning of all administrative departments and
operations. Monitor all project development activities from the
financial perspective.
. Participate in major negotiations with third parties.
. Direct and manage, in coordination with the Sr. Vice President and
General Counsel, the operations of the Company in the absence of the
Chief Executive Officer.
4
<PAGE>
Exhibit 10.9.3
THIRD AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
OF
JAMES F. VERHEY
This THIRD AMENDMENT TO THE EMPLOYMENT AGREEMENT OF JAMES F. VERHEY ("Third
Amendment") is made and entered into as of January 6, 2000, by and between JAMES
F. VERHEY ("Employee") and KAISER VENTURES INC. ("Kaiser").
Recitals
--------
A. Employee is currently employed by Kaiser as Executive Vice President-
Finance and Chief Financial Officer and has an existing Employment Agreement
with Kaiser dated effective June 17, 1996, as amended by that certain First
Amendment dated effective January 15, 1998, as further amended by that certain
Second Amendment dated effective October 1, 1999, between Kaiser and Employee
(collectively the "Employment Agreement"); and
B. Employee and Kaiser have mutually agreed to the modification of
certain provisions of the Employment Agreement and therefore Employee and Kaiser
desire to amend the Employment Agreement solely as provided herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment of Paragraph 11 of Employment Agreement. Paragraph 11 of the
Employment Agreement is hereby amended as follows:
(a) Subparagraph 11.b. Subparagraph 11.b. of the Employment Agreement
-----------------
is hereby deleted in its entirety and the following new subparagraph 11.b.
is substituted therefore:
"b. any acquisition of common stock by a person or "group" (as
defined in section 13(d) of the Securities Exchange Act of 1934),
resulting in the "beneficial ownership" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) by that person or group of
more than 35% of the capital stock of Kaiser."
(b) Subparagraph 11.c. Subparagraph 11.c of the Employment Agreement
-----------------
is hereby deleted in its entirety an the following new subparagraph 11.c.
is substituted therefore:
"c. following the date of this Amendment there has been an
aggregate of net assets with a cumulative value that exceeds the
greater of (i) $30,000,000 or (ii) 30% of the net equity of Kaiser at
the time of the distribution (whether by dividend or repurchase of
stock) distributed to any one or more Kaiser shareholders."
(c) Addition of Subparagraphs 11.d. and 11.e. Paragraph 11 of the
----------------------------------------
Employment Agreement is amended by the addition of the following new
subparagraphs:
1
<PAGE>
"d. During any period of two consecutive years, the individuals
who at the beginning of such period constitute the Board of Directors
of the Company, cease for any reason, to constitute at least a
majority thereof, unless the election, or the nomination for election
by the Company's shareholders, of each new director has been approved
at the time of such election or nomination by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of the period; or
e. The Board of Directors or any designated committee
determines, in its sole discretion, that any person (such as that
term is used in Sections 13(d) and 14(d) of the Exchange Act)
directly or indirectly exercises a controlling influence over the
management or policies or the Company."
2. Amendment of Paragraph 12 of the Employment Agreement. Subparagraph
12.c. of the Employment Agreement is hereby deleted in its entirety, except for
that portion of the paragraph commencing with "then, at Employee's option---"
and ending with the words "Paragraph 13 below," and the following new portion of
Subparagraph 12.c. is substituted therefor:
"c. Any failure to provide Employee with compensation and
benefits in the aggregate on terms that are materially less favorable
than those enjoyed by Employee under this Agreement immediately prior
to a Material Change, or the subsequent taking of any action that
would materially reduce Employee's compensation and benefits in effect
at the time of the Material Change."
3. Amendment of Paragraph 13 of the Employment Agreement. Paragraph 13 of
the Employment Agreement is hereby amended as follows:
(a) Subparagraph 13.a. The phrase "as measured by the preceding
-----------------
year's bonus" in subparagraph 13.a. is hereby deleted in its entirety and
the following new phrase is substituted therefore in Subparagraph 13.a.:
"as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive a bonus)."
(b) Subparagraph 13.b. The phrase in Subparagraph 13.b averaged over
-----------------
the two (2) immediately preceding years" is herein deleted and replaced
with the phrase "as measured by Employee's average percentage bonus over
the past five years" (or such lesser period of time during which Employee
was eligible to receive a bonus)."
(c) Subparagraph 13.c. The word "will" in Subparagraph 13.c is hereby
-----------------
deleted and replaced with the word "with," such that the end of
Subparagraph 13.c reads "in proportion to shares owned together with all
other shareholders."
(d) Additional Paragraph. Paragraph 13 of the Employment Agreement is
--------------------
hereby amended by the addition of the following paragraph at the end of the
current Paragraph 13.
"For purposes of this Agreement, "average percentage bonus over
the past five years" shall mean the average percentage bonus received
by Employee for the five years preceding the year of termination (or
for such lesser period in which bonus payments were
2
<PAGE>
received) as applied to the Employee's current annual base salary," is
substituted therefore:
4. Amendment of Paragraph 16. Paragraph 16 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."
5. Amendment of Paragraph 18. Paragraph 18 of the Employment Agreement is
hereby amended by the addition of the following phrase to the end of the first
sentence of Paragraph 18, "provided, however, Employee shall give a minimum of
ninety (90) days advance written notice."
6 Ratification of Employment Agreement as Amended. The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this Third Amendment is hereby ratified
and approved in all respects
7 Governing Law. This Third Amendment shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.
"Employee" "Kaiser"
James F. Verhey Kaiser Ventures Inc.
/s/ James F. Verhey By: /s/ Richard E. Stoddard
- --------------------------- ------------------------------------
James F. Verhey Richard E. Stoddard
President & Chief Executive Officer
By: /s/ Todd G. Cole
------------------------------------
Todd G. Cole, Chairman of the
Human Relations Committee
3
<PAGE>
EXHIBIT 10.10.1
Second AMENDMENT TO LEASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 27th day of September, 1999
between Lord Baltimore Capital Corporation formerly known as American Trading
Estate Company, Inc. (hereinafter referred to as "Landlord") and Kaiser Ventures
Inc. p/k/a Kaiser Resources Inc. (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease dated June 6, 1994 (the
"Lease Agreement") for approximately seven thousand five hundred eighty (7,580)
rentable square feet (the "Demised Premises") known as suite 850 on the eighty
(8/th/) floor of the building commonly known as Empire Towers I, located at 3633
East Inland Empire Blvd., Ontario, CA 91764 (the "Building") and
WHEREAS, by First Amendment to Lease ("First Amendment") dated May 18,
1999, Landlord and Tenant amended the Lease Agreement to, among other things,
accomplish the following:
(i) Reduce the Demised Premises
(ii) extend the Term by three (3) years and six (6) days
and (iii) renovate the Demised Premises (the Lease Agreement, as amended, is
sometimes collectively referred to as the "Lease Agreement"); and
[See Additional Recitals Attached: Yes ___ No x ]
-----
WHEREAS, Landlord and Tenant, by this Second Amendment to Lease Agreement,
desire to, among other things, accomplish the following:
(i) expand the Demised Premises by ninety one (91) rentable square feet
(ii) ___________________________________________________________________________
and (iii) ______________________________________________________________________
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Incorporation of Recitals. All of the recitals set forth above in the
-------------------------
"WHEREAS" Clauses are hereby made an integral part of this Agreement.
Page 1 of 7
<PAGE>
2. Fixed Effective Date. Unless otherwise expressly set forth herein, the
--------------------
effective date ("Effective Date") of this Agreement shall be 12:01 A.M. on
August 1 , 1999.
(INTENTIONALLY LEFT BLANK)
Page 2 of 7
<PAGE>
3. (A) Expansion. As of the Effective Date, the Demised Premises which
-------------
currently are deemed to contain five thousand four hundred forty four (5,444)
rentable square feet (the "Current Demised Premises") shall be increased by
ninety one (91) rentable square feet (the "Additional Space") so that following
said increase, the Demised Premises shall be deemed to contain five
thousand five hundred thirty five (5,535) rentable square feet.
(B) Floor Plan. As of the Effective Date, the floor plan, showing the
----------
location of (i) the Additional Space, and (ii) the Current Demised Premises,
attached hereto as Exhibit "A-2 ______, "and by this reference made a part
hereof, shall replace Exhibit "A-1" to the Agreement.
(C) Early Entry. In the event Landlord permits Tenant to enter upon the
-----------
Additional Space prior to the Effective Date (or if Tenant enters the Additional
Space without Landlord's consent) for the purpose of moving or installing any of
Tenant's furniture, equipment, fixtures, business machines or other personal
property into or upon the Additional Space or for any other reason, all of the
provisions of the Lease Agreement shall apply and become effective with respect
to the Additional Space as of the date of the first such entry by Tenant (except
for the provisions to pay rent or additional rent for same).
(INTENTIONALLY LEFT BLANK)
Page 3 of 7
<PAGE>
4. Tenant's Percentage. As of the Effective Date, Section(s) 7.03 and
-------------------
7.06 (Taxes and Operating Costs Escalation) of the Lease Agreement shall be
amended by increasing/decreasing the percentage set forth therein from " three
and 0668/10000 percent (3.0668)" to " three and 1180/1000 percent (3.1180%)."
(INTENTIONALLY LEFT BLANK)
Page 4 of 7
<PAGE>
5. Base Rent. As of the Effective Date, the Base Rent payable for the
----------
Demised Premises shall be as follows:
Lease Period Annual Rent Period Monthly
- ------------ Per Sq. Foot Rent Base Rent
------------ ------ ---------
8/1/99 - 8/31/00 $22.20 $133,116,75 $10,239.75
9/1/00 - 8/31/01 $22.80 $126,198,00 $10,516.50
9/1/01 - 8/31/02 $23.40 $129,519,00 $10,793.25
N/A $ $ $
N/A $ $ $
Total Base Rent
$388,833.75
Said Base Rent ("Base Rent") shall be payable without demand in monthly
installments ("Monthly Base Rent") in advance on the first day of each calendar
month. For purpose of applying the rent schedule set forth above, if the
Effective Date occurs on a day other than the first day of a calendar month,
then the Monthly Base Rent for the month during which the Effective Date occurs
and for each month during which a Monthly Base Rent change occurs, if any, shall
be prorated on the basis of the actual number of days in said month. In the
event that the term hereof expires on a day other than the last day of a
calendar month, then the Monthly Base Rent for the month during which said
expiration occurs shall be prorated on the basis of the actual number of days in
said month.
(INTENTIONALLY LEFT BLANK)
Page 5 of 7
<PAGE>
6. No Broker. Landlord and Tenant represent and warrant to each other
----------
that they have not had any dealings or communications with any real estate
broker or agent in connection herewith and agree to indemnify and hold the other
harmless from and against any and all damages, costs and expenses (including
court costs and reasonable attorney's fees) which they may incur as a result of
a claim for compensation or a commission by any real estate broker or agent with
whom the other has dealt or communicated.
