Document:

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                                                                  EXHIBIT 10.4.3

     REIMBURSEMENT AGREEMENT, dated as of May 1, 2000, made by WEST VALLEY MRF,
LLC, a California limited liability company (the "Borrower"), in favor of UNION
BANK OF CALIFORNIA, N.A. (the "Bank").

     WHEREAS, the Borrower has requested the California Pollution Control
Financing Authority, a public instrumentality and political subdivision of the
State of California (the "Issuer"), to finance, pursuant to a Loan Agreement
dated as of May 1, 2000 (the "Loan Agreement") between the Issuer and the
Borrower, a part of the cost of acquiring and financing certain facilities
described in the Loan Agreement (the "Project"), by the issuance pursuant to an
Indenture dated as of May 1, 2000 (the "Indenture"), between the Issuer and BNY
Western Trust Company, as trustee (the "Trustee"), of $8,500,000 in principal
amount of the Issuer's Variable Rate Demand Solid Waste Disposal Revenue Bonds
(West Valley MRF, LLC Project) Series 2000 (the "Bonds"); capitalized terms used
herein without definition shall have the respective meanings ascribed to them in
the Indenture or the Loan Agreement; and

     WHEREAS, the Borrower has requested the Bank to issue a letter of credit
substantially in the form of Exhibit A hereto (the "Letter of Credit"), in an
amount of up to $8,625,754 (the "Letter of Credit Commitment") of which not more
than $8,500,000 may be drawn with respect to principal on the Bonds and not more
than the lesser of (i) 45 days' interest on the Bonds at an interest rate equal
to 12% per annum or (ii) $125,754 may be drawn with respect to interest on the
Bonds.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to issue the Letter of Credit, the parties hereby agree as follows:

     SECTION 1.  Application, Reimbursement and Other Payments; Definitions.
                 ----------------------------------------------------------

          (a)    The Borrower hereby applies to the Bank for, and authorizes and
instructs the Bank to issue, for the Borrower's account, the Letter of Credit in
the amount of the Letter of Credit Commitment subject to reduction as therein
provided.

          (b)    The Borrower hereby agrees to pay to the Bank (i) on the date
that any amount is drawn under the Letter of Credit, a sum equal to the amount
drawn under the Letter of Credit; provided however that, (1) with respect to any
drawing under the Letter of Credit made pursuant to a liquidity drawing
certificate in the form of Exhibit 2 to the Letter of Credit (a "Liquidity
Drawing"), the Borrower agrees to repay to the Bank, on or before the one
hundred and twentieth (120th) day following the date of the Liquidity Drawing,
an aggregate amount equal to such Liquidity Drawing together with interest on
the unpaid balance thereof at an interest rate equal to one percent (1%) above
the Bank's Reference Rate (as defined below); and (2) upon receipt by the Bank,
funds representing the remarketing proceeds of Bank Bonds shall be applied by
the Bank to reduce, pro tanto, the Borrower's repayment obligation with respect
                    --- -----
to Liquidity Drawings; (ii) upon each transfer of the Letter of Credit, a sum in
such amount as shall be necessary to cover the transfer fee and costs and
expenses of the Bank incurred in connection with

                                      -1-
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each transfer of the Letter of Credit in accordance with its terms to a
successor trustee under the Indenture; (iii) on demand, any amount that is paid
by the Bank in connection with its exercise of its discretionary rights pursuant
to paragraph (b) of Section 9 of this Agreement or pursuant to the Borrower
Agreements (as hereinafter defined) or any security agreement entered into
pursuant to Section 6(k) hereof; (iv) concurrently with each drawing under the
Letter of Credit a drawing fee in the amount of One Hundred Dollars ($100); (v)
on demand, interest on any and all amounts unpaid by the Borrower when due
hereunder from the date such amounts become due until payment in full at a rate
per annum (computed for the actual number of days elapsed on the basis of a year
of 360 days) equal to four percent (4%) per annum above the Reference Rate (as
defined below) as in effect from time to time, but in no event shall such
fluctuating rate exceed the maximum rate of nonusurious interest allowed from
time to time by law as is now or, to the extent allowable by law, as may
hereafter be in effect; and (vi) on demand, any and all reasonable out-of-pocket
charges and expenses which the Bank may pay or incur (including reasonable
attorneys' fees) in enforcing any rights under this Agreement.

          (c)  The obligations of the Borrower under this Agreement are
guaranteed pursuant to the Guaranties and upon fulfillment of the conditions set
forth in Section 3(a) below are expected to be secured pursuant to the Deed of
Trust.

