-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RNFuZPAQ/78uaGuUGOSNqo4tYJmbJ0GblpPwnObHHEJm85YUBIfPl8CM2HTzigR+ 4ZBZHF0CYIR26CY0K9LGUw== 0000944209-00-000413.txt : 20000324 0000944209-00-000413.hdr.sgml : 20000324 ACCESSION NUMBER: 0000944209-00-000413 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAISER VENTURES INC CENTRAL INDEX KEY: 0000729365 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 940594733 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18858 FILM NUMBER: 576968 BUSINESS ADDRESS: STREET 1: 3633 E INLAND EMPIRE BLVD STREET 2: STE 850 CITY: ONTARIO STATE: CA ZIP: 91764-4922 BUSINESS PHONE: 9094838500 MAIL ADDRESS: STREET 1: 3633 E INLAND EMPIRE BLVD STREET 2: STE 850 CITY: ONTARIO STATE: CA ZIP: 91764-4922 FORMER COMPANY: FORMER CONFORMED NAME: KAISER RESOURCES INC DATE OF NAME CHANGE: 19931101 FORMER COMPANY: FORMER CONFORMED NAME: KAISER STEEL RESOURCES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: KAISER STEEL CORP/DE/NEW DATE OF NAME CHANGE: 19881130 10-K 1 KAISER VENTURES - 10-K 12/31/1999 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 ------------------------------------- -------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 3633 E. Inland Empire Blvd. Suite 850 Ontario, Ca 91764 ------------------------------------- (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 ------------------------------------ ---------------------------------- 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 ___ --- 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 ___ --- 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. TABLE OF CONTENTS TO FORM 10-K ------------------------------ PART I 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
i 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. 1 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 2 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. 3 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 4 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 5 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. 6 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. 7 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 8 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 9 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. 10 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 11 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. 12 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. 13 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 14 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. 15 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.
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 ------------------------------- ------------------------------------------------------------------- 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
------------------------------- /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. 16 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 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 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 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 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 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 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. 23 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 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 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 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 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 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 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 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.
Selected Statement of Income Data for the years ended December 31: 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- 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
Selected Balance Sheet Data as of December 31: 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- 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
(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 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 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:
1999 1998 % Inc. (Dec) ---- ---- ------------ 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% =========== ==========
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 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). 34 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:
1998 1997 % Inc. (Dec) ---- ---- ------------ 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% ========== ===========
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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 KAISER VENTURES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS as of December 31
1999 1998 ---- ---- ASSETS 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 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 57 KAISER VENTURES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS as of December 31
1999 1998 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities 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 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 58 KAISER VENTURES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME for the Years Ended December 31
1999 1998 1997 ---- ---- ---- 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
The accompanying notes are an integral part of the consolidated financial statements. 59 KAISER VENTURES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the Years Ended December 31
1999 1998 1997 ---- ---- ---- 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 ============ =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 60 KAISER VENTURES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY for the Years Ended December 31, 1999, 1998 and 1997
Capital In Common Stock Excess of Retained ----------------------------------- Shares Amount Par Value Earnings Total ------------------------------------------------------------------------------------------ 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 ========== ========= ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 61 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 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 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 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 Note 3. ACCOUNTS RECEIVABLE AND OTHER Accounts receivable as of December 31 consisted of the following:
1999 1998 ---- ---- 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 ========== ==========
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 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:
1999 1998 ---- ---- 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 =========== ===========
67 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:
1999 1998 ---- ---- 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 =========== ===========
68 Note 10. ACCRUED LIABILITIES - CURRENT The current portion of accrued liabilities as of December 31 consisted of the following:
1999 1998 ---- ----- 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 ========== ==========
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:
1999 1998 ---- ---- 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 =========== ===========
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 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:
1999 1998 1997 ---- ---- ---- 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 ============= ============ ============
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 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:
1999 1999 1999 ------------------------ ------------------------ ------------------------ Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price ------- ----- ------- ----- ------- ----- 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
71 The following table summarizes information about fixed stock options outstanding as of December 31, 1999:
Options Outstanding Options Exercisable ---------------------------------------- ------------------------------------------ Weighted- Average Weighted- Weighted- Remaining Average Average Range of Exercise Prices Life (years) Options Excercise Price Options Excercise Price - ------------------------ ----------- ------- --------------- ------- --------------- $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
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:
1999 1998 1997 ---- ---- ---- 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
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:
1999 1998 1997 ---- ---- ---- 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%
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 Note 14. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
1999 1998 1997 ---- ---- ---- Numerator: 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 =========== =========== ===========
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.