(INTENTIONALLY LEFT BLANK)
Page 6 of 7
<PAGE>
7. Miscellaneous and Signature
---------------------------
(A) Gender and Context. As used therein, all terms shall include the
-------------------
singular and plural, and all genders as the Context may reasonably require.
(B) Counterparts. This Agreement may be executed in multiple counterparts
------------
each of which said executed Counterparts shall be deemed an original for all
purposes.
(C) Controlling Law. This Agreement shall be interpreted, governed and
---------------
construed pursuant to the laws of the State where the Demised Premises are
located.
(D) Severability. In the event that any provisions or clauses of this
------------
Agreement conflict with or are contrary to applicable law, such conflicting or
contrary provisions shall not affect any other provisions which can be given
effect without the conflicting provisions, and to this end, the provisions of
this Agreement are declared to be severable to allow the striking of any and all
provisions which conflict with or are contrary to law while all provisions of
this Agreement shall continue to be effective and fully operable.
(E) Time of Essence. Time is of the essence, with respect to all the
---------------
obligations and covenants in this Agreement.
(F) Ratification. All of the other provisions of the Lease Agreement, are
------------
hereby ratified and confirmed and shall remain unchanged and in full force and
effect except to the extent that they are inconsistent with the foregoing.
(G) Defined Terms. Landlord and Tenant agree that all capitalized terms,
-------------
if any, not defined herein shall have the applicable definition given to said
term in the Lease Agreement.
(H) Entire Agreement. This Agreement contains the entire agreement between
----------------
the Landlord and Tenant with respect to the subject matter hereof, and any
purported agreement hereafter made shall be ineffective to change, modify,
discharge or waive it in whole or in part unless it is in writing and signed by
the party against whom enforcement is sought.
(I) Conflicts with Exhibits. Any and all Exhibits attached hereto and made
-----------------------
a part hereof are subordinate in nature to this Agreement and if there is
anything therein which is inconsistent with this Agreement, this Agreement shall
govern.
(J) No Option. This submission of this Agreement to Tenant for examination
---------
does not constitute a reservation of or option for the amendments set forth
herein. This Agreement shall be effective and binding only upon execution and
delivery thereof by both Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATTEST: LANDLORD:
Lord Baltimore Capital Corporation
----------------------------------
__________________________________
BY: /s/ Jonathan E. Newman
---------------------------------- BY: /s/ Alan E. Kerry
Jonathan E. Newman, Assistant Secretary -----------------------------
Alan E. Kerry, President
ATTEST: TENANT:
Kaiser Ventures, Inc.
-----------------------------------
___________________________________
BY: /s/ Terry L. Cook BY: /s/ J. F. Verhey
----------------------------------- -----------------------------
Secretary or Assistant Secretary NAME: J. F. Verhey
-----------------------------
of Tenant's Corporation TITLE: EVP/CFO
----------------------------
Page 7 of 7
<PAGE>
EXHIBIT 10.25.4
THIRD AMENDMENT TO GUARANTY
---------------------------
This Amendment, dated as of September 22, 1999, is entered into by KAISER
VENTURES INC., a Delaware corporation (the "Guarantor"), and UNION BANK OF
---------
CALIFORNIA, N.A., a national banking association (the "Bank").
----
Recitals
--------
A. The Guarantor has executed a Guaranty dated as of September 30, 1994
in favor of the Bank, as amended by a First Amendment to Guaranty dated as of
January 30, 1997 and a Second Amendment to Guaranty dated August 14, 1997
between the Guarantor and the Bank (said Guaranty, as so amended, herein called
the "Guaranty"), pursuant to which the Guarantor has guaranteed all of the
--------
obligations of Fontana Water Resources, Inc., a Delaware corporation (the
"Borrower"), to the Bank under the Revolving Credit and Term Loan Agreement
--------
dated as of September 30, 1994 (said Agreement, as amended to date, herein
called the "Credit Agreement") between the Borrower and the Bank. Terms defined
----------------
in the Credit Agreement and not otherwise defined herein have the same
respective meanings when used herein, and the rules of interpretation set forth
in Sections 1.2 and 1.3 of the Credit Agreement are incorporated herein by
reference.
B. The Guarantor and the Bank wish to amend the Guaranty to revise
certain of the covenants contained therein. Accordingly, the Guarantor and the
Bank agree as set forth below.
Section 1. Amendments to Guaranty. The Guaranty is hereby amended as set
--------- ----------------------
forth below.
(a) Section 7.2(b) of the Guaranty is amended in full to read as
follows:
"(b) Maintenance of Tangible Net Worth. The Guarantor will
---------------------------------
not permit the consolidated Tangible Net Worth of it and its
Subsidiaries as of the end of any fiscal year thereof to be less
$50,000,000, as determined by reference to the consolidated financial
statements of the Guarantor and its Subsidiaries included in the
annual filings on Form 10-K made by the Guarantor with the SEC."
(b) Section 7.2(c) of the Guaranty is amended in full to read as
follows:
"(c) Maintenance of Debt to Equity Ratio. The Guarantor
-----------------------------------
will not permit the ratio of (i) the consolidated liabilities of it
and its Subsidiaries as of the end of any fiscal quarter thereof to
(ii) the consolidated Tangible Net Worth of it and its Subsidiaries as
of the end of such fiscal quarter to be greater than 1.25 to 1.0, as
determined by reference to the consolidated financial statements of
the Guarantor and its Subsidiaries included in the quarterly filings
on Form 10-Q made by the Guarantor with the SEC."
<PAGE>
(c) Section 7.2(d) of the Guaranty is deleted.
Section 2. Representations and Warranties of Guarantor. The Guarantor
--------- -------------------------------------------
represents and warrants to the Bank as set forth below.
(a) The execution, delivery and performance by the Guarantor of this
Amendment, and of the Guaranty as amended hereby, and the consummation of the
transactions contemplated by this Amendment and by the Guaranty as amended
hereby, are within the Guarantor's corporate powers, have been duly authorized
by all necessary corporate action and do not (i) contravene the Guarantor's
charter documents or bylaws, (ii) violate any Governmental Rule, (iii) conflict
with or result in the breach of, or constitute a default under, any Material
Contract, loan agreement, indenture, mortgage, deed of trust or lease, or any
other contract or instrument binding on or affecting the Guarantor or any of its
properties, the conflict, breach or default of which would be reasonably likely
to have a materially adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Guarantor or
the ability of the Guarantor to perform its obligations under any of the Credit
Documents, as amended by this Amendment, or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the properties
of the Guarantor, other than in favor of the Bank.
(b) No Governmental Action is required for the due execution,
delivery or performance by the Guarantor of this Amendment, or of the Guaranty
as amended hereby.
(c) This Amendment, and the Guaranty as amended hereby, constitute
legal, valid and binding obligations of the Guarantor, enforceable against the
Guarantor in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally.
(d) The Stock Pledge Agreement constitutes a valid and perfected
first-priority Lien on the Collateral purported to be covered thereby,
enforceable against all third parties in all jurisdictions, and secures the
payment of all obligations of the Guarantor under the Guaranty, as amended by
this Amendment, and the other Credit Documents; and the execution, delivery and
performance of this Amendment do not adversely affect the Lien of the Stock
Pledge Agreement.
(e) The audited consolidated balance sheet of the Guarantor and its
Subsidiaries as of December 31, 1998, and the related audited consolidated
statements of income, retained earnings and cash flows of the Guarantor and its
Subsidiaries for the fiscal year then ended, fairly present the consolidated
financial condition of the Guarantor and its Subsidiaries as of such date and
the consolidated results of the operations of the Guarantor and its Subsidiaries
for the fiscal year ended on such date, all in accordance with generally
accepted accounting principles applied on a consistent basis. The unaudited
consolidated balance sheet of the Guarantor and its Subsidiaries as of June 30,
1999, and the related unaudited consolidated statements of income, retained
earnings and cash flows of the Guarantor and its Subsidiaries for the 6-month
period then ended, certified (subject to normal year-end audit adjustments) by
the chief financial officer or chief accounting officer of the
-2-
<PAGE>
Guarantor as having been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, fairly present the
consolidated financial condition of the Guarantor and its Subsidiaries as of
such date and the consolidated results of the operations of the Guarantor and
its Subsidiaries for the 6-month period ended on such date. Since June 30, 1999
there has been no materially adverse change in the business, condition
(financial or otherwise), operations, performance, properties or prospects of
the Guarantor or any of its Subsidiaries. The Guarantor and its Subsidiaries
have no material contingent liabilities, except as disclosed in such
consolidated financial statements or the notes thereto, that would be reasonably
likely to have a materially adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Guarantor
or any of its Subsidiaries.
(f) There is no pending or, to the knowledge of the Guarantor,
threatened action, suit, investigation, litigation or proceeding affecting the
Guarantor before any Governmental Person or arbitrator that purports to affect
the legality, validity or enforceability of this Amendment or of the Guaranty as
amended hereby.
(g) There has been no amendment to the Bylaws of the Guarantor since
the Closing Date, except as disclosed in the Officers' Certificate dated August
14, 1997 delivered by the Guarantor to the Bank. There has been no amendment to
any of the Material Contracts or to the Commission Agreement since the Closing
Date. The charter documents (including any amendments and other modifications)
of the Guarantor delivered to the Bank on or about January 30, 1997 have not
been further amended or otherwise further modified. The representations and
warranties of the Guarantor contained in each Credit Document are correct in all
material respects on and as of the date of this Amendment, before and after
giving effect to this Amendment, as though made on and as of such date. No
event has occurred and is continuing, or would result from the effectiveness of
this Amendment, that constitutes a Default or an Event of Default, except for
any Default or Event of Default waived by the Bank pursuant to Section 5 of this
Amendment.
Section 3. Reference to and Effect on Guaranty.
--------- -----------------------------------
(a) On and after the effective date of this Amendment, each reference
in the Guaranty to "this Guaranty," "hereunder," "hereof," "herein" or any other
expression of like import referring to the Guaranty, and each reference in the
other Credit Documents to "the Guaranty," "thereunder," "thereof," "therein" or
any other expression of like import referring to the Guaranty, shall mean and be
a reference to the Guaranty as amended by this Amendment.
(b) Except as specifically amended by this Amendment, the Guaranty
shall remain in full force and effect and is hereby ratified and confirmed.
Without limiting the generality of the foregoing, the Stock Pledge Agreement and
all of the Collateral described therein do and shall continue to secure the
payment of all obligations of the Guarantor under the Guaranty, as amended by
this Amendment, and the other Credit Documents.
-3-
<PAGE>
(c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of the Bank under any of
the Credit Documents or constitute a waiver of any provision of any of the
Credit Documents.