          (d)  If any change in any law or regulation or in the interpretation
thereof (whether or not having the force of law) by any court or administrative
or governmental authority charged with the administration thereof shall either
(i) impose, modify or deem applicable any capital adequacy, reserve, special
deposit, tax or similar requirement or modify any deduction, credit, tax
preference item or other allowance for federal income tax purposes with respect
to this Agreement, the Letter of Credit or letters of credit issued by, or
assets held by, or outstanding commitments of, or deposits in or for the account
of, the Bank or any bank or financial institution participating in the Bank's
rights and obligations hereunder or under the Letter of Credit (a
"Participant"), or (ii) impose on the Bank or any Participant any other
condition regarding this Agreement or the Letter of Credit, or (iii) subject the
Bank or any Participant to any tax, charge, fee, deduction or withholding of any
kind whatever (except for a change in the rate of tax on the overall net income
of the Bank or such Participant) and the result of any event referred to in
clause (i), (ii) or (iii) above shall be to increase the cost to the Bank of
issuing or maintaining the Letter of Credit or the cost to such Participant of
participating herein or in the Letter of Credit or reduce the amount of any
payment receivable by the Bank or such Participant (which increase in cost or
reduction in payment shall be the result of the Bank's or such Participant's
reasonable allocation of the aggregate of such cost increases or payment
reductions resulting from such events), then, upon demand by the Bank after
notice has been given as provided below (acting on its own behalf or on behalf
of such Participant), the Borrower shall promptly pay to the Bank from time to
time as specified by the Bank all additional amounts which are necessary to
compensate the Bank and/or such Participant (as the case may be) for such
increased costs or reduction in payments.  Bank shall provide ten (10) Business
Day's prior written notice to Borrower prior to the imposition of any of the
foregoing items.  All payments in respect of increased costs or reduced payments
shall be accompanied by interest thereon from the date of demand until payment
in full thereof at the Reference Rate.  A certificate as to such increased cost
or reduced payment incurred by the Bank or such Participant as a result of any
event mentioned in clause (i), (ii) or

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(iii) above, showing the manner of calculation thereof, shall be submitted by
the Bank or such Participant to the Borrower and shall be rebuttably presumed to
be correct.

          (e)  The Borrower hereby agrees to pay to the Bank, on demand, any and
all expenses, including reasonable attorneys' fees and legal expenses, incurred
or paid by the Bank in connection with (i) the preparation and negotiation of
this Agreement and the instruments referred to herein, (ii) the closing of the
transactions contemplated hereby, (iii) collecting the Borrower's indebtedness
to the Bank under this Agreement, (iv) protecting or foreclosing against or
otherwise enforcing any collateral security therefor, or (v) protecting,
exercising or enforcing any or all of the Bank's rights and remedies against the
Borrower, including, without limitation, all reasonable fees and disbursements
of counsel for the Bank in any reorganization, insolvency or bankruptcy
proceeding affecting the Borrower or any Guarantor.

          (f)  On the date of issuance of the Letter of Credit (the "Date of
Issuance") the Borrower shall pay to the Bank (i) a non-refundable letter of
credit fee for the period from the Date of Issuance to June 1, 2000 in an amount
equal to the sum resulting when One Hundred Forty Six Thousand Six Hundred and
Thirty Eight Dollars ($146,638) is multiplied by a fraction the numerator of
which is the number of days from the Date of Issuance to June 1, 2000 and the
denominator of which is 365; and (ii) the sum of Eighty Six Thousand Two Hundred
and Fifty Eight Dollars ($86,258), representing the nonrefundable commitment fee
payable to the Bank.  On June 1, 2000 and on the first Business Day of each
September, December, March and June and thereafter (each of said dates being
referred to in this paragraph as a "LC Fee Payment Date"), the Borrower shall
pay to the Bank a nonrefundable quarterly commitment fee in an amount equal to
the amount resulting when the amount available to be drawn under the Letter of
Credit on such LC Fee Payment Date is multiplied by the appropriate Quarterly LC
Fee Percentage set forth on the Pricing Grid, attached hereto as Exhibit H.

          (g)  Reference is made to the Reimbursement Deposit Schedule attached
hereto as Exhibit B (the "Reimbursement Deposit Schedule").  On or before the
Date of Issuance, the Borrower shall establish an interest bearing deposit
account (the "Deposit Account") with the Bank, which account shall be utilized
by the Borrower and the Bank as follows:

               (i)   So long as the Letter of Credit is outstanding, during each
month of the twelve-month period ending in April of each of the years listed in
the Reimbursement Deposit Schedule, the Borrower shall deposit into the Deposit
Account an amount equal to one twelfth of the amount set forth on the
Reimbursement Deposit Schedule opposite each such calendar year, so that on or
before April 15 of each such year the aggregate amount on deposit in the Deposit
Account equals or exceeds the appropriate amount specified in the Reimbursement
Deposit Schedule (as such annual deposit amounts are adjusted each year in
accordance with clause (v) below); provided, however, that in each of the months
from and including July, 2000 through and including April 2001, the Borrower
shall deposit $30,000 into the Deposit Account.

               (ii)  Promptly after the receipt thereof, the Borrower shall also
deposit into the Deposit Account: (a) 100% of the net proceeds of any new debt
and/or equity offering(s), excluding debt incurred for the purchase and/or lease
of equipment used in operations; and (b)

                                      -3-
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100% of the net proceeds of the sale of any assets, excluding sales in the
ordinary course of business.