1999 1998 1997 ---- ---- ---- 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
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 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 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:
1999 1998 1997 ---- ---- ---- 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 =========== =========== ===========
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:
1999 1998 ---- ---- 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 =============== ===============
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 A reconciliation of the effective income tax rate to the federal statutory rate, for financial reporting purposes, is as follows:
1999 1998 1997 ----- ----- ----- 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% ===== ===== =====
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:
Year Ending Cucamonga December 31 Lease MTC Lease Total ----------- ----- --------- ----- 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
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 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 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 78 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 79 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 80 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] 81 Note 21. QUARTERLY FINANCIAL DATA (Unaudited)
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- 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)
82 KAISER VENTURES INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance at Charged to Deductions Beginning Costs and from Balance at Classification of Period Expenses (A) Reserves End of Period - ------------------------------------- ---------- ------------ ---------- ------------- 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 ========== ============ ========== =============
(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. 83
EX-3.2 2 AMENDED & RESTATED BYLAWS OF KAISER VENTURES 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. 1 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 2 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 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. 4 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. 5 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. 6 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 --------------------------------------------------------------------- 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 7 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 8 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. 9 (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. 10 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. 11 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 12 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 13 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 EX-10.3.1 3 1ST AMD EMPLOYMENT AGREEMENT-RICHARD STODDARD & KAISER 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 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 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 EX-10.5.1 4 1ST AMD EMPLOYMENT AGREEMENT-TERRY COOK & KAISER 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 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 "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 "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 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 EX-10.6 5 TRANSITION EMPLOYMENT AGREEMENT-LEE REDMOND & KAISER 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 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 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 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 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 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 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 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 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 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 (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 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 EX-10.7 6 EMPLOYMENT AGREEMENT-KAISER & PAUL SHAMPAY 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 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 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 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 4 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 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 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 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 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 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 EX-10.8.1 7 1ST AMD EMPLOYMENT AGREEMENT-KAISER & ANTHONY SILVA 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 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 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 EX-10.9.2 8 2ND AMD EMPLOY AGREEMENT-KAISER & JAMES VERHEY 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 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 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 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 EX-10.9.3 9 3RD AMD EMPLOYMENT AGREEMENT-KAISER & JAMES VERHEY 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 "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 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 EX-10.10.1 10 2ND AMD LEASE AGREEMENT-LORD BALTIMORE & KAISER 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 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 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 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 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 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 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 EX-10.25.4 11 3RD AMENDMENT TO GUARANTY BY KAISER VENTURES 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." (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- 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- (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- 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- EX-10.25.7 12 3RD MODIFICATION OF DEED OF TRUST & ASSIGN OF LEASES 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. 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- 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- EX-10.25.9 13 3RD AMD TO REVOLVING CREDIT & TERM LOAN AGREEMENT 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 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- 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- 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- 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- 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- EX-10.37.1 14 4TH AMD TO PURCHASE & SALE AGREEMENT 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 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 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 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 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 RECEIVED AND ACCEPTED THIS ____ DAY OF __________________, 1999. ESCROW HOLDER: CHICAGO TITLE INSURANCE COMPANY By:________________________ Its:_______________________ 6 Exhibits Available ------------------ to the SEC ---------- Upon Written Request -------------------- 7 EX-10.37.2 15 5TH AMD TO PURCHASE & SALE AGREEMENT 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 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 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 EX-10.37.3 16 6TH AMD TO PURCHASE & SALE AGREEMENT 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 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 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 EX-10.37.4 17 7TH AMD TO PURCHASE & SALE AGREEMENT 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: 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 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 EX-10.37.5 18 8TH AMD TO PURCHASE & SALE AGREEMENT 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 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 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 EX-10.37.6 19 9TH AMD TO PURCHASE & SALE AGREEMENT 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 --------- 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 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 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 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 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 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 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 EX-23 20 CONSENT OF ERNST & YOUNG 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 EX-27 21 FINANCIAL DATA SCHEDULE
5 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. 12-MOS DEC-31-1999 DEC-31-1999 14,686,000 0 2,085,000 0 0 17,056,000 0 0 103,445,000 11,886,000 0 0 0 189,000 60,701,000 103,445,000 0 51,626,000 0 11,112,000 4,786,000 0 498,000 35,230,000 11,201,000 24,029,000 0 0 0 24,029,000 2.35 2.31
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