Section 4. Consent. The Guarantor hereby consents to the Third Amendment
--------- -------
to Revolving Credit and Term Loan Agreement dated as of September 22, 1999 (the
"Credit Agreement Amendment") between the Borrower and the Bank and hereby
--------------------------
confirms and agrees that the Guaranty is and shall continue to be in full force
and effect and is ratified and confirmed in all respects, except that, on and
after the effective date of the Credit Agreement Amendment, each reference in
the Guaranty to "the Credit Agreement," "thereunder," "thereof," "therein" or
any other expression of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended by the Credit Agreement
Amendment.
Section 5. Limited Waiver. The Bank hereby waives the requirement under
--------- --------------
Section 7.1(b)(iv) of the Guaranty that the Guarantor deliver to the Bank a
budget, an operating plan, and an operating-profit and cash-flow projection for
the Guarantor for its 1999 fiscal year, as prepared by the Guarantor and
approved by its board of directors; provided, however, that (a) if and when the
-------- -------
Guarantor's board of directors approves any such budget, operating plan, and/or
operating-profit and cash-flow projection for the Guarantor's 1999 fiscal year,
the Guarantor will deliver a copy of the same to the Bank within 10 days
thereafter and (b) the Guarantor shall in any event remain obligated to comply
with Section 7.1(b)(iv) of the Guaranty with respect to its fiscal years other
than 1999.
Section 6. Costs and Expenses. The Guarantor agrees to pay on demand all
--------- ------------------
costs and expenses of the Bank in connection with the preparation, execution and
delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
legal counsel for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities hereunder and thereunder.
Section 7. Headings. The section headings used herein have been inserted
--------- --------
for convenience of reference only and do not constitute matters to be considered
in interpreting this Amendment.
Section 8. Execution in Counterparts. This Amendment may be executed in
--------- -------------------------
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
-4-
<PAGE>
Section 9. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
---------- -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF CALIFORNIA.
KAISER VENTURES INC.
By: /s/ James F. Verhey
---------------------------------
James F. Verhey
Executive Vice President
& Chief Financial Officer
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard P. DeGrey
---------------------------------
Richard P. DeGrey, Jr.
Vice President
-5-
<PAGE>
EXHIBIT 10.25.7
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Pillsbury Madison & Sutro LLP
725 South Figueroa Street
Los Angeles, California 90017
Attention: R. V. Slattery Jr.
THIRD MODIFICATION
------------------
OF
--
DEED OF TRUST AND ASSIGNMENT OF LEASES AND RENTS
------------------------------------------------
This Modification is made as of September 22, 1999 by FONTANA WATER
RESOURCES, INC., a Delaware corporation ("Trustor"), and UNION BANK OF
-------
CALIFORNIA, N.A., a national banking association (successor in interest to Union
Bank, a California banking corporation) ("Beneficiary").
-----------
Recitals
--------
A. Trustor executed a Deed of Trust and Assignment of Leases and Rents
dated as of September 30, 1994 to First American Title Insurance Company, as
trustee, for the benefit of Beneficiary, as amended by a First Modification of
Deed of Trust and Assignment of Leases and Rents dated as of January 30, 1997
between Trustor and Beneficiary and a Second Modification of Deed of Trust and
Assignment of Leases and Rents dated as of August 14, 1997 between Trustor and
Beneficiary (said Deed of Trust, as so amended, herein called the "Deed of
-------
Trust"), covering interests in real property located in San Bernardino,
- -----
Riverside and Los Angeles Counties, California, as more particularly described
in Exhibit A to the Deed of Trust. The Deed of Trust was recorded (1) in the
Official Records of San Bernardino County on October 7, 1994 as instrument
number 94412304, (2) in the Official Records of Riverside County on October 6,
1994 as instrument number 388292 and (3) in the Official Records of Los Angeles
County on October 13, 1994 as instrument number 94-1872435. Terms defined in
the Deed of Trust and not otherwise defined herein have the respective meanings
given to such terms in the Deed of Trust. The Deed of Trust secures, among
other obligations, all of the obligations of Trustor to Beneficiary under (1)
the Amended and Restated Promissory Note dated January 30, 1997 in the maximum
principal amount of $30,000,000 made by Trustor in favor of Beneficiary and (2)
the Revolving Credit and Term Loan Agreement dated as of September 30, 1994, as
amended by the First Amendment to Revolving Credit and Term Loan Agreement dated
as of January 30, 1997 and the Second Amendment to Revolving Credit and Term
Loan Agreement dated as of August 14, 1997 (said Agreement, as so amended,
herein called the "Credit Agreement"), between Trustor and Beneficiary.
----------------
B. Concurrently herewith, Trustor and Beneficiary have executed a Third
Amendment to Revolving Credit and Term Loan Agreement dated as of September 22,
1999 for the purpose of adding certain covenants to the Credit Agreement.
<PAGE>
C. Trustor and Beneficiary now wish to amend the Deed of Trust to modify
certain references therein, and they accordingly agree as set forth below.
Modification
------------
1. Amendment. Section 1.2(c) of the Deed of Trust is amended in full to
---------
read as follows:
"(c) Payment of all other moneys agreed or provided to
be paid by Trustor herein and/or in the Revolving Credit and Term
Loan Agreement dated as of September 30, 1994, as amended by the
First Amendment to Revolving Credit and Term Loan Agreement dated
as of January 30, 1997, the Second Amendment to Revolving Credit
and Term Loan Agreement dated as of August 14, 1997 and the Third
Amendment to Revolving Credit and Term Loan Agreement dated as of
September 22, 1999, between Trustor and Beneficiary, including
any further renewals, extensions, modifications, changes and/or
amendments thereof (the `Credit Agreement'), and performance of
----------------
all other obligations of Trustor contained herein and/or in the
Credit Agreement, including any modifications, changes and/or
amendments hereto or thereto; and."
2. Effect of Modification. On and after the effective date of this
----------------------
Modification, each reference in the Deed of Trust to "this Deed of Trust,"
"hereunder," "hereof," "herein" or any other expression of like import referring
to the Deed of Trust, and each reference in the Credit Agreement and the other
Credit Documents (as defined in the Credit Agreement) to "the Deed of Trust,"
"thereunder," "thereof," "therein" or any other expression of like import
referring to the Deed of Trust, shall mean and be a reference to the Deed of
Trust as amended by this Modification.
3. Other Terms Unchanged. Except as specifically amended above, the Deed
---------------------
of Trust shall remain in full force and effect and is hereby ratified and
confirmed.
4. Headings. The section headings used herein have been inserted for
--------
convenience of reference only and do not constitute matters to be considered in
interpreting this Modification.
5. Execution in Counterparts. This Modification may be executed in any
-------------------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute one and the same instrument.
6. Governing Law. THIS MODIFICATION SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THE STATE OF CALIFORNIA.
-2-
<PAGE>
IN WITNESS WHEREOF, Trustor and Beneficiary have executed this Modification
as of the date first written above.
FONTANA WATER RESOURCES, INC.
By: /s/ Richard E. Stoddard
-----------------------
Richard E. Stoddard
President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard P. DeGrey
---------------------
Richard P. DeGrey, Jr.
Vice President
-3-
<PAGE>
EXHIBIT 10.25.9
THIRD AMENDMENT
---------------
TO
--
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
This Amendment, dated as of September 22, 1999, is entered into by FONTANA
WATER RESOURCES, INC., a Delaware corporation (the "Borrower"), and UNION BANK
--------
OF CALIFORNIA, N.A., a national banking association (the "Bank").
----
Recitals
--------
A. The Borrower and the Bank have entered into a Revolving Credit and Term
Loan Agreement dated as of September 30, 1994, as amended by a First Amendment
to Revolving Credit and Term Loan Agreement dated as of January 30, 1997 and a
Second Amendment to Revolving Credit and Term Loan Agreement dated as of August
14, 1997 (said Agreement, as so amended, herein called the "Credit Agreement").
----------------
Terms defined in the Credit Agreement and not otherwise defined herein have the
same respective meanings when used herein, and the rules of interpretation set
forth in Sections 1.2 and 1.3 of the Credit Agreement are incorporated herein by
reference.
B. The Borrower and the Bank wish to amend the Credit Agreement to add
some new covenants thereto. Accordingly, the Borrower and the Bank agree as set
forth below.
Section 1. Amendments to Credit Agreement. Effective as of the date
---------- ------------------------------
hereof and subject to satisfaction of the conditions precedent set forth in
Section 2, the Credit Agreement is hereby amended as set forth below.
(a) The following new definition is added to Section 1.1 of the Credit
Agreement in appropriate alphabetical order:
"Operating Income" means, with respect to the Borrower for any fiscal
----------------
quarter thereof, (a) gross revenues, less (b) the sum of (i) operating
----
expenses, (ii) cost of goods sold, (iii) selling, general and
administrative expenses and (iv) any similar expenses; provided, however,
-------- -------
that the foregoing shall (A) exclude any extraordinary and nonrecurring
losses and/or gains to the extent such losses and gains would be excluded
in accordance with generally accepted accounting principles and (B) be
determined by reference to the certificate for such quarter delivered by
the Borrower to the Bank pursuant to Section 6.1(g) or (h)."
(b) Section 6.1 of the Credit Agreement is amended by deleting the
word "and" at the end of Section 6.1(f), re-lettering Section 6.1(g) as Section
6.1(i) and adding the following new Sections 6.1(g) and (h):
"(g) as soon as available and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, a
<PAGE>
certificate of the chief financial officer or chief accounting officer of
the Borrower, in reasonable detail and otherwise in form satisfactory to
the Bank, showing the computations used by the Borrower in determining
compliance for such fiscal quarter with the covenant contained in Section
6.23;
"(h) as soon as available and in any event within 90 days after the
end of the fourth fiscal quarter of each fiscal year of the Borrower, a
certificate of the chief financial officer or chief accounting officer of
the Borrower, in reasonable detail and otherwise in form satisfactory to
the Bank, showing the computations used by the Borrower in determining (i)
compliance for such fiscal quarter with the covenant contained in Section
6.23 and (ii) any adjustment required with respect to any of the
certificates delivered by the Borrower to the Bank pursuant to Section
6.1(g) with respect to the first three fiscal quarters of such fiscal year,
all based upon the audit of the consolidated operations of the Guarantor
for such fiscal year; and."
(c) Article 6 of the Credit Agreement is amended by adding a new
Section 6.23, to read as follows:
"Section 6.23 Interest Coverage Ratio. The Borrower will not permit
------------ -----------------------
the ratio of (a) Operating Income for any fiscal quarter of the Borrower to
(b) interest expense of the Borrower for such fiscal quarter to be less
than 2.0 to 1.0, as determined by reference to the certificate for such
fiscal quarter delivered by the Borrower to the Bank pursuant to Section
6.1(g) or (h)."