               (iii)  So long as no Event of Default shall have occurred and be
continuing hereunder, monies on deposit in the Deposit Account shall be used to
prepay the Borrower's obligations under the Loan Agreement (or to reimburse the
Bank in connection with any such prepayment) on the Interest Payment Date in
June of each year from and including 2001 to and including 2011, by the amount
on deposit in the Deposit Account on the date the Borrower gives notice of
prepayment under Section 8.5 of the Loan Agreement, which notice the Borrower
agrees to give not later than April 15 of each year from 2001 through 2011;
provided, however, that (i) in no event shall the amount specified in any notice
of prepayment in any year be less than the amount specified for such year on the
Reimbursement Deposit Schedule (as adjusted from time to time pursuant to clause
(iv) below); and (ii) the amount of the prepayment shall be at least $100,000
and in increments of $5,000 each thereafter.  In accordance with Section 4.01 of
the Indenture, the Borrower shall direct the Issuer to call the Bonds for
partial optional redemption and the Trustee to give notice of such redemption.
The Bank shall provide its written consent to each such prepayment as required
under the Indenture and, when the Letter of Credit has been drawn upon in the
amount of the prepayment, shall withdraw from the Deposit Account the amount
necessary to reimburse itself.

               (iv)   Promptly after each Bond redemption effected pursuant to
clause (iii) above, the Reimbursement Deposit Schedule shall be adjusted as
follows: an amount equal to the portion of the total Bond redemption which is
derived from payments made by the Borrower into the Deposit Account pursuant to
clause (ii) of this Section 1(g) shall be applied to reduce the amount of all
subsequent Annual Reimbursement Deposit Amounts, with thirty percent (30%) of
such amount being allocated to all remaining Annual Reimbursement Deposit
Amounts so that each such Annual Reimbursement Deposit Amount is reduced by the
same ratio that the 30% aggregate reduction bears to the aggregate of all
remaining Annual Reimbursement Deposit Amounts, and seventy percent (70%) being
applied to such Annual Reimbursement Deposit Amounts in inverse order of
maturity. After each annual adjustment in the Reimbursement Deposit Schedule,
the remaining equal monthly Reimbursement Deposits required under clause (i)
above shall be reduced accordingly.

               (v)    Until such time as the Letter of Credit has expired and
all obligations of the Borrower hereunder have been paid and performed in full,
monies on deposit in the Deposit Account including the interest earnings thereon
shall be used solely for the purpose described in clause (iii) above; provided
however that upon the occurrence of an Event of Default, the Bank shall have the
right to withdraw monies from the Deposit Account and apply such monies toward
payment of any obligation of the Borrower then due and payable hereunder. To
secure payment and performance of its obligations hereunder, the Borrower hereby
grants to the Bank a security interest in the Deposit Account, and in all the
proceeds thereof and earnings thereon.

               (vi)   Monies on deposit in the Deposit Account shall be invested
in money-market funds or such other liquid, short-term investments as are
mutually satisfactory to the Borrower and the Bank. Interest earnings shall be
retained in the Deposit Account and the

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Borrower shall be entitled to a credit against its regular monthly deposit
obligation described in clause (i) above in an amount equal to the interest
earnings credited to the Deposit Account during the preceding month.

               (vii)  The Borrower may make prepayments and optional redemptions
in addition to those described in clauses (i) and (ii) above, provided that the
Borrower shall have deposited the amount of such additional prepayment/optional
redemption into the Deposit Account not later than the date on which the
Borrower gives notice of prepayment under Section 8.5 of the Loan Agreement.
There shall also be deposited into the Deposit Account any casualty insurance
proceeds received by the Bank which are not utilized to repair or replace
damaged collateral. Unless otherwise agreed to by the Borrower and the Bank the
aggregate amount of such additional deposits made in any year shall be added to
the amount specified in the annual notice of prepayment given each year and
shall be used to reimburse the Bank for the amounts drawn on the Letter of
Credit when the Bonds are redeemed in June. The Borrower acknowledges that, upon
the occurrence of certain events specified in the Guaranties, the Bank shall
have the right to demand of the Kaiser Guarantors or the Burrtec Guarantors, as
the case may be, that such Guarantors make certain payments to the Bank which,
upon receipt by the Bank, shall be deposited into the Deposit Account. The
Borrower hereby acknowledges that it has received a copy of the Guaranties and
consents to all the provisions thereof, including the provisions regarding
mandatory deposits by the Guarantors to the Deposit Account.

          (h)  All payments to the Bank by the Borrower hereunder shall be made
in lawful currency of the United States and in immediately available funds to
the Bank at its office at 530 B Street, Fourth Floor, San Diego, California
92101 or such other office as the Bank may hereafter notify the Borrower in
writing.

          (i)  As used herein the following terms shall have the following
respective meanings:

          "Agreement to Furnish Insurance" shall mean the Agreement to Furnish
           ------------------------------
Insurance   substantially in the form attached hereto as Exhibit E.

          "Book Net Worth" shall mean, on any date, the amount by which the
           --------------
     Borrower's total assets exceeds the Borrower's total liabilities, as
     determined in accordance with GAAP.

