<PAGE>
 
Recorded at the request of:Recorded at the request of:
          Clerk of the Board of Supervisors
          County of Riverside


When recorded return to:
          Clerk of the Board of Supervisors
          4080 Lemon Street, 14/th/ Floor
          Riverside, CA  92501



                          DEVELOPMENT AGREEMENT NO 64


                        A development agreement between

                              COUNTY OF RIVERSIDE

                                      and

                          MINE RECLAMATION CORPORATION
                                   and others



                    Specific Plan Nos. 305 - EAGLE MOUNTAIN



                                    FINAL - BUT NOT EFFECTIVE UNTIL A LATER DATE
                                                NO SIGNATURES HAVE BEEN OBTAINED
<PAGE>
 
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
 
<S>                                                                          <C>
RECITALS....................................................................  1
--------
COVENANTS...................................................................  2
---------
1.   DEFINITIONS AND EXHIBITS...............................................  2
     ------------------------
     1.1  Definitions.......................................................  2
          -----------
     1.2  Exhibits..........................................................  7
          --------

2.   GENERAL PROVISIONS.....................................................  8
     ------------------
     2.1   Binding Effect of Agreement......................................  8
           ---------------------------
     2.2   Ownership of Property............................................  8
           ---------------------
     2.3   Term.............................................................  8
           ----
           2.3.1   Development Agreement....................................  8
                   ---------------------
           2.3.2   Specific Plan No. 305, Site Specific
                   ------------------------------------
                   Plot Plans and Plot Plans................................ 12
                   -------------------------
     2.4   Assignment....................................................... 12
           ----------
           2.4.1   Right to Assign.......................................... 12
                   ---------------
           2.4.2   Release of Transferring Owner............................ 13
                   -----------------------------
           2.4.3   Subsequent Assignment.................................... 14
                   ---------------------
           2.4.4   Partial Release of Purchaser, Transferee
                   ----------------------------------------
                   or Assignee of Industrial or Commercial
                   ---------------------------------------
                   Lot...................................................... 14
                   ---
     2.5   Amendment or Cancellation of Agreement........................... 14
           --------------------------------------
     2.6   Termination...................................................... 14
           -----------
     2.7   Disposal of Solid Waste.......................................... 15
           -----------------------
     2.8   Restriction on Importation....................................... 15
           --------------------------
     2.9   Notices.......................................................... 16
           -------

3.   DEVELOPMENT OF THE PROPERTY............................................ 18
     ---------------------------

     3.1   Rights to Develop................................................ 18
           -----------------
     3.2   Effect of Agreement on Land Use Regulations...................... 18
           -------------------------------------------
     3.3   Timing of Development............................................ 19
           ---------------------
     3.4   Changes and Amendments........................................... 19
           ----------------------
     3.5   Site Specific Plot Plan(s)....................................... 20
           --------------------------
     3.6   Plot Plan(s)..................................................... 20
           ------------
     3.7   Application Fees................................................. 20
           ----------------
     3.8   Reservations of Authority........................................ 21
           -------------------------
           3.8.1   Limitations, Reservations and
                   -----------------------------
                   Exceptions............................................... 21
                   ----------
           3.8.2   Modification or Suspension by State or
                   --------------------------------------
                   Federal Law.............................................. 22
                   -----------
           3.8.3   Intent................................................... 22
                   ------
     3.9   Public Works..................................................... 22
           ------------
     3.10  Access and Rights of Way......................................... 23
           ------------------------
     3.11  Regulation by other Public Agencies.............................. 23
           -----------------------------------
     3.12  Local Enforcement Agency Authority............................... 24
           ----------------------------------
     3.13  Vesting Tentative Maps........................................... 26
           ----------------------
     3.14  Staged Tonnage Increase.......................................... 27
           -----------------------
</TABLE>
<PAGE>
 
<TABLE>
<CAPTION> 
<S>                                                                          <C>
4.   ECONOMIC BENEFITS...................................................... 30
     -----------------
     4.1   Intent........................................................... 30
           ------
     4.2   Conveyance of Capacity of the Project............................ 30
           -------------------------------------
     4.3   Purchase of County Interest...................................... 30
           ---------------------------
     4.4   Conveyance Documentation......................................... 31
           ------------------------
     4.5   Default of Purchase and Sale Agreement........................... 31
           --------------------------------------
     4.6   Capacity Rights.................................................. 31
           ---------------
     4.7   Additional Payments by OWNER..................................... 32
           ----------------------------
           4.7.1   State and Federal Trust/Insurance
                   ---------------------------------
                   Programs................................................. 32
                   --------
           4.7.2   Insurance................................................ 32
                   ---------
           4.7.3   Park, Open Space, Habitat Mitigation,
                   -------------------------------------
                   Environmental Monitoring and Research.................... 32
                   -------------------------------------
           4.7.4   Environmental Mitigation Trust........................... 33
                   ------------------------------
           4.7.5   Rail Safety Improvement Trust Fund....................... 33
                   ----------------------------------
           4.7.6   Air Emissions Offset Trust Fund.......................... 35
                   -------------------------------
           4.7.7   Host Community Funding................................... 35
                   ----------------------
           4.7.8   UCR Endowment............................................ 36
                   -------------
           4.7.9   Waiver of Credit for Consultant Services
                   ----------------------------------------
                   Paid by MRC.............................................. 37
                   -----------
           4.7.10  Entire Economic Benefits................................. 38
                   ------------------------
5.   FINANCING OF PUBLIC IMPROVEMENTS....................................... 39
     --------------------------------
6.   REVIEW FOR COMPLIANCE.................................................. 39
     ---------------------
     6.1   Periodic Review.................................................. 39
           ---------------
     6.2   Special Review................................................... 39
           --------------
     6.3   Procedure........................................................ 39
           ---------
     6.4   Proceedings Upon Modification or Termination..................... 40
           --------------------------------------------
     6.5   Failure to Make Payment.......................................... 41
           -----------------------
     6.6   Hearing.......................................................... 41
           -------
     6.7   Certificate of Agreement Compliance.............................. 42
           -----------------------------------
7.   INCORPORATION AND ANNEXATION........................................... 42
     ----------------------------
     7.1   Intent........................................................... 42
           ------
     7.2   Incorporation.................................................... 42
           -------------
     7.3   Incorporation and Annexation..................................... 42
           ----------------------------
8.   DEFAULT AND REMEDIES................................................... 43
     --------------------
     8.1.  Remedies in General.............................................. 43
           -------------------
     8.2   Specific Performance............................................. 43
           --------------------
     8.3   Release.......................................................... 43
           -------
     8.4   Termination or Modification of Agreement for
           --------------------------------------------
           Default of OWNER................................................. 44
           ----------------
     8.5   Termination of Agreement for Default of COUNTY................... 44
           ----------------------------------------------
9.   THIRD PARTY LITIGATION, ENVIRONMENTAL IMPAIRMENT,
     -------------------------------------------------
     INDEMNITY AND FINANCIAL ASSURANCES..................................... 44
     ----------------------------------
     9.1   General Plan Litigation.......................................... 44
           -----------------------
     9.2   Third Party Litigation........................................... 45
           ----------------------
</TABLE> 
<PAGE>
 
<TABLE>
<CAPTION>
<S>                                                                          <C>
     9.3  OWNER Indemnity................................................... 46
          ---------------                                 
     9.4  COUNTY Indemnity.................................................. 46
          ----------------                                
     9.5  Additional OWNER Indemnity........................................ 47
          --------------------------                      
     9.6  Reservation of Rights............................................. 47
          ---------------------                           
     9.7  Environmental Impairment and Damage to Natural  
          ----------------------------------------------  
          Resources......................................................... 48
          ---------                                       
     9.8  Emergencies....................................................... 48
          -----------                                     
     9.9  Financial Assurances.............................................. 49
          --------------------                             
          9.9.1  Letter of Credit........................................... 49
                 ----------------                          
          9.9.3  Comprehensive General Liability Insurance.................. 53
                 -------------------------------------------
          9.9.4  Corporate Guarantee........................................ 54
                 -------------------                       
          9.9.5  Financial Assurances Fund.................................. 56
                 -------------------------                 
          9.9.6  Priority of Use of Financial Assurances.................... 58
                 ---------------------------------------   
          9.9.7  Alternative or Substitute Financial       
                 -----------------------------------
                 Assurances................................................. 59
                 ----------                                
          9.9.8  Wrongful or Improper Claim or Draw by     
                 -------------------------------------
                 COUNTY..................................................... 60
                 ------                                    
     9.10 Source Communities Indemnity Provisions........................... 60
          ---------------------------------------          
     9.11 Unforeseen Circumstances.......................................... 60
          ------------------------                         
     9.12 Survival.......................................................... 61
          --------                                          
10.  MORTGAGEE PROTECTION................................................... 62
     --------------------
11.  MISCELLANEOUS PROVISIONS............................................... 63
     ------------------------
     11.1 Recordation of Agreement.......................................... 63
          ------------------------
     11.2 Entire Agreement.................................................. 64
          ----------------
     11.3 Severability...................................................... 64
          ------------
     11.4 Interpretation and Governing Law.................................. 64
          --------------------------------
     11.5 Section Headings.................................................. 64
          ----------------
     11.6 Singular and Plural............................................... 64
          -------------------
     11.7 Joint and Several Obligations..................................... 65
          -----------------------------
     11.8 Time of Essence................................................... 65
          ---------------
     11.9 Waiver............................................................ 65
          ------
     11.10 No Third Party Beneficiaries..................................... 65
           ----------------------------
     11.11 Force Majeure.................................................... 65
           -------------
     11.12 Mutual Covenants................................................. 65

     11.13 Successors in  Interest.......................................... 65
           -----------------------
     11.14 Counterparts..................................................... 66
           ------------
     11.15 Project as a Private Undertaking................................. 66
           --------------------------------
     11.16 Further Actions and Instruments.................................. 66
           -------------------------------
     11.17 Jurisdiction, Venue and Attorneys' Fees.......................... 66
           ---------------------------------------
     11.18 Eminent Domain................................................... 67
           --------------
     11.19 County's Reserve for Unfunded County Liabilities
           ------------------------------------------------
           on Other Landfills............................................... 67
           ------------------
     11.20 Authority to Execute............................................. 67
           --------------------
</TABLE>
                         DEVELOPMENT AGREEMENT NO. 64
                         ----------------------------

     This Development Agreement (hereinafter "AGREEMENT") is 
<PAGE>
 
entered into effective on the Effective Date, as defined herein, by and between
the COUNTY OF RIVERSIDE (hereinafter "COUNTY"), MINE RECLAMATION CORPORATION, a
California corporation, KAISER EAGLE MOUNTAIN, INC., a Delaware corporation,
EAGLE MOUNTAIN RECLAMATION, INC., a Delaware corporation, and KAISER VENTURES
INC., a Delaware corporation (hereinafter collectively "OWNER").

                                   RECITALS
                                   --------
     WHEREAS, the COUNTY is authorized to enter into binding development
agreements with persons having legal or equitable interests in real property for
the development of such property, pursuant to Section 65864, et seq. of the
                                                             -------       
Government Code; and,

     WHEREAS, the COUNTY has adopted rules and regulations for consideration of
development agreements, pursuant to Section 65865 of the Government Code; and,

     WHEREAS, OWNER and COUNTY have determined that a development agreement is
the most appropriate means of meeting the needs of the parties and proceedings
have been taken in accordance with the rules and regulations of COUNTY; and,

     WHEREAS, by electing to enter into this Agreement, COUNTY shall bind future
Boards of Supervisors of COUNTY by the obligations specified herein and limit
the future exercise of certain governmental and proprietary powers of COUNTY;
and,

     WHEREAS, the terms and conditions of this Agreement have undergone
extensive negotiation and review by COUNTY and the Board of Supervisors and have
been found to be fair, just and reasonable; and,

     WHEREAS, the best interests of the citizens of Riverside County and the
public health, safety and welfare will be served by entering into this
Agreement; and,

     WHEREAS, the COUNTY has caused to be prepared an environmental impact
report in accordance with all of the procedures of the California Environmental
Quality Act [CEQA] with respect to the Project, Development Plan and the
Agreement; and,

     WHEREAS, this Agreement and the Project are consistent with the Riverside
County Comprehensive General Plan and any Specific Plan applicable thereto; and,

09/04/97
                                       5
<PAGE>
 
      WHEREAS, all actions taken and approvals given by COUNTY have been duly
taken or approved in accordance with all applicable legal requirements for
notice, public hearings, findings, votes, and other procedural matters; and,

     WHEREAS, the COUNTY has determined that there is a current and future need
for environmentally safe landfill space; and,

     WHEREAS, development of the Property in accordance with this Agreement will
provide substantial benefits to COUNTY and will further important policies and
goals of COUNTY; and,

     WHEREAS, this Agreement will eliminate uncertainty in planning and provide
for the orderly development of the Property, ensure progressive installation of
necessary improvements, provide for public services appropriate to the
development of the Project, assure vesting of legal rights to develop the
Property in accordance with this Agreement, and generally serve the purposes for
which development agreements under Sections 65864, et seq. of the Government
                                                   ------                   
Code are intended; and,

     WHEREAS, OWNER has incurred and will in the future incur substantial costs
in order to assure development of the Property in reliance upon and in
accordance with this Agreement; and,

     WHEREAS, prior to the Effective Date of this Agreement, COUNTY has approved
a Specific Plan for the Property and its related Project;

                                   COVENANTS
                                   ---------
     NOW, THEREFORE, in consideration of the above recitals and of the mutual
covenants hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:

1.   DEFINITIONS AND EXHIBITS.
     ------------------------ 

     1.1   Definitions.   The following terms when used in this Agreement and
           -----------                                                       
Exhibits attached hereto or referred to herein shall be defined as follows:

          1.1.1     "AGREEMENT" means this Development Agreement.

          1.1.2     "COUNTY" means the County of Riverside, a political
subdivision of the State of California.

          1.1.3     "COUNTY WASTE" means municipal solid waste 

09/04/97 
                                       6
<PAGE>
 
which was first collected for disposal, or was generated inside, the geographic
boundaries of Riverside County as set forth in Government Code Section 23133 and
including both incorporated and unincorporated territory within those
boundaries.

          1.1.4     "DEVELOPMENT" means the improvement of the Property for the
purposes of completing the structures, improvements and facilities comprising
the Development Plan including, but not limited to: grading; the construction of
infrastructure and public facilities related to the Development Plan whether
located within or outside the Property; the construction of buildings and
structures; and the installation of landscaping as required.  "Development" does
not include the maintenance, repair, reconstruction or redevelopment of any
building, structure, improvement or facility after the construction and
completion thereof.

          1.1.5     "DEVELOPMENT APPROVALS" means all permits and other
entitlements for use subject to approval or issuance by COUNTY in connection
with development of the Property including, but not limited to:

               (a)  General plan amendment;

               (b)  Specific plans and specific plan amendments;

               (c)  Tentative and final subdivision and parcel maps;

               (d)  Conditional use permits, public use permits and site and
                    plot plans;

               (e)  Zoning changes;

               (f)  Grading and building permits;

               (g)  Landfill facility permits;

               (h)  Encroachment permits;

               (i)  Mine reclamation plan revisions;

               (j)  All such other and further COUNTY imposed discretionary
                    permits, approvals or authorizations other than any
                    ministerial permits or plans.

          1.1.6     "DEVELOPMENT EXACTION" means any requirement of 

09/04/97
                                       7
<PAGE>
 
COUNTY in connection with or pursuant to any Land Use Regulation or Development
Approval for the dedication of land, the construction of improvements or public
facilities, or the payment of fees in order to lessen, offset, mitigate or
compensate for the impacts of development on the environment or other public
interests.

          1.1.7     "DEVELOPMENT PLAN" means the Existing Development Approvals
for the Landfill to be developed and utilized on Property as contemplated by the
Specific Plan No. 305 and the Specific Plan Zoning Ordinance for Specific Plan
No. 305 and the Existing Land Use Regulations applicable to development of the
Property.   The "Development Plan" may be further defined, enhanced or modified
pursuant to the provisions of this Agreement.  "Development Plan" also means the
development of the structures, improvements and facilities on the Property which
are complementary and necessary for the Start Up of Operations for which
approvals have been granted or may be granted in the future.

          1.1.8     "EFFECTIVE DATE" means the date this Agreement is recorded
with the County Recorder; provided, however, that in no event shall this
Agreement become effective, even if recorded, until and unless Kaiser Eagle
Mountain, Inc., a wholly-owned subsidiary of Kaiser Ventures Inc., a Delaware
corporation, has acquired the fee interest in the property which is currently
owned by the United States of America and administered by the Bureau of Land
Management ("BLM"), as more particularly described in the Environmental Impact
Statement prepared by the BLM in conjunction with the Project, and the Lease
described in Section 2.2 hereof includes the Property.

          1.1.9     "EXISTING DEVELOPMENT APPROVALS" means all COUNTY
Development Approvals approved or issued prior to the Effective Date and all
discretionary and administrative COUNTY approvals required to permit Start Up of
Operations of the Landfill.  Existing Development Approvals includes the
Approvals incorporated herein as Exhibit "C" and all other Approvals which are a
matter of public record on the Effective Date.

          1.1.10    "EXISTING LAND USE REGULATIONS" for the Landfill and the
Project as defined in (S)1.1.17(a)-(h) hereof shall mean all Land Use
Regulations in effect on the Effective Date.  For the purpose of any other uses
of the Property, including, but not limited to those identified in (S)1.1.17(i)-
(v) hereof, "Existing Land Use Regulations" shall mean all Land Use Regulations
in effect on the date the application for such use is submitted to the COUNTY
and deemed complete.  Existing Land Use Regulations includes the Regulations
incorporated herein as Exhibit "D" and all other regulations which are a matter
of public record.

09/04/97
                                       8
<PAGE>
 
          1.1.11    "LANDFILL" means a Class III Nonhazardous solid waste
disposal, storage and management facility located at the Property.

          1.1.12    "LAND USE REGULATIONS" means all ordinances, resolutions,
codes, rules, regulations and official policies of COUNTY governing the
development and use of land, including, without limitation, the permitted use of
land, the density or intensity of use, subdivision requirements, the maximum
height and size of proposed buildings, the provisions for reservation or
dedication of land for public purposes, and the design, improvement and
construction standards and specifications applicable to the development of the
Property.  "Land Use Regulations" does not include any COUNTY ordinance,
resolution, code, rule, regulation or official policy, governing:

               (a)  The conduct of businesses, professions, and occupations;

               (b)  Taxes and assessments;

               (c)  The control and abatement of nuisances;

               (d)  The granting of encroachment permits and the conveyance of
                    rights and interests which provide for the use of or the
                    entry upon public property;

               (e) The exercise of the power of eminent domain.

          1.1.13    "MORTGAGEE" means a mortgagee under a mortgage, a
beneficiary under a deed of trust or any other security-device lender, and their
successors and assigns.

          1.1.14    "NON-COUNTY WASTE" means municipal solid waste which is not
County Waste.

          1.1.15    "NONHAZARDOUS SOLID WASTE" means all waste defined in Title
23 California Code of Regulations Section 2523 as it now exists or may be
amended, provided, however, that the following are not and shall not in the
future, either by amendment to Section 2523 or otherwise, be classified as
Nonhazardous solid waste: incineration ash, putrescrible and nonputrescrible
liquid waste, abandoned vehicles and parts thereof and sewage or water treatment
sludge, even if they have been dewatered.

          1.1.16    "OWNER" means (i) Mine Reclamation Corporation, 

09/04/97
                                       9
<PAGE>
 
a California corporation (the lessee of the Property), and its successors in
interest to all or any part of the Property, (ii) Kaiser Eagle Mountain, Inc., a
Delaware corporation (the owner of the Property), and its successors in interest
to all or any part of the Property, (iii) Eagle Mountain Reclamation, Inc., a
Delaware corporation (the current majority shareholder of Mine Reclamation
Corporation), and its successors in interest, and (iv) Kaiser Ventures Inc., a
Delaware corporation (the parent of Kaiser Eagle Mountain, Inc. and Eagle
Mountain Reclamation, Inc.), and its successors in interest. The obligations of
OWNER hereunder shall be performed by any one or more of the above described
entities.

          1.1.17    "PROJECT" means the Landfill and complementary improvements
and facilities to be developed as contemplated by the Development Plan and for
which approvals have been or will be granted in order to achieve Start Up of
Operations. "Project" also means the development of facilities as contemplated
by the Specific Plan No. 305 and its zoning ordinance, for which approvals may
be applied for and granted in the future, subject to the applicable
environmental reviews.  "Project" includes, but is not limited to, the
following:

               (a)  on-site, above-ground drop-off, storage, sorting and
                    processing facilities for recyclable materials;

               (b)  temporary storage of household hazardous waste;

               (c)  Methane or similar power-generating and landfill gas energy
                    recovery facilities;

               (d)  Administration, repair, maintenance and fueling facilities;

               (e)  Truck marshaling yards;

               (f)  Rail yards for loading and unloading waste containers;

               (g)  Environmental monitoring facilities;

               (h)  Such other compatible and ancillary uses necessary or
                    convenient to the operation of any of the above-mentioned
                    uses.
 
     "Project" may include, subject to further environmental review, and
appropriate amendments to, Specific Plan No. 305 and/or 

09/04/97
                                      10
<PAGE>
 
its zoning ordinance, if necessary, the following:

                  (i)    Sales facilities for recycled materials and fabricated
                         products;

                  (ii)   Fabricating plants or facilities;

                  (iii)  Mining facilities and operations;

                  (iv)   Composting or co-composting of solid waste; and,

                  (v)    Recycling facilities.

          1.1.18    "PROPERTY" means the real property described on Exhibit "A"
and shown on Exhibit "B" to this Agreement.

          1.1.19    "RESERVATIONS OF AUTHORITY" means the rights and authority
excepted from the assurances and rights provided to OWNER under this Agreement
and reserved to COUNTY under Section 3.8 of this Agreement.

          1.1.20    "START UP OF OPERATIONS" means the first day that
Nonhazardous solid waste is disposed at the Property.

          1.1.21    "SUBSEQUENT DEVELOPMENT APPROVALS" means all Development
Approvals applied for subsequent to the Effective Date  of this Agreement.
"Subsequent Development Approvals" shall not include any continuation of the
term of this Agreement pursuant to Section 2.3.1, any Site Specific Plot Plans
as described in Section 3.5, or the staged tonnage provisions as described in
Section 3.14.

          1.1.22    "SUBSEQUENT LAND USE REGULATIONS" means any Land Use
Regulations adopted and effective after the Effective Date of this Agreement.

          1.1.23    "MRC" means Mine Reclamation Corporation, a California
corporation.

          1.1.24    "LESSOR" means Kaiser Eagle Mountain, Inc., a Delaware
corporation.

     1.2  Exhibits.   The following documents are attached to, and by this
          ---------                                                       
reference made a part of, this Agreement:

          Exhibit "A" -- Legal Description of the Property.

          Exhibit "B" -- Map showing Property and its location.

09/04/97
                                      11
<PAGE>
 
          Exhibit "C" -- Existing Development Approvals.

          Exhibit "D" -- Existing Land Use Regulations.

          Exhibit "E" -- Assignment of Leasehold Interest.       
                                                                 
          Exhibit "F" -- Purchase and Sale Agreement.            
                                                                 
          Exhibit "G" -- Assignment of County Interest.
                                                                 
          Exhibit "H" -- Environmental Mitigation Trust.          

          Exhibit "I" -- Certificate of Agreement Compliance.

          Exhibit "J" -- Letter of Credit.

          Exhibit "K" -- Guarantee Agreement.
 
2.   GENERAL PROVISIONS.
     -------------------

     2.1  Binding Effect of Agreement.  The Property is hereby made subject to
          ----------------------------                                        
this Agreement.  Development of the Property is hereby authorized and shall be
carried out only in accordance with the terms of this Agreement and all
documents incorporated herein.

     2.2  Ownership of Property.  MRC represents and covenants that it is the
          ----------------------                                             
lessee pursuant to that certain lease between Kaiser Eagle Mountain, Inc.
(Lessor) and MRC dated November 30, 1988, as amended (the "LEASE"), under which
MRC holds a one hundred (100) year leasehold interest in the Property. Kaiser
Eagle Mountain, Inc., represents that on the Effective Date it is the fee owner
of the Property.

     2.3  Term.
          -----

          2.3.1     Development Agreement.  COUNTY has determined that the
                    ----------------------                                
Environmental Impact Statement/Environmental Impact Report ("EIS/EIR") for the
Project adequately analyzes the environmental impacts of the disposal of up to
20,000 tons per day of Non-hazardous municipal solid waste at the Landfill for a
period of over 100 years.  COUNTY has approved a maximum of 20,000 tons per day,
and the parties have agreed to stage the average daily volume of disposal of
Non-County Waste as set forth in Section 3.14 below.
 
          The County has further approved the term of this Agreement for the
period beginning on the Effective Date and continuing until November 30, 2088,
and the parties have agreed to

09/04/97                                                       
                                      12
<PAGE>
 
stage the term. Specifically, the parties have agreed to an initial term of
fifty (50) years from the Effective Date, although there will be additional
Landfill capacity available at the expiration of the initial term of this
Agreement. Accordingly, at any time or times after thirty (30) years from the
Effective Date of this Agreement (and no earlier), and in accordance with the
requirements of this Section 2.3.1, OWNER shall have the option(s) to continue
the term of this Agreement for a period up to the then-expected remaining life
of the Landfill's capacity as set forth in Specific Plan No. 305 (including any
amendments thereto)("SPECIFIC PLAN"); provided, however, in no event shall the
term of this "Agreement be extended under this Section 2.3.1 beyond November 30,
2088.

          If at any time or times after the thirtieth anniversary date of this
Agreement OWNER desires to continue the term of this Agreement beyond the fifty
(50)-year initial term, OWNER shall so notify the COUNTY's Chief Executive
Officer, in writing by certified mail, return receipt requested ("OWNER'S
CONTINUATION NOTICE").  The COUNTY's Chief Executive Officer shall cause OWNER's
Continuation Notice to be delivered to, and reviewed by, an independent panel of
five scientists and engineers who shall be selected by the Dean/Chairman of
Bourns College of Engineering Center for Environmental Research and Technology,
University of California at Riverside (UCR CE-CERT)(or other designee of the
Chancellor of UCR if CE-CERT is no longer part of UCR), with the concurrence of
OWNER.  If OWNER and the Dean/Chairman of UCR CE-CERT are unable to agree upon
the selections to such panel within forty-five (45) days of the date of OWNER's
Continuation Notice, then the panel shall be selected as follows within thirty
(30) days thereafter: two (2) members shall be selected by the Dean/Chairman of
UCR CE-CERT (or other designee of the Chancellor of UCR if CE-CERT is no longer
part of UCR); two (2) members shall be selected by OWNER from a list of ten
qualified scientists and engineers provided to OWNER by the Dean/Chairman of UCR
CE-CERT (or other designee of the Chancellor of UCR if CE-CERT is no longer part
of UCR); and the fifth member shall be selected by the other four members.