Section 2. Conditions to Effectiveness. This Amendment shall become
---------- ---------------------------
effective when the Bank has received all of the following documents, each dated
the date of receipt thereof by the Bank (which date shall be the same for all
such documents), in form and substance satisfactory to the Bank and in the
number of originals requested by the Bank:
(a) this Amendment, duly executed by the Borrower;
(b) a modification to the Deed of Trust for the purpose of making
reference therein to this Amendment (the "Deed of Trust Modification"), duly
--------------------------
executed by the Borrower, for recording in the Official Records of San
Bernardino, Riverside and Los Angeles Counties;
(c) an amendment to the Guaranty for the purpose of amending certain
covenants thereof, together with a consent to this Amendment (collectively the
"Guaranty Amendment"), duly executed by the Guarantor;
------------------
(d) copies of previously adopted (i) resolutions of the Board of
Directors of the Borrower and (ii) minutes of the Finance Committee of the Board
of Directors of the Guarantor, in each case approving those of this Amendment,
the Deed of Trust Modification and the Guaranty Amendment (the "Amendment
---------
Documents") to which such Loan Party is or is to be a party, and copies of all
- ---------
other documents evidencing necessary corporate action or Governmental Action, if
any, with respect to such Amendment Documents, certified by the
-2-
<PAGE>
Secretary or another authorized officer of such Loan Party to be correct and
complete and in full force and effect;
(e) a certificate of the Secretary or an Assistant Secretary of each
Loan Party as to the incumbency, and setting forth a specimen signature, of each
of the persons who has signed or will sign any Amendment Document, or any other
document delivered hereunder, on behalf of such Loan Party;
(f) one or more certificates of the appropriate Governmental Persons
of the States of Delaware and California, dated a recent date, certifying that
(i) each Loan Party has paid all franchise taxes in Delaware and California to
the date of such certificate and (ii) each Loan Party is duly incorporated and
in good standing under the laws of Delaware and is in good standing under the
laws of California; and
(g) such other approvals, opinions and documents as the Bank may
reasonably request.
Section 3. Representations and Warranties of Borrower. The Borrower
---------- ------------------------------------------
represents and warrants to the Bank as set forth below.
(a) The execution, delivery and performance by the Borrower of the
Amendment Documents, and of the Credit Documents as amended thereby, to which
the Borrower is a party, and the consummation of the transactions contemplated
by such Amendment Documents and Credit Documents, are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate action
and do not (i) contravene the Borrower's charter documents or bylaws, (ii)
violate any Governmental Rule, (iii) conflict with or result in the breach of,
or constitute a default under, any Material Contract, loan agreement, indenture,
mortgage, deed of trust or lease, or any other contract or instrument binding on
or affecting the Borrower or any of its properties, the conflict, breach or
default of which would be reasonably likely to have a materially adverse effect
on the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the ability of the Borrower to
perform its obligations under any of the Credit Documents, as amended by the
Amendment Documents, or (iv) result in or require the creation or imposition of
any Lien upon or with respect to any of the properties of the Borrower, other
than in favor of the Bank.
(b) Except for the recording of the Deed of Trust Modification in the
Official Records of San Bernardino, Riverside and Los Angeles Counties, no
Governmental Action is required for the due execution, delivery or performance
by the Borrower of any Amendment Document, or of any Credit Document as amended
thereby, to which the Borrower is a party.
(c) Each of the Amendment Documents, and each of the Credit Documents
as amended hereby, to which the Borrower is a party constitute legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy,
-3-
<PAGE>
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally.
(d) Each of the Collateral Documents, as amended by the Amendment
Documents, constitutes a valid and perfected first-priority Lien on the
Collateral purported to be covered thereby, enforceable against all third
parties in all jurisdictions, and secures the payment of all obligations of the
Borrower under the Credit Documents, as amended by the Amendment Documents; and
the execution, delivery and performance of the Amendment Documents do not
adversely affect the Liens of the Collateral Documents.
(e) The unaudited balance sheet of the Borrower as of June 30, 1999
and the related statements of income, retained earnings and cash flows of the
Borrower for the 6-month period then ended, certified by the chief financial
officer or chief accounting officer of the Borrower, fairly present the
financial condition of the Borrower as of such date and the results of the
operations of the Borrower for the 6-month period ended on such date, all in
accordance with generally accepted accounting principles applied on a consistent
basis. Since June 30, 1999 there has been no materially adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower. The Borrower has no contingent
liabilities, except as disclosed in such balance sheet or the notes thereto,
that would be reasonably likely to have a materially adverse effect on the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower.
(f) There is no pending or, to the knowledge of the Borrower,
threatened action, suit, investigation, litigation or proceeding affecting the
Borrower before any Governmental Person or arbitrator that purports to affect
the legality, validity or enforceability of any Amendment Document or of any of
the Credit Documents as amended thereby.
(g) There has been no amendment to the Bylaws of the Borrower since
the Closing Date. There has been no amendment to any of the Material Contracts
or to the Commission Agreement since the Closing Date. The charter documents
(including any amendments and other modifications) of the Borrower delivered to
the Bank on or about January 30, 1997 have not been further amended or otherwise
further modified. The representations and warranties of the Borrower contained
in each Credit Document are correct in all material respects on and as of the
date of this Amendment, before and after giving effect to the Amendment
Documents, as though made on and as of such date. No event has occurred and is
continuing, or would result from the effectiveness of the Amendment Documents,
that constitutes a Default or an Event of Default, except for any Default or
Event of Default waived by the Bank pursuant to Section 5 of the Guaranty
Amendment.
Section 4. Reference to and Effect on Credit Documents.
---------- -------------------------------------------
(a) On and after the effective date of this Amendment, each reference
in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or
any other expression of like import referring to the Credit Agreement, and each
reference in the other Credit Documents to "the Credit Agreement," "thereunder,"
"thereof," "therein" or any other
-4-
<PAGE>
expression of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended by this Amendment.
(b) Except as specifically amended by the Amendment Documents, the
Credit Agreement and the other Credit Documents shall remain in full force and
effect and are hereby ratified and confirmed. Without limiting the generality
of the foregoing, the Collateral Documents, as amended by the Amendment
Documents, and all of the Collateral described therein do and shall continue to
secure the payment of all obligations of the Borrower under the Credit
Documents, as amended by the Amendment Documents.
(c) The execution, delivery and effectiveness of the Amendment
Documents shall not operate as a waiver of any right, power or remedy of the
Bank under any of the Credit Documents or constitute a waiver of any provision
of any of the Credit Documents. The Borrower acknowledges and agrees that, as
of the date of this Amendment, it has no defenses, offsets or claims against the
Bank with respect to the Borrower's obligations to the Bank under the Credit
Documents.
Section 5. Costs and Expenses. The Borrower agrees to pay on demand all
---------- ------------------
reasonable costs and expenses of the Bank in connection with the preparation,
execution and delivery of the Amendment Documents and the other instruments and
documents to be delivered hereunder, including the reasonable fees and out-of-
pocket expenses of legal counsel for the Bank with respect thereto and with
respect to advising the Bank as to its rights and responsibilities hereunder and
thereunder.
Section 6. Headings. The section headings used herein have been inserted
---------- --------
for convenience of reference only and do not constitute matters to be considered
in interpreting this Amendment.
Section 7. Execution in Counterparts. This Amendment may be executed in
---------- -------------------------
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
-5-
<PAGE>
Section 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
---------- -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF CALIFORNIA.
FONTANA WATER RESOURCES, INC.
By: /s/ Richard E. Stoddard
---------------------------------
Richard E. Stoddard
President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard P. DeGrey
---------------------------------
Richard P. DeGrey, Jr.
Vice President
-6-
<PAGE>
EXHIBIT 10.37.1
AMENDMENT NO. 4 TO
------------------
PURCHASE AND SALE AGREEMENT AND
-------------------------------
JOINT ESCROW INSTRUCTIONS
-------------------------
AND SIDE LETTER AGREEMENT
-------------------------
THIS AMENDMENT NO. 4 TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS AND SIDE LETTER AGREEMENT (this "Amendment") is made and entered
---------
into and effective as of November 30, 1999, by and between KAISER VENTURES INC.,
a Delaware corporation and KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation (collectively, "Seller"), and ONTARIO VENTURES I, LLC, a Delaware
------
limited liability company ("Buyer").
-----
RECITALS
--------
A. WHEREAS, Buyer and Seller have entered into that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of October 19, 1999 as
amended by that certain Amendment No. 1 to Purchase and Sale Agreement and Joint
Escrow Instructions and Side Letter Agreement dated as of November 2, 1999, by
that certain Amendment No. 2 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 12, 1999, and by
that certain Amendment No. 3 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 19, 1999
(collectively, the "Purchase Agreement"); and
------------------
B. WHEREAS, pursuant to the Purchase Agreement, Buyer and Seller
have entered into that certain Side Letter Agreement dated as of October 19,
1999 which side letter was amended by the amendments to the Purchase Agreement
described in Recital A above (as amended, the "Side Letter Agreement"), the form
---------------------
of which was attached to the Purchase Agreement as Exhibit DD; and
----------
C. WHEREAS, Buyer and Seller desire to again amend the Side Letter
Agreement and the Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
AGREEMENT
---------
1. The Purchase Agreement is hereby amended as follows:
A. The "Contingency Date" (as defined in Section 1.11 of the
Purchase
1
<PAGE>
Agreement) shall be February 4, 2000; provided, however, that if Buyer does not
cancel Escrow prior to February 4, 2000, and if the sum of Seventy-Five Thousand
Dollars is therefore released to Seller as set forth in Section 3.1.2 below,
then the Contingency Date shall automatically be extended to March 6, 2000.
B. Section 3.1.2 of the Agreement is hereby revised to read in full
as follows:
3.1.2 Disposition of Deposit. In the event this Agreement is
----------------------
terminated for any reason prior to 5:00 p.m. on December 16, 1999 or
pursuant to Section 6.1 or 13 hereof, the Deposit (including all interest
thereon) shall be fully refunded to Buyer by Escrow Holder. On December
17, 1999, Seventy-Five Thousand Dollars ($75,000) of the Deposit shall be
released to Seller and become nonrefundable to Buyer, but shall be
applicable to the Purchase Price. The balance of the Deposit, including
all interest thereon, shall be fully refundable to Buyer by Escrow Holder
in the event that this Agreement is terminated for any reason prior to the
Contingency Date. On February 4, 2000, an additional Seventy-Five Thousand
Dollars ($75,000) of the Deposit shall be released to Seller and become
nonrefundable to Buyer, but shall be applicable to the Purchase Price. The
remaining balance of the Deposit, including all interest thereon, shall be
fully refunded to Buyer by Escrow Holder in the event that this Agreement
is terminated for any reason prior to the Contingency Date. Following the
Contingency Date, in the event this Agreement is terminated or the Close of
Escrow fails to occur by reason of Buyer's default hereunder, the entire
Deposit (including all interest thereon) shall be held by Escrow Holder for
the benefit of Seller and paid to Seller pursuant to Section 6.2 hereof.