          "Borrower Agreements" means the Security Agreement, the Deed of Trust,
           -------------------
     the Environmental Agreement, the ADR Agreement executed by the Borrower in
     favor of the Bank, the Application and each other agreement executed by the
     Borrower evidencing or securing the Borrower's obligations to the Bank in
     connection with the Letter of Credit, the Bonds or the Project.

          "Borrower's Funds" shall mean such sum as may be determined by Bank in
           ----------------
     accordance with Sections 3(b)(vii) and 6(o) hereof to be made available by
     Borrower in a form satisfactory to Bank for disbursement in the manner and
     for the purposes described in

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     this Agreement. Borrower's Funds shall be disbursed prior to disbursement
     of any Bond proceeds.

          "Borrower's Funds Account" shall mean a special non-interest bearing
           ------------------------
     account with the Bank into which Borrower's Funds shall be deposited
     pending any disbursement thereof.

          "Burrtec Guarantor" means each or any of the following Guarantors:
           -----------------
     Burrtec Waste Industries, Inc., a California corporation ("BWI"); and West
     Valley Recycling & Transfer, Inc., a California corporation ("WVRT").

          "Burrtec Guaranty" means the Guaranty executed by the Burrtec
           ----------------
     Guarantors.

          "BWI" means Burrtec Waste Industries, Inc., a California corporation.
           ---

          "BWI Performance Guaranty" means that certain Performance Guaranty and
           ------------------------
     Indemnification Agreement dated June 19, 1997 given by BWI in favor of the
     Borrower, KRC and KRC's affiliates.

          "Capital Asset" shall mean, with respect to any Person, any tangible
           -------------
     fixed or capital asset owned or leased (in the case of a Capital Lease) by
     such Person, or any expense incurred by such Person, which in accordance
     with GAAP, should be reported as a capital asset on such Person's balance
     sheet.

          "Capital Expenditures" shall mean, with respect to any Person and any
           --------------------
     period, the total cost of all Capital Assets acquired by such Person during
     such period.

          "Capital Leases" shall mean any and all lease obligations that, in
           --------------
     accordance with GAAP, are required to be capitalized on the books of a
     lessee.

          "Certified Invoice" shall mean a certified invoice for progress
           -----------------
     payments as customarily used by Bank, a copy of which has been delivered by
     Bank to Borrower prior to or concurrently with the execution of this
     Agreement.

          "Change Order" shall mean any amendment or modification to the General
           ------------
     Contract or any subcontract.

          "Completion Date" shall mean March 31, 2001 provided however that upon
           ---------------
     the occurrence of any Force Majeure Delays the Completion Date shall be
     extended by the number of days in each such Force Majeure Delay; provided
     however that in no event shall the Completion Date be later than June 30,
     2001.

          "Compliance Certificate" shall have the meaning given such term in
           ----------------------
     Section 6(j).

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          "Cost Breakdown" means an itemized schedule on a component, unit and
           --------------
     trade breakdown basis covering all costs of constructing and completing the
     Improvements.

          "Cumulative Change Order Amount" shall mean $250,000.
           ------------------------------

          "Debt" of any Person means, at any date without duplication: (a) all
           ----
     obligations of such Person for borrowed money; (b) all obligations of such
     Person evidenced by bonds, debentures, notes or other similar instruments;
     (c) all obligations of such Person to pay the deferred purchase price of
     property or services (excluding normal trade payables not overdue that are
     incurred in the ordinary course of such Person's business); (d) all
     indebtedness created or arising under any conditional-sale or other title-
     retention agreement with respect to property acquired by such Person (even
     though the rights and remedies of the seller or lender under such agreement
     in the event of default are limited to repossession or sale of such
     property); (e) all obligations of such Person as lessee under leases that
     have been or should be, in accordance with generally accepted accounting
     principles, recorded as capitalized leases; (f) all obligations, contingent
     or otherwise of such Person under acceptance, letter-of-credit or similar
     facilities; (g) all obligations of such Person to purchase, redeem, retire,
     defease or otherwise acquire for value any capital stock of such Person or
     any warrants, rights or options to acquire such capital stock, valued, in
     the case of redeemable preferred stock, at the greater of its voluntary and
     involuntary liquidation preference plus accrued and unpaid dividends; (h)
     all executory obligations of such Person in respect of interest-rate swap
     agreements and other similar agreements designed to hedge against
     fluctuations in interest rates; (i) all Debt referred to in any of clauses
     (a) through (h) above that is guaranteed directly or indirectly by such
     Person, or in effect guaranteed directly or indirectly by such Person
     through an agreement (i) to pay or purchase such Debt or to advance or
     supply funds for the payment or purchase of such Debt, (ii) to purchase,
     sell or lease (as lessee or lessor) property, or to purchase or sell
     services, primarily for the purpose of enabling the debtor to make payment
     of such Debt or to assure the holder of such Debt against loss, (iii) to
     advance or supply funds to maintain working capital or equity capital of
     another Person or otherwise to maintain the net worth or solvency of such
     Person (including any agreement in the nature of a support arrangement to
     pay for property or services irrespective of whether such property is
     received or such services are rendered) or (iv) otherwise to assure a
     creditor against loss; and (j) all Debt referred to in any of clauses (a)
     through (h) above secured by (or for which the holder of such Debt has an
     existing right, contingent or otherwise, to be secured by) any Lien on
     property (including accounts receivable and contract rights) owned by such
     Person, even though such Person has not assumed or become liable for the
     payment of such Debt.