          If the Dean/Chairman of UCR CE-CERT (or other designee of the
Chancellor of UCR if CE-CERT is no longer part of UCR) is unable or unwilling to
perform in accordance with the foregoing paragraph, or if the Citizens Oversight
Committee established in the conditions of approval for the Specific Plan
determines that UCR or UCR CE-CERT has a conflict of interest arising from the
UCR Endowment (See Section 4.7.8), then, within forty-five (45) days of the date
of OWNER's Continuation Notice, the COUNTY's Chief Executive Officer shall
designate and cause a Chancellor/Dean from 

09/04/97
                                      13
<PAGE>
 
another university within the State of California to work with OWNER to make
such selections (or, in the event OWNER and such designee cannot agree, then to
make two selections each, pursuant to and within the time periods specified in
the foregoing paragraph).

          The panel shall limit its review to confirming that OWNER has
substantially complied with all Existing Development Approvals, Subsequent
Development Approvals and regulatory permits related to the construction and
operation of the Landfill and confirming that the potential environmental
impacts of the Project would remain as identified in the EIS/EIR.  Any action or
concurrence of a majority of the members of the panel shall be deemed to be the
action of the panel for purposes of this Agreement.

          The panel shall conduct and complete its review within eight (8)
months of the date of OWNER's Continuation Notice, and shall consider the
EIS/EIR, the Existing and any Subsequent Development Approval documents and such
existing site-specific data and evidence as may be presented by OWNER and
appropriate regulatory agencies responsible for the issuance and enforcement of
regulatory permits for the Landfill.

          a.   If the panel  confirms, based upon substantial evidence in the
               record before it, that OWNER  has substantially complied with
               such approvals and permits and that the potential environmental
               impacts of the Project would remain as identified in the EIS/EIR,
               then this Agreement shall automatically be continued for the
               period delineated in OWNER's Continuation Notice, which shall not
               exceed the then-expected remaining life of the Landfill's
               capacity as set forth in the Specific Plan and shall not extend
               beyond November 30, 2088.

          b.   If the panel preliminarily determines, based upon substantial
               evidence in the record before it, that OWNER has not
               substantially compled with its approvals and permits, but
               confirms that the potential environmental impacts of the Project
               would remain as identified in the EIS/EIR, then the panel shall
               provide to OWNER in writing all such reasons for its
               determination, and promptly meet with OWNER.  If the panel and
               OWNER are able to reach agreement concerning OWNER's substantial
               compliance, then this Agreement shall automatically be continued
               for the period delineated in OWNER's 

09/04/97
                                      14
<PAGE>
 
               Continuation Notice, which shall not exceed the then-expected
               remaining life of the Landfill's capacity as set forth in the
               Specific Plan and shall not extend beyond November 30, 2088,
               subject to the implementation of such agreement by OWNER.

               In the event the panel and OWNER are unable to reach agreement
               within ninety (90) days of commencement of discussions, then:

               i.   OWNER may terminate the process, in which case the then-
                    existing term of this Agreement shall not be continued
                    beyond its expiration date; or

               ii.  OWNER may request mediation of the matter by the Chief
                    Executive Officer of the COUNTY or his designee. Such
                    request shall be in writing, addressed to the Chief
                    Executive Officer and the panel (in care of the Dean of UCR
                    CE-CERT or his/her substitute as described in the fourth
                    paragraph above of this subsection 2.3.1) and be sent by
                    certified mail, return receipt requested. If at the
                    conclusion of the mediation process OWNER and the panel are
                    able to reach agreement, then this Agreement shall
                    automatically be continued for the period delineated in
                    OWNER's Continuation Notice, which shall not exceed the 
                    then-expected remaining life of the Landfill's capacity as
                    set forth in the Specific Plan and shall not extend beyond
                    November 30, 2088, subject to the implementation of such
                    agreement by OWNER. In the event OWNER and the panel are
                    unable to reach agreement, OWNER may terminate the process,
                    and the then-existing term of this Agreement shall not be
                    continued beyond its expiration date.

          c.   If the panel determines, based upon substantial evidence in the
               record before it, that it cannot confirm that the potential
               environmental impacts of the Project would remain as identified
               in the EIS/EIR, then the panel shall provide to OWNER in writing
               all such reasons for its determination, the determination shall
               be reported to the Board of Supervisors and the then-existing
               term of this 

09/04/97
                                      15
<PAGE>
 
               Agreement shall not at that time be continued beyond
               its expiration date.

          2.3.2     Specific Plan No. 305, Site Specific Plot Plans and Plot
                    --------------------------------------------------------
Plans.  The term of Specific Plan No. 305 and any Site Specific Plot Plans (see
------                                                                         
Section 3.5 below) or Plot Plans (see Section 3.6 below) shall be co-terminous
with the term of this Agreement (including any continuation beyond the 50-year
initial term pursuant to Section 2.3.1 above), subject to the following: (a) the
termination of this Agreement by reason of the default by COUNTY shall not cause
a termination of the Specific Plan or any Site Specific Plot Plans or Plot
Plans; and (b) in order to provide for closure and post-closure care and
maintenance of the Landfill as required by law, upon termination of this
Agreement (for reason other than COUNTY's default), the Specific Plan, Site
Specific Plot Plans and Plot Plans shall continue for a period of thirty (30)
years (subject to extension as provided below) after the termination of this
Agreement, solely for purposes of closure and post-closure care and maintenance
of the Landfill pursuant to the provisions of Federal Subtitle D regulations at
40 CFR Section 258.61 and California Code of Regulations at Title 27, Section
21180.  The term of the Specific Plan, Site Specific Plot Plans and Plot Plans
may be extended beyond the term provided herein in the discretion of the COUNTY
Board of Supervisors, or in the event that the time required for post-closure
care exceeds 30 years, as determined by then applicable laws and regulations
governing landfill closure and post-closure care requirements.

     2.4  Assignment.
          -----------

          2.4.1     Right to Assign.  OWNER shall have the right to sell,
                    ---------------                                      
transfer or assign its interest in and to the Property or Project in whole or in
part (provided that no such partial transfer shall violate the Subdivision Map
Act, Government Code Section 66410 et seq., or Riverside County Ordinance No.
460) to any person, partnership, joint venture, firm, corporation, trust,
limited liability company, public agency, quasi-public agency, governmental
authority or any other person or entity at any time during the term of this
Agreement.  Concurrent with any such sale, transfer or assignment, or within
fifteen (15) business days thereafter, OWNER shall notify COUNTY, in writing, of
such sale, transfer or assignment and shall provide COUNTY with an executed
agreement, in a form reasonably acceptable to COUNTY, by the purchaser,
transferee or assignee and providing therein that the purchaser, transferee or
assignee expressly and unconditionally assumes all the duties and obligations of
OWNER under this Agreement; provided, however, and notwithstanding the
foregoing, MRC shall not sell, transfer or assign its leasehold interest in 

09/04/97
                                      16
<PAGE>
 
and to the Landfill without the prior written consent of the COUNTY which shall
not be unreasonably delayed, conditioned or withheld.

     Notwithstanding the failure of any purchaser, transferee or assignee to
execute the agreement hereinabove, the burdens of this Agreement shall be
binding upon such purchaser, transferee or assignee, but the benefits of this
Agreement shall not inure to such purchaser, transferee or assignee until and
unless such agreement is executed.

     The provisions of this Subsection are not intended to affect, and shall not
affect, OWNER's right to encumber the Property or any interest therein pursuant
to Section 10 below.

          2.4.2     Release of Transferring Owner.  Notwithstanding any sale,
                    -----------------------------                            
transfer or assignment, a transferring OWNER shall continue to be obligated
under this Agreement unless such transferring OWNER is given a release in
writing by COUNTY, which release shall be provided by COUNTY upon the full
satisfaction by such transferring OWNER of the following conditions:

               (a)  OWNER no longer has a legal or equitable interest in all or
                    any part of the Property or Project, except OWNER may be
                    permitted to be a mortgagee.

               (b)  OWNER is not then in material default under this Agreement.
                 
               (c)  OWNER has provided COUNTY with the notice and agreement
                    executed in accordance with Subsection 2.4.1 above.
                 
               (d)  The purchaser, transferee or assignee provides COUNTY with
                    financial assurances substantially equivalent to any
                    financial assurances previously provided by OWNER to secure
                    performance of its obligations hereunder.

     The release of the transferring OWNER in accordance with this Section 2.4.2
(i) shall not be delayed upon the satisfaction of the conditions set forth
herein, and (ii) shall be canceled and of no force and effect should the
transferring OWNER re-acquire any legal or equitable interest in all or any part
of the Property or Project, except as permitted as a mortgagee.
 
          2.4.3     Subsequent Assignment.  Any subsequent sale, transfer or
                    ---------------------                                   
assignment after an initial sale, transfer or 

09/04/97
                                      17
<PAGE>
 
assignment shall be made only in accordance with and subject to the terms and
conditions of Section 2.4.1.
   
            2.4.4     Partial Release of Purchaser, Transferee or Assignee of
                      -------------------------------------------------------
Industrial or Commercial Lot.  A purchaser, transferee or assignee of a lot,
----------------------------                                                
which has been finally subdivided and for which a commercial or industrial plot
plan for development of the lot, other than as a landfill of any type, has been
finally approved, may submit a request, in writing, to COUNTY to release said
lot from the obligations under this Agreement relating to all other portions of
the Property.  Within sixty (60) days of such request, COUNTY shall review, and
if the above conditions specified in this Section 2.4.4 are satisfied (i.e., the
lot has been finally subdivided and a commercial or industrial plot plan for the
development of the lot has been finally approved), shall approve the request for
release and notify the purchaser, transferee or assignee in writing thereof.  No
such release approved pursuant to this Subsection 2.4.4 shall cause, or
otherwise effect, a release of OWNER from its duties and obligations under this
Agreement.

     2.5  Amendment or Cancellation of Agreement.  This Agreement may be amended
          ---------------------------------------                               
or canceled in whole or in part only by written consent of all parties in the
manner provided for in Government Code Section 65868 or applicable provision.
This provision shall not limit any remedy of COUNTY or OWNER as provided by this
Agreement.

     2.6  Termination. This Agreement shall be deemed terminated and of no
          ------------                                                    
further effect upon the occurrence of any of the following events:

               (a)  Expiration of the applicable term of this Agreement as set
                    forth in Section 2.3.1.
                 
               (b)  Entry of a final judgment by a court of competent
                    jurisdiction (including the exhaustion of all appeals or, if
                    no appeals are made, the expiration of all applicable
                    appeals periods) setting aside, voiding or annulling this
                    Agreement and/or  the adoption of the ordinance approving
                    this Agreement.
                 
               (c)  The adoption of a referendum measure overriding or repealing
                    the ordinance approving this Agreement.
                 
               (d)  Failure of the Landfill to commence Start Up of Operations
                    within ten (10) years of the 

09/04/97
                              18
<PAGE>
 
                    Effective Date of this Agreement.

               (e)  Default of either party, pursuant to the provisions of
                    Sections 8.4 and 8.5 of this Agreement.
    
     Upon the termination of this Agreement, no party shall have any further
right or obligation hereunder except with respect to any obligation to have been
performed prior to such termination or with respect to any default in the
performance of the provisions of this Agreement which has occurred prior to such
termination or with respect to any obligations which are specifically set forth
as surviving this Agreement.

     2.7  Disposal of Solid Waste.  No Non-County Waste shall be knowingly
          -----------------------                                         
delivered to or accepted on the Property from any person, firm, entity or agency
source determined by the California Integrated Waste Management Board to be out
of compliance with the then current household hazardous waste and recycling
regulations unless disposal of waste in the Landfill would be a part of such
source's proposed means to remedy any non-compliance.  Except as otherwise
provided herein, all solid waste shall be screened and processed through a
transfer facility or materials recovery facility and meet the requirements for
disposal at a Class III Nonhazardous solid waste disposal facility. If the
Nonhazardous solid waste is County Waste, it shall be processed through
facilities approved in accordance with the Riverside County Integrated Waste
Management Plan (Waste Plan) if (i) the Waste Plan has been adopted; and (ii)
the provisions of the Waste Plan are being applied on a uniform and consistent
basis on all landfills within the COUNTY.  Notwithstanding any provision of this
Section to the contrary, nothing shall prohibit the disposal of nonhazardous
solid County Waste from being deposited within the Landfill.

     2.8  Restriction on Importation.  No waste shall knowingly be delivered to
          --------------------------                                           
or accepted at the Property which was generated at a site outside of the
California counties of Los Angeles, Ventura, Santa Barbara, Riverside, Orange,
San Diego and San Bernardino without any further environmental review as
required by CEQA or other applicable law.

     No waste generated outside the geographic boundaries of the State of
California shall knowingly be delivered to or accepted at the Property.  The
restrictions of this paragraph of Section 2.8 represent a voluntary and
contractual agreement between OWNER and  COUNTY.

09/04/97
                                      19
<PAGE>
 
     2.9  Notices.
          ------- 

          (a) As used in this Agreement, "notice" includes, but is not limited
to, the communication of notice, request, demand, approval, statement, report,
acceptance, consent, waiver, appointment or other communication required or
permitted hereunder.

          (b) All notices shall be in writing and shall be considered given
either:  (i) when delivered in person to the recipient named below; or (ii) two
(2) business days after deposit in the United States mail in a sealed envelope
as either registered or certified mail with return receipt requested, and
postage and postal charges prepaid, and addressed to the recipient named below;
or (iii) on the date of delivery shown in the records of the telegraph company
after transmission by telegraph to the recipient named below; or (iv) upon
receipt of a facsimile (fax) transmission to the fax number listed below.  All
notices shall be addressed as follows:


          IF TO COUNTY:
          Clerk of the Board of Supervisors
          County of Riverside
          4080 Lemon St., 14th Floor
          P. O. Box 1147
          Riverside, CA 92502-1147
          Fax No.:  909-275-1071

          WITH COPIES TO:

          Chief Executive Officer
          County of Riverside
          4080 Lemon St., 12th Floor
          Riverside, CA 92501
          Fax No.:  909-275-1105

          Director
          Planning Department
          County of Riverside
          4080 Lemon St., 9th Floor
          P.O. Box 1409
          Riverside, CA 92502-1409
          Fax No.:  909-275-3157

          County Counsel
          County of Riverside
          3535 Tenth St., Suite 300
          Riverside, CA 92501
          

09/04/97
                                      20
<PAGE>
 
          Fax No.:  909-275-6322

          Chief Executive Officer
          Riverside County Waste Resources Management District
          1995 Market Street
          Riverside, CA 92501
          Fax No.:  909-275-1374

          Director
          Environmental Health
          Health Administration Building
          4065 County Circle Drive
          Riverside, CA 92503
          Fax No.:  909-358-5017

          IF TO OWNER:
          Mine Reclamation Corporation
          43-645 Monterey Ave., Suite A
          Palm Desert, CA 92260
          Fax No.: 619-778-5891

          WITH COPIES TO:            
                                     
          Mine Reclamation Corporation
          Chief Executive Officer     
          43-645 Monterey Ave., Suite A
          Palm Desert, CA 92260
          Fax No.: 619-778-5891

          Mine Reclamation Corporation
          General Counsel
          3633 E. Inland Empire Blvd., Suite 850
          Ontario, CA 91764
          Fax No.:  909-944-6605

          IF TO KAISER EAGLE MOUNTAIN, INC., EAGLE MOUNTAIN RECLAMATION, INC. OR
          KAISER VENTURES INC.:

          Kaiser Eagle Mountain, Inc.
          Eagle Mountain Reclamation, Inc.
          Kaiser Ventures Inc.                 
          Attn.:  President                    
          3633 E. Inland Empire Blvd., Suite 850
          Ontario, CA 91764                     
          Fax No.:  909-944-6605

     (c)  In the event notice is given by fax, a copy of the notice shall also
be mailed, by first-class mail, postage prepaid, to the 

09/04/97
                                      21
<PAGE>
 
recipients on the same day the fax notice is given.

     (d)  Either party may, by notice given at any time, require subsequent
notices to be given to another person or entity, whether a party or an officer
or representative of a party, or to a different address, or both.  Notices given
before actual receipt of notice of change shall not be invalidated by the
change.


3.   DEVELOPMENT OF THE PROPERTY.
     --------------------------- 

     3.1  Rights to Develop.  Subject to the terms of this Agreement, including
          -----------------                                                    
the Reservations of Authority, OWNER shall have a vested right to develop the
Property and operate the Landfill and other improvements constructed on the
Property in accordance with, and to the extent of, the Development Plan.  This
vested right includes the right to obtain all approvals required for the Start
Up of Operations as contemplated by the Development Plan, including the
administrative approval of a Site Specific Plot Plan(s) consistent with and in
accordance with Specific Plan No. 305 and its zoning ordinance.  Except as
otherwise provided in this Agreement, the permitted uses of the Property, the
density and intensity of use, the maximum height and size of proposed buildings,
and provisions for reservation and dedication of land for public purposes shall
be those set forth in the Development Plan.

     3.2  Effect of Agreement on Land Use Regulations.  Except as otherwise
          -------------------------------------------                      
provided under the terms of this Agreement (including the Reservations of
Authority), the rules, regulations and official policies governing permitted
uses of the Property, the intensity of use of the Property, the maximum height
and size of proposed buildings, and the design, improvement and construction
standards and specifications applicable to development of the Property with
respect to all required approvals for the Start Up of Operations shall be the
Existing Land Use Regulations.  In connection with any Subsequent Development
Approval, COUNTY shall exercise its discretion in accordance with the
Development Plan, and as provided by this Agreement including, but not limited
to, the Reservations of Authority.  COUNTY shall accept for processing, review
and action all applications for Subsequent Development Approvals. COUNTY agrees
to promptly commence and diligently proceed to complete the review of all of
OWNER's applications for Subsequent Development Approvals during the preparation
of all drawings, plans, and related documents.  The staffs of COUNTY and OWNER
shall hold regular progress meetings as needed to coordinate the preparation and
review of such items.  The staffs of COUNTY and OWNER shall communicate and
consult informally as frequently as is 

09/04/97
                                      22
<PAGE>
 
necessary to insure that formal submittal of any documents to COUNTY can receive
prompt and speedy attention. COUNTY shall not unreasonably delay or withhold the
approval of any application for a Subsequent Development Approval. Any
disapproval by COUNTY shall state in writing all of the reasons for disapproval.
No plan, permit or approval required for the Development of the Project shall be
revoked or subsequently disapproved once issued by COUNTY provided that the
plan, permit or approval is consistent with the Project.

     3.3  Timing of Development.  The parties acknowledge that OWNER cannot at
          ---------------------                                               
this time predict when or the rate at which phases of the Property will be
developed.  Such decisions depend upon numerous factors which are not within the
control of OWNER, such as market orientation and demand, interest rates,
absorption, completion and other similar factors.  Since the California Supreme
Court held in Pardee Construction Co. v. City of Camarillo (1984) 37 Cal.3d 465,
              --------------------------------------------                      
that the failure of the parties therein to provide for the timing of development
resulted in a later adopted initiative restricting the timing of development to
prevail over such parties' agreement, it is the parties' intent to cure that
deficiency by acknowledging and providing that OWNER shall have the right to
develop the Property in such order and at such rate and at such times as OWNER
deems appropriate within the exercise of its subjective business judgment,
subject only to any timing or phasing requirements set forth in the Development
Plan and Section 2.6(d) hereof.

     3.4  Changes and Amendments.  The parties acknowledge that refinement and
          ----------------------                                              
further development of the Project will require Subsequent Development Approvals
and may demonstrate that changes are appropriate and mutually desirable in the
Existing Development Approvals.  In the event OWNER finds that a change in the
Existing Development Approvals is necessary or appropriate, OWNER shall apply
for a Subsequent Development Approval to effectuate such change and COUNTY shall
process and act on such application in accordance with the Existing Land Use
Regulations, except as otherwise provided by this Agreement.  If approved, any
such change in the Existing Development Approvals shall be incorporated herein
as an addendum to Exhibit "C," and may be further changed from time to time as
provided in this Section.  Unless otherwise required by law, a change to the
Existing Development Approvals may be deemed "minor," as determined in COUNTY's
reasonable discretion, and not require an amendment to this Agreement.

     3.5  Site Specific Plot Plan(s).  The parties acknowledge that
          --------------------------                               
implementation of the Landfill and Project as defined in (S)1.1.17(a)-(h) hereof
requires the approval of Site Specific Plot

09/04/97
                                      23
<PAGE>
 
Plan(s)and that refinement and further development of the Landfill and Project
as defined in (S)1.1.17(a)-(h) hereof may require future amendments to the Site
Specific Plot Plan(s). The parties agree that, to the extent legally
permissible, Site Specific Plot Plan(s) (including any grading permit(s) and
building permit(s)) for the Landfill and Project as defined in (S) 1.1.17(a)-
(h), and any amendments thereto, shall be reviewed and approved by the COUNTY at
an administrative level to determine its compliance with Specific Plan No. 305
and the Specific Plan zoning ordinance in accordance with the COUNTY's
procedures for plot plans that are not subject to California Environmental
Quality Act review but are transmitted to one or more governmental agencies
other than the Riverside County Planning Department pursuant to Section 18.30 of
Riverside County Ordinance No. 348. The parties further agree that the
provisions of Section 18.30.d(3) and Section 18.30.e. of Riverside County
Ordinance No. 348 shall not apply to Site Specific Plot Plan(s) implementing or
refining the Landfill and Project as defined in (S)1.1.17(a)-(h) and that the
decision of the Planning Director on Site Specific Plot Plan(s) shall be final.

     The term of any Site Specific Plot Plan shall not extend beyond the term of
Specific Plan No. 305 (see Section 2.3.2 above).

     3.6  Plot Plan(s).  Plot Plans(s) for any other use, including but not
          ------------                                                     
limited to uses defined in (S)1.1.17(i)-(v) hereof, and any amendments thereto,
shall be processed in accordance with the Existing Land Use Regulations except
as otherwise provided by this Agreement, including the Reservations of
Authority.

     The term of any Plot Plan shall not extend beyond the term of Specific Plan
No. 305 (see Section 2.3.2 above).

     3.7  Application Fees.  In connection with the processing of any
          ----------------                                           
discretionary or administrative approval required in order to achieve Start Up
of Operations, including, but not limited to, Specific Plan No. 305 and its
Zoning Ordinance, General Plan Amendment No. 402, Revised Permit to Reclamation
Plan No. 107, any Site Specific Plot Plan(s) and the approval of this Agreement,
OWNER shall (i) deposit in advance with COUNTY the entire amount of any fee set
forth in the then-current COUNTY fee schedule for the processing of such
approval, plus (ii) if the time actually and reasonably expended by COUNTY staff
in processing any such approval, multiplied by the hourly rate of such personnel
as set forth in Riverside County Ordinance Nos. 671 and 457, as they may be
amended from time to time, exceeds the amount of the funds previously deposited
by OWNER, upon written notice from COUNTY, OWNER shall deposit with COUNTY
additional funds so that the total fee paid equals COUNTY's actual, reasonable
processing costs.

09/04/97
                                      24
<PAGE>
 
     3.8  Reservations of Authority.
          ------------------------- 

          3.8.1     Limitations, Reservations and  Exceptions.  Notwithstanding
                    -----------------------------------------                  
any other provision of this Agreement, the following Subsequent Land Use
Regulations shall apply to the development of the Property.

          (a)  Standard processing fees and charges for processing Subsequent
               Development Approvals (including without limitation all General
               Plan Amendments, Specific Plan Amendments, Changes of Zone or
               Subdivision Maps within the boundaries of the Project as
               described in Exhibit "A"), and all Site Specific Plot Plans and
               Plot Plans within the boundaries of the Project imposed by COUNTY
               on a uniform COUNTY-wide basis at the time such fees are due, to
               cover the actual costs incurred by COUNTY for processing
               applications for such Subsequent Development Approvals, Site
               Specific Plot Plans and Plot Plans unless such processing fees
               and charges have been waived for any other privately owned or
               operated landfill in the COUNTY.
            
          (b)  Except as provided in Section 3.5, procedural regulations
               relating to hearing bodies, petitions, applications, notices,
               findings, records, hearings, reports, recommendations, appeals
               and any other matter of procedure.
            
          (c)  Regulations governing construction standards and specifications
               including, without limitation, the COUNTY's Building Code,
               Plumbing Code, Mechanical Code, Electrical Code, Fire Code and
               Grading Code.
            
          (d)  Regulations imposing Development Exactions with respect to
               Subsequent Development Approvals; provided, however, that no such
               subsequently adopted Development Exaction shall be applicable to
               development of the Property unless such Development Exaction is
               applied uniformly to development, either throughout the COUNTY or
               within a defined area of benefit which includes the Property.  No
               such subsequently adopted Development Exaction shall apply if its
               application to the Property would prevent or substantially impair
               development or operation of the Property for the uses and to the
               density or intensity of development set forth 

09/04/97
                                      25
<PAGE>
 
in the Development Plan.
 
          (e)  Except for the Landfill and the Project as defined in (S)
               1.1.17(a)-(h) hereof, Land Use Regulations in effect on the date
               the application is submitted to COUNTY and deemed complete.

     Nothing in this Section is intended to exempt or otherwise relieve OWNER
from its obligations to pay ad valorem property taxes and assessments (including
any increases in same) in accordance with State law, or other taxes that may in
the future be imposed on a Statewide level.

          3.8.2     Modification or Suspension by State or Federal Law.  In the
                    --------------------------------------------------         
event that State or Federal laws or regulations, enacted after the Effective
Date of this Agreement, prevent or preclude compliance with one or more of the
provisions of this Agreement, such provisions of this Agreement shall be
modified or suspended as may be necessary to comply with such State or Federal
laws or regulations, provided, however, that this Agreement shall remain in full
force and effect to the extent it is not inconsistent with such laws or
regulations and to the extent such laws or regulations do not render such
remaining provisions impractical to enforce.

          3.8.3     Intent.  The parties acknowledge and agree that COUNTY is
                    ------                                                   
restricted in its authority to limit its police power by contract and that the
foregoing limitations, reservations and exceptions are intended to reserve to
COUNTY all of its police power which cannot be so limited.  This Agreement shall
be construed, contrary to its stated terms if necessary, to reserve to COUNTY
all such power and authority which cannot legally be restricted by contract.

     3.9  Public Works.  If OWNER is required by this Agreement to construct any
          ------------                                                          
public works facilities which will be dedicated to COUNTY or any other public
agency upon completion, and if required by applicable laws to do so, OWNER shall
perform such work in the same manner and subject to the same requirements as
would be applicable to COUNTY or such other public agency should it have
undertaken such construction.
 