In the event this Agreement is terminated by reason of Seller's default or
the Close of Escrow fails to occur by reason of Seller's default hereunder,
then the Deposit (including all interest thereon and including any portion
of the Deposit which was released to Seller) shall be returned to Buyer.
Upon the Close of Escrow, the entire Deposit (including all interest
thereon) shall be paid to Seller and shall be credited towards the payment
of the Purchase Price.
C. Section 14.1.3 is hereby added to the Purchase Agreement to read
in full as follows:
14.1.3 Agreement Re Tamkin. Buyer and Seller have each received
-------------------
a letter from lawyers representing the Tamkin entities asserting various
claims. During the term of this Agreement and if Buyer acquires the
property as provided herein Buyer (and Buyer's members and their
affiliates) and Seller each agree that none of them will enter into or
propose a settlement with Tamkin Capital Partners, Jeffrey H. Tamkin and
related parties arising out of Buyer's purchase of the Real Property
without (i) trying to effect a settlement of all of their respective
disputes with such entities, (ii) seeking and obtaining the consent
2
<PAGE>
of the other Party to any such settlement (which consent shall not be
unreasonably withheld), and (iii) being certain that no such settlement
would preclude the settling Party from being a witness on behalf of any
non-settling Party; in the event that a Party desires to settle and the
other Party does not consent to such settlement, the Party not consenting
to the settlement shall thereafter advance and pay all costs and expenses
of the defense, including but not limited to, all reasonable attorneys'
fees, expert witness fees, and other similar items, of the Party desiring
to settle the claims against it and the Party desiring not to settle shall
indemnify and hold harmless the Party desiring to settle as to any amount
or obligation that the Party desiring to settle may be obligated to pay or
perform in excess of the amount or obligation for which the matter could
have been settled.
D. Seller and Buyer hereby agree that Exhibits D, H, I, J, P, R, S,
T, U, V, W, X, AA and BB attached hereto shall be deemed final and shall be
attached to, deemed to be part of and included in the Purchase Agreement.
E. Exhibit O is hereby omitted from the Purchase Agreement and all
---------
reference to Exhibit O in the Side Letter Agreement and the Purchase Agreement
---------
shall hereinafter constitute references to Exhibit R.
---------
F. The date by which Buyer and Seller shall negotiate in reasonable
good faith to finalize the remaining provisions of Exhibits E, G, K, L, M, M-I,
Q, Y and CC and attach them to the Purchase Agreement shall be further extended
to February 4, 2000. During the time between the date hereof and February 4,
2000, the Parties shall diligently use reasonable good faith to finalize such
Exhibits. In the event that all of such Exhibits are not so agreed upon by such
date, then either Buyer or Seller may terminate the Purchase Agreement, in which
event the provisions of Section 4.7 thereto shall apply except that any portion
of the Deposit theretofore released to Seller shall not be refunded to Buyer.
G. Section 4.11 shall be added to the Purchase Agreement to read in
full as follows:
4.11 Approval of Financial Abilities of Buyer. Seller shall
----------------------------------------
have until February 4, 2000 to satisfy itself as to the matters set forth
in Section 4.10 of the Purchase Agreement. If Seller is not satisfied as
to such matters, then the Purchase Agreement shall be terminated, in which
event the provisions of Section 4.7 of the Purchase Agreement shall apply
except that any portion of the Deposit theretofore released to Seller shall
not be refundable to Buyer.
H. Amendment to Section 4.9. Section 4.9 of the Purchase Agreement
------------------------
is hereby amended by extending the date by which Buyer and Seller shall
negotiate in good faith to finalize the IT Contract and performance bond
therefor or each of the Insurance Policies so that they are acceptable to Seller
to February 4, 2000. In the event that all of such Insurance Policies,
3
<PAGE>
the IT Contract and the performance bond therefor are not so agreed upon by such
date, then either Buyer or Seller may terminate the Purchase Agreement, in which
event the provisions of Section 4.7 thereto shall apply except that any portion
of the Deposit theretofore released to Seller shall not be refundable to Buyer.
2. No Other Amendments. Except as expressly amended hereby, the Purchase
-------------------
Agreement and the Side Letter Agreement are unchanged and in full force and
effect.
4
<PAGE>
3. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original and all of which taken together shall constitute the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the dates written below.
BUYER: ONTARIO VENTURES I, LLC, a Delaware limited
- ----- liability company
By: LandBank Environmental Properties, LLC, a
Delaware limited liability company, its
Manager
By: LandBank, Inc., a Delaware
corporation, its managing member
By: /s/ Stuart L. Miner
---------------------------
Date Executed: 12/17/99 Its: Principal
-------------- ---------------------------
SELLER: KAISER VENTURES INC., a Delaware corporation
- ------
By: /s/ Terry L. Cook
--------------------------------
Date Executed: 12/17/99 Its: Sr. Vice President
-------------- --------------------------------
KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation
By: /s/ Terry L. Cook
--------------------------------
Date Executed: 12/17/99 Its: Vice President
-------------- --------------------------------
5
<PAGE>
RECEIVED AND ACCEPTED THIS ____ DAY OF __________________, 1999.
ESCROW HOLDER:
CHICAGO TITLE INSURANCE COMPANY
By:________________________
Its:_______________________
6
<PAGE>
Exhibits Available
------------------
to the SEC
----------
Upon Written Request
--------------------
7
<PAGE>
EXHIBIT 10.37.2
AMENDMENT NO. 5 TO
------------------
PURCHASE AND SALE AGREEMENT AND
--------------------------------
JOINT ESCROW INSTRUCTIONS
-------------------------
AND SIDE LETTER AGREEMENT
-------------------------
THIS AMENDMENT NO. 5 TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS AND SIDE LETTER AGREEMENT (this "Amendment") is made and entered
---------
into and effective as of February 4, 2000, by and between KAISER VENTURES INC.,
a Delaware corporation and KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation (collectively, "Seller"), and ONTARIO VENTURES I, LLC, a Delaware
------
limited liability company ("Buyer").
-----
RECITALS
--------
A. WHEREAS, Buyer and Seller have entered into that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of October 19, 1999 as
amended by that certain Amendment No. 1 to Purchase and Sale Agreement and Joint
Escrow Instructions and Side Letter Agreement dated as of November 2, 1999, by
that certain Amendment No. 2 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 12, 1999, by that
certain Amendment No. 3 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 19, 1999 and by that
certain Amendment No. 4 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 30, 1999
(collectively, the "Purchase Agreement"); and
------------------
B. WHEREAS, pursuant to the Purchase Agreement, Buyer and Seller
have entered into that certain Side Letter Agreement dated as of October 19,
1999 which side letter was amended by the amendments to the Purchase Agreement
described in Recital A above (as amended, the "Side Letter Agreement"), the form
---------------------
of which was attached to the Purchase Agreement as Exhibit DD; and
----------
C. WHEREAS, Buyer and Seller desire to again amend the Side Letter
Agreement and the Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
AGREEMENT
---------
1. Amendments. The Purchase Agreement and Side Letter Agreement are
----------
hereby amended as follows:
1
<PAGE>
A. The "Contingency Date" (as defined in Section 1.11 of the
Purchase Agreement) shall be extended further to March 6, 2000 and the sum of
Seventy-Five Thousand Dollars is therefore released to Seller as set forth in
Section 3.1.2.
B. The date by which Buyer and Seller shall negotiate in reasonable
good faith to finalize the remaining provisions of Exhibits E, G, K, L, M, M-I,
Q, Y and CC and attach them to the Purchase Agreement shall be further extended
to March 6, 2000. During the time between the date hereof and March 6, 2000, the
Parties shall diligently use reasonable good faith to finalize such Exhibits. In
the event that all of such Exhibits are not so agreed upon by such date, then
either Buyer or Seller may terminate the Purchase Agreement, in which event the
provisions of Section 4.7 thereto shall apply except that any portion of the
Deposit theretofore released to Seller shall not be refunded to Buyer.
C. Section 4.9 of the Purchase Agreement is hereby amended by
extending the date by which Buyer and Seller shall negotiate in good faith to
finalize the IT Contract and performance bond therefor or each of the Insurance
Policies so that they are acceptable to Seller to March 6, 2000. In the event
that all of such Insurance Policies, the IT Contract and the performance bond
therefor are not so agreed upon by such date, then either Buyer or Seller may
terminate the Purchase Agreement, in which event the provisions of Section 4.7
thereto shall apply except that any portion of the Deposit theretofore released
to Seller shall not be refundable to Buyer.
2. Buyer's Financial Abilities. Seller hereby confirms that it has
---------------------------
satisfied itself as to the Financial Abilities of Buyer set forth in Section
4.10 of the Purchase Agreement.
3. No Other Amendments. Except as expressly amended hereby, the Purchase
-------------------
Agreement and the Side Letter Agreement are unchanged and in full force and
effect.
4. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original and all of which taken together shall constitute the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the dates written below.
2
<PAGE>
Buyer: ONTARIO VENTURES I, LLC, a Delaware limited
- ----- liability company
By: LandBank Environmental Properties, LLC, a
Delaware limited liability company, its
Manager
By: LandBank, Inc., a Delaware
corporation, its managing member
By: /s/ Stuart L. Miner
-----------------------------
Date Executed: 02/10/00 Its: Principal
-------------- -----------------------------
Seller: KAISER VENTURES INC., a Delaware corporation
- ------
By: /s/ Lee R. Redmond
---------------------------------------
Date Executed: 02/08/00 Its: Sr. Vice President
-------------- ---------------------------------------
KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation
By: /s/ Lee R. Redmond
---------------------------------------
Date Executed: 02/08/00 Its: Vice President
--------------- ---------------------------------------
RECEIVED AND ACCEPTED THIS ____ DAY OF _________________, 2000.
ESCROW HOLDER:
CHICAGO TITLE INSURANCE COMPANY
By:_______________________
Its:______________________
3
<PAGE>
EXHIBIT 10.37.3
AMENDMENT NO. 6 TO
------------------
PURCHASE AND SALE AGREEMENT AND
-------------------------------
JOINT ESCROW INSTRUCTIONS
-------------------------
AND SIDE LETTER AGREEMENT
-------------------------
THIS AMENDMENT NO. 6 TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS AND SIDE LETTER AGREEMENT (this "Amendment") is made and entered
---------
into and effective as of March 6, 2000, by and between KAISER VENTURES INC., a
Delaware corporation and KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation (collectively, "Seller"), and ONTARIO VENTURES I, LLC, a Delaware
------
limited liability company ("Buyer").