          "Debt Service Coverage Ratio" means with respect to the Borrower, for
           ---------------------------
     any period, EBITDA minus unfinanced Capital Expenditures for the four (4)
     quarters then ended, divided by the sum of (i) scheduled payments on long-
     term debt coming due during the following twelve (12) months, plus (ii)
     interest expense, inclusive of letter of credit fees, for the preceding
     twelve (12) months, whether paid or accrued.

                                      -7-
<PAGE>

          "Deed of Trust" means the Deed of Trust and Assignment of Leases and
           -------------
     Rents executed by the Borrower in favor of the Bank substantially in the
     form of Exhibit C.

          "Default" means any event or condition that, with the giving of notice
           -------
     or the lapse of time, or both, would become an Event of Default.

          "Default Rate" means the applicable rate set forth in Section 1(b)(v)
           ------------
     hereof.

          "Design Professional" shall mean J.R. Miller & Associates, the person
           -------------------
     or firm which prepared the Plans and Specifications.

          "Disbursement Schedule" shall mean the Disbursement Schedule attached
           ---------------------
     hereto as Exhibit D providing for the manner of disbursement of Bond
     proceeds to pay for the costs of Project.

          "EBITDA" means, for any fiscal period, Borrower's net income for such
           ------
     period after eliminating extraordinary gains and losses, plus (i) interest
     expense and letter of credit fees, (ii) depreciation and amortization
     expense, and (iii) other non cash expenses, in each case determined in
     accordance with generally accepted accounting principles for such period.

          "Environmental Agreement" has the meaning set forth in Section
           -----------------------
     3(a)(viii) hereof.

          "Event of Default" has the meaning set forth in Section 8 hereof.
           ----------------

          "Final Disbursement" shall have the meaning ascribed thereto in
           ------------------
     Section 3(d)(iii) hereof.

          "Force Majeure Delay" shall mean any delay caused by civil
           -------------------
     disturbance, riot, natural disaster, act of God (including but not limited
     to fires, storms or earthquakes), unforeseeable shortage of materials or
     other event beyond the reasonable control of the Borrower.

          "Governmental Action" means any authorization, approval, consent,
           -------------------
     waiver, exception, license, filing, registration, permit, notarization,
     notification or other requirement of any Governmental Person.

          "Governmental Authority" means the authority of the United States, the
           ----------------------
     State of California, any political subdivision thereof and any city and any
     agency, department, commission, board, bureau or instrumentality of any of
     them.

          "Governmental Person" means, whether domestic or foreign, any
           -------------------
     national, federal, state or local government, any political subdivision
     thereof, or any governmental, quasi-

                                      -8-
<PAGE>

     governmental, judicial, public or statutory instrumentality, authority,
     body or entity, including any central bank and any comparable authority.

          "Governmental Rule" means any treaty, law, rule, regulation,
           -----------------
     ordinance, order, code, interpretation, judgment, writ, injunction, decree,
     determination, directive, guideline, policy or similar form of decision of
     any Governmental Person.

          "Guarantor" means either of the Burrtec Guarantors and either of the
           ---------
     Kaiser Guarantors.

          "Guarantor Agreements" means the Guaranties and the ADR Agreements
           --------------------
     executed by the Guarantors.

          "Guaranty" means each Guaranty and Mandatory Deposit Agreement dated
           --------
     as of the date hereof executed by a Guarantor in favor of the Bank.

          "Improvements" shall mean the improvements being constructed or
           ------------
     acquired and installed as a part of the Project as described in the Plans,
     including on- and offsite improvements and equipment.

          "Kaiser Guarantor" means each of KVI and KRC.
           ----------------

          "Kaiser Guaranty" means the Guaranty executed by the Kaiser
           ---------------
     Guarantors.

          "KRC" means Kaiser Recycling Corporation, a Delaware corporation.
           ---

          "KVI" means Kaiser Ventures Inc., a Delaware corporation.
           ---

          "KVI Performance Guaranty" means that certain Performance Guaranty and
           ------------------------
     Indemnification Agreement dated June 19, 1997 given by KVI in favor of the
     Borrower, WVRT and WVRT's affiliates.

          "Leverage Ratio" shall mean on any date, the ratio, determined in
           --------------
     accordance with GAAP, of the Borrower's total liabilities to the Borrower's
     Book Net Worth.

          "Lien" means, with respect to any asset, (a) any lien, charge, option,
           ----
     claim, mortgage, deed of trust, security interest, pledge or other
     encumbrance of any kind in respect of such asset or (b) the interest of a
     vendor or lessor under any conditional-sale agreement, capital lease or
     other title retention agreement relating to such asset.

          "Net Cash Balance" means cash as reflected on Borrower's balance sheet
           ----------------
     supported by a bank statement of like date, excluding any Restricted Cash.