     3.10 Access and Rights of Way.  In addition to the right of access and use
          ------------------------                                             
of all public rights-of-way, COUNTY and OWNER acknowledge and agree that certain
real property, together with improvements thereon, are required by OWNER for the
development and operation of the Project.  COUNTY acknowledges that in the event
that OWNER has, after exercising reasonable efforts, been unable to 

09/04/97
                                      26
<PAGE>
 
acquire the real property interest necessary for such access and related
facilities required to service the Project, that in order to facilitate the
acquisition of such real property interest, COUNTY agrees to use its best
efforts to negotiate the purchase of such necessary real property interests in
order to allow OWNER to construct such access and related facilities as required
by this Agreement and if necessary, and in compliance with the procedures
established by law, use its power of eminent domain to acquire such required
real property interests. OWNER shall pay all costs associated with such
acquisition or condemnation proceedings. This Section 3.10 is not intended by
the parties to impose upon the OWNER an enforceable duty to acquire land or
construct any public improvements on land not owned by OWNER, except to the
extent that the OWNER elects to proceed with the development of the Project, and
then only in accordance with valid conditions imposed by the COUNTY upon the
development of the Project under the Subdivision Map Act or other legal
authority.

     3.11 Regulation by other Public Agencies.  It is acknowledged by the
          -----------------------------------                            
parties that other public agencies, governmental authorities or public utilities
("public agencies") not within the direct or indirect control of COUNTY possess
authority to regulate aspects of the development of the Property separately from
or jointly with COUNTY, and this Agreement does not limit the authority of such
other public agencies.  COUNTY agrees, in good faith, to use its best efforts to
assist OWNER or such other public agencies in the processing and/or review of
any and all permits or approvals which may be required for the development and
operation of the Project that are within the authority or otherwise issued or
granted by other public agencies with jurisdiction over the development and
operation of the Project.  Any joint exercise of a regulatory authority between
COUNTY and any other public agency shall be exercised by COUNTY consistent with
the terms of this Agreement.  This Agreement does not limit the authority, nor
expand the duties, of the COUNTY or the Local Enforcement Agency to enforce
applicable state and federal regulations.

     3.12 Local Enforcement Agency Authority.
          ---------------------------------- 

          3.12.1    OWNER and COUNTY agree that the Local Enforcement Agency
(LEA) designated by COUNTY and approved by the California Integrated Waste
Management Board shall have authority to regulate all disposal, processing
and/or transferring activities at the Project and shall have the right to make
reasonable inspections to determine compliance with applicable laws and
regulations.

          3.12.2    OWNER and COUNTY further agree that inspection 

09/04/97
                                      27
<PAGE>
 
and monitoring of all solid waste facilities which are involved in the flow of
waste to the Project is necessary to assure themselves of compliance with the
Nonhazardous solid waste standards for all waste destined for the Project. OWNER
and COUNTY, therefore, agree to the following:

          (a)  The LEA may participate, subject to appropriate state
               authority, in the regulation of all solid waste facilities
               which are involved in the flow of waste to the Project;
             
          (b)  In the event the LEA authority cannot be extended outside
               the boundaries of COUNTY, then OWNER agrees that COUNTY may
               elect to direct its Department of Environmental Health staff
               to perform such inspection and monitoring of all solid waste
               facilities involved in the flow of waste to the Project;
             
          (c)  OWNER shall include a provision in each contract with a
               supplier of Non-County Waste that:

               (i)   requires the waste supplier to operate under a valid
                     Solid Waste Facilities Permit for such operations;
                   
               (ii)  requires the waste supplier to have and follow
                     documented inspection procedures which seek to ensure
                     that hazardous material and other prohibited materials
                     are not included in the Nonhazardous solid waste
                     delivered to the Project;
                   
               (iii) provides that the waste supplier shall not ship to the
                     Landfill Non-hazardous waste from a community which has
                     been found by a governmental agency or jurisdiction to
                     be in violation of the provisions of any applicable
                     state or federal law dealing with waste diversion to
                     the Landfill unless diversion of waste to the Landfill
                     through a state permitted recycling or transfer
                     facility is an approved step to remedy any non-
                     compliance;

09/04/97
                                      28
<PAGE>
 
               (iv)  requires that the OWNER has the right to inspect,         
                     without notice, any facility from which waste will be    
                     delivered to the Project;                                
                                                                              
               (v)   provides that OWNER may terminate or suspend any         
                     contract with any facility shipping waste to the         
                     Project if OWNER determines that the facility is not     
                     operating in substantial accordance with its permit, or  
                     is not substantially implementing its documented         
                     inspection procedure, or that the community served by    
                     it is not meeting the provisions of any applicable       
                     state or federal law dealing with waste diversion;       
                                                                              
               (vi)  provides the LEA and/or COUNTY Department of              
                     Environmental Health staff have the right to inspect,
                     without notice, from time-to-time, but no more than
                     once in any six-month period in the absence of a
                     violation of the terms of the facility permit, any
                     solid waste facility from which waste will be delivered
                     to the Project.

          (d)       OWNER shall, periodically on its own, and at any time
                    requested by the LEA and/or COUNTY Department of
                    Environmental Health, inspect all facilities from which
                    waste is shipped to the Project or from which waste is
                    delivered to the Project in order to verify proper
                    implementation of the waste suppliers' documented inspection
                    procedures and substantial compliance with all applicable
                    state and federal solid waste laws and regulations,
                    including but not limited to those dealing with waste
                    diversion requirements.  In addition, OWNER shall give the
                    LEA and/or COUNTY Department of Environmental Health the
                    opportunity to accompany OWNER during any such inspections.
            
          (e)       Prior to the initial shipment of waste from a solid waste
                    facility, and from time to time thereafter, the LEA and/or
                    COUNTY Department of Environmental Health shall have the
                    right 

09/04/97
                                      29
<PAGE>
 
                    to verify that the solid waste facility (1) is
                    operating in substantial compliance with its permit, (2) has
                    a documented inspection procedure to ensure that hazardous
                    materials and other prohibited materials are not included in
                    waste shipped to the Project, and (3) is substantially
                    implementing its documented inspection procedures, and that
                    (4) the community it serves is in substantial compliance
                    with applicable state and federal laws dealing with waste
                    diversion.  Shipments will not be made to or accepted at the
                    Project from any facility found not to be in compliance with
                    this section.

          (f)       The LEA and/or COUNTY Department of Environmental Health
                    shall have the unrestricted right to inspect at any time any
                    and all shipments of waste which are received at the Project
                    to insure that only Nonhazardous solid waste is disposed of
                    at the Landfill and is being delivered to the Project; such
                    inspections shall not unreasonably or without cause disrupt
                    or interfere with normal operations of the Landfill.
            
          (g)       OWNER shall reimburse the LEA and/or COUNTY Department of
                    Environmental Health, within thirty (30) days of billing,
                    for all reasonable costs the LEA and/or COUNTY Department of
                    Environmental Health incur in connection with the inspection
                    and monitoring requirements set forth herein.

     3.13 Vesting Tentative Maps.  If any tentative or final subdivision map, or
          ----------------------                                                
tentative or final parcel map, hereafter approved in connection with development
of the Property, is a vesting map under the Subdivision Map Act (Government Code
Section 66410, et seq.) and Riverside County Ordinance No. 460, and if this
               -------                                                     
Agreement is determined by a final judgment of a court of competent jurisdiction
(including the exhaustion of all appeals or, if no appeals are made, the
expiration of all applicable appeals periods) to be invalid or unenforceable
insofar as it grants a vested right to develop to OWNER, then and to that extent
the rights and protections afforded OWNER under the laws and ordinances
applicable to vesting maps shall supersede the provisions of this Agreement.
Except as set forth immediately above, development of the Property 

09/04/97
                                      30
<PAGE>
 
shall occur only as provided in this Agreement and other Development Approvals,
and the provisions of this Agreement shall be controlling over any conflicting
provision of law or ordinance concerning vesting maps.

     3.14 Staged Tonnage Increase.  The EIS/EIR for the Project adequately
          -----------------------                                         
analyzes the environmental impacts of disposing up to 20,000 tons per day of
non-hazardous municipal solid waste at the Landfill for a period of over 100
years and includes appropriate mitigation therefor.  The COUNTY has approved a
maximum of 20,000 tons per day in total County Waste and Non-County Waste to be
disposed at the Landfill.  The parties agree to stage the daily volume of
disposal of Non-County Waste as follows.

          OWNER may dispose of an average of ten thousand (10,000) tons per day
(i.e., a maximum of 260,000 tons per month) of Non-County Waste.

          OWNER may, at any time after ten (10) years from Start Up of
Operations (or earlier with the concurrence of COUNTY's Chief Executive Officer)
and up to five (5) times during the term of this Agreement, notify the COUNTY's
Chief Executive Officer of OWNER's intention to increase the daily tonnage of
County Waste plus Non-County Waste to be disposed at the site, up to a maximum
total of 20,000 tons per day (520,000 tons per month).  Any such notification
("OWNER'S STAGED TONNAGE NOTICE") shall be in writing and submitted to the
COUNTY's Chief Executive Officer by certified mail, return receipt requested.
The COUNTY's Chief Executive Officer shall cause OWNER's Staged Tonnage Notice
to be delivered to, and reviewed by, an independent panel of five scientists and
engineers who shall be selected by the Dean/Chairman of Bourns College of
Engineering Center for Environmental Research and Technology, University of
California at Riverside (UCR CE-CERT)(or other designee of the Chancellor of UCR
if CE-CERT is no longer part of UCR), with the concurrence of OWNER.  If OWNER
and the Dean/Chairman of UCR CE-CERT are unable to agree upon the selections to
such panel within forty-five (45) days of the date of OWNER's Notice, then the
panel shall be selected as follows within thirty (30) days thereafter: two (2)
members shall be selected by the Dean/Chairman of UCR CE-CERT (or other designee
of the Chancellor of UCR if CE-CERT is no longer part of UCR); two (2) members
shall be selected by OWNER from a list of ten qualified scientists and engineers
provided to OWNER by the Dean/Chairman of UCR CE-CERT (or other designee of the
Chancellor of UCR if CE-CERT is no longer part of UCR); and the fifth member
shall be selected by the other four (4) members.

          If the Dean/Chairman of UCR CE-CERT (or other designee of 

09/04/97
                                      31
<PAGE>
 
the Chancellor of UCR if CE-CERT is no longer part of UCR) is unable or
unwilling to perform in accordance with the foregoing paragraph, or if the
Citizens Oversight Committee established in the conditions of approval for the
Specific Plan determines that UCR or UCR CE-CERT has a conflict of interest
arising from the UCR Endowment (See Section 4.7.8), then, within forty-five (45)
days of the date of OWNER's Staged Tonnage Notice, the COUNTY's Chief Executive
Officer shall designate and cause a Chancellor/Dean from another university
within the State of California to work with OWNER to make such selections (or,
in the event OWNER and such designee cannot agree, then to make two selections
each, pursuant to and within the time periods specified in the foregoing
paragraph).

          The panel shall limit its review to confirming that OWNER has
substantially complied with all Existing Development Approvals, Subsequent
Development Approvals and regulatory permits related to the construction and
operation of the Landfill and confirming that the potential environmental
impacts of the Project would remain as identified in the EIS/EIR.  Any action or
concurrence of a majority of the members of the panel shall be deemed to be the
action of the panel for purposes of this Agreement.

          The panel shall conduct and complete its review within eight (8)
months of the date of OWNER's Staged Tonnage Notice, and shall consider the
EIS/EIR, the Existing and any Subsequent Development Approval documents and such
existing site-specific data and evidence as may be presented by OWNER and
appropriate regulatory agencies responsible for the issuance and enforcement of
regulatory permits for the Landfill.

     a.   If the panel confirms, based upon substantial evidence in the record
          before it, that OWNER has substantially complied with such approvals
          and permits and that the potential environmental impacts of the
          Project would remain as identified in the EIS/EIR, then OWNER shall
          automatically be allowed to increase the daily tonnage of Non-County
          Waste to be disposed at the Landfill, up to the daily tonnage amount
          indicated in OWNER's Staged Tonnage Notice, provided that the total
          tonnage of County Waste plus Non-County Waste shall not exceed 20,000
          tons per day.
        
     b.   If the panel preliminarily determines, based upon substantial evidence
          in the record before it, that OWNER has not substantially complied
          with its approvals and permits, but confirms that the potential
          environmental impacts of the Project would remain as identified in the

09/04/97          
                                      32
<PAGE>
 
          EIS/EIR, then the panel shall provide to OWNER in writing all such
          reasons for its determination, and promptly meet with OWNER.  If the
          panel and OWNER are able to reach agreement concerning OWNER's
          substantial compliance, OWNER shall automatically be allowed to
          increase the daily tonnage of Non-County Waste, up to the daily
          tonnage amount indicated in OWNER's Staged Tonnage Notice, provided
          that the total tonnage of County Waste plus Non-County Waste shall not
          exceed 20,000 tons per day, subject to the implementation of such
          agreement by OWNER.

          In the event the panel and OWNER are unable to reach agreement within
          ninety (90) days of commencement of discussions, then:

          i.   OWNER may terminate the process, in which case OWNER shall not be
               allowed to increase its average daily tonnage of Non-County
               Waste; or
            
          ii.  OWNER may request mediation of the matter by the Chief Executive
               Officer of the COUNTY or his designee. Such request shall be in
               writing, addressed to the Chief Executive Officer and the panel
               (in care of the Dean of UCR CE-CERT or his/her substitute as
               described in the fourth paragraph above of this Section 3.14) and
               be sent by certified mail, return receipt requested. If at the
               conclusion of the mediation process OWNER and the panel are able
               to reach agreement, then OWNER shall automatically be allowed to
               increase the daily tonnage of Non-County Waste, up to the daily
               tonnage amount indicated in OWNER's Staged Tonnage Notice,
               provided that the total tonnage of County Waste plus Non-County
               Waste shall not exceed 20,000 tons per day, subject to the
               implementation of such agreement by OWNER. In the event OWNER and
               the panel are unable to reach agreement, OWNER may terminate the
               process, and OWNER shall not be allowed to increase its daily
               tonnage of Non-County Waste.

      c.  If the panel determines, based upon substantial evidence in the record
          before it, that it cannot confirm that the potential environmental
          impacts of the Project would remain as identified in the EIS/EIR, then
          the panel shall provide to OWNER in writing all such reasons for its
          determination, that determination shall be reported to 

09/04/97
                                      33
<PAGE>
 
          the Board of Supervisors, and OWNER shall not at that time be allowed
          to increase its daily tonnage of Non-County Waste.

4.   ECONOMIC BENEFITS.
     ----------------- 

     4.1  Intent.   The parties acknowledge and agree that development of the
          ------                                                             
Property and operation of the Landfill will result in substantial public needs
which will not be fully met by the Development Plan and further acknowledge and
agree that this Agreement confers substantial private benefits on OWNER which
should be balanced by commensurate public benefits and mitigation.  Accordingly,
the parties intend to provide consideration to the public to balance the private
benefits conferred on OWNER by providing more fully for the satisfaction of the
public needs and mitigating potential impacts resulting from the Project.

     4.2  Conveyance of Capacity of the Project.  MRC hereby grants COUNTY an
          -------------------------------------                              
undivided eight percent (8%) interest in and to the air space of its leasehold
interest in the Property as of the Effective Date of this Agreement in order to
offset the diminution of future capacity within the COUNTY for the disposal of
waste generated by its residents. Conveyance of said eight percent (8%)
undivided interest (hereinafter "COUNTY INTEREST") will be effected by the
delivery by MRC to COUNTY of an assignment of MRC's leasehold interest
concurrently with the execution of this Agreement by MRC, which assignment shall
be effective as of the Effective Date of this Agreement.  The assignment
documentation shall be in the same form as that attached hereto as Exhibit "E"
incorporated herein by reference and made a part hereof.

     4.3  Purchase of County Interest.  Because the COUNTY currently has more
          ---------------------------                                        
geographically convenient and currently more cost effective disposal facilities
available to it, the capacity of which could accommodate waste generated within
Riverside County for at least the next decade, and because the COUNTY does not
wish to hold the County Interest for a long period of time given the potential
for liability and the removal of the value of the interest from the COUNTY tax
rolls, the COUNTY hereby accepts the County Interest only with the understanding
that the County Interest is declared by COUNTY to be surplus property of the
COUNTY and shall be immediately sold to MRC pursuant to the provisions of the
Purchase and Sale Agreement.  The Board of Supervisors finds and determines that
MRC is the only party reasonably able to purchase the County Interest, and that
the solicitation of bids for the purchase of the County Interest is futile and
will not produce an advantage to the COUNTY.  COUNTY's determination that the
County Interest will be sold to MRC without fulfilling the requirements of

09/04/97
                                      34
<PAGE>
 
Government Code Section 25520, et seq. is made pursuant to the provisions set
                               -------                                       
forth in Meakin v. Steveland (1977) 68 Cal.App.3d 490.
         -------------------                          

     4.4  Conveyance Documentation.  Title to the County Interest will be
          ------------------------                                       
conveyed to MRC as of the effective date of the Purchase and Sale Agreement,
which shall be the Effective Date of this Agreement.  The conveyance
documentation shall be in the same form as that attached hereto as Exhibit "G"
incorporated herein by reference and made a part hereof.

     4.5  Default of Purchase and Sale Agreement.  The parties agree that
          --------------------------------------                         
default in the payment of the purchase price as set forth in the Purchase and
Sale Agreement shall be a default of this Development Agreement.

     4.6  Capacity Rights.  As further consideration for the vested development
          ---------------                                                      
rights being granted to OWNER under this Agreement, OWNER covenants and agrees
that from the Start Up of Operations and during the entire term of this
Agreement, the COUNTY or Riverside County Waste Resources Management District
("DISTRICT") or, with the concurrence of the COUNTY and District, cities or
other jurisdictions within the COUNTY, shall have the right to deliver to the
Project in the aggregate up to Two Thousand (2,000) tons per day of County Waste
at non-discriminatory rates which rates shall be determined after deducting the
Purchase Price payments (net of amounts to be set aside for Environmental
Mitigation Trust payments pursuant to Section 4.7.3 below) set forth in the
Purchase and Sale Agreement.  To the extent that COUNTY, District and/or such
cities or other jurisdictions contract for and deliver in the aggregate more
that one thousand five hundred (1500) tons per day, there shall be a ten percent
(10%) discount from the basic price (i.e., from the non-discriminatory rate) set
forth in the disposal contract for all tonnage in excess of 1500 tons per day.
For purposes of this section, the "non-discriminatory rate" shall mean the
lowest rate being paid by any user at the time the rate is determined.  The non-
discriminatory rate shall be subject to reduction from time to time during the
term of the disposal contract effective if and when any user pays a rate that is
lower than the initial non-discriminatory rate.  Any such reductions in the non-
discriminatory rate shall not be retroactive or applicable to waste previously
disposed at the Project.  The reservation of capacity rights set forth
hereinabove shall be non-cumulative, shall be used or lost on a daily basis, and
shall continue for the entire term of this Agreement.  In addition, to the
extent that OWNER has permitted, but uncommitted daily capacity at the Project,
COUNTY or District or, with the concurrence of COUNTY and District, cities or
jurisdictions within the COUNTY, shall at any time during the term of this
Agreement have the first priority to contract for 

09/04/97
                                      35
<PAGE>
 
and deliver County Waste to the Project. For purposes of this Section,
"permitted, but uncommitted daily capacity at the Project" shall mean the daily
capacity calculated in tons per day which the Project is legally permitted to
accept minus the number of tons per day which it is contractually committed to
accept from others, as of the date the COUNTY, District or city or jurisdiction
within the COUNTY enters into the contract with OWNER to deliver such waste.

     4.7  Additional Payments by OWNER.  In addition to the purchase price,
          ----------------------------                                     
OWNER shall make the following payments:

          4.7.1     State and Federal Trust/Insurance Programs.  OWNER shall
                    ------------------------------------------              
maintain or cause to be maintained all trust funds and/or insurance programs and
pay all fees now required or which in the future may be required by State or
Federal law or regulatory programs for operation of a landfill including but not
limited to those established under the provisions of Federal Subtitle D
regulations at 40 CFR Section 258.61 and California Code of Regulations at Title
27, Section 21180 for closure and post-closure funds, corrective action funds
and general or environmental liability funds.

          4.7.2     Insurance.  OWNER shall procure and pay the premium for
                    ---------                                              
Comprehensive General Liability insurance for the Landfill which policy shall
name COUNTY as an additional insured in amounts and upon such terms as shall be
agreed upon by OWNER and the COUNTY.  OWNER shall procure as necessary all other
insurance required by applicable law.

          4.7.3     Park, Open Space, Habitat Mitigation, Environmental
                    ---------------------------------------------------
Monitoring and Research.  As a mitigation measure for the potential
-----------------------                                            
environmental impacts of the Project pursuant to the EIS/EIR for the Project,
and in accordance with the biological opinion issued by the U.S. Fish & Wildlife
Service pursuant to Section 7 of the federal Endangered Species Act, an
environmental mitigation trust payment equal to One Dollar ($1.00) per ton of
waste delivered to the Landfill shall be paid.  The following sums shall be
deposited into an Environmental Mitigation Trust to be established by COUNTY as
provided in Section 4.7.4 below: (i) from the proceeds paid by OWNER to COUNTY
under the Purchase and Sale Agreement, the sum of Ninety Cents ($.90) per ton
for each ton of Non-County Waste actually disposed at the Landfill; and (ii)
from OWNER directly, the sum of Ninety Cents ($0.90) per ton for each ton of
County Waste actually disposed at the Landfill.  The parties acknowledge that
OWNER has agreed to pay Ten Cents ($.10) per ton of the $1.00 per ton
environmental mitigation trust payment directly to National Park Foundation, a
Congressionally chartered private corporation, under a separate agreement
between OWNER and the National Park Service.  The use of the funds in the

09/04/97
                                      36
<PAGE>
 
Environmental Mitigation Trust shall be dedicated to the protection,
acquisition, preservation, and restoration of parks, open space, biological
habitat, scenic, cultural, and scientific resources; to support environmental
education and research; mitigation of the Project's environmental impacts; and
long term monitoring of the above-mentioned items.

          4.7.4     Environmental Mitigation Trust.  Prior to the Effective
                    ------------------------------                         
Date, the Board of Supervisors of COUNTY shall establish an Environmental
Mitigation Trust in the form of Exhibit "H" attached hereto and incorporated
herein by this reference.  The funds deposited into the Environmental Mitigation
Trust shall be expended and administered in accordance with the provisions of
Exhibit "H."

          To the extent that OWNER may advance or otherwise pre-pay funds to the
Environmental Mitigation Trust pursuant to an agreement between OWNER and
COUNTY, then OWNER shall receive credit therefor, without interest, against
payment required by OWNER pursuant to Section 4.7.3 (ii).

          The Board of Supervisors of COUNTY may pledge or encumber the assets
(including the right to receive future income) of the Environmental Mitigation
Trust to accomplish the purposes of the trust.

          4.7.5     Rail Safety Improvement Trust Fund.  In order to assist the
                    ----------------------------------                         
residents in the Banning-Beaumont Pass area (Calimesa, Beaumont, Banning and
Cabazon) and/or the Eastern Coachella Valley area of Riverside County in
achieving local rail safety upgrades for existing, at-grade, crossings along the
Union Pacific Rail Line through Riverside County, OWNER agrees that it will fund
95% of the local share, not to exceed $500,000.00 per crossing, of the cost to
construct four (4) grade separation crossings of the rail line, pursuant to the
funding schedule set forth below.

          Four grade separations in the Banning-Beaumont Pass area and/or
Eastern Coachella Valley shall be selected by the COUNTY and implemented in
accordance with the priorities established by the Public Utilities Commission
(PUC) Grade Separation Program.  OWNER shall fund 95% of the local share, not to
exceed Five Hundred Thousand Dollars ($500,000.00) per grade separation, for
each of the four grade separations.

          The funding schedule for OWNER's contribution towards the local share
is as follows:

09/04/97
                                      37
<PAGE>
 
          (a)  First and Second Crossings.  For the first and second grade
               --------------------------                                 
               separations approved, funding will be provided within ninety (90)
               days of OWNER receiving all of the necessary local, state and
               federal permits and approvals for operation of the Landfill,
               provided that such grade separations qualify for funding under
               the PUC program or similar program.  Funding of these first two
               grade separations shall be provided so that no more than one (1)
               grade separation from each of the two areas listed above
               (Banning-Beaumont Pass and Eastern Coachella Valley) is funded.
               If at the time Landfill construction is commenced none, or only
               one, of the grade separations qualify for funding under the PUC
               or similar program, OWNER shall deposit said funds into a Rail
               Safety Improvement Trust Fund ("RAIL SAFETY IMPROVEMENT TRUST
               FUND") to be administered by the COUNTY for similar improvements
               along the Union Pacific Rail Line in the Banning-Beaumont Pass
               area and/or the Eastern Coachella Valley area of Riverside
               County.  In any event, the funds for the first two crossings
               shall be spent equally between the two areas.
            
          (b)  Third and Fourth Crossings.  For the third grade separation
               --------------------------                                 
               approved, funding will be provided by OWNER when the waste
               transported to the Project by rail reaches an average of 11,000
               tons per day (tpd) over a 30-day period.

               For the fourth grade separation approved, funding will be
               provided by OWNER when the waste transported to the Project by
               rail reaches an average of 15,000 tpd over a 30-day period.

               The funds for the third and fourth grade separations shall be
               used for crossings in either the Banning-Beaumont Pass area or
               the Eastern Coachella Valley area.  If no at-grade crossings in
               Riverside County qualify for funding under the PUC program or
               similar program in effect at that time, then OWNER shall deposit
               said funds into the Rail Safety Improvement Trust Fund to be
               administered by the COUNTY for similar improvements along the
               Union Pacific Rail line in the Banning-Beaumont Pass area and/or
               Eastern Coachella Valley.

          The foregoing obligations of OWNER under this Section 

09/04/97
                                      38
<PAGE>
 
4.7.5 are contractual in nature and are not required mitigation under the
California Environmental Quality Act.

          4.7.6     Air Emissions Offset Trust Fund.  Pursuant to COUNTY's
                    -------------------------------                       
request that OWNER provide funding for air emission offsets in the Coachella
Valley, OWNER will provide funding in the amount of $150,000 when waste being
transported to the Project by rail first reaches a level of 3,000 tons per day
(tpd) over a 30-day period.  Such funds will be used in reducing or offsetting
increases in air emissions from the Project in the Coachella Valley area of
Riverside County.  OWNER will provide additional funding in the amount of
$150,000 when waste being transported to the Project by rail first reaches a
level of 7,000 tpd over a 30-day period, 11,000 tpd over a 30-day period, and
15,000 tpd over a 30-day period.  (This results in a total of $600,000.00 being
funded by OWNER for air emissions offset under this provision.)  The funds
described herein ("AIR EMISSIONS OFFSET TRUST FUND") shall be paid to COUNTY or
as designated by COUNTY when such funding is due.  The COUNTY, after
consultation with the Coachella Valley Association of Governments (CVAG,) will
decide how the funding provided will be used to lower air emissions in the
Coachella Valley portion of Riverside County.

          The foregoing obligations of OWNER under this Section 4.7.6 are
contractual in nature and are not required mitigation under the California
Environmental Quality Act.