-----
RECITALS
--------
A. WHEREAS, Buyer and Seller have entered into that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of October 19, 1999 as
amended by that certain Amendment No. 1 to Purchase and Sale Agreement and Joint
Escrow Instructions and Side Letter Agreement dated as of November 2, 1999, by
that certain Amendment No. 2 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 12, 1999, by that
certain Amendment No. 3 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 19, 1999, by that
certain Amendment No. 4 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 30, 1999, and by
that certain Amendment No. 5 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of February 4, 2000
(collectively, the "Purchase Agreement"); and
------------------
B. WHEREAS, pursuant to the Purchase Agreement, Buyer and Seller
have entered into that certain Side Letter Agreement dated as of October 19,
1999 which side letter was amended by the amendments to the Purchase Agreement
described in Recital A above (as amended, the "Side Letter Agreement"), the form
---------------------
of which was attached to the Purchase Agreement as Exhibit DD; and
----------
C. WHEREAS, Buyer and Seller desire to again amend the Side Letter
Agreement and the Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
AGREEMENT
---------
1. Amendments. The Purchase Agreement and Side Letter Agreement are
----------
hereby amended as follows:
1
<PAGE>
A. The "Contingency Date" (as defined in Section 1.11 of the
Purchase Agreement) shall be extended further to March 10, 2000.
B. The date by which Buyer and Seller shall negotiate in reasonable
good faith to finalize the remaining provisions of Exhibits E, G, K, L, M, M-I,
Q, Y and CC and attach them to the Purchase Agreement shall be further extended
to March 10, 2000. During the time between the date hereof and March 10, 2000,
the Parties shall diligently use reasonable good faith to finalize such
Exhibits. In the event that all of such Exhibits are not so agreed upon by such
date, then either Buyer or Seller may terminate the Purchase Agreement, in which
event the provisions of Section 4.7 thereto shall apply except that any portion
of the Deposit theretofore released to Seller shall not be refunded to Buyer.
C. Section 4.9 of the Purchase Agreement is hereby amended by
extending the date by which Buyer and Seller shall negotiate in good faith to
finalize the IT Contract and performance bond therefor or each of the Insurance
Policies so that they are acceptable to Seller to March 10, 2000. In the event
that all of such Insurance Policies, the IT Contract and the performance bond
therefor are not so agreed upon by such date, then either Buyer or Seller may
terminate the Purchase Agreement, in which event the provisions of Section 4.7
thereto shall apply except that any portion of the Deposit theretofore released
to Seller shall not be refundable to Buyer.
2. No Other Amendments. Except as expressly amended hereby, the Purchase
-------------------
Agreement and the Side Letter Agreement are unchanged and in full force and
effect.
3. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original and all of which taken together shall constitute the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the dates written below.
2
<PAGE>
Buyer: ONTARIO VENTURES I, LLC, a Delaware limited
- ----- liability company
By: LandBank Environmental Properties, LLC, a
Delaware limited liability company, its
Manager
By: LandBank, Inc., a Delaware
corporation, its managing member
By: /s/ Stuart L. Miner
--------------------------------
Date Executed: 03/06/00 Its: Vice President
------------- --------------------------------
Seller: KAISER VENTURES INC., a Delaware corporation
- ------
By: /s/ Terry L. Cook
------------------------------------------
Date Executed: 03/06/00 Its: Executive Vice President & General Counsel
------------- ------------------------------------------
KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation
By: /s/ Terry L. Cook
------------------------------------------
Date Executed: 03/06/00 Its: Vice President
------------ ------------------------------------------
RECEIVED AND ACCEPTED THIS ____ DAY OF __________________, 2000.
ESCROW HOLDER:
CHICAGO TITLE INSURANCE COMPANY
By:_________________________
Its:________________________
3
<PAGE>
EXHIBIT 10.37.4
AMENDMENT NO. 7 TO
------------------
PURCHASE AND SALE AGREEMENT AND
-------------------------------
JOINT ESCROW INSTRUCTIONS
-------------------------
AND SIDE LETTER AGREEMENT
-------------------------
THIS AMENDMENT NO. 7 TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS AND SIDE LETTER AGREEMENT (this "Amendment") is made and entered
---------
into and effective as of March 10, 2000, by and between KAISER VENTURES INC., a
Delaware corporation and KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation (collectively, "Seller"), and ONTARIO VENTURES I, LLC, a Delaware
------
limited liability company ("Buyer").
-----
RECITALS
--------
A. WHEREAS, Buyer and Seller have entered into that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of October 19, 1999 as
amended by that certain Amendment No. 1 to Purchase and Sale Agreement and Joint
Escrow Instructions and Side Letter Agreement dated as of November 2, 1999, by
that certain Amendment No. 2 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 12, 1999, by that
certain Amendment No. 3 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 19, 1999, by that
certain Amendment No. 4 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 30, 1999, by that
certain Amendment No. 5 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of February 4, 2000, and by that
certain Amendment No. 6 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of March 6, 2000 (collectively,
the "Purchase Agreement"); and
------------------
B. WHEREAS, pursuant to the Purchase Agreement, Buyer and Seller
have entered into that certain Side Letter Agreement dated as of October 19,
1999 which side letter was amended by the amendments to the Purchase Agreement
described in Recital A above (as amended, the "Side Letter Agreement"), the form
---------------------
of which was attached to the Purchase Agreement as Exhibit DD; and
----------
C. WHEREAS, Buyer and Seller desire to again amend the Side Letter
Agreement and the Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
<PAGE>
AGREEMENT
---------
1. Amendments. The Purchase Agreement and Side Letter Agreement are
----------
hereby amended as follows:
A. The "Contingency Date" (as defined in Section 1.11 of the
----------------
Purchase Agreement) shall be extended further to March 13, 2000.
B. The date by which Buyer and Seller shall negotiate in reasonable
good faith to finalize the remaining provisions of Exhibits E, G, K, L, M, M-I,
Q, Y and CC and attach them to the Purchase Agreement shall be further extended
to March 13, 2000. During the time between the date hereof and March 13, 2000,
the Parties shall diligently use reasonable good faith to finalize such
Exhibits. In the event that all of such Exhibits are not so agreed upon by such
date, then either Buyer or Seller may terminate the Purchase Agreement, in which
event the provisions of Section 4.7 thereto shall apply except that any portion
of the Deposit theretofore released to Seller shall not be refunded to Buyer.
C. Section 4.9 of the Purchase Agreement is hereby amended by
extending the date by which Buyer and Seller shall negotiate in good faith to
finalize the IT Contract and performance bond therefor or each of the Insurance
Policies so that they are acceptable to Seller to March 13, 2000. In the event
that all of such Insurance Policies, the IT Contract and the performance bond
therefor are not so agreed upon by such date, then either Buyer or Seller may
terminate the Purchase Agreement, in which event the provisions of Section 4.7
thereto shall apply except that any portion of the Deposit theretofore released
to Seller shall not be refundable to Buyer.
2. No Other Amendments. Except as expressly amended hereby, the Purchase
-------------------
Agreement and the Side Letter Agreement are unchanged and in full force and
effect.
3. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original and all of which taken together shall constitute the
same instrument.
[Signatures on next page]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the dates written below.
Buyer: ONTARIO VENTURES I, LLC, a Delaware limited
- ----- liability company
By: LandBank Environmental Properties, LLC, a
Delaware limited liability company, its
Manager
By: LandBank, Inc., a Delaware
corporation, its managing member
By: /s/ Timi Anyon Hallem
-----------------------------
Date Executed: __________ Its: Agent
-----------------------------
Seller: KAISER VENTURES INC., a Delaware corporation
- ------
By: /s/ Terry L. Cook
------------------------------------------
Date Executed: 03/10/00 Its: Executive Vice President & General Counsel
---------- ------------------------------------------
KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation
By: /s/ Terry L. Cook
------------------------------------------
Date Executed: 03/10/00 Its: Vice President
---------- ------------------------------------------
RECEIVED AND ACCEPTED THIS ____ DAY OF _________________, 2000.
ESCROW HOLDER:
CHICAGO TITLE INSURANCE COMPANY
By:______________________
Its:_____________________
3
<PAGE>
EXHIBIT 10.37.5
AMENDMENT NO. 8 TO
------------------
PURCHASE AND SALE AGREEMENT AND
--------------------------------
JOINT ESCROW INSTRUCTIONS
-------------------------
AND SIDE LETTER AGREEMENT
-------------------------
THIS AMENDMENT NO. 8 TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS AND SIDE LETTER AGREEMENT (this "Amendment") is made and entered
---------
into and effective as of March 13, 2000, by and between KAISER VENTURES INC., a
Delaware corporation and KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation (collectively, "Seller"), and ONTARIO VENTURES I, LLC, a Delaware
------
limited liability company ("Buyer").
-----
RECITALS
--------
A. WHEREAS, Buyer and Seller have entered into that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of October 19, 1999 as
amended by that certain Amendment No. 1 to Purchase and Sale Agreement and Joint
Escrow Instructions and Side Letter Agreement dated as of November 2, 1999, by
that certain Amendment No. 2 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 12, 1999, by that
certain Amendment No. 3 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 19, 1999, by that
certain Amendment No. 4 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 30, 1999, by that
certain Amendment No. 5 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of February 4, 2000, by that
certain Amendment No. 6 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of March 6, 2000, and by that
certain Amendment No. 7 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of March 10, 2000
(collectively, the "Purchase Agreement"); and
------------------
B. WHEREAS, pursuant to the Purchase Agreement, Buyer and Seller have
entered into that certain Side Letter Agreement dated as of October 19, 1999
which side letter was amended by the amendments to the Purchase Agreement
described in Recital A above (as amended, the "Side Letter Agreement"), the form
---------------------
of which was attached to the Purchase Agreement as Exhibit DD; and
----------
C. WHEREAS, Buyer and Seller desire to again amend the Side Letter
Agreement and the Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
1
<PAGE>
AGREEMENT
---------
1. Amendments. The Purchase Agreement and Side Letter Agreement are
----------
hereby amended as follows:
A. The "Contingency Date" (as defined in Section 1.11 of the Purchase
----------------
Agreement) shall be extended further to March 14, 2000.
B. The date by which Buyer and Seller shall negotiate in reasonable
good faith to finalize the remaining provisions of Exhibits E, G, K, L, M, M-I,
Q, Y and CC and attach them to the Purchase Agreement shall be further extended
to March 14, 2000. During the time between the date hereof and March 14, 2000,
the Parties shall diligently use reasonable good faith to finalize such
Exhibits. In the event that all of such Exhibits are not so agreed upon by such
date, then either Buyer or Seller may terminate the Purchase Agreement, in which
event the provisions of Section 4.7 thereto shall apply except that any portion
of the Deposit theretofore released to Seller shall not be refunded to Buyer.
C. Section 4.9 of the Purchase Agreement is hereby amended by
extending the date by which Buyer and Seller shall negotiate in good faith to
finalize the IT Contract and performance bond therefor or each of the Insurance
Policies so that they are acceptable to Seller to March 14, 2000. In the event
that all of such Insurance Policies, the IT Contract and the performance bond
therefor are not so agreed upon by such date, then either Buyer or Seller may
terminate the Purchase Agreement, in which event the provisions of Section 4.7
thereto shall apply except that any portion of the Deposit theretofore released
to Seller shall not be refundable to Buyer.