                                      -9-
<PAGE>

          "Net Profit Before Tax" means Borrower's net profit before the
           ---------------------
     provision for taxes and before any extraordinary gain or loss, including
     but not limited to, interest income, all as determined in accordance with
     GAAP.

          "1997 Deed of Trust" means that certain Deed of Trust, Assignment of
           ------------------
     Rents, Security Agreement and Fixture Filing dated as of June 19, 1997
     given by the Borrower for the benefit of the Bank, recorded July 28, 1997
     as document no. 19970264401, Official Records, San Bernardino County.

          "1997 Reimbursement Agreement" means that certain Reimbursement
           ----------------------------
     Agreement dated as of June 1, 1997, between the Borrower and the Bank, as
     amended from time to time.

          "Obligations" means all payment obligations of the Borrower to the
           -----------
     Bank outstanding from time to time under this Agreement and the other
     Related Documents to which the Borrower is a party, whether for principal,
     interest, fees, expenses, indemnification or otherwise.

          "Permitted Liens" means such of the following as to which no
           ---------------
     enforcement, collection, execution, levy or foreclosure proceeding has been
     commenced: (a) Liens for taxes, assessments and governmental charges or
     levies to the extent not required to be paid under the Deed of Trust; (b)
     pledges or deposits to secure obligations under workers compensation laws
     or similar legislation or to secure public or statutory obligations; (c)
     easements, rights of way and other encumbrances on title to real property
     that do not, in the Bank's good faith discretion, render title to the
     property encumbered thereby unmarketable or materially and adversely affect
     the use of such property for its present purposes; (d) deposits to secure
     the performance of bids, trade contracts (other than for borrowed money),
     leases, statutory obligations, surety and appeal bonds, performance bonds
     and other obligations of like nature incurred in the ordinary course of
     business; and (e) purchase money liens.

          "Person" means an individual, a corporation, a partnership, an
           ------
     association, a business trust or any other entity or organization,
     including any Governmental Person.

          "Plans" shall mean the final plans and specifications (including any
           -----
     AIA general conditions incorporated in the specifications or other general
     conditions acceptable to the Bank and any addenda thereto) for the
     construction of the Improvements prepared by the Design Professional, and
     approved as required in this Agreement and all amendments and modifications
     thereof made by approved Change Orders.

          "Principal Contract" shall mean the Construction Agreement dated as of
           ------------------
     February 25, 2000 by and between Borrower and the Principal Contractor.

          "Principal Contractor" shall mean Inland Valley Contracting, Inc.
           --------------------

                                      -10-
<PAGE>

          "Pricing Grid" shall mean the Pricing Grid attached hereto as Exhibit
           ------------
     H.

          "Project" shall have the meaning ascribed thereto in the first whereas
           -------
     clause of this Agreement.

          "Property" shall mean, collectively, the Real Property together with
           --------
     all buildings, structures and other improvements now or hereafter located
     on the Real Property.

          "Real Property" shall mean the real property located in San Bernardino
           -------------
     County, California, and more particularly described on Exhibit A to the
     Deed of Trust.

          "Reference Rate" means the variable rate of interest per annum
           --------------
     announced by the Bank from time to time as its "reference rate." Such
     "reference rate" is set by the Bank as a general reference rate of
     interest, taking into account such factors as the Bank may deem
     appropriate, it being understood that many of the Bank's commercial or
     other loans are priced in relation to such rate, that it is not necessarily
     the lowest or best rate actually charged to any customer and that the Bank
     may make various commercial or other loans at rates of interest having no
     relationship to such rate.  For purposes of this Agreement, each change in
     the Reference Rate shall be effective as of the opening of business on the
     date announced as the effective date of any change in such "reference
     rate."

          "Related Documents" shall have the meaning ascribed thereto in Section
           -----------------
     4(a)(i) hereof.

          "Requirements" shall have the meaning ascribed to such term in Section
           ------------
     5(k).

          "Restricted Cash" means cash on deposit in either the Deposit Account
           ---------------
     created hereunder or the DSR Account created under the 1997 Reimbursement
     Agreement.

          "Security Agreement" has the meaning ascribed thereto in Section
           ------------------
     2(a)(ix).

          "Subsidiary" of any Person means any corporation, partnership, joint
           ----------
     venture, trust or estate of which (or in which) more than 50% of (a) the
     outstanding capital stock having ordinary voting power to elect a majority
     of the Board of Directors of such corporation (irrespective of whether at
     the time capital stock of any other class or classes of such corporation
     has or might have voting power upon the occurrence of any contingency), (b)
     the interest in the capital or profits of such partnership or joint venture
     or (c) the beneficial interest of such trust or estate is at the time
     directly or indirectly owned by such Person, by such Person and one or more
     of its other Subsidiaries, or by one or more of such Person's other
     Subsidiaries.

          "Title Company" shall mean Chicago Title Company.
           -------------

          "WVRT" means West Valley Recycling & Transfer, Inc., a California
           ----
     corporation.

                                      -11-
<PAGE>

          (j)    Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared, in accordance with generally accepted accounting principles as in
effect from time to time, on a basis consistent with the financial statements
previously delivered to the Bank.