          4.7.7     Host Community Funding.  As further consideration for the
                    ----------------------                                   
vested development rights granted to OWNER hereunder, OWNER agrees to make a
payment of five hundred thousand dollars ($500,000) to County Service Area 51,
within ten (10) days of the commencement of construction of the Landfill.

          Thereafter, and until the total of all payments to County Service Area
51 under this Agreement (including the initial $500,000 payment) reaches two
million dollars ($2 million), OWNER shall make the following payments to County
Service Area 51 each year on July 1, based on the month with the highest average
daily tonnage of Nonhazardous solid waste (averaged over the number of operating
days in each subject month) delivered to the Landfill by rail over the previous
12-month period:

          a.   One hundred thousand dollars ($100,000), when the highest average
               daily tonnage delivered to the Landfill by rail in any of the
               previous twelve months is between 3,000 tons per day (tpd) and
               7,000 tpd.

09/04/97
                                      39
<PAGE>
 
          b.   One hundred fifty thousand dollars ($150,000), when the highest
               average daily tonnage delivered to the Landfill by rail in any of
               the previous twelve months is between 7,000 tpd and 11,000 tpd.
           
          c.   Two hundred thousand dollars ($200,000), when the highest average
               daily tonnage delivered to the Landfill by rail in any of the
               previous twelve months is greater than 11,000 tpd.

          After the aggregate amount of payments made by OWNER to County Service
Area 51 reaches two million dollars ($2 million), and until termination of this
Agreement, OWNER shall pay to County Service Area 51, fifty thousand dollars
($50,000) annually, on July 1.  In no event shall any payments be required, or
made, after the cessation of waste disposal at the Landfill.


          The foregoing obligations of OWNER under this Section 4.7.7 are
contractual in nature and are not required mitigation under the California
Environmental Quality Act.

          4.7.8     UCR Endowment.  OWNER and COUNTY acknowledge the continuing
                    -------------                                              
need for research in the fields of landfill design and monitoring, waste
reduction, alternatives to landfilling, mitigation of PM10 and PM2.5 impacts and
other research relevant to landfill operations and waste disposal.  To address
these long term needs of COUNTY and the region, OWNER and COUNTY concur in the
need to support long term research in these and related areas.  To accomplish
this, OWNER and COUNTY are committed to work with the University of California
at Riverside to establish a program to create an endowment of ultimately not
less than Ten Million Dollars ($10,000,000.00) to support this need for long
term research ("UCR ENDOWMENT").

     The UCR Endowment will provide funding in perpetuity for research and for
environmental educational programs in topics including, but not limited to:

          a.   Landfill liner system performance;
          b.   Groundwater modeling and monitoring;
          c.   Landfill gas and leachate generation;
          d.   Alternatives to landfill disposal, including conversion of trash
               and landfill gas to energy;
          e.   Alternative transportation technologies and other useable
               products;
          f.   Assistance of new environmental businesses and technologies in
               the COUNTY; and

09/04/97
                                      40
<PAGE>
 
          g.   Assistance for small businesses in environmental compliance.

     The vision of the research and educational program is to:

          a.   Protect the environment by developing technologies for improved
               landfill operations and monitoring, and by focusing on the
               attainment of ozone and particulate air quality standards in the
               COUNTY;
          b.   Develop cleaner transportation systems for vehicles operating at
               landfills;
          c.   Develop technologies that derive useful energy or by-products
               from refuse; and
          d.   Improve the economic climate in the COUNTY by helping businesses
               with environmental compliance and supporting the establishment of
               new environmental businesses and technologies in the region.

     OWNER's and COUNTY's obligations under this Section 4.7.8 shall be limited
to the negotiation in good faith with each other and with UCR to assist in
securing funding for the UCR Endowment in an amount not to exceed Ten Million
Dollars ($10,000,000.00) from potential sources such as California Environmental
Protection Agency, U.S. Environmental Protection Agency, California Air
Resources Board, South Coast Air Quality Management District, California
Integrated Waste Management Board, the Eagle Mountain Environmental Mitigation
Trust, and other businesses, organizations  and individuals.

     The foregoing obligations of OWNER and COUNTY under this Section 4.7.8 are
contractual in nature and are not required mitigation under the California
Environmental Quality Act.

          4.7.9     Waiver of Credit for Consultant Services Paid by MRC.  MRC
                    ----------------------------------------------------      
has advanced approximately $80,000 to DISTRICT for amounts actually paid by
DISTRICT to employ outside consultants, pursuant to an agreement between MRC,
COUNTY and DISTRICT approved by the DISTRICT's Board of Directors and COUNTY's
Board of Supervisors on November 14, 1995.  MRC agrees to waive its rights under
said agreement to obtain a credit for such payments, and releases COUNTY and
DISTRICT from their obligations to provide any such credits.

          4.7.10    Entire Economic Benefits.  It is the intent of the parties
                    ------------------------                                  
that this Agreement specifically set forth all fees, exactions, taxes and other
payments to be imposed on OWNER by or paid by OWNER to COUNTY, and that no new
or additional fees, taxes, 

09/04/97
                                      41
<PAGE>
 
exactions, donations, or other payments be imposed by or paid to COUNTY except
as specifically provided for in this Agreement.

          OWNER shall pay all ad valorem property taxes and assessments
(including any increases in same) in accordance with State law, and all other
taxes that may in the future be imposed on a statewide level ("PROPERTY AND
OTHER STATEWIDE TAXES").

          OWNER shall also pay, to the extent permitted by applicable law, any
taxes or fees ("UNIFORM BUSINESS FEES") that are imposed by COUNTY on a uniform,
County-wide basis on all businesses, which are not specific to the Project or to
landfills and which are not based on acreage, gross revenue, tonnage of any
waste deposited, or other landfill operational criteria.  "Uniform Business
Fees" shall include, by way of example, sales taxes or utility taxes that are
imposed on all businesses County-wide.

          OWNER shall also pay all other payments, fees and exactions required
under the other terms and provisions of this Agreement, specifically: the
Purchase Price payments (Exhibit "F"); application and processing fees and
charges ((S)(S)3.7, 3.8.1(a)); development exactions for Subsequent Development
Approvals subject to the requirements of (S)3.8.1(d); condemnation costs
((S)3.10); LEA/Department of Environmental Health inspection and monitoring
costs ((S)3.12.2(g)); financial benefits to COUNTY under Section 4.6; payments
to be made under Sections 4.7.1 through 4.7.9 inclusive; and amounts to be paid
by OWNER pursuant to Section 9.9 and all subsections thereunder.  It is
acknowledged by the parties that none of the fees, exactions or other payments
payable by OWNER pursuant to this Agreement are taxes.

          Other than as described in the foregoing paragraphs of this Section
4.7.10, no other payments, taxes, fees, exactions or property donations shall be
required by COUNTY in connection with the Property or the Project during the
term of this Agreement.  To the extent COUNTY, while this Agreement is in
effect, imposes any new or additional taxes, fees, exactions, donations, or
payments in connection with the Property or the Project other than as described
in the foregoing paragraphs of this Section 4.7.10 and OWNER makes such
payments, then OWNER shall be credited for such amounts against the payments
OWNER owes to COUNTY pursuant to the terms of the Purchase and Sale Agreement.

5.   FINANCING OF PUBLIC IMPROVEMENTS.
     -------------------------------- 

     If deemed appropriate, COUNTY and OWNER will cooperate in the formation of
any special assessment district, community facilities district or alternate
financing mechanism to pay for the 

09/04/97
                                      42
<PAGE>
 
construction and/or maintenance and operation of public infrastructure
facilities required as part of the Development Plan. COUNTY also agrees that, to
the extent any such district or other financing entity is formed and sells bonds
in order to finance such reimbursements, OWNER may be reimbursed out of the
proceeds of said district to the extent that OWNER spends funds or dedicates
land for the establishment of public facilities. Notwithstanding the foregoing,
it is acknowledged and agreed by the parties that nothing contained in this
Agreement shall be construed as requiring COUNTY or the COUNTY Board of
Supervisors to form any such district or to issue and sell bonds nor to
reimburse OWNER out of the proceeds of COUNTY's sale of property to OWNER in
accordance with the Purchase and Sale Agreement.

6.   REVIEW FOR COMPLIANCE.
     --------------------- 

     6.1  Periodic Review.  The COUNTY Chief Executive Officer shall review this
          ---------------                                                       
Agreement annually, on or before the anniversary of the Effective Date, in order
to ascertain the good faith compliance by OWNER with the terms of the Agreement.
OWNER shall submit an Annual Monitoring Report, in a form acceptable to the
COUNTY Chief Executive Officer, within 30 days after written notice from the
COUNTY Chief Executive Officer. COUNTY hereby waives any annual or special
review administration fee.

     6.2  Special Review.  The Board of Supervisors may order a special review
          --------------                                                      
of compliance with this Agreement at any time.  OWNER shall be given written
notice prior to the commencement of any special review.  The COUNTY Chief
Executive Officer, or other officer as may be directed by the Board, shall
conduct such special review.

     6.3  Procedure.
          --------- 

          (a) During either a periodic review or a special review, OWNER shall
     be required to demonstrate good faith compliance with the terms of this
     Agreement.  Failure of OWNER, subject to matters beyond its reasonable
     control:

               (1) to submit its application for approval of the Project to the
          Colorado River Water Quality Control Board within ninety (90) days
          after Certification of EIR No. 397; or,

               (2) to submit its application for approval of the Project to the
          South Coast Air Quality Management District within two (2) months
          after Certification of EIR No. 397; or,

09/04/97
                                      43
<PAGE>
 
               (3) to submit its application for approval of the Project to the
          Local Enforcement Agency within six (6) months after Certification of
          EIR No. 397,

     shall be considered as evidence that OWNER is not complying in good faith
     with this Agreement.

          (b)  Upon completion of a periodic review or a special review, the
     COUNTY Chief Executive Officer shall submit a report to the Board of
     Supervisors setting forth the evidence concerning good faith compliance by
     OWNER with the terms of this Agreement and his recommended finding on that
     issue.

          (c)  If, after giving OWNER a reasonable opportunity to review and
     respond to the COUNTY Chief Executive's report, the Board finds on the
     basis of substantial evidence in the record before it that OWNER has
     complied in good faith with the terms and conditions of this Agreement in
     all material respects, the review shall be concluded.

          (d)  If, after giving OWNER a reasonable opportunity to review and
     respond to the COUNTY Chief Executive's report, the Board makes a
     preliminary finding on the basis of substantial evidence in the record
     before it that OWNER has not complied in good faith with the terms and
     conditions of this Agreement in all material respects, the Board may
     proceed with modification or termination of this Agreement or other action
     as provided in Section 6.4 and Section 6.6.  Written notice as provided
     under Section 8.4 of this Agreement shall be given to OWNER prior to or
     concurrent with, proceedings under Section 6.4 and Section 6.6.

     6.4  Proceedings Upon Modification or Termination.  If the Board makes a
          --------------------------------------------                       
preliminary finding of non-compliance in accordance with Section 6.3, then
COUNTY may proceed to consider the modification or termination of this Agreement
or other action, which shall be the subject of a hearing before the Board.
COUNTY shall give written notice to OWNER of its preliminary findings, a summary
of the substantial evidence in the current record which COUNTY asserts supports
its preliminary findings, and the scheduled hearing date.  The notice shall be
given at least sixty (60) calendar days prior to the scheduled hearing and shall
contain:

          (a)  The time, date and place of the hearing;

          (b)  A statement as to whether COUNTY proposes to terminate or to
               modify the Agreement or take any 

09/04/97
                                      44
<PAGE>
 
               other action, together with a detailed description of any
               proposed modifications or other proposed actions; and,

          (c)  Such other information as is reasonably necessary to inform OWNER
               of the nature of the proceeding and give OWNER a reasonable
               opportunity to respond and be heard.

     6.5  Failure to Make Payment.  If at any time, OWNER fails to make a
          ------------------------                                       
payment as required by the Purchase and Sale Agreement, COUNTY shall give
written notice to OWNER of its intent to terminate, modify or take any other
action with regard to this Agreement.  The notice shall comply with the
provisions of Section 6.4.

     6.6  Hearing.  At the time and place set for the hearing as noticed in
          -------                                                          
accordance with Section 6.4, OWNER shall be given an opportunity to be heard.
OWNER shall be required to demonstrate good faith compliance with the terms and
conditions of this Agreement in all material respects.  If the Board of
Supervisors finds, based upon substantial evidence in the record before it, that
OWNER has not complied in good faith with the terms and conditions of this
Agreement in all material respects, the Board shall require OWNER to take
specific actions, within one hundred and twenty (120) days of the Board's
decision, to cure such non-compliance.  If OWNER fails to cure the non-
compliance within 120 days, the COUNTY may terminate or modify this Agreement
and take such other actions or impose such conditions as are reasonably
necessary to protect the interests of the COUNTY; provided, however, if the
nature of the non-compliance is such that it cannot reasonably be cured within
120 days and OWNER is proceeding in good faith and with due diligence to
prosecute said cure to completion, OWNER shall not be considered to be in
default.  The decision of the Board of Supervisors to terminate or modify this
Agreement or take any other action shall be final, subject only to judicial
review pursuant to Section 1094.5 or similar provision of the Code of Civil
Procedure.

     6.7  Certificate of Agreement Compliance.  If, after a Periodic or Special
          -----------------------------------                                  
Review or upon any review that may be initiated at the request of OWNER, OWNER
is found to be in compliance with this Agreement in all material respects, or
has come into compliance with this Agreement by taking curative action within
the time specified, COUNTY shall, within ten (10) days of request by OWNER,
issue a Certificate of Agreement Compliance ("Certificate") to OWNER, in the
form of Exhibit "I" attached hereto and incorporated herein by this reference,
stating that after the most 

09/04/97
                                      45
<PAGE>
 
recent Periodic or Special Review and based upon the information known or made
known to the Board of Supervisors that (1) this Agreement remains in full force
and effect, and (2) OWNER is not in default. The Certificate shall be in
recordable form, shall contain information necessary to communicate constructive
record notice of the finding of compliance, shall state whether the Certificate
is issued after a Periodic or Special Review and shall state the anticipated
date of commencement of the next Periodic Review. OWNER may record the
Certificate with the County Recorder or file the Certificate with any other
public agency or governmental authority.

     Whether or not the Certificate is relied upon by assignees or other
transferees or OWNER, COUNTY shall not be bound by a Certificate if a default
existed at the time of the Periodic or Special Review, but was concealed from or
otherwise not known to the COUNTY Chief Executive Officer or Board of
Supervisors.

7.   INCORPORATION AND ANNEXATION.
     ---------------------------- 

     7.1  Intent.  If all or any portion of the Property is annexed to or
          ------                                                         
otherwise becomes a part of a city or another county, it is the intent of the
parties that this Agreement and its term shall survive and be binding upon such
other jurisdiction.

     7.2  Incorporation.  If at any time during the term of this Agreement, a
          -------------                                                      
city is incorporated comprising all or any portion of the Property, the validity
and effect of this Agreement shall be governed by Section 65865.3 (or similar
provision) of the Government Code.

     7.3  Incorporation and Annexation.  OWNER and COUNTY shall oppose, in
          ----------------------------                                    
accordance with the procedures provided by law, any incorporation of a city
comprising all or any portion of the Property, any annexation to any city of all
or any portion of the Property, and any formation of another county whose
territory includes all or any portion of the Property unless both OWNER and
COUNTY give written consent to such incorporation, annexation or formation.

8.   DEFAULT AND REMEDIES.
     -------------------- 

     8.1. Remedies in General.  It is acknowledged by the parties that COUNTY
          --------------------                                               
would not have entered into this Agreement if there were not some limitation on
COUNTY'S payment of damages that may be awarded to OWNER in a judgment for
damages under this Agreement, or with respect to this Agreement or the
application thereof.

09/04/97
                                      46
<PAGE>
 
          In general, each of the parties hereto may pursue any remedy at law or
equity available for the breach of any provision of this Agreement, except that
should COUNTY be liable in damages to OWNER, then OWNER covenants that
collection of said damages shall be limited as follows:

          (a)  In the year the judgment is final against COUNTY, OWNER shall not
               collect more than OWNER actually paid COUNTY pursuant to the
               Purchase and Sale Agreement (net of the amounts paid by COUNTY
               from the Purchase Price proceeds into the Environmental
               Mitigation Trust) during the immediately preceding calendar year;
            
          (b)  If the amount of the judgment exceeds the amount collected
               pursuant to subparagraph (a) and if the Project remains in
               operation, the balance of the judgment (including interest) shall
               be collected at the rate of 50% of the amount actually paid by
               OWNER to COUNTY pursuant to the Purchase and Sale Agreement (net
               of the amounts paid by COUNTY from the Purchase Price proceeds
               into the Environmental Mitigation Trust) during the calendar year
               following finality of the judgment and every succeeding calendar
               year until the entire judgment is paid.

     8.2  Specific Performance.     The parties acknowledge that money damages
          ---------------------                                               
and remedies at law generally are inadequate, and specific performance and other
non-monetary relief are particularly appropriate and preferred remedies for the
enforcement of this Agreement and shall be available to all parties.

     8.3  Release.    Except for causes of action based on breach of the terms
          -------                                                             
of this Agreement and causes of action for non-damage remedies, including the
remedies of specific performance (see Section 8.2) and judicial review (see
Section 6.6), OWNER, for itself, its successors and assignees, hereby releases
the COUNTY, its officers, agents and employees from any and all claims, demands,
actions, or suits of any kind or nature arising out of any liability, known or
unknown, present or future, including, but not limited to, any claim or
liability, based or asserted, pursuant to Article I, Section 19 of the
California Constitution, the Fifth Amendment of the United States Constitution,
or any other law or ordinance which seeks to impose any other liability or
damage, whatsoever, upon the COUNTY because it entered into this Agreement or
because of the terms of this Agreement.

09/04/97
                                      47
<PAGE>
 
     8.4  Termination or Modification of Agreement for Default of
          -------------------------------------------------------

OWNER.  Subject to and upon compliance with the provisions contained in Section
-----                                                                          
6 herein, COUNTY may terminate or modify this Agreement or take other action for
any failure of OWNER to perform any material duty or obligation of OWNER under
this Agreement, or to comply in good faith with the terms of this Agreement in
all material respects.

     8.5  Termination of Agreement for Default of COUNTY.  OWNER
          ----------------------------------------------        
may terminate this Agreement only in the event of a default by

COUNTY in the performance of a material term of this Agreement and only after
providing written notice to COUNTY of default, setting forth the nature of the
default and the actions, if any, required by COUNTY to cure such default and,
where the default can be cured, COUNTY has failed to take such actions and cure
such default within 120 days after the effective date of such notice or, in the
event that such default cannot be cured within such 120-day period but can be
cured within a longer time, has failed to commence the actions necessary to cure
such default within such 120-day period and to diligently proceed to complete
such actions and cure such default.
 
9.   THIRD PARTY LITIGATION, ENVIRONMENTAL IMPAIRMENT, INDEMNITY AND FINANCIAL
     -------------------------------------------------------------------------
     ASSURANCES.
     ---------- 

     9.1  General Plan Litigation.  COUNTY has determined that this Agreement is
          -----------------------                                               
consistent with its Comprehensive General Plan, herein called General Plan, and
that the General Plan meets all requirements of law.  OWNER has reviewed the
General Plan and concurs with COUNTY's determination.  The parties acknowledge
that:

          (a)  Litigation is now pending challenging the legality, validity and
     adequacy of certain provisions of the General Plan; and,

          (b)  In the future there may be other similar challenges to the
     General Plan; and,

          (c)  If successful, such challenges could delay or prevent the
     performance of this Agreement and the development of the Property.
 
          COUNTY shall have no liability in damages under this Agreement for any
failure of COUNTY to perform under this Agreement or the inability of OWNER to
develop the Property as contemplated by the Development Plan of this Agreement
as the result of a judicial determination that on the Effective Date, or at any
time thereafter, the General Plan, or portions thereof, are invalid or
inadequate or not in compliance with law.

09/04/97
                                      48
<PAGE>
 
     9.2  Third Party Litigation.  OWNER shall defend, at its expense (including
          ----------------------                                                
COUNTY's reasonable attorneys' fees and attorneys' fees awarded by final
judgment of a court of competent jurisdiction to a prevailing party), indemnify,
and hold harmless COUNTY, its agents, officers and employees from any claim,
action or proceeding against COUNTY, its agents, officers, or employees to
attack, set aside, void, or annul the approval of this Agreement, the approval
of any permit granted pursuant to this Agreement, any challenge to Comprehensive
General Plan Amendment No. 402, Specific Plan No. 305, Change of Zone Case No.
6249, Environmental Impact Report No. 397, Revised Permit No. 158 to Reclamation
Plan No. 107 and/or any other Existing Development Approval, Subsequent
Development Approval, Site Specific Plot Plan (Section 3.5 above), Plot Plan
(Section 3.6 above) or any other action by COUNTY in connection with the
Project, to the extent that such claim, action or proceeding does not arise from
COUNTY's default under this Agreement or COUNTY's violation of applicable law.
COUNTY shall promptly notify OWNER of any such claim, action or proceeding, and
COUNTY shall assist in the defense of any actions where COUNTY is named as a
party and in which OWNER is obligated hereunder to defend COUNTY, including
appeals therefrom.  If COUNTY fails to promptly notify OWNER of any such claim,
action or proceeding, or if COUNTY fails to assist in the defense, OWNER shall
not thereafter be responsible to defend, indemnify, or hold harmless COUNTY.

          Should OWNER fail to perform or commence performing any of the
obligations or to take any action set forth above in this Section 9.2 within
sixty (60) days after OWNER becomes aware of such obligation, then COUNTY may
retain any legal counsel, consultant, contractor or other third party as may be
reasonably necessary to perform such obligation of OWNER.  OWNER shall reimburse
COUNTY for the reasonable costs of such third party within thirty (30) days of
the date such costs are submitted by COUNTY to OWNER for payment.  Should COUNTY
suffer any cost, damage or expense by reason of OWNER's failure to take action
as required above in this Section 9.2, OWNER shall reimburse COUNTY for the
amounts within thirty (30) days of the date that such costs, damages or expenses
are submitted by COUNTY to OWNER for payment.

     9.3  OWNER Indemnity.  OWNER shall indemnify and hold COUNTY, its officers,
          ---------------                                                       
agents, employees and independent contractors free and harmless from any
liability whatsoever, based or asserted upon any act or omission of OWNER, its
officers, agents, employees, subcontractors and independent contractors, for
property damage, bodily injury, or death (OWNER's employees included) or any
other element of damage of any kind or nature, relating to or in any way
connected with or arising from the activities contemplated 

09/04/97
                                      49
<PAGE>
 
hereunder, including, but not limited to, the study, design, engineering,
construction, completion, failure and conveyance of the public improvements,
save and except claims for damages to the extent arising from the sole active
negligence or sole willful misconduct of COUNTY. OWNER shall defend, at its
expense, including attorneys' fees, COUNTY, its officers, agents, employees and
independent contractors in any legal action based upon such alleged acts or
omissions.

          Should OWNER fail to perform or commence performing any of the
obligations or to take any action set forth above in this Section 9.3 within
sixty (60) days after OWNER becomes aware of such obligation, then COUNTY may
retain any legal counsel, consultant, contractor or other third party as may be
reasonably necessary to perform such obligation of OWNER.  OWNER shall reimburse
COUNTY for the reasonable costs of such third party within thirty (30) days of
the date such costs are submitted by COUNTY to OWNER for payment.  Should COUNTY
suffer any cost, damage or expense by reason of OWNER's failure to take action
as required above in this Section 9.3, OWNER shall reimburse COUNTY for the
amounts within thirty (30) days of the date that such costs, damages or expenses
are submitted by COUNTY to OWNER for payment.

     9.4  COUNTY Indemnity.  COUNTY shall indemnify and hold OWNER, its
          ----------------                                             
officers, agents, employees and independent contractors free and harmless from
any liability based or asserted upon acts or omissions of COUNTY, its officers,
agents, employees, subcontractors and independent contractors, for property
damage, bodily injury, or death or any other element of damage of any kind or
nature arising from the sole active negligence or sole willful misconduct of
COUNTY.  COUNTY shall defend, at its expense, including attorneys' fees, OWNER,
its officers, agents, employees and independent contractors in any legal action
based upon such alleged acts or omissions.  If OWNER fails to promptly notify
COUNTY of any such claim, action or proceeding, or if OWNER fails to cooperate
in the defense, COUNTY shall not thereafter be responsible to defend, indemnify
or hold harmless OWNER.

OWNER reserves the right to approve the attorney(s) which COUNTY selects, hires
or otherwise engages to defend OWNER hereunder, which approval shall not be
unreasonably withheld.  OWNER reserves the right, at its sole cost and expense,
to employ counsel of its own choosing to defend or assist in the defense of
OWNER in addition to the attorney(s) employed by COUNTY to defend OWNER.

     9.5  Additional OWNER Indemnity.  Notwithstanding any other provision of
          --------------------------                                         
this Agreement, OWNER shall indemnify and hold COUNTY, its officers, agents, and
employees free and harmless from any 

09/04/97
                                      50
<PAGE>
 
liability, based or asserted upon any act or omission of OWNER, its officers,
agents, employees, subcontractors, predecessors in interest (excluding COUNTY
predecessor in interest as it relates to the air space conveyed in accordance
with the Assignment of Leasehold Interest), successors, assigns and independent
contractors for any violation of any federal, state or local law, ordinance or
regulation relating to industrial hygiene or to environmental conditions on,
under or about the Property, including, but not limited to, remediation of soil
and groundwater conditions, and including COUNTY disposal of permitted waste at
the Landfill, and OWNER shall defend, at its expense, including attorneys' fees,
COUNTY, its officers, agents and employees in any action based or asserted upon
any such alleged act or omission. OWNER's indemnification of COUNTY hereunder is
also intended to include MRC's obligations for Landfill closure and post-closure
care and maintenance as required by Federal Subtitle D regulations at 40 CFR
Section 258.61 and California Code Regulations at Title 27, Section 21180 or
similar regulatory or statutory requirements.

          Should OWNER fail to perform or commence performing any of the
obligations or to take any action set forth above in this Section 9.5 within
sixty (60) days after OWNER becomes aware of such obligation, then COUNTY may
retain any legal counsel, consultant, contractor or other third party as may be
reasonably necessary to perform such obligation of OWNER.  OWNER shall reimburse
COUNTY for the reasonable costs of such third party within thirty (30) days of
the date such costs are submitted by COUNTY to OWNER for payment.  Should COUNTY
suffer any cost, damage or expense by reason of OWNER's failure to take action
as required above in this Section 9.5, OWNER shall reimburse COUNTY for the
amounts within thirty (30) days of the date that such costs, damages or expenses
are submitted by COUNTY to OWNER for payment.
 
     9.6  Reservation of Rights.  With respect to Sections 9.2, 9.3 and 9.5
          ---------------------                                            
herein, COUNTY reserves the right to approve the attorney(s) which OWNER
selects, hires or otherwise engages to defend COUNTY hereunder, which approval
shall not be unreasonably withheld.  COUNTY reserves the right, at its sole cost
and expense, to employ counsel of its own choosing to defend or assist in the
defense of COUNTY in addition to the attorney(s) employed by OWNER to defend
COUNTY.