2. No Other Amendments. Except as expressly amended hereby, the Purchase
-------------------
Agreement and the Side Letter Agreement are unchanged and in full force and
effect.
3. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original and all of which taken together shall constitute the
same instrument.
[Signatures on next page]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the dates written below.
Buyer: ONTARIO VENTURES I, LLC, a Delaware limited liability
- -----
company
By: LandBank Environmental Properties, LLC, a
Delaware limited liability company, its
Manager
By: LandBank, Inc., a Delaware corporation,
its managing member
By: /s/ Stuart L. Miner
-----------------------------
Date Executed: 03/13/00 Its: Vice President
-------------- -----------------------
Seller: KAISER VENTURES INC., a Delaware corporation
- ------
By: /s/ Terry L. Cook
--------------------------
Date Executed: 03/13/00 Its: Executive Vice President & General
-------- -----------------------------------
Counsel
-------
KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation
By: /s/ Terry L. Cook
-----------------------------
Date Executed: 03/13/00 Its: Vice President
----------- ---------------------------
RECEIVED AND ACCEPTED THIS ____ DAY OF _____________, 2000.
ESCROW HOLDER:
CHICAGO TITLE INSURANCE COMPANY
By:______________________________
Its:_____________________________
3
<PAGE>
Exhibit 10.37.6
AMENDMENT NO. 9 TO
------------------
PURCHASE AND SALE AGREEMENT AND
-------------------------------
JOINT ESCROW INSTRUCTIONS
-------------------------
AND SIDE LETTER AGREEMENT
-------------------------
THIS AMENDMENT NO. 9 TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS AND SIDE LETTER AGREEMENT (this "Amendment") is made and entered
---------
into and effective as of March 14, 2000, by and between KAISER VENTURES INC., a
Delaware corporation and KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation (collectively, "Seller"), and ONTARIO VENTURES I, LLC, a Delaware
------
limited liability company ("Buyer").
-----
RECITALS
--------
A. WHEREAS, Buyer and Seller have entered into that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of October 19, 1999 as
amended by that certain Amendment No. 1 to Purchase and Sale Agreement and Joint
Escrow Instructions and Side Letter Agreement dated as of November 2, 1999, by
that certain Amendment No. 2 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 12, 1999, by that
certain Amendment No. 3 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 19, 1999, by that
certain Amendment No. 4 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter Agreement dated as of November 30, 1999, by that
certain Amendment No. 5 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of February 4, 2000, and by that
certain Amendment No. 6 to Purchase and Sale Agreement and Joint Escrow
Instructions And Side Letter Agreement dated as of March 6, 2000, by that
certain Amendment No. 7 to Purchase and Sale Agreement and Joint Escrow
Instructions and Side Letter dated as of March 10, 2000, and by that certain
Amendment No. 8 to Purchase and Sale Agreement and Joint Escrow Instructions and
Side Letter dated as of March 13, 2000 (collectively, the "Purchase Agreement");
------------------
and
B. WHEREAS, pursuant to the Purchase Agreement, Buyer and Seller
have entered into that certain Side Letter Agreement dated as of October 19,
1999 which side letter was amended by the amendments to the Purchase Agreement
described in Recital A above (as amended, the "Side Letter Agreement"), the form
---------------------
of which was attached to the Purchase Agreement as Exhibit DD; and
----------
C. WHEREAS, Buyer and Seller desire to again amend the Side Letter
Agreement and the Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
AGREEMENT
---------
<PAGE>
1. Amendments. The Purchase Agreement and Side Letter Agreement are
----------
hereby amended as follows:
A. The "Contingency Date" (as defined in Section 1.11 of the
----------------
Purchase Agreement) shall be extended further to April 20, 2000, in
consideration for which the sum of One Hundred Thousand Dollars ($100,000) shall
be released to Seller as set forth in Section 3.1.2 below.
B. In the event that Escrow is not canceled as of the Contingency
Date (as herein extended), then on April 20, 2000, Buyer shall deposit into
Escrow and then cause to be released to Seller from Escrow as provided in
Section 3.1.2 below the additional sum of (i) Two Hundred Thousand Dollars
($200,000) if Buyer and DTSC have reached an agreement on a final Consent Order
for the former Kaiser Steel Mill, or (ii) the additional sum of Three Hundred
Thousand Dollars ($300,000) if Buyer and DTSC have not reached agreement on a
final Consent Order for the former Kaiser Steel Mill by such date (either sum
shall be herein referred to as the "April 20 Deposit"). Whether the DTSC and
----------------
Buyer have agreed upon a final Consent Order shall be evidenced by (x) a letter
executed and delivered by the DTSC stating that the DTSC is willing to execute
an attached Consent Order, without any change, modification or any contingency
other than modifying the name of the consenting party to be that of the entity
which purchases the Property, subject only to Buyer or its permitted assignee
taking title to the Real Property, and (y) a letter from Buyer to Seller stating
that Buyer or its permitted assignee will execute and deliver the Consent Order
attached to the DTSC's letter without any change, modification or amendment or
any contingency other than Buyer or its permitted assignee taking title to the
Real Property.
C. The "Closing Date" (as defined in Section 1.9 of the Purchase
------------
Agreement) shall be June 15, 2000.
D. Section 3.1.2 of the Agreement is hereby revised to read in full
as follows:
3.1.2 Disposition of Deposit. Any portion of the Deposit or the
----------------------
April 20 Deposit which has been released to Seller prior to the termination
of the Agreement shall be retained by Seller and become non-refundable to
Buyer, so long as Seller has not materially defaulted, including, without
limitation, by not delivering the Deed. All amounts released to Seller
shall be applicable to the Purchase Price. On December 17, 1999, the sum of
Seventy-Five Thousand Dollars ($75,000.00) of the Deposit was released to
Seller. On February 4, 2000, the sum of Seventy-Five Thousand Dollars
($75,000.00) of the Deposit was released to Seller. On March 14, 2000, an
additional One Hundred Thousand Dollars ($100,000.00) of the Deposit shall
be released to Seller. On April 21, 2000, if Escrow was not canceled prior
to that date, the April 20 Deposit shall be released to the Seller.
Following the Contingency Date, in the event this Agreement is terminated
or the Close of Escrow fails to occur by reason of Buyer's default
hereunder, the entire Deposit and the entire April 20 Deposit (including
all interest thereon) shall constitute liquidated damages pursuant to
Section 6.2 below. In the event this Agreement is terminated by reason of
Seller's material default or the Close of Escrow fails to occur by reason
of Seller's material default hereunder, then the Deposit and the entire
April 20 Deposit (including all interest thereon) shall be returned to
Buyer. Upon the Close of Escrow, the entire Deposit and
2
<PAGE>
the entire April 20 Deposit (including all interest thereon) shall be
credited towards the payment of the Purchase Price.
E. Section 4.7 of the Agreement is hereby revised to read in full as
follows:
4.7 Termination by Buyer Prior to Contingency Date. Buyer shall
----------------------------------------------
have the right, exercisable in Buyer's sole and absolute discretion at any
time on or prior to the Contingency Date, to terminate this Agreement for
any reason or no reason whatsoever. If Buyer shall, on or prior to the
Contingency Date, deliver written notice of termination of this Agreement
to Seller and Escrow Holder, then this Agreement shall terminate, Seller
shall retain any portion of (i) the Deposit and (ii) the April 20 Deposit
which have been released to Seller prior to the date of such termination,
Escrow shall be canceled, Seller and Buyer shall each pay one-half (1/2) of
all Title Company and Escrow cancellation fees, and Buyer and Seller shall
have no further obligations to each other hereunder, except as otherwise
expressly set forth herein. In that event, Buyer shall return to Seller all
documents delivered to Buyer at the request of Seller. Buyer's failure to
deliver written notice of Buyer's election to terminate this Agreement in
accordance with this Section 4.7 shall constitute a waiver of Buyer's right
to disapprove any matters set forth in this Article 4, except as expressly
provided in Section 4.1, above.
F. Section 4.8 of the Agreement is hereby revised to read in full as
follows:
4.8 Termination by Seller. If Buyer disapproves any of (i) the
---------------------
Adjacent Property Indemnification and Other Agreements or (ii) the Permits
or (iii) any of the Other Assumed Obligations and Liabilities, then Seller
shall have the right, within fourteen (14) days after Buyer gives notice of
such disapproval, to terminate this Agreement, in which event the Seller
shall retain any portion of the Deposit and the April 20 Deposit which has
been released to Seller prior to the termination of the Agreement as set
forth in Section 3.1.2 hereof. Notwithstanding anything to the contrary,
with respect to the following railroad obligation only, Buyer shall only be
obligated to assume Kaiser Venture Inc.'s guaranty of and the obligation of
Kaiser Recycling Corporation ("KRC") to "provide space for a rail storage
---
yard sufficient to meet the needs of the Company," as required by Section
2.2(A) of the Members Operating Agreement of West Valley MRF, LLC ("MRF")
---
dated as of June 19, 1997 in accordance with and to the extent of the
matters set forth below in this Section. Such agreement is as follows:
(a) MRF must use the Tar Pits Parcel for rail storage purposes to the
extent set forth below; (b) Buyer will, without charge, grant to MRF
through Escrow at the Close of Escrow, a nonexclusive easement, to be used
by MRF to the extent the Tar Pits Parcel is not available for MRF's rail
storage purposes, drafted by Buyer to MRF (but MRF shall pay any recording
costs), KRC, or Seller granting to MRF the nonexclusive right to use the
existing rail tracks on Parcel 5 of the Land (APN No. 229-291-29) for MRF's
rail storage purposes (x) for a storage period not exceeding 48 hours,
except that on weekends and holidays such period shall be extended to 72
hours, (y) for storage of rail cars being delivered to or picked up from
MRF, and (z) for an aggregate use at any one time not to exceed one and
one-half (1-1/2) trains (hereinafter called "Rail Storage"), all subject to
------------
the conditions set forth below (the "Existing Track Easement"); (c) Buyer
-----------------------
shall, without charge, through Escrow at the Close of Escrow, grant to MRF
a new, nonexclusive blanket easement pursuant to which MRF may, at its sole
cost and expense, construct on such portions of the area of said Parcel 5
of the Land on which there is no existing track as Buyer may reasonably
approve, additional railroad track to be used for Rail Storage or
3
<PAGE>
spur line purposes, subject to the conditions set forth below (the
"Additional Track Easement"), so long as such tracks are (aa) in a location
-------------------------
reasonably approved by Buyer or its assigns after consultation with the
MRF, (bb) available for use by Buyer and its assignees if not in use by or
necessary for the operations of MRF, and (cc) are consistent with any and
all rights granted to any party prior to the date of notification by MRF to
Buyer or its assigns that MRF intends to construct such additional railroad
track, including, without limitation, rights granted to Speedway
Development Corporation or The California Speedway Corporation; and (d)
Buyer shall, without charge, through Escrow at the Close of Escrow, grant
to MRF, subject to the easement granted for the San Sevaine Channel, and
subject to there being property which satisfies the condition set forth in
this (d), a nonexclusive easement to construct (at MRF's sole cost and
expense) additional railroad track to be used for Rail Storage or spur line
purposes, subject to the conditions described below (the "San Sevaine Track
-----------------
Easement"), so long as Buyer and its assigns may use such track if not in
--------
use by or necessary for the operations of MRF. Such easement shall only be
used to the extent that the ultimate location and construction of the San
Sevaine Channel is such that there exists, after such location and
construction, a portion of the Land which lies east of the San Sevaine
----
Channel and west of the easterly boundary of the Land. Buyer (at its cost)
----
and Seller (at its cost) shall negotiate in good faith the final form of
each of such above-referenced easements on or prior to the Contingency
Date.