          (k)    In this Agreement, the singular includes the plural; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible visible
form; the words "including," "includes" and "include" are deemed to be followed
by the words "without limitation"; references to articles, sections (or
subdivisions of sections), recitals, exhibits, annexes or schedules are to those
of this Agreement unless otherwise indicated; references to agreements and other
contractual instruments are deemed to include all subsequent amendments and
other modifications to such instruments, but only to the extent such amendments
and other modifications are not prohibited by the terms of this Agreement; and
references to Persons include their respective permitted successors and assigns.

     SECTION 2.  Conditions Precedent to the Issuance of the Letter of Credit.
                 ------------------------------------------------------------
Subject to the prior fulfillment of the following conditions precedent set forth
in clauses (a) through (d) below, the Bank shall issue the Letter of Credit,
effective on the Date of Issuance:

          (a)    The Bank shall have received, on or before the Date of
Issuance, the following, in form and substance satisfactory to the Bank:

                 (i)    Good standing certificates for the Borrower and for all
Guarantors from the offices of the Secretaries of State of California and
Delaware, as applicable, together with copies of (i) all Borrower action
authorizing the execution, delivery and performance by the Borrower of this
Agreement, the Deed of Trust, and the Loan Agreement and other Borrower
Agreements and approving the Letter of Credit; (ii) the Members Operating
Agreement for the Borrower, the Borrower's Certificate of Formation (Form LLC-1)
and all amendments thereto; (iii) all action of the Guarantors authorizing the
execution, delivery and performance of the Corporate Guaranties; and (iv) the
Guarantors' Articles of Incorporation and By-laws and all amendments thereto;

                 (ii)   A certificate of the secretary or assistant secretary of
each Guarantor and of two members of the Executive Committee of the Borrower,
certifying the name and true signatures of the individuals authorized to sign
this Agreement and the other documents to be delivered by the Borrower or any
Guarantor hereunder;

                 (iii)  The favorable opinion of Orrick, Herrington & Sutcliffe,
as bond counsel, as to the validity of the Bonds and as to federal income tax
matters, and a favorable opinion of McCabe & Associates, P.C., as special
counsel to the Borrower, and Gresham, Savage, Nolan and Tilden, LLP, as counsel
to the Borrower as to such other matters as the Bank may reasonably request;

                                      -12-
<PAGE>

                 (iv)   An executed counterpart of the Loan Agreement;

                 (v)    An executed counterpart of the Indenture;

                 (vi)   (Intentionally omitted);

                 (vii)  the Kaiser Guaranty duly executed and delivered by the
Kaiser Guarantors;

                 (viii) the Burrtec Guaranty duly executed and delivered by the
Burrtec Guarantors;

                 (ix)   (Intentionally omitted);

                 (x)    A fully-executed counterpart of the Application for
Irrevocable Standby Letter of Credit (the "Application"); provided, however,
                                                          --------  -------
that in the event of any inconsistency between the terms of this Agreement and
the Application, this Agreement shall control and govern; and

                 (xi)   Such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies thereof) or
opinions as the Bank may reasonably request on or before the Date of Issuance.

          (b)    The following statements shall be true and correct on the Date
of Issuance and the Bank shall have received a certificate signed by a duly
authorized agent of the Borrower, dated the Date of Issuance, so stating:

                 (i)    the representations and warranties contained in Section
5 hereof, or made by the Borrower or any Guarantor in any statement, certificate
or document delivered by the Borrower or any Guarantor in connection with this
Agreement, are correct in all material respects on and as of the Date of
Issuance as though made on and as of such date; and

                 (ii)   no Event of Default (as defined in Section 8 hereof) has
occurred and is continuing, or would result from the issuance of the Letter of
Credit, and no event has occurred and is continuing which would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.

          (c)    On or before the Date of Issuance:

                 (i)    the Issuer shall have duly adopted resolutions
authorizing the execution, delivery and performance by the Issuer of the Loan
Agreement and the Indenture, and on the Date of Issuance such resolutions shall
continue to be in full force and effect;

                 (ii)   the Trustee shall have accepted the trusts of the
Indenture;

                                      -13-
<PAGE>

                 (iii)  all conditions precedent to the issuance of the Bonds
shall have occurred;

                 (iv)   The Bank shall have received written notice from Fitch's
Rating Service that it has assigned a rating or ratings for the Bonds of not
lower than the current long- and short-term ratings (as applicable) assigned to
the Bank by such rating agency; and

                 (v)    the Issuer shall have duly executed, issued and
delivered the Bonds to the Trustee and the Trustee shall have authenticated and
delivered the Bonds to the underwriter.

          (d)    No change shall have occurred in any law or regulation
thereunder or interpretation thereof which in the opinion of counsel for the
Bank would make it illegal for the Bank to issue the Letter of Credit as
provided herein.

     SECTION 3.  Approval of Construction Fund Disbursements.
                 -------------------------------------------

     On the Date of Issuance, an initial requisition of Bond Proceeds in the
amount of $170,000 (the "Initial Requisition") shall be disbursed by the Trustee
for Costs of Issuance subject to compliance with the requirements of the
Indenture.  Unless approved by the Bank in writing, no further funds shall be
disbursed without the prior fulfillment of all the conditions precedent set
forth in clauses (a) and (b), below.