     9.7  Environmental Impairment and Damage to Natural Resources.  OWNER shall
          --------------------------------------------------------              
promptly comply with all final judgments and orders issued by a court of
competent jurisdiction as well as all orders, rules or regulations issued by any
county, state or federal regulatory agency having jurisdiction over the Project
which 

09/04/97
                                      51
<PAGE>
 
require OWNER or COUNTY to remediate any environmental impairment or damage to
any natural resource or to pay monetary damages to any third party as a result
of any environmental impairment or damage to natural resources arising out of
the Project.

          Should OWNER fail to perform or commence performing any of the
obligations or to take any action set forth above in this Section 9.7 within
sixty (60) days after OWNER becomes aware of such obligation, then COUNTY may
retain any legal counsel, consultant, contractor or other third party as may be
reasonably necessary to perform such obligation of OWNER.  OWNER shall reimburse
COUNTY for the reasonable costs of such third party within thirty (30) days of
the date such costs are submitted by COUNTY to OWNER for payment.  Should COUNTY
suffer any cost, damage or expense by reason of OWNER's failure to take action
as required above in this Section 9.7, OWNER shall reimburse COUNTY for the
amounts within thirty (30) days of the date that such costs, damages or expenses
are submitted by COUNTY to OWNER for payment.

     9.8  Emergencies.  In the event the Board of Supervisors of the COUNTY
          -----------                                                      
determines by Resolution and in good faith, that an emergency exists:

          (a)  which, unless responded to immediately, would likely result in
               serious and immediate adverse impacts upon the public health,
               safety or welfare; and,

          (b)  which is a direct result of an accident arising out of or
               connected with any aspect of the Project, including but not
               limited to operations at the Project and transportation of waste
               to the Project; and,

          (c)  which appears, in the good faith judgment of the Board of
               Supervisors, to be the legal responsibility of the OWNER;

it may order OWNER to respond immediately to such emergency to commence and
complete such cleanup, remediation or such other action as the Board of
Supervisors determines necessary to reduce or eliminate the immediate threat to
the public health, safety, or welfare.  In the event OWNER refuses or neglects
to immediately respond to the emergency, the COUNTY may undertake the cleanup,
remediation or other response and draw upon the financial assurances required to
be provided in and pursuant to the terms of Section 9.9 hereof to cover the cost
of such cleanup, remediation or other response.  In the event it is later
determined, as a result of any lawsuit, negotiated settlement, arbitration or

09/04/97
                                      52
<PAGE>
 
otherwise, that OWNER was not, but for the terms of this Agreement, legally
responsible to pay for the cleanup, remediation or other response, the COUNTY
shall immediately reimburse OWNER for all amounts drawn from the financial
assurances for which it is determined as a result of such negotiated settlement,
arbitration, lawsuit or otherwise not to have been legally responsible to pay
but for the terms of this Agreement.

          Should OWNER fail to perform or commence performing any of the
obligations or to take any action set forth above in this Section 9.8 within
sixty (60) days after OWNER becomes aware of such obligation, then COUNTY may
retain any legal counsel, consultant, contractor or other third party as may be
reasonably necessary to perform such obligation of OWNER.  OWNER shall reimburse
COUNTY for the reasonable costs of such third party within thirty (30) days of
the date such costs are submitted by COUNTY to OWNER for payment.  Should COUNTY
suffer any cost, damage or expense by reason of OWNER's failure to take action
as required above in this Section 9.8, OWNER shall reimburse COUNTY for the
amounts within thirty (30) days of the date that such costs, damages or expenses
are submitted by COUNTY to OWNER for payment.

     9.9  Financial Assurances.
          -------------------- 

          9.9.1  Letter of Credit.
                 ---------------- 
 
          (a)  No later than five (5) business days after OWNER's receipt of all
               the land use approvals from the COUNTY necessary for the
               construction and operation of the Project, to secure OWNER's
               obligations pursuant to Sections 9.2, 9.3 and 9.5 hereof, OWNER
               shall deposit with COUNTY a letter of credit ("Letter of Credit")
               in the amount of Five Hundred Thousand Dollars ($500,000.00).
            
          (b)  No later than the date of the execution of this Agreement by both
               parties, to secure OWNER's obligations pursuant to Sections 9.2,
               9.3 and 9.5 hereof, OWNER shall increase the amount of the Letter
               of Credit to One Million Dollars ($1,000,000.00), or provide a
               new letter of credit in the amount of One Million Dollars
               ($1,000,000.00), or deposit an additional letter of credit (or
               cash equivalent) in the amount of Five Hundred Thousand Dollars
               ($500,000.00), so that the aggregate amount of the Letter(s) of
               Credit equals One Million Dollars ($1,000,000.00).

09/04/97
                                      53
<PAGE>
 
          (c)  Commencing on the date of Start Up of Operations of the Project
               and continuing until terminated as provided in this Agreement, to
               secure OWNER's obligations pursuant to Sections 9.2, 9.3, 9.5,
               9.7 and 9.8 hereof, OWNER shall increase the amount of the Letter
               of Credit to Two Million Dollars ($2,000,000.00), or provide a
               new Letter of Credit in the amount of Two Million Dollars
               ($2,000,000.00), or deposit an additional Letter of Credit of an
               additional One Million Dollars ($1,000,000.00), so that the
               aggregate amount  of the Letter(s) of Credit equals Two Million
               Dollars ($2,000,000.00).
            
          (d)  The Letter of Credit shall be irrevocable and shall be in
               substantially the form as Exhibit "J" attached hereto and
               incorporated herein by this reference.  The Letter of Credit
               shall be payable in Riverside, California, or such other location
               as is specified in writing by COUNTY.  The Letter of Credit shall
               allow for multiple draws.  The Letter of Credit shall be issued
               by a financial institution with a Standard & Poor's or Moody's
               long-term senior unsecured debt rating ("credit rating") of B+ or
               better.  In the event the credit rating of the issuing financial
               institution falls below B+, then OWNER shall obtain a replacement
               letter of credit satisfying the requirements of this section
               within ninety (90) days of being notified of the credit rating
               change.  The Letter of Credit shall not require COUNTY to state
               or certify to the issuer that COUNTY has made any demand upon, or
               taken any action against, OWNER, as a condition to draw down on
               the Letter of Credit; provided, however, COUNTY shall comply with
               Section 9.9.1(e) below.

               Prior or subsequent to the issuance of the Letter of Credit,
               COUNTY may require an opinion from the issuer's legal counsel
               confirming that the Letter of Credit is an authorized and binding
               obligation of the issuer.

               At any time, and from time to time, OWNER may replace the Letter
               of Credit, change the issuing institution or modify the terms of
               the Letter of Credit, but only with the advance written consent
               of the COUNTY, which shall not be unreasonably 

09/04/97
                                      54
<PAGE>
 
               withheld or delayed. Subject to the terms of Section 9.9.7
               (Alternative or Substitute Financial Assurances), in the event
               OWNER desires to replace or modify the Letter of Credit or change
               the issuing institution, then OWNER shall first or concurrently
               obtain such replacement or new Letter of Credit in substantially
               the form of Exhibit "J" or as otherwise approved by the advance
               written consent of COUNTY.

          (e)  COUNTY shall have the right to draw upon the Letter of Credit for
               any unpaid amount secured by the Letter of Credit (i) one hundred
               twenty (120) days after the date that OWNER is required to pay
               any such amount under this Agreement or (ii) sixty (60) days
               after written demand by COUNTY upon OWNER specifying the nature
               and amount of the obligation(s) due, whichever is earlier, except
               for demand(s) arising out of those obligations described in
               Section 9.8 of this Agreement ("Emergencies"), in which case five
               (5) days written demand shall be provided.  COUNTY's right to
               draw upon the Letter of Credit shall be subject to Section 9.9.8
               below (Wrongful or Improper Claim or Draw by COUNTY).

          9.9.2  Environmental Liability Insurance.
                 --------------------------------- 

          (a)  No later than the date of the execution of this Agreement by both
               parties, OWNER shall deposit with the COUNTY a certificate of
               insurance evidencing the issuance of an environmental liability
               insurance policy ("Environmental Liability Insurance") with
               coverage in an amount not less than Five Million Dollars
               ($5,000,000.00), naming COUNTY as an additional insured and
               containing emergency response and payment procedures that are
               satisfactory to COUNTY, to secure OWNER's obligations pursuant to
               Sections 9.3, 9.5, 9.7 and 9.8 hereof.
            
          (b)  Commencing on the date of Start Up of Operations and continuing
               until terminated as provided in this Agreement, to secure OWNER's
               obligations pursuant to Sections 9.3, 9.5, 9.7 and 9.8 hereof,
               OWNER shall increase the amount of the Environmental Liability
               Insurance coverage to Ten Million Dollars ($10,000,000.00).

09/04/97
                                      55
<PAGE>
 
          (c)  The Environmental Liability Insurance shall be issued by an
               insurance company with a Standard & Poor's, Moody's or AM Best
               rating of B+ or better.  The Environmental Liability Insurance
               policy shall cover, without limitation, third party claims for
               environmental resource damages arising from the transportation or
               deposit of Nonhazardous municipal solid waste to or at the
               Landfill.
            
          (d)  Prior to making any claim on the Environmental Liability
               Insurance, the COUNTY shall first provide at least sixty (60)
               days written demand on the OWNER, except for demand(s) arising
               out of those obligations described in Section 9.8 of this
               Agreement ("Emergencies"), in which case five (5) days written
               demand and notice shall be provided.  Each demand and notice
               shall specify the nature and amount of the obligation(s) due.
               Following the expiration of the demand and notice periods
               described above, the COUNTY may proceed to present a claim on the
               Environmental Liability Insurance to the extent that the
               obligation(s) identified in the demand and notice have not been
               satisfied by the OWNER.
            
               COUNTY shall promptly provide OWNER with notice and a copy of any
               claim, document or correspondence submitted to or provided by the
               Environmental Liability Insurance carrier or it agent(s).  COUNTY
               and OWNER shall cooperate in good faith in the submission and
               processing of any claim made on the Environmental Liability
               Insurance.
            
               COUNTY's right to make a claim upon the Environmental Liability
               Insurance shall be subject to Section 9.9.8 below (Wrongful or
               Improper Claim or Draw by COUNTY).
            
          (e)  At any time, and from time to time, OWNER may change the
               Environmental Liability Insurance carrier, but only with the
               advance written consent of the COUNTY, which shall not be
               unreasonably withheld or delayed.
            
          (f)  If at any time during the term of this Agreement the requisite
               Environmental Liability Insurance coverage is not available or is
               not in place, then 

09/04/97
                                      56
<PAGE>
 
               the amount of the Corporate Guarantee provided pursuant to
               Section 9.9.4 below shall be increased accordingly, or other
               substitute financial assurance shall be provided in accordance
               with Section 9.9.7 below, or other financial assurance acceptable
               to COUNTY shall be provided.

          9.9.3  Comprehensive General Liability Insurance.
                 ----------------------------------------- 

          (a)  No later than the date of the execution of this Agreement by both
               parties, and continuing throughout the term of this Agreement,
               OWNER shall deposit with the COUNTY a certificate of insurance
               evidencing the issuance of a comprehensive general liability
               insurance policy ("General Liability Insurance") with coverage in
               an amount not less than Ten Million Dollars ($10,000,000.00),
               naming COUNTY as an additional insured and containing emergency
               response and payment procedures that are satisfactory to COUNTY,
               to secure OWNER's obligations pursuant to Sections 9.3, 9.5 and
               9.8 hereof.
            
          (b)  The General Liability Insurance shall be issued by an insurance
               company with a Standard & Poor's, Moody's or AM Best rating of B+
               or better.  The General Liability Insurance policy shall be
               reasonably satisfactory to COUNTY.
            
          (c)  Prior to making any claim on the General Liability Insurance, the
               COUNTY shall first provide at least sixty (60) days written
               demand on the OWNER, except for demand(s) arising out of those
               obligations described in Section 9.8 of this Agreement
               ("Emergencies"), in which case five (5) days written demand and
               notice shall be provided.  Each demand and notice shall specify
               the nature and amount of the obligation(s) due.  Following the
               expiration of the demand and notice periods described above, the
               COUNTY may proceed to present a claim on the General Liability
               Insurance to the extent that the obligation(s) identified in the
               demand and notice have not been satisfied by the OWNER.

               COUNTY shall promptly provide OWNER with notice and a copy of any
               claim, document or correspondence submitted to or provided by the
               General Liability 

09/04/97
                                      57
<PAGE>
 
               Insurance carrier or it agent(s). COUNTY and OWNER shall
               cooperate in good faith in the submission and processing of any
               claim made on the General Liability Insurance.

               COUNTY's right to make a claim upon the General Liability
               Insurance shall be subject to Section 9.9.8 below (Wrongful or
               Improper Claim or Draw by COUNTY).

          (d)  At any time, and from time to time, OWNER may change the General
               Liability Insurance carrier, but only with the advance written
               consent of the COUNTY, which shall not be unreasonably withheld
               or delayed.

          9.9.4  Corporate Guarantee.
                 ------------------- 

          (a)  Commencing upon the date of Start Up of Operations OWNER shall
               cause to be provided to COUNTY a guarantee agreement similar in
               form to Exhibit "K" attached hereto and incorporated herein by
               this reference ("Corporate Guarantee"), which absolutely and
               unconditionally guarantees the full and complete payment of any
               amounts payable by OWNER under Sections 9.2, 9.3, 9.5, 9.7 or 9.8
               up to the maximum amount of Ten Million Dollars ($10,000,000.00)
               per single guaranteed event thereunder.  The Corporate Guarantee
               shall be promptly reinstated to the full Ten Million Dollars
               ($10,000,000.00) after any payment in accordance with this
               Section or the Corporate Guarantee and shall remain in effect
               until and except to the extent it is terminated in whole or in
               part as provided in  or pursuant to Sections 9.9.5(c) or 9.9.7
               below or the Guarantee Agreement, or until the COUNTY gives its
               written consent to such termination.
            
          (b)  The Corporate Guarantee shall be executed by a party or entity
               other than OWNER which has a Standard & Poor's or Moody's credit
               rating of B+ or better or a tangible net worth equal to at least
               One Hundred Million Dollars ($100,000,000.00).  For purposes of
               this requirement, the guarantor's "tangible net worth" shall be
               calculated net of (i.e., excluding) the amount of the guarantor's
               investment in OWNER or in the Project and net of the amount of
               any 

09/04/97
                                      58
<PAGE>
 
               other guarantee executed by the guarantor for OWNER's
               financial obligations relating to the Project (i.e., other than
               the guarantee required by this Section 9.9.4).  At all times
               during the term of the Corporate Guarantee,  and regardless of
               whether the amount of the Corporate Guarantee is reduced from
               time to time pursuant to Sections 9.9.5(c), 9.9.7, the Guarantee
               Agreement, or otherwise with the COUNTY's written consent, at
               that time the guarantor must have either (i) a credit rating of
               B+ or better, OR (ii) a tangible net worth equal to at least One
               Hundred Million Dollars ($100,000,000.00).  Accordingly, if at
               any time during the term of the Corporate Guarantee, both (i) the
               guarantor's credit rating is below B+ (or the guarantor is
               unrated) AND (ii) the guarantor's tangible net worth is less than
               $100,000,000.00, then within ninety (90) days of becoming aware
               of such circumstance OWNER shall provide for adequate substitute
               or additional financial assurance(s) pursuant to Section 9.9.7
               below (Alternative or Substitute Financial Assurances) or as
               otherwise agreed to in writing by COUNTY.

               The Corporate Guarantee may be replaced in whole or in part with
               adequate substitute financial assurance(s) pursuant to the
               requirements of Section 9.9.7.  If a portion of the Corporate
               Guarantee is replaced by a substitute financial assurance
               pursuant to Section 9.9.7, thus reducing the amount of the
               Corporate Guarantee accordingly, or the amount of the Corporate
               Guarantee is reduced pursuant to Section 9.9.5(c), then the
               Corporate Guarantee shall remain in full force and effect as to
               the remaining amount of the Guarantee (i.e., that portion not
               replaced or reduced).

          (c)  The Corporate Guarantee shall be accompanied by a certified
               resolution of the guarantor's board of directors (or other       
               governing body if the guarantor is not a corporation)            
               authorizing the guarantor to enter into and execute the          
               Guarantee Agreement. COUNTY may also require an opinion from     
               the guarantor's legal counsel confirming that the Corporate      
               Guarantee is an authorized and binding obligation of the         
               guarantor.  Within one hundred twenty (120) days after the       
               end of each fiscal year 
               
09/04/97
                                      59
<PAGE>
 
               of the guarantor during the term of the Corporate Guarantee, the
               guarantor shall provide to COUNTY certification from a nationally
               recognized public accounting firm that the guarantor has the
               required level of tangible net worth (or required credit rating).
          (d)  Prior to making any claim on the Corporate Guarantee, the        
               COUNTY shall first provide at least sixty (60) days written      
               demand on the OWNER, except for demand(s) arising out of         
               those obligations described in Section 9.8 of this Agreement     
               ("Emergencies"), in which case five (5) days written demand      
               and notice shall be provided.  Each demand and notice shall      
               specify the nature and amount of the obligation(s) due.          
               Following the expiration of the demand and notice periods        
               described above, the COUNTY may proceed to  present a claim      
               on the Corporate Guarantee to the extent that the                
               obligation(s) identified in the demand and notice have not       
               been satisfied by the OWNER.                                     
                                                                                
          (e)  COUNTY's right to make a claim upon the Corporate Guarantee      
               shall be subject to Section 9.9.8 below.                         
                                                                                
          (f)  The obligations of OWNER imposed in Section 8 of Exhibit "K" are
               incorporated herein by reference as if set forth in full.

          9.9.5  Financial Assurances Fund.
                 ------------------------- 

          (a)  Commencing upon the date of Start Up of Operations, OWNER       
               and COUNTY shall contribute into a financial assurances fund     
               to be held by a trustee or other entity mutually selected by     
               OWNER and COUNTY ("Financial Assurances Fund") a total of        
               Ten Cents ($0.10) per each ton of waste deposited at the         
               Landfill, on a monthly basis until such time that the            
               Financial Assurances Fund equals and is maintained at a          
               minimum amount of Fifty Million Dollars ($50,000,000.00)(        
               the "Fund Cap").  OWNER and COUNTY shall each contribute one     
               half (i.e., Five Cents ($0.05) per ton) of the per tonnage       
               amount required to be deposited into the Fund.  COUNTY's         
               allocated portion of the deposit may come from the Purchase      
               Price, or otherwise, in the discretion of the COUNTY.  All       
               interest or other earnings from the Financial Assurances         
               Fund shall be deposited into and held in the Fund.  After        
               the 

09/04/97
                                      60
<PAGE>
 
               Fund Cap is reached, any amounts in the Financial            
               Assurances Fund in excess of the Fund Cap may be distributed     
               equally to OWNER and COUNTY if OWNER and COUNTY mutually         
               agree.                                                           
                                                                                
          (b)  The monies in the Financial Assurances Fund shall be held        
               and administered, pursuant to a separate agreement to be         
               entered into between COUNTY and  OWNER, for the exclusive        
               purposes of securing OWNER'S obligations under Sections 9.2,     
               9.3, 9.5, 9.7 and 9.8 above, for securing COUNTY's               
               obligations to OWNER under this Agreement, and for               
               discharging any environmental liability of OWNER or COUNTY       
               in connection with the transportation or deposit of waste at     
               the Landfill (the "Financial Assurances Fund Agreement").        
               Although COUNTY and OWNER shall each own fifty percent (50%)     
               of the Financial Assurances Fund (assuming COUNTY and OWNER      
               have made equal deposits), the Financial Assurances Fund         
               Agreement shall structure the holding and administration of      
               the Financial Assurances Fund in such a manner so as to          
               reasonably minimize the risk to and/or loss of any monies in     
               the Financial Assurances Fund as a result of the bankruptcy      
               of or creditor's claims against either the COUNTY or OWNER       
               not arising from such party's obligations under this             
               Agreement.                                                       
                                                                                
          (c)  At any time that the balance of funds in the Financial           
               Assurances Fund is such that the aggregate amount of             
               financial assurances provided under Sections 9.9.1 (Letter       
               of Credit, up to a maximum of $2 million), 9.9.2                 
               (Environmental Liability Insurance, up to a maximum of $10       
               million), 9.9.4 (Corporate Guarantee, up to a maximum of $10     
               million) and 9.9.5 (Financial Assurances Fund) exceeds           
               Thirty Million Dollars ($30,000,000.00), then OWNER shall        
               have the right to reduce, by the amount of such excess, the      
               amount of the (1) Letter of Credit, (2) Environmental            
               Liability Insurance, and (3) Corporate Guarantee, in that        
               order as (and if) the amount of each is respectively reduced     
               in full or as otherwise agreed to by COUNTY, provided that       
               the aggregate amount of financial assurances available           
               thereafter does not fall below Thirty Million Dollars            
               ($30,000,000.00).                                                
                                                                                
          (d)  Unless otherwise provided in the agreement between 

09/04/97
                                      61
<PAGE>
 
               COUNTY and OWNER described in subsection (b) above, prior to
               making any claim on the Financial Assurances Fund, the COUNTY
               shall first provide at least sixty (60) days written demand on
               the OWNER, except for demand(s) arising out of those obligations
               described in Section 9.8 of this Agreement ("Emergencies"), in
               which case five (5) days written demand and notice shall be
               provided. Each demand and notice shall specify the nature and
               amount of the obligation(s) due. Following the expiration of the
               demand and notice periods described above, the COUNTY may proceed
               to draw on the Financial Assurances Fund to the extent that the
               obligation(s) identified in the demand and notice have not been
               satisfied by the OWNER. COUNTY's right to make a claim or draw
               upon the Financial Assurances Fund shall be subject to Section
               9.9.8 below.

          9.9.6   Priority of Use of Financial Assurances.  Notwithstanding any
                  ---------------------------------------                      
other provision of this Agreement, except in the event of an Emergency (see
Section 9.8 above), if OWNER does not pay any obligation of OWNER arising out of
Section 9.2, 9.3, 9.5, 9.7 or 9.8 hereinabove, COUNTY shall seek payment of
OWNER's obligations from the financial assurances provided in  Section 9.9 and
subsections thereunder in the following order of priority unless OWNER shall
otherwise agree:
 
          (a)  First, a claim shall be made against the Environmental           
               Liability Insurance or General Liability Insurance, as           
               appropriate;                                                     
                                                                                
          (b)  Second, to the extent there is no insurance or if the            
               insurance claim has not been paid, compromised or is denied      
               within one hundred eighty (180) days of the submission of        
               the claim, a call or claim may be made on and only to the        
               extent of that portion, if any, of the Financial Assurances      
               Fund which then exceeds a Fund balance of Eight Million          
               Dollars ($8,000,000.00);                                         
                                                                                
          (c)  Third, to the extent a claim or call is not satisfied by         
               insurance and/or the Financial Assurances Fund as provided       
               in subparagraphs (a) and (b) above, a call or claim may be       
               made on the Letter of Credit(s);                                 
                                                                                
          (d)  Fourth, to the extent a claim or call is not 

09/04/97
                                      62
<PAGE>
 
               satisfied by insurance, the Financial Assurances Fund and/or the
               Letter(s) of Credit as provided in subparagraphs (a), (b) and (c)
               above, a call or claim may be made on the Corporate Guarantee;
               and
                                                           
          (e)  Fifth, to the extent a claim or call is not satisfied by         
               insurance, the Financial Assurances Fund, the Letter(s) of       
               Credit and/or the Corporate Guarantee as provided in             
               subparagraphs (a), (b), (c) and (d) above, a call or claim       
               may be made on the balance of the Financial Assurances Fund.  

     COUNTY's right to make a claim or draw upon any financial assurance shall
be subject to Section 9.9.8 below.  COUNTY and OWNER shall promptly each provide
the other with notice and copies of all claims, correspondence or other
documents submitted to or provided by any insurance carrier, trustee, financial
institution or other party in connection with any claim or call on any financial
assurance.

          9.9.7  Alternative or Substitute Financial Assurances.  With the
                 ----------------------------------------------           
COUNTY's consent, which shall not be unreasonably withheld or delayed, OWNER
shall have the right to replace in whole or in part any of the financial
assurances listed in Sections 9.9.1 through 9.9.5 with a substitute financial
assurance, provided that (i) the total dollar amount of the financial assurance
being replaced shall not be reduced from the dollar amount of such financial
assurance then in place (and required to be in place) at the time of the
substitution, (ii) insurance may not be used as a substitute financial assurance
without the COUNTY's advance written consent, and (iii) no portion of the
Financial Assurances Fund may be replaced by another financial assurance until
the aggregate amount of financial assurances exceeds Thirty Million Dollars
($30,000,000.00) and a minimum balance of Eight Million Dollars ($8,000,000.00)
is maintained in the Financial Assurances Fund after such substitution.

          In the event OWNER substitutes a new or additional Letter of Credit
for all or any part of any financial assurance hereunder, then such new or
additional Letter of Credit shall be in substantially the form of Exhibit "J" or
as otherwise approved by the advance written consent of COUNTY.

          9.9.8  Wrongful or Improper Claim or Draw by COUNTY.  COUNTY agrees
                 ---------------------------------------------               
that in the event (i) COUNTY makes a claim or draw on any of the financial
assurances described above in Sections 9.9.1 (Letter of Credit), 9.9.2
(Environmental Liability Insurance), 9.9.3 (Comprehensive General Liability
Insurance), 9.9.4 (Corporate  

09/04/97
                                      63
<PAGE>
 
Guarantee)and 9.9.5 (Financial Assurances Fund) without just cause, i.e., OWNER
is not in breach of any of its obligations secured by such financial assurance
under this Agreement, or (ii) COUNTY makes a claim or draw on any financial
assurance in violation of the priority provisions of Section 9.9.7 above
(Priority of Use of Financial Assurances), then COUNTY shall immediately
reimburse to OWNER the principal amount, if any, wrongfully or improperly drawn
on such financial assurance and all of OWNER's reasonable costs, expenses and
fees (including without limitation attorneys' fees) incurred in connection with
such wrongful or improper claim or draw, together with interest on all such
amounts (including the principal amount of the draw) at the then highest lawful
rate.

     9.10 Source Communities Indemnity Provisions.  OWNER will request, and use
          ---------------------------------------                              
its reasonable, good faith efforts to require, that each contract (Contract)
entered into between OWNER and any entity, whether public or private, which
provides for the delivery of waste to or disposal of waste at the Project shall
contain a provision, enforceable by the COUNTY, and which survives the
termination of this Agreement and the Contract, which shall provide that such
entity shall defend, indemnify, save and hold COUNTY and District, their
respective officers, agents and employees harmless from any and all liabilities,
penalties, fines, demands, claims, causes of action, suits and costs and
expenses incidental thereto, including, without limitation costs of judgments,
orders, defense, settlement and reasonable attorneys fees, which COUNTY or
District may suffer, incur, be responsible for or pay out, of whatsoever nature
or kind, including without limitation costs associated with environmental
impairment and remediation, caused by the delivery by such entity or its agents
of any waste which is not Nonhazardous solid waste to the Project or disposal of
any waste which is not Nonhazardous solid waste in the Landfill.  Such provision
shall not limit any other remedy or right available to COUNTY or District at law
or equity.