Buyer shall have the right to establish reasonable rules for the use
and conduct of operations of the railroad and on the rail storage
facilities, including provisions to ensure that no activity or construction
undertaken by MRF shall cause Buyer or its assigns to incur any out-of-
pocket third party cost or expense.
At such time as the MRF begins to use any easement for Rail Storage,
Buyer shall request that CSI and The California Speedway agree to increase
the size of the Rail Transportation Committee to include a representative
of the MRF.
With respect to the Additional Track Easement and the San Sevaine
Track Easement, such easements shall provide that they will not be
exercised and used by the MRF if it is commercially reasonable to use the
Tar Pits Parcel for Rail Storage. The Parties agree that it shall be
commercially unreasonable, among other things, to require the remediation
of the Tar Pits Parcel in a manner other than the use of a capping
strategy. In addition, Buyer and the MRF shall in good faith determine the
final location of the additional track and switches to be constructed
pursuant to the exercise of the rights granted pursuant to the Additional
Track Easement and/or the San Sevaine Track Easement. Other than providing
the Existing Track Easement, the Additional Track Easement and the San
Sevaine Channel Easement, Buyer shall have no obligation to grant or convey
any other real property or interest therein to Seller, the MRF or KRC
pursuant to Section 2.2 (A).
Seller hereby agrees that in no event shall Buyer assume any
obligation of Seller or any related entity to expend money pursuant to any
agreement relating to the MRF for any capital or operational cost relating
to the rail operations of the MRF. Buyer shall have no obligation to
contribute, grant or convey any other real property or interest therein to
MRF or KRC pursuant to such Section 2.2(A).
G. Section 6.2. of the Agreement is hereby revised to read in full
as follows:
4
<PAGE>
6.2 Default by Buyer. IN THE EVENT THAT BUYER FAILS IN THE
----------------
PERFORMANCE OF ANY OF ITS OBLIGATIONS HEREUNDER FOLLOWING THE CONTINGENCY
DATE BUT PRIOR TO THE CLOSE OF ESCROW, OR IN THE EVENT THAT THE CLOSE OF
ESCROW SHALL FAIL TO OCCUR BY REASON OF A DEFAULT IN BUYER'S OBLIGATIONS
HEREUNDER, THE PARTIES AGREE THAT IT WOULD BE IMPRACTICAL OR EXTREMELY
DIFFICULT TO FIX, PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH
WOULD BE SUFFERED BY SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER
THIS AGREEMENT. THEREFORE, IN THE EVENT THAT THE CLOSE OF ESCROW SHALL FAIL
TO OCCUR BY REASON OF A DEFAULT IN BUYER'S OBLIGATIONS HEREUNDER, SELLER
SHALL BE ENTITLED, AS ITS SOLE AND EXCLUSIVE REMEDY FOR SUCH DEFAULT, TO
IMMEDIATELY TERMINATE THIS AGREEMENT UPON SUCH DEFAULT, IN WHICH CASE THE
SELLER SHALL RETAIN ANY PORTION OF THE DEPOSIT AND/OR THE APRIL 20 DEPOSIT
ALREADY RELEASED TO SELLER AS LIQUIDATED DAMAGES AND BUYER SHALL NOT BE
ENTITLED TO RECOVER ANY OF ITS DUE DILIGENCE EXPENSES PURSUANT TO ARTICLE 4
ABOVE. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES
IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA
CIVIL CODE SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED
DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676,
AND 1677. THE PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR
AGREEMENT WITH THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION.
SELLER WAIVES ALL OTHER REMEDIES AGAINST BUYER FOR BUYER'S FAILURE TO CLOSE
ESCROW, INCLUDING ANY RIGHT TO SPECIFIC PERFORMANCE UNDER CALIFORNIA CIVIL
CODE SECTION 1680 OR ANY OTHER APPLICABLE LAW.
BUYER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTOOD THE
PROVISIONS OF THIS SECTION 6.2 AND BY THEIR INITIALS BELOW AGREE TO BE
BOUND BY ITS TERMS
________________
Buyer's Initials Seller's Initials
H. The date by which Buyer and Seller shall negotiate in reasonable
good faith to finalize the remaining provisions of Exhibits E, G, K, L, M, M-I,
Q, Y and CC and attach them to the Purchase Agreement shall be further extended
to April 20, 2000. During the time between the date hereof and April 20, 2000,
the Parties shall diligently use reasonable good faith to finalize such
Exhibits. In the event that all of such Exhibits are not so agreed upon by such
date, then either Buyer or Seller may terminate the Purchase Agreement, in which
event the provisions of Section 4.7 thereto shall apply except that any portion
of the Deposit and the April 20 Deposit theretofore released to Seller shall not
be refunded to Buyer.
I. Section 4.9 of the Purchase Agreement is hereby amended by
extending the date by which Buyer and Seller shall negotiate in good faith to
finalize the IT Contract and performance bond therefor or each of the Insurance
Policies so that they are acceptable to Seller to April 20, 2000. In the
5
<PAGE>
event that all of such Insurance Policies, the IT Contract and the performance
bond therefor are not so agreed upon by such date, then either Buyer or Seller
may terminate the Purchase Agreement, in which event the provisions of Section
4.7 thereto shall apply except that any portion of the Deposit and the April 20
Deposit theretofore released to Seller shall not be refundable to Buyer.
2. Seller's Right to Contact Other Parties. If this Agreement is
---------------------------------------
terminated or Buyer fails to close Escrow as provided herein, then Seller may
contact directly any party, including Catellus Development Corporation,
regarding the sale of the former Kaiser Steel Mill site. Buyer, LandBank and
Hooper Knowlton and each of their affiliates have no agreement in effect and
will not place one into effect nor consent to any permitted assignee's placing
one into effect that would restrict or limit any person or entity from dealing
with Seller or the Real Property or which would require that any party who
enters into an agreement regarding the Property after such termination or
failure to close be required to pay to any of such parties any commission or
other amount. Seller acknowledges that Buyer may enter into an agreement with
Catellus Development Corporation or any other party pursuant to which such party
will reimburse its expenses whether or not Buyer consummates the purchase of the
Real Property.
3. Seller's Right to Contact Catellus. In addition to Seller's having the
----------------------------------
right to discuss the contemplated purchase of the former Kaiser Steel Mill site
with Buyer and its members and agents, Seller may respond to or initiate
contacts with and have conversations with Catellus Development Corporation or
its employees or agents and upon notice (which may be oral), Seller may meet in
person with Catellus Development Corporation or any other person or entity
identified by Buyer as a potential financial partner. Buyer shall have the right
to attend any such meetings.
4. IT Reports. Buyer shall promptly deliver to Seller (i) the IT Phase I
----------
report and (ii) the underwriting report for the Property which IT is preparing.
5. No Other Amendments. Except as expressly amended hereby, the Purchase
-------------------
Agreement and the Side Letter Agreement are unchanged and in full force and
effect.
6. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original and all of which taken together shall constitute the
same instrument.
[Signatures continued on next page]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the dates written below.
Buyer: ONTARIO VENTURES I, LLC, a Delaware limited liability
- -----
company
By: LandBank Environmental Properties, LLC, a
Delaware limited liability company, its
Manager
By: LandBank, Inc., a Delaware corporation,
its managing member
By: /s/ Stuart L. Miner
-----------------------------------
Date Executed: 03/14/00 Its: Vice President
-------- -----------------------------------
Seller: KAISER VENTURES INC., a Delaware corporation
- ------
By: /s/ Terry L. Cook
----------------------------------------------
Date Executed: 03/14/00 Its: Executive Vice President & General Counsel
-------- ---------------------------------------------
KAISER STEEL LAND DEVELOPMENT INC., a Delaware
corporation
By: /s/ Terry L. Cook
----------------------------------------------
Date Executed: 03/14/00 Its: Vice President
-------- ----------------------------------------------
7
<PAGE>
RECEIVED AND ACCEPTED THIS ____ DAY OF _______________, 2000.
ESCROW HOLDER:
CHICAGO TITLE INSURANCE COMPANY
By:________________________
Its:_______________________
The undersigned hereby acknowledge that they agree to be bound by the
provisions of paragraph 2 above.
LandBank Environmental Properties, LLC, a Delaware
limited liability company, its Manager
By: LandBank, Inc., a Delaware corporation, its
managing member
By: /s/ Stuart L. Miner
------------------------------------------
Date Executed: 03/14/00 Its: Vice President
-------- -----------------------------------------
Date Executed: 03/14/00 /s/ Hooper Knowlton
-------- ---------------------------------------------
Hooper Knowlton
8
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
EXHIBIT 23
----------
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-51116, 33-39557, 33-39556 and 333-17843) pertaining to the
Kaiser Steel Resources, Inc. 1992 Stock Option Plan, the Kaiser Steel Resources,
Inc. 1989 Officer Bonus Program, the Amended, Restated and Substituted Kaiser
Steel Resources, Inc. 1989 Stock Plan, and the Kaiser Ventures Inc. 1995 Stock
Plan, respectively, of Kaiser Ventures Inc. of our report dated January 25,
2000, with respect to the consolidated financial statements and schedules of
Kaiser Ventures Inc. and Subsidiaries included in this Annual Report (Form 10-K)
for the year ended December 31, 1999.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Riverside, California
March 23, 2000
<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
DECEMBER 31, 1999 FORM 10-K REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 14,686,000
<SECURITIES> 0
<RECEIVABLES> 2,085,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,056,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 103,445,000
<CURRENT-LIABILITIES> 11,886,000
<BONDS> 0
0
0
<COMMON> 189,000
<OTHER-SE> 60,701,000
<TOTAL-LIABILITY-AND-EQUITY> 103,445,000
<SALES> 0
<TOTAL-REVENUES> 51,626,000
<CGS> 0
<TOTAL-COSTS> 11,112,000
<OTHER-EXPENSES> 4,786,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 498,000
<INCOME-PRETAX> 35,230,000
<INCOME-TAX> 11,201,000
<INCOME-CONTINUING> 24,029,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,029,000
<EPS-BASIC> 2.35
<EPS-DILUTED> 2.31
</TABLE>