     9.11 Unforeseen Circumstances.  If an unforeseen circumstance or event
          ------------------------                                         
resulting from the Project occurs and such unforeseen circumstance or event is
not otherwise within the regulatory jurisdiction of the COUNTY or another
agency, be it state, federal or local, then upon request of COUNTY, OWNER and
COUNTY shall negotiate, in good faith, for a mutually agreed upon plan of action
which shall be undertaken by OWNER to remedy, resolve or manage such unforeseen
circumstance or event.  If OWNER and COUNTY fail to agree upon such a plan of
action within ninety (90) days, then COUNTY may request the appointment of an
arbitrator to resolve the dispute by binding arbitration. The arbitrator
appointed by COUNTY shall be a neutral arbitrator agreed to by OWNER.  If COUNTY
and 

09/04/97
                                      64
<PAGE>
 
OWNER are unable to agree on an arbitrator, then COUNTY may petition the
Superior Court of Riverside County for the appointment of an arbitrator. The
decision to arbitrate the matter rests solely with the COUNTY. Unless otherwise
specified in this Section 9.11, the binding arbitration shall be governed by the
provisions of Title 9 of Part 3, commencing at (S)1280, of the California Code
of Civil Procedure, as amended, provided, however, that OWNER and COUNTY shall
each pay fifty percent (50%) of the cost of the arbitrator and each party shall
bear its own cost for presenting the issue to the arbitrator.

     Arbitration under this Section 9.11 shall not be considered "legal action
or other proceedings" for the purpose of Section 11.17 of this Agreement.

     For the purpose of this Section 9.11, an "unforeseen circumstance or event"
shall mean any circumstance, condition or situation resulting from the Project
which is not addressed or contemplated in this Agreement, Specific Plan No. 305,
the Conditions of Approval for Specific Plan No. 305, the Mitigation Monitoring
Program for Specific Plan No. 305, Section 17. of Ordinance No. 348 (Specific
Plan Zoning Ordinance) reflecting Change of Zone No. 6249, or other current and
future land use entitlements and requirements for the Project, as the same may
be amended or supplemented from time to time, or which is not analyzed and
considered in Draft or Final Environmental Impact Statement/Environmental Impact
Report No. 397 or any future environmental documentation for the Project.  The
parties further agree that no plan of action shall be required to be undertaken
by OWNER under this Section 9.11 to remedy, resolve or manage any unforeseen
circumstance or event if the implementation of such action is commercially
infeasible.

     9.12 Survival.  The following provisions of this Agreement shall survive
          --------                                                           
the termination of this Agreement for any reason: Section 2.3.2 (Specific Plan
No. 305); the Purchase and Sale Agreement (Exhibit "F"); Sections 4.7.3 (Park,
Open Space, Habitat Mitigation, Environmental Monitoring and Research) and 4.7.4
(Environmental Mitigation Trust) and Exhibit "H" (Environmental Mitigation
Trust); Section 8 and subsections thereunder (Default and Remedies); and
Sections 9.2 (Third Party Litigation Concerning Agreement), 9.3 (OWNER
Indemnity), 9.4 (COUNTY Indemnity), 9.5 (Additional OWNER Indemnity), 9.6
(Reservation of Rights), 9.7 (Environmental Impairment and Damage to Natural
Resources) and 9.8 (Emergencies).

     The provisions of Section 9.9 (Financial Assurances) and all subsections
thereunder shall survive the termination of this 

09/04/97
                                      65
<PAGE>
 
Agreement until the expiration of five years from the cessation of the disposal
of waste at the Landfill; provided, however, in the event a claim is made by
COUNTY on the financial assurances at any time during that period (i.e., prior
to the expiration of five years from the cessation of the disposal of waste at
the Landfill), then an adequate reserve for such claim shall be established by
agreement of OWNER and COUNTY.

     The provisions of Section 3.14 (Staged Tonnage Increase) and Section 4.7.7
(Host Community Funding) shall survive the termination of this Agreement only if
termination is by reason of COUNTY's default.

10.  MORTGAGEE PROTECTION.
     -------------------- 

     The parties hereto agree that this Agreement shall not prevent or limit
OWNER, in any manner, at OWNER's sole discretion, from encumbering the Property
or any interest therein or portion thereof or any improvement thereon, or from
encumbering, selling or reserving air space associated with the Property by any
mortgage, deed of trust or other security device securing financing with respect
to the Property.  COUNTY acknowledges that the lenders providing such financing
may require certain Agreement interpretations and modifications and agrees upon
request, from time to time, to meet with OWNER and representatives of such
lenders to negotiate in good faith any such request for interpretation or
modification.  COUNTY will not unreasonably delay or withhold its consent to any
such requested interpretation or modification provided such interpretation or
modification is consistent with the intent and purposes of this Agreement.  Any
Mortgagee of the Property shall be entitled to the following rights and
privileges:

          (a)  Neither entering into this Agreement nor a breach of this        
               Agreement shall defeat, render invalid, diminish or impair       
               the lien of any mortgage on the Property made in good faith      
               and for value, unless otherwise required by law.                 
                                                                                
          (b)  The Mortgagee of any mortgage or deed of trust encumbering       
               the Property, or any part thereof, which Mortgagee has           
               submitted a request in writing to the COUNTY in the manner       
               specified herein for giving notices, shall be entitled to        
               receive written notification from COUNTY of any default by       
               OWNER in the performance of OWNER's obligations under this       
               Agreement.

09/04/97
                                      66
<PAGE>
 
          (c)  If COUNTY timely receives a request from a Mortgagee             
               requesting a copy of any notice of default given to OWNER        
               under the terms of this Agreement, COUNTY shall provide a        
               copy of that notice to the Mortgagee within ten (10) days of     
               sending the notice of default to OWNER.  The Mortgagee shall     
               have the right, but not the obligation, to cure the default      
               during the remaining cure period allowed such party under        
               this Agreement.                                                  
                                                                                
          (d)  Any Mortgagee who comes into possession of the Property, or      
               any part thereof, pursuant to foreclosure of the mortgage or     
               deed of trust, or deed in lieu of such foreclosure, shall        
               take the Property, or part thereof, subject to the terms of      
               this Agreement.  Notwithstanding any other provision of this     
               Agreement to the contrary, no Mortgagee shall have an            
               obligation or duty under this Agreement to perform any of        
               OWNER's obligations or other affirmative covenants of OWNER      
               hereunder, or to guarantee such performance; provided,           
               however, that should the Mortgagee operate the Landfill then     
               Mortgagee shall be subject to all of the provisions of this      
               Agreement and provided further that to the extent that any       
               covenant to be performed by OWNER is a condition precedent       
               to the performance of a covenant by COUNTY, the performance      
               thereof shall continue to be a condition precedent to            
               COUNTY's performance hereunder, and further provided that        
               any sale, transfer or assignment by any Mortgagee in             
               possession shall be subject to the provisions of Section 2.4     
               of this Agreement.                               

11.  MISCELLANEOUS PROVISIONS.
     ------------------------ 

     11.1 Recordation of Agreement.  This Agreement and any amendment or
          ------------------------                                      
cancellation thereof shall be recorded with the County Recorder by the Clerk of
the Board of Supervisors within the period required by Section 65868.5 of the
Government Code.

     11.2 Entire Agreement.  This Agreement sets forth and contains the entire
          ----------------                                                    
understanding and agreement of the parties, and there are no oral or written
representations, understandings or ancillary covenants, undertakings or
agreements which are not contained or expressly referred to herein.  No
testimony or evidence of any such representations, understandings or covenants
shall be admissible in any proceeding of any kind or nature to interpret or
determine the 

09/04/97
                                      67
<PAGE>
 
terms or conditions of this Agreement.

     11.3 Severability.  If any term, provision, covenant or condition of this
          ------------                                                        
Agreement shall be determined invalid, void or unenforceable by a court of
competent jurisdiction, the remainder of this Agreement shall not be affected
thereby to the extent such remaining provisions are not rendered impractical to
perform taking into consideration the purposes of this Agreement.
Notwithstanding the foregoing, the provisions regarding Economic Benefits set
forth in Section 4 of this Agreement, the provisions regarding Indemnity and
Financial Assurances set forth in Section 9 of this Agreement, and the Purchase
and Sale Agreement are essential elements of this Agreement and COUNTY would not
have entered into this Agreement but for such provisions, and therefore in the
event any such provisions is/are determined to be invalid, void or
unenforceable, this entire Agreement shall be null and void and of no force and
effect whatsoever.  In addition, if OWNER violates the terms of Section  2.8 of
this Agreement ("Restriction on Importation") and a court of competent
jurisdiction subsequently upholds any challenge by OWNER to the enforceability
of said Section 2.8 and declares the terms of Section 2.8 invalid, void or
unenforceable, then this entire Agreement shall be null and void and of no force
and effect whatsoever.

     11.4 Interpretation and Governing Law.  This Agreement and any dispute
          --------------------------------                                 
arising hereunder shall be governed and interpreted in accordance with the laws
of the State of California.  This Agreement shall be construed as a whole
according to its fair language and common meaning to achieve the objectives and
purposes of the parties hereto, and the rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be employed
in interpreting this Agreement, all parties having been represented by counsel
in the negotiation and preparation hereof.

     11.5 Section Headings.  All section headings and subheadings are inserted
          ----------------                                                    
for convenience only and shall not affect any construction or interpretation of
this Agreement.

     11.6 Singular and Plural.  As used herein, the singular of any word
          -------------------                                           
includes the plural.
 
     11.7 Joint and Several Obligations.  If at any time during the term of this
          -----------------------------                                         
Agreement the Property or Project is owned, in whole or in part, by more than
one OWNER, all rights and obligations of such OWNERS under this Agreement shall
be joint and several, the default of any such OWNER shall be the default of all
such OWNERS, and any OWNER have the right to enforce the terms of this

09/04/97
                                      68
<PAGE>
 
Agreement.

     11.8 Time of Essence.  Time is of the essence in the performance of the
          ---------------                                                   
provisions of this Agreement as to which time is an element.

     11.9 Waiver.  Failure by a party to insist upon the strict performance of
          ------                                                              
any of the provisions of this Agreement by the other party, or the failure by a
party to exercise its rights upon the default of the other party, shall not
constitute a waiver of such party's right to insist and demand strict compliance
by the other party with the terms of this Agreement thereafter.

     11.10   No Third Party Beneficiaries.  This Agreement is made and entered
             ----------------------------                                     
into for the sole protection and benefit of the parties and their successors and
assigns.  No other person shall have any right of action based upon any
provision of this Agreement.

     11.11   Force Majeure.  Neither party shall be deemed to be in default
             -------------                                                 
where failure or delay in performance of any of its obligations under this
Agreement is caused by floods, earthquakes, other Acts of God, fires, wars,
riots or similar hostilities, strikes and other labor difficulties beyond the
party's control (including the party's employment force), government
regulations, court actions (such as restraining orders or injunctions),
referendum, substantially changed economic conditions or circumstances or other
causes beyond the party's control.  If any such events shall occur, the time for
performance by either party of any of its obligations hereunder shall be
extended for the period of time that such events prevented such performance, but
in no event shall the time be extended beyond the term of this Agreement.

     11.12   Mutual Covenants.  The covenants contained herein are mutual
             ----------------                                            
covenants and also constitute conditions to the concurrent or subsequent
performance by the party benefited thereby of the covenants to be performed
hereunder by such benefited party.

     11.13   Successors in  Interest.  The burdens of this Agreement shall be
             -----------------------                                         
binding upon, and the benefits of this Agreement shall inure to, all successors
in interest to the parties to this Agreement.  All provisions of this Agreement
shall be enforceable as equitable servitudes and constitute covenants running
with the land.  Each covenant to do or refrain from doing some act hereunder
with regard to development of the Property: (a) is for the benefit of and is a
burden upon every portion of the Property; (b) runs with the Property and each
portion thereof; and (c) is binding upon each party and each successor in
interest during ownership of the 

09/04/97
                                      69
<PAGE>
 
Property or any portion thereof.

     11.14   Counterparts.  This Agreement may be executed by the parties in
             ------------                                                   
counterparts, which counterparts shall be construed together and have the same
effect as if all of the parties had executed the same instrument.

     11.15   Project as a Private Undertaking.  It is specifically understood
             --------------------------------                                
and agreed by and between the parties hereto that the development of the Project
is a private development, that neither party is acting as the agent of the other
in any respect hereunder, and that each party is an independent contracting
entity with respect to the terms, covenants and conditions contained in this
Agreement.  No partnership, joint venture or other association of any kind is
formed by this Agreement.  The only relationship between COUNTY and OWNER is
that of a government entity regulating the development of private property and
the owner of such property.

     11.16   Further Actions and Instruments.  Each of the parties shall
             -------------------------------                            
cooperate with and provide reasonable assistance to the other to the extent
contemplated hereunder in the performance of all obligations under this
Agreement and the satisfaction of the conditions of this Agreement.  Upon the
request of either party at any time, the other party shall promptly execute,
with acknowledgment or affidavit if reasonably required, and file or record such
required instruments and writings and take any actions as may be reasonably
necessary under the terms of this Agreement to carry out the intent and to
fulfill the provisions of this Agreement or to evidence or consummate the
transactions contemplated by this Agreement.
 
     11.17     Jurisdiction, Venue and Attorneys' Fees.  Any action at law or in
               ---------------------------------------                          
equity arising under this Agreement or brought by a party hereto for the purpose
of enforcing, construing or determining the validity of any provision of this
Agreement shall be filed and tried in the Superior Court of the County of
Riverside, State of California, and the parties hereto waive all provisions of
law providing for the filing, removal or change of venue to any other State
court provided, however, that the parties reserve the right to file in or remove
to Federal District Court.  Should legal action or other proceedings be brought
by either party for breach of this Agreement or to enforce any provision, the
prevailing party in such action or proceeding shall be entitled to reasonable
attorneys' fees, court costs, and other litigation expenses, including without
limitation, expenses incurred for preparation and discovery.

     11.18     Eminent Domain.  No provision of this Agreement 
               --------------
             
09/04/97
                                      70
<PAGE>
 
shall be construed to limit or restrict the exercise by COUNTY of its power of
eminent domain or, except to extent provided in Section 8.3 if applicable,
OWNER's right to just compensation in the event COUNTY exercises its power of
eminent domain.

     11.19     County's Reserve for Unfunded County Liabilities on Other
               ---------------------------------------------------------
Landfills.  The parties acknowledge that the COUNTY, through the establishment
----------                                                                    
and operation of the Riverside County Waste Resources Management District, has
established a sinking fund reserve in order to fund certain currently unfunded
potential liabilities relating to the closure, post-closure and remediation of
landfills owned and operated by the COUNTY or the District.  To date, the
District has used a portion of the tipping fees charged for County Waste at
these facilities to contribute to its closure, post-closure and remediation
reserve fund.  In the event OWNER contracts with any party to accept County
Waste, OWNER will request and in good faith endeavor to require that such user
make a contribution to the District's closure/post-closure/remediation reserve
fund; this covenant is not intended, and shall not be interpreted to, put OWNER
in a less competitive position for County Waste contracts vis-a-vis other
landfills or waste disposal facilities.

     11.20     Authority to Execute.  The person or persons executing this
               --------------------                                       
Agreement or Exhibit attached hereto on behalf of OWNER or any other person or
business entity hereby warrants and represents that he/she has/have the
authority to execute this Agreement or Exhibit on behalf of his/her corporation,
partnership or business entity and warrants and represents that he/she has/have
the authority to bind OWNER or any other person or business entity to the
performance of its obligations hereunder.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year set forth below.

09/04/97
                                      71
<PAGE>
 
                              "COUNTY"
                              COUNTY OF RIVERSIDE


Dated:_______________         By:_____________________________

ATTEST:

GERALD A. MALONEY
Clerk of the Board

By:__________________
     Deputy



(SEAL)




09/04/97
                                      72
<PAGE>
 
                              "OWNER"
                              MINE RECLAMATION CORPORATION,
                              A CALIFORNIA CORPORATION



Dated: _____________          By:____________________________

                              Title: ________________________



Dated: _____________          By:____________________________

                              Title:_________________________



[ALL SIGNATURES SHALL BE ACKNOWLEDGED BY A NOTARY PUBLIC.  EXECUTION ON BEHALF
OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.]

09/04/97
                                      73 
<PAGE>
 
                              KAISER EAGLE MOUNTAIN, INC.,
                              A DELAWARE CORPORATION



Dated: _____________          By:____________________________

                              Title: _________________________



Dated: _____________          By:____________________________

                              Title:__________________________

 



[ALL SIGNATURES SHALL BE ACKNOWLEDGED BY A NOTARY PUBLIC.  EXECUTION ON BEHALF
OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.]

09/04/97
                                      74
<PAGE>
 
                              EAGLE MOUNTAIN RECLAMATION, INC.,
                              A DELAWARE CORPORATION



Dated: _____________          By:____________________________

                              Title: _________________________



Dated: _____________          By:____________________________

                              Title:__________________________



 



[ALL SIGNATURES SHALL BE ACKNOWLEDGED BY A NOTARY PUBLIC.  EXECUTION ON BEHALF
OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.]

09/04/97
                                      75
<PAGE>
 
                              KAISER VENTURES INC., A DELAWARE
                              CORPORATION



Dated: _____________          By:____________________________

                              Title: _________________________



Dated: _____________          By:____________________________

                              Title:__________________________



[ALL SIGNATURES SHALL BE ACKNOWLEDGED BY A NOTARY PUBLIC.  EXECUTION ON BEHALF
OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.]

09/04/97
                                      76
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "A"


                      LEGAL DESCRIPTION OF EAGLE MOUNTAIN
                      -----------------------------------
                        LANDFILL SPECIFIC PLAN BOUNDARY
                        -------------------------------



                          [legal description follows]



                                       1
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "B"

                     MAP SHOWING PROPERTY AND ITS LOCATION
                     -------------------------------------












DUE TO THE SIZE OF THE MAP EXHIBIT "B" MENTIONED ABOVE IS ON FILE IN THE
RIVERSIDE COUNTY PLANNING DEPARTMENT AND IS INCORPORATED HEREIN BY REFERENCE.

                                       1
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "C"


                         EXISTING DEVELOPMENT APPROVALS
                         ------------------------------


GENERAL PLAN AMENDMENT
----------------------

     General Plan Amendment No. 402

SPECIFIC PLAN
-------------
 
     Specific Plan No. 305


ZONING
------

     Ordinance No. 348.1355
     (Zone Change No. 1621)

     Ordinance No. 348.3477
     (Zone Change No. 6249)


LAND DIVISIONS
--------------

     None

OTHER DEVELOPMENT APPROVALS
---------------------------

     Revised Permit No. 158 to Reclamation Plan No. 107



The development approvals listed above include the approved maps and all
conditions of approval.

COPIES OF THE EXISTING DEVELOPMENT APPROVALS LISTED ABOVE ARE ON FILE IN THE
RIVERSIDE COUNTY PLANNING DEPARTMENT AND ARE INCORPORATED HEREIN BY REFERENCE.
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "D"

                         EXISTING LAND USE REGULATIONS
                         -----------------------------


1.   Riverside County Comprehensive General Plan as amended through Resolution
     No. 97-097.

2.   Ordinance No. 348 as amended through Ordinance No. 3793.

3.   Ordinance No. 448 as amended through Ordinance No. a.

4.   Ordinance No. 457 as amended through Ordinance No. 88.

5.   Ordinance No. 458 as amended through Ordinance No. 12.

6.   Ordinance No. 460 as amended through Ordinance No. 137.

7.   Ordinance No. 461 as amended through Ordinance No. 8.

8.   Ordinance No. 509 as amended through Ordinance No. 2.

9.   Ordinance No. 546 as amended through Ordinance No. 15.

10.  Ordinance No. 547 as amended through Ordinance No. 7.

11.  Ordinance No. 555 as amended through Ordinance No. 18.

12.  Ordinance No. 617 as amended through Ordinance No. 4.

13.  Ordinance No. 650 as amended through Ordinance No. 4.

14.  Ordinance No. 659 as amended through Ordinance No. 5.

15.  Ordinance No. 663 as amended through Ordinance No. 10.

16.  Ordinance No. 671 as amended through Ordinance No. 13.

17.  Ordinance No. 682 as amended through Ordinance No. 3.

18.  Resolution No. 87-525a Establishing Procedures and Requirements for the
     Consideration of Development Agreements, as amended by Resolution No. 88-
     39, Resolution No. 88-119 and Resolution 91-233.

COPIES OF THE EXISTING LAND USE REGULATIONS LISTED ABOVE ARE ON FILE IN THE
RIVERSIDE COUNTY PLANNING DEPARTMENT AND ARE INCORPORATED HEREIN BY REFERENCE.
<PAGE>
 
                          Development Agreement No. 64

                                  EXHIBIT "E"

                        ASSIGNMENT OF LEASEHOLD INTEREST
                        --------------------------------


     THIS AGREEMENT is this _____ day of _______, 19__, by and between MINE
RECLAMATION CORPORATION, a California corporation, hereinafter called
"Assignor," and the COUNTY OF RIVERSIDE, a political subdivision of the State of
California, hereinafter called "COUNTY."


                                    RECITALS
                                    --------


     A.  KAISER EAGLE MOUNTAIN, INC., as Landlord, KAISER VENTURES INC., as
Landlord's guarantor, and Assignor as Tenant executed a Lease on November 30,
1988, and subsequently recorded a Memorandum of Lease on December 1, 1988, as
Instrument No. 351814, of the County Recorder of Riverside County, California.
Said lease, as amended, is herein referred to as the "Lease."  By the terms of
the Memorandum of Lease, the real property described in the Lease was leased to
Assignor as Tenant for a term of One Hundred (100) years, commencing on November
30, 1988, and ending on November 30, 2088, subject to earlier termination as
therein provided ("Leasehold Interest").

     B.  Assignor now desires to assign to COUNTY  a eight percent (8%)
undivided interest in the air space of that portion of Assignor's Leasehold
Interest which is subject to Specific Plan No. 305, as more particularly
described in Exhibit "A" attached to Development Agreement No. 64, as tenants-
in-common, and COUNTY desires to accept the assignment thereof.

     THEREFORE, Assignor and COUNTY agree as follows:


                                   ASSIGNMENT
                                   ----------


     FOR VALUE RECEIVED, Assignor hereby assigns and transfers to COUNTY, a
eight Percent (8%) undivided interest, as tenants-in-common, of all of its
right, title and interest in and to the air space of that portion of the
Leasehold Interest hereinbefore described, and COUNTY hereby agrees to and does
accept the assignment.

     Executed at _____________________, California, on the day and 

                                       1
<PAGE>
 
year first written above.
 
                                    ASSIGNOR:

                                    MINE RECLAMATION CORPORATION, a California
                                    corporation

                                    By:  ___________________________

                                    Title:  ________________________
 
                                    By:  ___________________________

                                    Title:  ________________________


                              CONSENT OF LANDLORD
                              -------------------

     The undersigned are the Landlord and guarantor of Landlord in the Lease
described in the foregoing Assignment and hereby consents to the Assignment of
that air space of that portion of the Lease hereinbefore described to the COUNTY
OF RIVERSIDE.

                                    LANDLORD:

                                    KAISER EAGLE MOUNTAIN, INC.

                                    By:  ___________________________

                                    Title:  ________________________


                                    By:  ___________________________

                                    Title:  ________________________

                                    KAISER VENTURES INC.

                                    By:  ___________________________

                                    Title:  ________________________


                                    By:  ___________________________

                                    Title:  ________________________


(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                                       2
<PAGE>
 
                                    ASSIGNEE:

                                    COUNTY OF RIVERSIDE


                                    By:___________________________
                                            Chairman, Board of
                                            Supervisors


ATTEST:

GERALD A. MALONEY
Clerk of the Board


By:____________________
     Deputy

(SEAL)

                                       3
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "F"

                          PURCHASE AND SALE AGREEMENT
                          ---------------------------

     THIS PURCHASE AND SALE AGREEMENT ("Agreement") is made this _____ day
of ____________, 19__, by and between the COUNTY OF RIVERSIDE, a political
subdivision of the State of California ("COUNTY") and MINE RECLAMATION
CORPORATION, a California corporation ("Buyer").

                                R E C I T A L S
                                ---------------
                                        
     WHEREAS, COUNTY is the owner of an eight percent (8%) undivided
interest in the air space of that portion of a Leasehold Interest which is
subject to Specific Plan No. 305 pursuant to an Assignment of Leasehold Interest
(the "County Interest"); and

     WHEREAS, COUNTY has determined that the County Interest is surplus
property pursuant to Section 4.3 of Development Agreement No. 64, which by this
reference is incorporated herein and made a part hereof; and

     WHEREAS, COUNTY desires to sell and Buyer desires to purchase the County
Interest; and

     WHEREAS, Buyer and COUNTY intend that the consideration to be paid
pursuant to this Purchase and Sale Agreement will derive from monies generated
from Buyer's Eagle Mountain Landfill Project ("Project").

     NOW, THEREFORE, it is agreed as follows:

     1.  RECITALS INCORPORATED.
         --------------------- 
 
         The above-stated Recitals are hereby expressly made a part of this
Purchase and Sale Agreement.

     2.  PURCHASE AND SALE; CONSIDERATION.
         -------------------------------- 

          2.1  Purchase and Sale.  COUNTY hereby agrees
               -----------------                       
to sell and Buyer hereby agrees to purchase the County Interest.

          2.2  COUNTY's Rights and Obligations.  Concurrent with the execution
               -------------------------------                                
of this Agreement, COUNTY agrees to execute and deliver to Buyer an Assignment
of Leasehold Interest.

          2.3  Consideration.  As consideration for the transfer of the County
               -------------                                                  
Interest to Buyer, Buyer shall pay to COUNTY the following sums of money
("Purchase Price") based solely and exclusively upon the volume of Non-County
Waste actually disposed 

                                       1
<PAGE>
 
of at the Landfill, and as illustrated in Table F-1 attached hereto and
incorporated herein by this reference; for purposes of calculating the Purchase
Price payments, the term "PERCENTAGE BASE RATE" as used below shall mean (a) Ten
Percent (10%)of the lowest price per ton then being charged for County or Non-
County Waste, if the amount of Non-County Waste disposed of at the Landfill in
the subject calendar month is 310,000 tons or less, and (b) Twelve and One-Half
Percent (12.5%) of the lowest price per ton then being charged for County or 
Non-County Waste, if the amount of Non-County Waste disposed of at the Landfill
in the subject calendar month is more than 310,000 tons:

          2.3.1  The greater of (i) the Percentage Base Rate or (ii) $2.70 per
ton, for each ton of Non-County Waste disposed of at the Landfill in any
calendar month;

          2.3.2  An additional $0.80 per ton for additional Non-County Waste
disposed of at the Landfill in any calendar month, after 180,000 tons and until
260,000 tons of Non-County Waste have been disposed of at the Landfill in that
month;

          2.3.3  An additional $0.50 per ton for additional Non-County Waste
disposed of at the Landfill in any calendar month, after 260,000 tons and until
310,000 tons of Non-County Waste have been disposed of at the Landfill in that
month;

          2.3.4  An additional $1.00 per ton for additional Non-County Waste
disposed of at the Landfill in any calendar month, after 310,000 tons and until
410,000 tons of Non-County Waste have been disposed of at the Landfill in that
month; and

          2.3.5  An additional $1.00 per ton for additional Non-County Waste
disposed of at the Landfill in any calendar month, after 410,000 tons of Non-
County Waste have been disposed of at the Landfill in that month.

          2.4  Environmental Mitigation Trust Payments.  From the amounts
               ---------------------------------------                   
received pursuant to Section 2.3 of this Agreement, COUNTY shall deposit $0.90
per ton into the Environmental Mitigation Trust established pursuant to Sections
4.7.3 and 4.7.4 of Development Agreement No. 64 and Exhibit "H" thereto.

          2.5  Environmental Mitigation Trust COLA Payments.  The Environmental
               --------------------------------------------                    
Mitigation Trust established pursuant to Sections 4.7.3 and 4.7.4 of Development
Agreement No. 64 and Exhibit "H" thereto provides for a cost of living increase
in the $0.90 per ton Environmental Mitigation Trust payment upon the occurrence
of certain events ("COLA INCREASE").  The COLA Increase shall be calculated as
follows:

     Commencing on January 1 of the tenth (10th) year after that 

                                       2
<PAGE>
 
     year in which total non-hazardous municipal solid waste disposed of at the
     Landfill reaches the maximum annual amount (6,240,000 tons) of non-
     hazardous municipal solid waste permitted by the COUNTY ("Base Year") that
     can be disposed of at the Landfill, and on January 1 of every tenth (10th)
     year thereafter ("Tenth Anniversary Year"), the Environmental Mitigation
     Trust payment (EMT Payment) shall be modified to an amount calculated as
     follows: The then current EMT Payment multiplied by a fraction, the
     numerator of which is the COLA Index amount on January 1 of the then
     current Tenth Anniversary Year and the denominator of which is the COLA
     Index amount on January 1, ten years prior thereto; provided however, that
     in no event shall the adjusted EMT Payment be less than ninety cents
     ($0.90) per ton; and provided further that the increase for the next
     succeeding ten year period shall not exceed fifty percent (50%) of the EMT
     Payment in effect immediately prior to the increase as calculated pursuant
     to this paragraph. The COLA Index shall be the Consumer Price Index for all
     Urban Consumers in the Los Angeles-Anaheim-Riverside Areas (1982-1984 =
     100), published by the United State Bureau of Labor Statistics. If the COLA
     Index specified herein is discontinued or revised during the term of this
     Agreement, such other governmental index or computation with which it is
     replaced shall be used in order to obtain substantially the same result as
     would have been obtained if the COLA Index had not been discontinued.

The Purchase Price payments to be made by Buyer to COUNTY under Section 2.3.1
hereof shall be increased by the amount of any COLA Increase which is required
for the EMT Payment under the foregoing paragraph (i.e., the amount in excess of
$0.90 per ton).

          2.6  Payment Adjustment; Payment Terms.
               --------------------------------- 

               2.6.1   Payment to the COUNTY of the Purchase Price shall be
made on a monthly basis within one hundred twenty (120) days after the actual
disposal of waste within the Landfill; provided, however, that commencing on the
tenth anniversary date of this Agreement, in the event amounts actually owed the
COUNTY pursuant hereto do not equal Fifty Thousand Dollars ($50,000.00) per
month (Minimum Monthly Payment), Buyer shall nevertheless pay to COUNTY at least
the Minimum Monthly Payment which shall be credited against future amounts due
hereunder.  Commencing on the fifteenth anniversary date of this Agreement and
as of each anniversary date thereafter, and continuing until January 1, 2015,
the Minimum Monthly Payment shall increase by Ten Thousand Dollars ($10,000.00).

              2.6.2  In the event Buyer receives an advance payment of
tipping fees from any Landfill contract user (including, but not limited to,
money paid to Buyer from the sale of capacity 

                                       3
<PAGE>
 
rights, options to reserve capacity or options to secure a fixed or reduced
future tipping fee meeting the requirements of this Section 2.6.2), which
payment is to be credited against amounts which would otherwise be due to the
COUNTY pursuant to Section 2.3 hereof, Buyer shall pay to COUNTY Eight Percent
(8%) of the amount of such advance payment. The full amount of any money paid to
COUNTY pursuant hereto shall be credited against future payments next due to
COUNTY as a result of Non-County Waste actually deposited in the Landfill by the
contract user making the advance payment, or its assigns, until credited in
full.

          2.6.3 Provided that the documentation effecting each of the following
types of transactions contain an express acknowledgment of the obligation of any
person, firm or entity depositing Non-County Waste in the Landfill to make the
payments provided in Section 2.3 hereof, no Purchase Price payment shall be
payable to COUNTY as a result of:

              2.6.3.1   The sale of the stock of Buyer.
              2.6.3.2   The sale of any asset of Buyer involved in the Project,
                        except for any asset on which a payment would be due to
                        COUNTY pursuant to the provisions of Section 2.6.2.
              2.6.3.3   The sale of an option to purchase the stock of Buyer or
                        any asset of Buyer involved in the Project, except for
                        any asset on which a payment would be due to COUNTY
                        pursuant to the provisions of Section 2.6.2, provided,
                        however, that no advance payment will be payable to
                        COUNTY under Section 2.6.2 unless the option is
                        exercised and the option price is actually credited
                        against the purchase price of such asset.
              2.6.3.4   The reimbursement to Buyer of any expenses, costs, fees
                        or other charges incurred by it in the development,
                        permitting, licensing, construction or operation of the
                        Project.
              2.6.3.5   Any other payment to Buyer of whatsoever kind or nature
                        arising out of or in connection with the Project.

          2.6.4     Notwithstanding the foregoing with respect to the
payment of the Purchase Price, each party acknowledges that:

                                       4
<PAGE>
 
          (a) At the present time the projected tipping fee to users of the
Landfill may exceed alternative tipping fees charged by many competitors.  In
the event Buyer meets with significant resistance to the tipping fee it proposes
to charge a user, it may request COUNTY to consider a reduction, on a contract
by contract basis, of the Purchase Price payment.  In such event, the parties
will meet within thirty (30) days of written notice from Buyer to COUNTY and
negotiate in good faith with respect to a reduction of the Purchase Price
payment, provided, however, the parties hereto recognize that there is no
obligation on the part of COUNTY to agree to any such reduction while at the
same time recognizing that failure to reduce the Purchase Price payment may
result in a diminution of the use and stream of income to both the COUNTY and
Buyer.  In the event Buyer requests a reduction of the Purchase Price payment,
it shall allow the COUNTY reasonable access to its proprietary financial
information, subject to the COUNTY's agreement to maintain the confidentiality
of such information.
 
          (b) The Purchase Price set forth herein has been negotiated and agreed
to based upon, among other things, the provisions of Section 7 of Development
Agreement No. 64.  In the event all of the property described in Exhibit "A" of
Development Agreement No. 64 ("Property") becomes part of a single city as the
result of incorporation or annexation and the city legally imposes any fee,
charge, tax or other imposition which would be a credit if imposed by the COUNTY
pursuant to Section 4.7.9 of Development Agreement No. 64, the parties will meet
within thirty (30) days of written notice from Buyer to COUNTY and negotiate in
good faith with respect to a reduction of the Purchase Price payment.  In the
event Buyer requests a reduction of the Purchase Price payment, it shall allow
COUNTY reasonable access to its proprietary financial information.

          2.6.5  Buyer shall maintain complete, accurate and correct written
records of waste volumes at or with respect to the Landfill which would give
rise to payment to COUNTY, as provided in this Agreement. Such records shall be
open for inspection by COUNTY and its authorized agents and representatives at
all reasonable times, but, only after at least five (5) business day's notice,
at COUNTY'S sole cost and expense; provided, however, that, if any inspection by
COUNTY results in an adjustment to Buyer's records which has the effect of
increasing any payment by more than three percent (3%) of the amount paid by
Buyer, then the cost of such inspection shall be borne solely by Buyer. Without
limiting the effect of the foregoing, Buyer shall provide and maintain proper
books, records and accounts in which shall be kept correct records of the type
and quantity of the wastes which are deposited to the Landfill, as provided in
this Agreement. In addition, Buyer shall provide and maintain, at each point of
determination of tonnages of the wastes which are deposited at the Landfill,
irrespective of whether such points are located at or outside of the Landfill,
certified scales or other devices which 

                                       5
<PAGE>
 
are suitable for accurately determining quantity of the wastes which are
deposited at the Landfill. The weight in tons of the wastes which are deposited
at the Landfill shall be determined by deducting the tare weight of the vehicle
or container in which they are transported from the loaded weight of such
vehicle or container. COUNTY shall have the right, at its sole cost and expense,
to test the accuracy of such scales or other devices, at any time, with or
without notice; provided, however, that, if any testing by COUNTY necessitates
the recalibration of such scales or other devices, then the cost of such testing
shall be borne solely by Buyer. If any inspection or testing by COUNTY, as
provided in this Section results in an adjustment in any payment, or if any
adjustment between Buyer and any customer of Buyer requires an adjustment in any
payment, then COUNTY and Buyer shall cooperate with one another in retroactively
correcting all such payments.

          2.7  No Increase in Purchase Price for Staged Tonnage Increase or
               ------------------------------------------------------------
Extension of Term.  In the event an independent scientific panel is established
-----------------                                                              
in accordance with the requirements of Section 3.14 (Staged Tonnage Increase) or
Section 2.3 (Term) of Development Agreement No. 64, the panel shall not be
authorized to request an increase in the Purchase Price payments above those set
forth in this Agreement.

          2.8  Breach.   Any breach of either party's obligations under any of
               ------                                                         
the provisions of Section 2 and sub-sections thereunder shall be deemed to be a
breach of such party's obligations under Development Agreement No. 64.

     3.   TIMELY PERFORMANCE.
          ------------------ 

          Time is of the essence of this Agreement and failure to comply with
this provision shall be a material breach of this Agreement.

     4.   ATTORNEY'S FEES.
          --------------- 

          If either party files any action or brings any proceeding against the
other arising out of this Agreement, then the prevailing party shall be entitled
to recover as an element of its costs of suit, and not as damages, reasonable
attorney's fees to be fixed by the court.  The "prevailing party" shall be the
party who is entitled to recover its costs of suit, whether or not suit proceeds
to final judgment.  A party not entitled to recover its costs shall not recover
attorney's fees.  No sum for attorney's fees shall be counted in calculating the
amount of a judgment for purposes of determining whether a party is entitled to
its costs or attorney's fees.
 
     5.   EFFECT OF WAIVER OF PROVISION OR REMEDY.
          --------------------------------------- 

          No waiver by a party of any provision of this Agreement shall be
considered a waiver of any other provision or any 

                                       6
<PAGE>
 
subsequent breach of the same or any other provision, including the time for
performance of any such provision. The exercise by a party of any remedy
provided in this Agreement or at law shall not prevent the exercise by that
party of any other remedy provided in this Agreement or at law.

     6.   AMENDMENT.
          --------- 

          This Agreement may be amended, in whole or in part, only upon written
agreement duly executed by the parties hereto.

     7.   COUNTERPARTS.
          ------------ 

          This Agreement and all amendments and supplements to it may be
executed in counterparts, and all counterparts together shall be construed as
one document.

     8.   BINDING ON SUCCESSORS AND ON OWNERS UNDER DEVELOPMENT AGREEMENT.
          --------------------------------------------------------------- 

          This Agreement inures to the benefit of, and is binding on, the Buyer,
its heirs, personal representatives, assigns, successors, and the COUNTY.

          By their signatures below, Kaiser Eagle Mountain, Inc., Eagle Mountain
Reclamation, Inc. and Kaiser Ventures Inc., which are all defined as "Owners"
under Development Agreement No. 64,  hereby agree to be bound by the obligations
of Buyer hereunder, and each of such parties shall be entitled to enforce
Buyer's rights under this Agreement.

     9.   CAPTIONS, JOINT AND SEVERAL LIABILITY, CONTROLLING LAW.
          ------------------------------------------------------ 

          The captions heading the various paragraphs of this Agreement are for
convenience and shall not be considered to limit, expand or define the contents
of the respective paragraphs.

          Masculine, feminine or neuter gender and the singular and the plural
number, shall each be considered to include the other whenever the context so
requires.  If either party consists of more than one person, each such person
shall be jointly and severally liable.

          This Agreement shall be interpreted under the California law and
according to its fair meaning, and not in favor of or against any party.

     10.  SURVIVAL.
          -------- 

          This Agreement is independent of and separate and apart from any and
all other or additional agreements between the parties hereto of whatsoever
kind, nature or sort, concerning or in any 

                                       7
<PAGE>
 
manner related to the subject matter hereof, and shall survive the termination
or expiration of any and all such agreements, including, but not by way of
limitation, Development Agreement No. 64, between said parties.

     11.  NOTICES.
          ------- 

     All notices shall be in writing and shall be considered given either:  (i)
when delivered in person to the recipient named below; or (ii) two (2) business
days after deposit in the United States mail in a sealed envelope as either
registered or certified mail with return receipt requested, and postage and
postal charges prepaid, and addressed to the recipient named below; or (iii) on
the date of delivery shown in the records of the telegraph company after
transmission by telegraph to the recipient named below; or (iv) upon receipt of
a facsimile (fax) transmission to the fax number listed below.  All notices
shall be addressed as follows:

          IF TO COUNTY:

          Clerk of the Board of Supervisors
          County of Riverside
          P.O. Box 1147
          Riverside, CA 92502-1147
          Fax No.:  909-275-1071

          WITH COPIES TO:

          Chief Executive Officer
          County of Riverside
          4080 Lemon St., 12th Floor
          Riverside, CA 92501
          Fax No.:  909-275-1105

          Director
          Planning Department
          County of Riverside
          P.O. Box 1409
          Riverside, CA 92502-1409
          Fax No.:  909-275-3157

          County Counsel
          County of Riverside
          3535 Tenth St., Suite 300
          Riverside, CA 92501
          Fax No.:  909-275-6322
 
          Chief Executive Officer
          Riverside County Waste Resources Management District
          1995 Market Street
          Riverside, CA 92501
          Fax No.:  909-275-1374

                                       8
<PAGE>
 
          Director
          Environmental Health
          Health Administration Building
          4065 County Circle Drive
          Riverside, CA 92503
          Fax No.:  909-358-5017

          IF TO BUYER:

          Mine Reclamation Corporation
          43-645 Monterey Ave., Suite A
          Palm Desert, CA 92260
          Fax No.: 619-778-5891

          WITH A COPY TO:

          Mine Reclamation Corporation
          Chief Executive Officer
          43-645 Monterey Ave., Suite A
          Palm Desert, CA 92260
          Fax No.: 619-778-5891

          Mine Reclamation Corporation
          General Counsel
          3633 E. Inland Empire Blvd., Suite 850
          Ontario, CA 91764
          Fax No.:  909-944-6605

          IF TO KAISER EAGLE MOUNTAIN, INC., EAGLE MOUNTAIN RECLAMATION, INC. OR
          KAISER VENTURES INC.:

          Kaiser Eagle Mountain, Inc.
          Eagle Mountain Reclamation, Inc.
          Kaiser Ventures Inc.
          Attn.:  President
          3633 E. Inland Empire Blvd., Suite 850
          Ontario, CA 91764
          Fax No.:  909-944-6605

          In the event notice is given by fax, a copy of the notice shall also
be mailed, first-class mail, postage prepaid, to the recipients on the same day
the fax notice is given.  Either party may, by notice given at any time, require
subsequent notices to be given to another person or entity, whether a party or
an officer or representative of a party, or to a different address, or both.
Notices given before actual receipt of notice of change shall not be invalidated
by the change.

     Executed on the day and year first above written.

                                       9
<PAGE>
 
COUNTY:                       COUNTY OF RIVERSIDE, a political
------                        subdivision of the State of   
                              California                  
                              
                              By:________________________
                              Chairman, Board of Supervisors

ATTEST:
GERALD A. MALONEY, Clerk of the Board

By:_________________________
          Deputy
(SEAL)


 
BUYER:                        MINE RECLAMATION CORPORATION,
------                                                     
                              a California corporation

                              By:  ___________________________
                              Title:  ________________________


                              By:  ___________________________
                              Title:  ________________________



(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                              KAISER EAGLE MOUNTAIN, INC.,
                              a Delaware corporation


                              By:  ___________________________
                              Title:  ________________________


                              By:  ___________________________
                              Title:  ________________________

                                      10
<PAGE>
 
(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                              EAGLE MOUNTAIN RECLAMATION, INC.,
                                a Delaware corporation


                              By:  ___________________________
                              Title:  ________________________


                              By:  ___________________________
                              Title:  ________________________



(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                                      11
<PAGE>
 
                              KAISER VENTURES INC.,
                              a Delaware corporation


                              By:     ________________________
                              Title:  ________________________


                              By:     ________________________
                              Title:  ________________________



(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                                      14
<PAGE>
 
                              EAGLE MOUNTAIN RECLAMATION, INC.,
                                a Delaware corporation


                              By:  ___________________________
                              Title:  ________________________


                              By:  ___________________________
                              Title:  ________________________



(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                                      13
<PAGE>
 
                              KAISER EAGLE MOUNTAIN, INC.,
                              a Delaware corporation


                              By:  ___________________________
                              Title:  ________________________


                              By:  ___________________________
                              Title:  ________________________



(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)

                                      12

<PAGE>
 
                             KAISER VENTURES INC.,
                             a Delaware corporation


                             By:  _______________________________
                             Title:  ____________________________


                             By:  _______________________________
                             Title:  ____________________________




(ALL SIGNATURES SHALL BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC.  EXECUTION ON 
BEHALF OF ANY CORPORATION SHALL BE BY TWO CORPORATE OFFICERS.)


                                      14
<PAGE>
 
COUNTY:                        COUNTY OF RIVERSIDE, a political
------                         subdivision of the state of
                               California

                               By: ____________________
                               Chairman, Board of Supervisors

ATTEST:
GERALD A. MALONEY, Clerk of the Board
By:_________________________
           Deputy
(SEAL)

                                      10
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "G"

Recorded at request of and return to:
County Counsel
3535 Tenth Street, Room 300
Riverside, California  92501

FREE RECORDING
This instrument is for the benefit of
the County of Riverside, and is
entitled to be recorded without fee.
(Govt. Code 6103)

 
Project:  EAGLE MOUNTAIN LANDFILL



                                QUITCLAIM DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, the
COUNTY OF RIVERSIDE, a political subdivision, hereby REMISES, RELEASES AND
QUITCLAIMS to MINE RECLAMATION CORPORATION, a California corporation, the
airspace above the real property in the County of Riverside, State of
California, described in Exhibit "A" attached to Development Agreement No. 64, a
copy of which exhibit is attached hereto as Exhibit "A" and made a part hereof.


Dated:
                                         COUNTY OF RIVERSIDE


                                         By: __________________________________
                                        Chairman, Board of Supervisors

ATTESTED:

GERALD A. MALONEY
Clerk, Board of Supervisors



By:___________________________
   Deputy
<PAGE>
 
                         Development Agreement No. 64

                                  Exhibit "H"


Board of Supervisors                         County of Riverside
--------------------                         -------------------


                              RESOLUTION NO. 97-
                              ---------------------

                        ENVIRONMENTAL MITIGATION TRUST
                        ------------------------------
                            EAGLE MOUNTAIN LANDFILL
                            -----------------------
                        (Development Agreement No. 64)
                        ------------------------------


   WHEREAS, Section 4.7.4 of Development Agreement No. 64 requires that the
Board of Supervisors of the County of Riverside establish an Environmental
Mitigation Trust prior to the Effective Date of Development Agreement No. 64;

   WHEREAS, Section 4.7.3 of Development Agreement No. 64 provides for
environmental mitigation trust payments to be used for the protection,
acquisition, preservation, and restoration of parks, open space, biological
habitat, scenic, cultural, and scientific resources; to support environmental
education and research; mitigation of the Project's environmental impacts; and
long term monitoring of the above-mentioned items; and

   WHEREAS, EIS/EIR No. 397 discusses an Environmental Mitigation Trust, and the
biological opinion issued by the U.S. Fish & Wildlife Service pursuant to the
Section 7 of the federal Endangered Species Act refers to an Environmental
Mitigation Trust;

   NOW THEREFORE;

   There is herewith established an Environmental Mitigation Trust.  All monies
received by the COUNTY pursuant to Section 4.7.3 of Development Agreement No. 64
shall be administered pursuant to the provisions of this Resolution, which shall
be known as the "Environmental Mitigation Trust -- Eagle Mountain Landfill."
The term "Trust" when used in this Resolution shall mean the "Environmental
Mitigation Trust -- Eagle Mountain Landfill."

   1.    This Trust is established pursuant to the provisions of Sections 4.7.3
and 4.7.4 of Development Agreement No. 64.  Funds deposited into this Trust are
being paid to the COUNTY pursuant to the provisions of Sections 4.7.3 and 4.7.4
of Development Agreement No. 64 as a partial mitigation measure for the
potential environmental consequences of the Project impacts.  Funds deposited in
the Trust shall be dedicated to the protection, acquisition, preservation, and
restoration of parks, open space, biological 


                                       1
<PAGE>
 
habitat, scenic, cultural, and scientific resources; to support environmental
education and research; mitigation of the Project's environmental impacts; and
long term monitoring of above-mentioned items.

   2.    Pursuant to the provisions of Section 4.7.3 of Development Agreement
No. 64, County shall hold in trust the sum of ninety cents ($0.90) per ton for
each ton of waste actually deposited at the Landfill.  In addition, commencing
on January 1 of the tenth (10th) year after that year in which total non-
hazardous municipal solid waste disposed at  the Landfill reaches the maximum
annual amount of non-hazardous municipal solid waste permitted by the County of
Riverside ("Base Year") to be  disposed at the Landfill (6,240,000 tons), and on
January 1 of every tenth (10th) year thereafter ("Tenth Anniversary Year"), the
payments set forth herein shall be modified to an amount calculated as follows:
The then current Payment multiplied by a fraction, the numerator of which is the
COLA Index amount on January 1 of the then current Tenth Anniversary Year and
the denominator of which is the COLA Index amount on January 1, ten years prior
thereto; provided however, that in no event shall the Payment be less than
ninety cents ($0.90) per ton; and provided further that the increase for the
next succeeding ten year period shall not exceed fifty percent (50%) of the
Payment in effect immediately prior to the increase as calculated pursuant to
this paragraph.  The COLA Index shall be the Consumer Price Index for all Urban
Consumers in the Los Angeles-Anaheim-Riverside Areas (1982-1984 = 100),
published by the United State Bureau of Labor Statistics.  If the COLA Index
specified herein is discontinued or revised during the term of the Trust, such
other governmental index or computation with which it is replaced shall be used
in order to obtain substantially the same result as would have been obtained if
the COLA Index had not been discontinued.

   3.    In order to accomplish the goals of the Trust, at least eighty (80%) of
the funds deposited in the Trust shall be used in the following areas:

         (i) Joshua Tree National Park Inholdings and Buffers.  This area
             ------------------------------------------------            
   consists of private Inholdings located within Joshua Tree National Park.
   Notwithstanding the foregoing, the payments by OWNER to the National Park
   Foundation pursuant to the agreement between OWNER and the National Park
   Service is intended to be utilized for this purpose, among others, and
   therefore, only in extraordinary circumstances should funds be allocated from
   this Trust for such purposes.

         (ii)  Chuckwalla Bench/Desert Tortoise Habitat Area.  This area is
               ---------------------------------------------               
   generally bounded on the west by the Orocopia Mountains, on the north by the
   Eagle Mountains, on the south by the Chocolate Mountains, and on the east by
   the Chuckwalla 

                                       2
<PAGE>
 
   Mountains.

         (iii)  Northwest Foothills of the San Jacinto Mountains.  This area is
                ------------------------------------------------               
   generally bounded on the west by Highway 79, on the north by Toe of Slope and
   on the east by the San Bernardino National Forest boundary.

         (iv)  Snow Creek Habitat Area and Wildlife Corridor.  This area is
               ---------------------------------------------               
   generally bounded on the west by the Santa Rosa Mountains National Scenic
   Area boundary, on the south by the San Bernardino National Forest boundary,
   on the north by the Whitewater Wilderness Study area, and on the east by the
   Windy Point area.

         (v)  Whitewater River and Mission Creek.  This area is generally
              ----------------------------------                         
   bounded on the west by the San Bernardino National Forest, on the south by
   Interstate Highway 10, on the north by Big Morongo Creek, and on the east by
   Highway 62.

         (vi)  Morongo Canyons.  This area is generally bounded on the west by
               ---------------                                                
   Highway 62 and Big Morongo Canyon, on the north by Little Morongo Canyon, on
   the south by Toe of Slope, and on the east by Joshua Tree National Park.

         (vii)  Santa Rosa Mountains National Scenic Area.  This area is
                -----------------------------------------               
   generally bounded on the west by the San Bernardino National Forest boundary,
   on the south by the ridge line, on the north by Toe of Slope, and on the east
   by the County line.

         (viii)  Indio Hills.  This area generally consists of the Coachella
                 -----------                                                
   Valley, Willow Hole and Edom Hill Preserves and one or more wildlife and sand
   transport corridors linking the Indio Hills with the Little San Bernardino
   Mountains.

         (ix)  Mecca Hills.  This area is generally bounded on the west and
               -----------                                                 
   south by the Coachella Canal, on the north by Interstate Highway 10, and on
   the east by Meccacopia Road (between Box Canyon and the Orocopia Mountains).

         (x)  Orocopia Mountains.  This area is generally bounded on the west by
              ------------------                                                
   Meccacopia Road, on the north by Interstate Highway 10, on the south by the
   Coachella Canal and Salt Creek, and on the east by the Chuckwalla
   Bench/Desert Tortoise Habitat Area.

         (xi)  Chuckwalla Mountains.  This area is generally bounded on the west
               --------------------                                             
   by the Chuckwalla Bench/Desert Tortoise Habitat Project Area, on the north by
   Interstate Highway 10, on the south by the Chocolate Mountains Aerials
   Gunnery Range, and on the east by the Little Chuckwalla Mountains.


                                       3
<PAGE>
 
         (xii)  Whitewater River Delta.  This area encompasses the mouth of the
                ----------------------                                         
   Whitewater River where it empties into the Salton Sea.

         (xiii)  Salt Creek/Dos Palmas Springs.  This area is generally bounded
                 -----------------------------                                 
   on the west by the Salton Sea, on the north by the Coachella Canal, on the
   south by the limits of the Salt Creek watershed, and on the east by the
   Chocolate Mountains.

         (xiv) Multiple Species Habitat Conservation Plan.  Areas designated for
               ------------------------------------------                       
   protection, acquisition and preservation pursuant to any Multiple Species
   Habitat Conservation Plan adopted and approved by the Board of Supervisors of
   Riverside County.

         (xv)  Anza Borrego Desert State Park.  This area consists of areas
              -------------------------------                              
   within the exterior boundaries of the Park, located within Riverside County.

         (xvi) Wilderness Areas. Areas within Riverside County  designated as
               ----------------                                              
   Wilderness Areas by the Bureau of Land Management, pursuant to the laws of
   the United States.

         (xvii)  Other Projects.  The areas listed as items (i) through (xvi)
                 --------------                                              
   shall have the highest priority, provided, however, the Board of Supervisors
   may, after consultation with the Advisory Committee, on four-fifths (4/5)
   vote of the Board of Supervisors, spend funds in the Trust held pursuant to
   this Section 3 on other projects not specifically listed but which are for
   the protection, acquisition, preservation, and restoration of parks, open
   space, biological habitat, scenic, cultural, and scientific resources and to
   support environmental education and research.

   4.    Accomplishing the goals of the Trust also recognizes that not more than
twenty percent (20%) of the funds deposited in the Trust will be used for other
expenses and costs, including but not limited to: administrative and operational
costs of the Trust and grants or awards to other entities related to the conduct
or development of plans, studies, research (including landfill design and
operation), environmental resource management and education.

   5.    To assist it in implementing and carrying out the goals of the Trust,
the Board of Supervisors hereby establishes a Trust Advisory Committee for the
purpose of preparing recommendations to the Board of Supervisors on the
expenditure of funds administered pursuant to this Resolution.  Within the
funding policies and guidelines as shall be developed by the Board of
Supervisors, the Trust Advisory Committee may develop and implement a grant or
award application procedure for purposes of soliciting, evaluating and
establishing priorities among land acquisition proposals and other 


                                       4
<PAGE>
 
funding and loan requests, and shall then report such recommendations to the
Board of Supervisors. The Trust Advisory Committee shall also make
recommendations regarding annual expenditures and long term funding priorities
from time to time as requested by the Board of Supervisors.

   6.    The Trust Advisory Committee shall be appointed by the Board of
Supervisors  every four years and shall consist of the following individuals,
all of whom shall be residents of Riverside County:

         (1) Two (2) members of the Board of Supervisors of Riverside County,
   California;

         (2) Two (2) citizens appointed by the Board of Supervisors  one of whom
   shall be a Native American;

         (3) One (1) citizen nominated by The Nature Conservancy;

         (4) One (1) citizen nominated by The Sierra Club;

         (5) One (1) citizen nominated by The Coachella Valley Mountains
   Conservancy; and

         (6) One (1) citizen nominated by The Desert Protective Council.

   In addition, each of the following organizations shall be entitled to the
appointment of one representative  to the Trust Advisory Committee: The
California Department of Fish and Game; The United States Department of the
Interior, Fish and Wildlife Service; The United States Department of the
Interior, Bureau of Land Management; The United States Department of the
Interior, National Park Service; and the University of California Natural
Reserve System.  Representatives or citizens to be appointed by entities,
including the Board of Supervisors, shall be selected by such entities in their
discretion, but each person must nevertheless be appointed by the Board of
Supervisors.

   Vacancies on the Trust Advisory Committee shall be filled for the unexpired
portion of the term in the same manner as provided in the case of original
appointment.

   7.    The Trust Advisory Committee shall meet at least annually and more
frequently as shall be determined by such Committee within those directives,
rules and regulations as the Board of Supervisors may adopt from time to time.
The Board of Supervisors shall also designate the quorum and voting requirements
for the Advisory Committee with respect to those matters, which come before such
Committee.  To the extent feasible, the Committee shall endeavor to operate by
consensus.


                                       5
<PAGE>
 
   8.    The day to day operations and administration of this Trust shall be
with the County Executive Officer.  All expenditures from this Trust must be
approved by the County Executive Officer and the County Executive Officer shall
annually file a report on all income and expenditures to the Board of
Supervisors.

   9.    The Board of Supervisors may, at any time, amend this Resolution so
long as the amendment[s] is [are] consistent with the provisions of Section
4.7.3 of Development Agreement No. 64.


                                       6
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "I"

                      CERTIFICATE OF AGREEMENT COMPLIANCE
                      -----------------------------------


RECORDING REQUESTED BY
CLERK, BOARD OF SUPERVISORS,
RIVERSIDE COUNTY

WHEN RECORDED RETURN
TO:
General Counsel
Mine Reclamation Corporation
__________________________
__________________________


--------------------------------------------------------------------------------

                      CERTIFICATE OF AGREEMENT COMPLIANCE
                      -----------------------------------

     THIS CERTIFICATE OF AGREEMENT COMPLIANCE is executed this _____ day of
__________, ____, by the COUNTY OF RIVERSIDE, a political subdivision of the 
State of California, hereinafter called "COUNTY," pursuant to Section 6.7 of
that certain Development Agreement No. 64 ("Development Agreement") entered into
by and between COUNTY, MINE RECLAMATION CORPORATION, a California corporation,
and KAISER EAGLE MOUNTAIN, INC., a Delaware corporation, who, together with its
assignees and successors-in-interest under the Development Agreement is
hereinafter referred to as "OWNER."

     1.   COUNTY, MINE RECLAMATION CORPORATION and KAISER EAGLE MOUNTAIN, INC.
previously entered into Development Agreement No. 64, which was approved by the
COUNTY on ___________, 19__.

     2.   Pursuant to Section 6.7 of the Development Agreement, COUNTY hereby
certifies as follows, as of the date of this Certificate:

          a.   A _____ Review [STATE WHETHER PERIODIC OR SPECIAL] has been
undertaken by COUNTY pursuant to Section 6 of the Development Agreement.  As a
result of such review, and based upon the information known by or made known to
the COUNTY Board of Supervisors, the COUNTY hereby finds, determines and
certifies that:

               (1)  The Development Agreement is in full force and effect.

                                       1
<PAGE>
 
               (2)  OWNER is not in default under the Development Agreement, and
                    OWNER is in compliance with the Development Agreement in all
                    material respects.

               (3)  It is anticipated that the next Periodic Review under the
                    Development Agreement will be commenced on or about
                    ________.

               (4)  This Certificate may be recorded, and may be relied upon by
                    OWNER or any party or entity.


                                    COUNTY OF RIVERSIDE


                                    By:___________________________
                                       Chairman, Board of
                                       Supervisors


ATTEST:

GERALD A. MALONEY
Clerk of the Board


By:____________________
     Deputy

(SEAL)

                                       2
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "J"
                                        
                              MRC LETTER OF CREDIT
                              --------------------


                                        _________________________
                                        [date]



County of Riverside
4080 Lemon Street
Riverside, CA  92501

Gentlemen:

     We hereby open our Irrevocable Standby Letter of Credit No. ("LETTER OF
CREDIT") in your favor for the account or benefit of Mine Reclamation
Corporation, Kaiser Eagle Mountain, Inc., Kaiser Reclamation, Inc. and Kaiser
Ventures, Inc., Attention: Mr. James F. Verhey, 3633 E. Inland Empire Blvd.,
Suite 850, Ontario, California, 91764, for the sum not exceeding
__________________ U.S. Dollars (U.S. _____________) available by your sight
draft on [BANK NAME] and accompanied by all documents specified below:

     1.   A certified statement signed by a duly authorized official of the
County of Riverside stating that:

        "I, a duly authorized official of the County of Riverside 
   ("THE COUNTY"), certify that the draft which accompanies this statement has
   been prepared and is presented in accordance with the Indemnification
   Agreement among the County of Riverside, Mine Reclamation Corporation, Kaiser
   Eagle Mountain, Inc., Kaiser Reclamation, Inc. and Kaiser Ventures, Inc.,
   dated _____________ ("THE AGREEMENT").

     2.   For any draft which in itself or in combination with previous drafts,
consumes the remaining balance of the Letter of Credit, the original Letter of
Credit.

     All drafts must bear the clause "Drawn under [BANK NAME] Letter of Credit
No. _______ dated ___________________."

     We hereby engage with drawers, endorsers, and bona fide holders that all
drafts drawn in compliance with the terms of this credit shall be duly honored
upon presentation and delivery of the documents at our offices located at
[ADDRESS] on or before [EXPIRATION DATE] or any other expiration date provided
herein, whichever comes first.  If a draft is presented that does not conform in
its entirety to the terms and conditions of this Letter of Credit, we shall
notify you promptly, state 

                                       1
<PAGE>
 
the reasons the draft does not conform and you may attempt to correct any such
nonconforming draft to the extent you are entitled and able to do so. This
Letter of Credit shall remain in full force and effect for a period of one (1)
year from the date hereof and shall automatically renew itself from year-to-year
for one (1) year periods thereafter unless and until [BANK NAME] shall give at
least one hundred twenty (120) days prior written notice to the County of
Riverside and Mine Reclamation Corporation, by certified mail, return receipt
requested, that it elects not to renew Letter of Credit No. ___________ at the
end of the one-year term then in effect. During said one hundred twenty (120)
days notice period, this Letter of Credit shall remain in full force and effect.
If we elect not to renew this Letter of Credit for any subsequent year and so
notify you at least one hundred twenty (120) days prior to such expiration, and
you determine that this Letter of Credit has not been replaced with a Letter of
Credit from another financial institution or other acceptable financial
assurance; then during the last thirty (30) days while the Letter of Credit is
in full force and effect, you may draw up to the full amount of the Letter of
Credit, less any prior drafts presented by you and paid by us, when accomplished
by a certified statement signed by a duly authorized official of the County of
Riverside stating that:

     "I, a duly authorized official of the County of Riverside, certify that (1)
     a reasonably acceptable substitute Irrevocable Standby Letter of Credit or
     other reasonably acceptable financial assurance has not been provided at
     least thirty (30) days prior to the current expiration date, and (2) the
     monies will be held for the sole purpose of securing the obligations of
     Mine Reclamation Corporation, Kaiser Eagle Mountain, Inc., Kaiser
     Reclamation, Inc. and Kaiser Ventures, Inc. under the terms of
     Indemnification Agreement Between the County of Riverside dated
     ____________.

     This Irrevocable Standby Letter of Credit is effective as of [DATE].

     If at any time during the term of this Letter of Credit the credit rating
of [BANK NAME] falls below B+, as determined by Standard & Poor's or Moody's
rating service, then [BANK NAME] shall immediately notify the County of
Riverside, Mine Reclamation Corporation, Kaiser Eagle Mountain, Inc., Kaiser
Reclamation, Inc. and Kaiser Ventures, Inc. of such change, by certified mail,
return receipt requested.

     This Letter of Credit shall be governed by the laws of the State of
California, and any litigation involving this Letter of Credit shall be brought
in the courts of that State.  Except so far as otherwise expressly stated, this
Letter of Credit is subject to Publication No. 500 of the Uniform Customs and
Practices for Documentary Credits (1993 Revision), International Chamber of
Commerce (Publication No. 500).

                              Very truly yours,


                              _______________________________

                                      2 
<PAGE>
 
                         Development Agreement No. 64

                                  EXHIBIT "K"

                              GUARANTEE AGREEMENT
                              -------------------

     THIS  GUARANTEE AGREEMENT ("GUARANTEE") is made by __________________ a
______________ ("GUARANTOR"), to the County of Riverside, a political
subdivision of the State of California ("COUNTY"), with reference to the
following facts:

                                   RECITALS:

     A.   County and Mine Reclamation Corporation, a California corporation,
Kaiser Eagle Mountain, Inc., a Delaware corporation, Eagle Mountain Reclamation,
Inc., a Delaware corporation, and Kaiser Ventures Inc., a Delaware corporation
(collectively, "OWNER"), have entered into that certain Development Agreement
No. 64 ("DEVELOPMENT AGREEMENT"), providing for the development by the Owner of
the Property described therein, and having an effective date as set forth
therein.

     B.   Owner has agreed under the terms of the Development Agreement to cause
Guarantor effective as of the Start Up of Operations (as that term is defined in
the Development Agreement), which date is also the effective date hereof, to
enter into and provide this Guarantee to assure the full payment of amounts
recoverable by the County pursuant to Sections 9.2 (Third Party Litigation
Concerning Agreement), 9.3 (Owner Indemnity), 9.5 (Additional Owner Indemnity),
9.7 (Environmental Impairment and Damage), and 9.8 (Emergencies) of the
Development Agreement.

     NOW, THEREFORE, to induce the County to enter into the Development
Agreement, and for other good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

     1.   GUARANTEE.  Guarantor hereby absolutely and unconditionally guarantees
to the County, the full and complete payment, as and when the same becomes due,
of any amounts payable in accordance with and pursuant to Sections 9.2, 9.3,
9.5, 9.7 and 9.8 (each a "guaranteed event," as defined in Section 2 below) of
the Development Agreement, subject only to the terms and conditions contained
herein and the Development Agreement.

     2.   PER OCCURRENCE AMOUNT OF GUARANTEE.  Notwithstanding anything in this
Guarantee to the contrary, the maximum amount guaranteed by Guarantor under this
Guarantee shall not, in the aggregate, commencing on the effective date hereof
[Start Up of Operations], exceed the maximum amount of ten million dollars
($10,000,000) for any single guaranteed event (as defined herein below) at any
one time.  The guarantee shall remain in effect until terminated as provided in
the Development Agreement.

     This Guarantee is intended to be continuing, but the aggregate amount of
the Guarantee available to be drawn against or claimed in connection with each
guaranteed event or occurrence giving rise to Guarantor's obligations shall be
limited to the maximum amount ($10 million), which maximum amount is subject to
adjustment pursuant to Section 9.9.7 of the Development 


                                       1
<PAGE>
 
Agreement (Alternative or Substitute Financial Assurances). As used in this
Guarantee, the terms "guaranteed event" and "occurrence" (and the consequences
of such guaranteed event or occurrence) are intended to have the same meaning as
is customarily used in the insurance industry to determine and limit the scope
of coverage for any particular claim arising from a covered event or occurrence.
Notwithstanding anything herein to the contrary, the maximum amount of the
Guarantee shall be promptly reinstated to the full maximum amount hereunder ($10
million) upon payment for any guaranteed events as set forth herein.

     3.   OTHER FINANCIAL ASSURANCES.  To the extent that the obligations of
Owner arise out of its failure to perform any act or to do any thing, the
performance of which is secured by any financial assurance held by the County
under the Development Agreement, such financial assurances shall be utilized in
the priority established in Section 9.9.6 of the Development Agreement and
otherwise in accordance with Section 9.9 of the Development Agreement (Financial
Assurances) unless the County, Owner and Guarantor (to the extent this Guarantee
is affected) should otherwise agree in writing, and the obligations of Guarantor
under this Guarantee shall not arise until all such financial assurances have
been utilized or pursued in the priority established in the Development
Agreement or the person or entity holding such financial assurance has failed or
refused to respond in accordance with the terms of the Development Agreement.

     4.   NOTICE OF ENVIRONMENTAL REMEDIAL ACTION.  Except in the case of
emergency where delay would have a substantial adverse impact upon the health,
safety or welfare, in the event the County intends to take any environmental
remedial action for which it intends to seek recovery or payment from Guarantor
pursuant to this Guarantee, the County shall first give at least sixty (60) days
written notice to Guarantor of its intention to take an environmental remedial
action, the entity or contractor which shall be responsible for the remedial
action, the estimated cost of the remedial action, and the likely duration of
such remedial action.  Guarantor may, at its sole option, agree to undertake the
remedial action so described by notifying the County in writing before the
expiration of the 60 day notice period.  In the event Guarantor elects to
undertake the environmental remedial action, that action must be undertaken
within a reasonable period of time and must not increase the danger to public
health, safety and welfare, and Guarantor must provide reasonable assurances
that its environmental remedial action will accomplish the same goals which were
to be accomplished by the environmental remedial action of the County.  Provided
that the undertaking and performance of the remedial action by Guarantor is
reasonable under the circumstances, or such undertaking is approved in advance
by the County, then the costs expended by Guarantor for such remediation shall
be applied against and reduce the amount of the Guarantee available for the
guaranteed event or occurrence (as defined in Section 2 above) which gave rise
to the need for such remediation; however, it shall not reduce or limit
Guarantor's obligations under this Guarantee for other unrelated events or
occurrences.

     5.   NOTICE OF CLAIM; WRONGFUL OR IMPROPER CLAIM OR DRAW ON GUARANTEE BY
COUNTY.  No action shall be commenced to collect any sums becoming due under
this Guarantee until the County has given Guarantor sixty (60) days written
notice of the amount due hereunder, specifying the nature and amount of the
obligation.

     County agrees that in the event (i) County makes a claim or draw on this
Guarantee without just cause, i.e., Owner is not in breach of any of its
obligations secured by this Guarantee 


                                       2
<PAGE>
 
under the Development Agreement, or (ii) County makes a claim or draw on this
Guarantee in violation of the priority provisions of Section 9.9.7 of the
Development Agreement (Priority of Use of Financial Assurances), then County
shall immediately reimburse to Guarantor the principal amount, if any,
wrongfully or improperly drawn on this Guarantee and immediately reimburse to
Owner and Guarantor all of Owner's and Guarantor's reasonable costs, expenses
and fees (including without limitation attorneys' fees) incurred in connection
with such wrongful or improper claim or draw, together with interest on all such
amounts (including the principal amount of the draw) at the then highest lawful
rate.

     6.   WAIVERS BY GUARANTOR/NO IMPAIRMENT.  Unless otherwise agreed by
Guarantor and County, Guarantor hereby expressly waives notice of acceptance of
this Guarantee, presentment, protest, dishonor, nonpayment and the creation,
renewal, extension, modification or accrual of any of the obligations guaranteed
as well as notice and diligence in collection, and further agrees that its
liability hereunder shall not be diminished, released, impaired, reduced or
affected by:

          6.1  TAKING OF OTHER SECURITY.  The taking or accepting by the County
of any other security or guarantee for any or all of the obligations of Owner
covered by this Guarantee;

          6.2  RELEASE OF OTHER SECURITY.  The release, withdrawal, waiver,
surrender, exchange, substitution, subordination, loss or other modification of
any other security or guarantee existing in connection with any or all the
obligations of Owner covered by this Guarantee;

          6.3  MODIFICATION OF OBLIGATIONS.  The extension, modification, or
consolidation of the payment of any or all the obligations of Owner covered by
this Guarantee, or any adjustment, indulgence, forbearance or compromise that
may be granted or given by the County to Owner with respect to such obligations;

          6.4  ACTION AGAINST OWNER.  The negligence, delay, omission, failure
or refusal of County to take or prosecute any action for the collection of any
obligation covered by this Guarantee against Owner or Guarantor.

     It being specifically agreed, however, the obligations of Guarantor
hereunder shall not be increased without the prior written consent of Guarantor.

     The obligations of Guarantor hereunder are independent of the obligation of
Owner.  Upon any failure of Owner to pay the amounts guaranteed by this
Guarantee, the County may, at its option and subject to and in compliance with
Sections 3 and 5 of this Guarantee, proceed directly and at once against
Guarantor to collect and recover the full amount hereby guaranteed, or any
portion thereof, without first proceeding against Owner.  Guarantor hereby
waives any right other than as set forth in Section 3 of this Guarantee to
require County to proceed against Owner or any other person, or to pursue any
other remedy.  Suit on this Guarantee may be joined with suit on the obligation
against Owner, or may be brought prior to, concurrently with or subsequent to
any such suit, or without the bringing of any such suite.

     Guarantor hereby assumes sole responsibility for keeping fully informed of
the financial condition of Owner and all other circumstances concerning Owner's
performance or ability to perform its obligations to County, and agrees that
County will have no duty to report to Guarantor 


                                       3
<PAGE>
 
any information that the County may receive about Owner's financial condition or
performance or ability to perform under this Guarantee.

     Guarantor hereby waives all rights and benefits under California Civil Code
Sections 2819, 2810, 2809, 2845, 2847, 2848, 2849 and 2850.

     The foregoing provisions of this Section 6 shall not, and are not intended
to be interpreted to, waive or otherwise affect the County's obligations under
Section 9.9 of the Development Agreement pertaining to notice, priority of use
of financial assurances, alternative or substitute financial assurances, or
wrongful claims or draws or the County's obligations pursuant to this Guarantee.

     7.   TERM.  This Guarantee shall remain in full force and effect until
terminated as provided in the Development Agreement or until the County gives
its written consent to such termination.

     8.   FINANCIAL STATUS OF GUARANTOR.  At all times during the term of this
Guarantee, and regardless of whether the amount of this Guarantee is reduced
from time to time pursuant to Sections 9.9.5(c) or 9.9.7 of the Development
Agreement, this Guarantee Agreement, or otherwise with the County's written
consent, at that time Guarantor must have either (i) a long-term senior
unsecured debt rating of B+ or better as determined by Standard and Poor's
Corporation ("S&P") or Moody's Investors Service ("MOODYS"), OR (ii) a tangible
net worth (as defined in Section 9.9.4(b) of the Development Agreement) equal to
at least One Hundred Million Dollars ($100,000,000.00).  Accordingly, if at any
time during the term of this Guarantee, both (i) Guarantor's credit rating is
below B+ (or Guarantor is unrated) AND (ii) Guarantor's tangible net worth is
less than $100,000,000.00, then, as provided in Section 9.9.4(b) of the
Development Agreement, within ninety (90) days of becoming aware of such
circumstance OWNER shall provide for adequate substitute or additional financial
assurance(s) pursuant to Section 9.9.7 of the Development Agreement or as
otherwise agreed to in writing by County.

     Within one hundred twenty (120) days after the end of each fiscal year of
Guarantor during the term of this Guarantee, Guarantor shall provide to the
County certification from a nationally recognized public accounting firm that
Guarantor has the required level of tangible net worth (or required debt
rating).

     9.   SUBSTITUTION OF OTHER FINANCIAL ASSURANCES.  Guarantor or Owner may,
at any time during the term of this Guarantee, and with the consent of the
County, which consent shall not be unreasonably withheld, substitute a different
financial assurance for all or a portion of this Guarantee subject to the terms
and restrictions specified in Section 9.9.7  (Alternative or Substitute
Financial Assurances) of the Development Agreement.  If a portion of this
Guarantee is replaced by a substitute financial assurance pursuant to Section
9.9.7, thus reducing the amount of this Guarantee accordingly, or the amount of
this Guarantee is reduced pursuant to Section 9.9.5(c) of the Development
Agreement (Financial Assurances Fund), then this Guarantee shall remain in full
force and effect as to the remaining amount of the Guarantee (i.e., that portion
not replaced or reduced).

     10.  SALE OF OWNERSHIP INTEREST IN OWNER.  The sale, exchange, modification
of an ownership position, or other disposition of its ownership interest in
Owner shall 


                                       4
<PAGE>
 
not diminish, reduce, impair, release or in any other way affect the guarantee
obligations of Guarantor under this Guarantee, unless and until the County has
specifically and in writing released Guarantor from its obligations hereunder.

     11.  NOTICES.  Any and all notices between the parties hereto provided for
or permitted hereunder shall be in writing and shall be deemed duly served when
personally delivered to the recipient named below, or in lieu of such personal
service, on the date of delivery shown on the return receipt, after deposit in
the United States mail in a sealed envelope as wither registered or certified
mail with return receipt requested, and postage and postal charges prepaid, and
addressed to the recipient named below, or on the date of delivery shown in the
records of the telegraph company after transmission by telegraph to the
recipient named below.  All notices shall be addressed as follows:

TO THE COUNTY:                Clerk of the Board of Supervisors
                              County of Riverside
                              P.O. Box 1147
                              Riverside, California  92502-1147

WITH COPY TO:                 County Counsel, County of Riverside
                              3535 Tenth Street, Suite 300
                              Riverside, California  92501
 
TO GUARANTOR:                 ----------------------------------------
                              ----------------------------------------
                              ----------------------------------------
                              ----------------------------------------
 
WITH COPY TO:                 Mine Reclamation Corporation
                              43-645 Monterey Avenue, Suite A
                              Palm Desert, CA  92260

                              Kaiser Eagle Mountain, Inc.
                              Eagle Mountain Reclamation, Inc.
                              Kaiser Ventures Inc.
                              3633 E. Inland Empire Blvd., Suite 850
                              Ontario CA 91764

     12.  MISCELLANEOUS PROVISIONS.

          12.1 INCORPORATION OF DEVELOPMENT AGREEMENT; INTEGRATION.  This
Guarantee was prepared as an exhibit to the Development Agreement, and the terms
of that Development Agreement are incorporated herein by reference.  In the
event of a conflict between the terms of this Guarantee and the Development
Agreement, the Development Agreement shall control.  Together with the
Development Agreement, this Guarantee embodies the entire agreement among the
parties hereto with respect to any matter, and supersedes any and all prior
agreements among the parties, if any, with respect to any matter.  No course of
prior dealing among the parties, no usage of trade, and no parol or extrinsic
evidence of any nature shall be used to supplement, modify or vary any of the
terms hereof.  There are no conditions to the full effectiveness (i.e., 


                                       5
<PAGE>
 
binding nature) of this Guarantee.

          12.2 GOVERNING LAW.  This Guarantee and any dispute arising hereunder
shall be governed and interpreted in accordance with the laws of the State of
California, and any litigation involving this Guarantee shall be brought in the
courts of that State.

          12.3 SECTION HEADINGS.  All section headings and subheadings are
inserted for convenience only and shall not affect any construction or
interpretation of this Guarantee.

          12.4 NO THIRD PARTY BENEFICIARIES.  This Guarantee is made and entered
into for the sole protection and benefit of the parties and their successors and
assigns, and no other person shall have any right of action based upon any
provision of this Guarantee.

          12.5 ATTORNEYS' FEES.  Should legal action or other proceedings be
brought by either party for breach of this Guarantee or to enforce or interpret
an provision hereof, the prevailing party in such action or proceeding shall be
entitled to reasonable attorneys fees, court costs, and other litigation
expenses, including without limitation, expenses incurred for preparation and
discovery.

          12.6 AMENDMENT.  Except as otherwise provided in Sections 9.9.5(c) and
9.9.7 of the Development Agreement, this Guarantee may be waived, modified or
amended only by writing signed by both of the parties.

     IN WITNESS WHEREOF, ______________________ has executed this Guarantee and
made it effective, and the County has accepted this Guarantee, on the effective
date as herein above set forth.

[signatures on next page]
                            "GUARANTOR"
 
                            a ______________________________________


                            By: ____________________________________

                            Its:____________________________________

                            "COUNTY"
                            COUNTY OF RIVERSIDE
                              a political subdivision of the State of California


                            By: ____________________________________

                            Its:____________________________________


                                       6