          (a)    The Bank shall have received at least one Business Day before
the date of the first Borrower requisition following the Initial Requisition
(the "Subsequent Requisition Date"), and the Borrower hereby covenants that the
Bank shall receive on or before July 15, 2000, the following, in form and
substance satisfactory to the Bank:

                 (i)   A fully executed copy of the Principal Contract;

                 (ii)  An Assignment of the Plans and of the agreement with the
Design Professional pursuant to which the Plans were prepared, in form
satisfactory to Bank together with written consent thereto by the Design
Professional;

                 (iii) The Deed of Trust fully executed and acknowledged by the
Borrower;

                 (iv)  Satisfactory soils report by soils engineer approved by
the Bank confirming, among other things, that the soil at the Project Site is of
sufficient stability to support the Facilities; and receipt of a Release of
Liability from the California Department of Toxic Substances Control;

                                      -14-
<PAGE>

                 (v)    an Appraisal of the Facility on an on-going business
basis, performed by an appraiser, and in form and substance and showing an
appraised value, satisfactory to the Bank in its sole discretion;

                 (vi)   An ALTA LP-10 loan policy or policies of title
insurance, or its equivalent or a written commitment by the title insurer to
issue one, with a liability limit of $8,625,754, issued by a title insurer
acceptable to the Bank insuring the interests of the Bank under the Deed of
Trust as a valid lien on the Project, subject in priority only to the lien of
the 1997 Deed of Trust and such other title exceptions as the Bank may approve
in writing; said policy or policies shall contain only such exceptions from its
coverage as have been approved in writing by the Bank;

                 (vii)  Agreement to Furnish Insurance, duly executed by the
Borrower, together with the original insurance policies or certificates thereof
for the insurance specified in such Agreement;

                 (viii) Executed counterparts of Amended and Restated
Environmental Compliance Agreement (the "Environmental Agreement") as executed
by the Borrower for the benefit of the Bank; together with the environmental
guaranties, executed by the Guarantors;

                 (ix)   Form UCC-1 Financing Statements executed by the Borrower
required to perfect the personal property security interests granted to the Bank
under the Deed of Trust;

                 (x)    letter from the Borrower approving the Plans;

                 (xi)   the Cost Breakdown and the completed and signed
Disbursement Schedule;

                 (xii)  the building permit and any other authorization, if any,
which may be required from any Governmental Authority having jurisdiction over
the Property or the construction of the Improvements and an Assignment of the
Principal Contract in form satisfactory to Bank and written consent thereto by
the Principal Contractor; provided, however, that so long as all other
conditions precedent to the disbursement of Bond proceeds specified in this
clause (a) and in clause (b) below have been met, the Bank will consent to the
disbursement of up to Three Million Dollars ($3,000,000) in Bond proceeds,
notwithstanding that the building permit has not been issued and that the Bank
has not received the Assignment of the Principal Contract and the written
consent thereto by the Principal Contractor;

                 (xiii) A Security Agreement (the "Security Agreement") duly
executed and delivered by the Borrower;

                 (xiv)  Form UCC-1 Financing Statement(s) executed by the
Borrower required to perfect the personal property security interests granted to
the Bank under the Security Agreement; and

                                      -15-
<PAGE>

                 (xv)   Such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies thereof) or
opinions as the Bank may reasonably request.

          (b)    Each Borrower requisition from the Trustee, submitted as
required by Section 3.2 of the Loan Agreement shall be approved as to form by
the Bank prior to submission thereof by the Borrower to the Trustee. Any
obligation of the Bank to approve the form of any requisition shall be subject
to the prior fulfillment of all of the following conditions precedent:

                 (i)    no Event of Default shall have occurred and be
continuing and no event which with notice or lapse of time or both would become
such an Event of Default shall have occurred and be continuing hereunder or
under any Borrower Agreement;

                 (ii)   the representations and warranties of the Borrower made
hereunder or in connection herewith shall be true and correct in all material
respects on the date of such requisition fully as if made on and as of such date
and, as to each of the foregoing conditions, the Borrower shall have so
certified in writing to the Bank;

                 (iii)  each of the conditions precedent set forth in Section
2(a) through (d) and Section 3(a) hereof shall have been fulfilled;

                 (iv)   each requisition shall be accompanied by Certified
Invoices, receipts or other evidence satisfactory to the Bank in its good faith
discretion as to the cost of the item with respect to which the requisition is
being submitted;

                 (v)    if Bank requests, it shall have received a list of the
names and addresses of all material dealers, laborers and subcontractors with
whom agreements have been made by the General Contractor and/or Borrower to
deliver materials to and/or perform work on the Improvements;

                 (vi)   the Improvements shall not have been materially injured
or damaged by fire or other casualty unless insurance proceeds are available in
an amount which the Bank deems sufficient, which when combined with Borrower's
Funds, in its reasonable judgment to effect the satisfactory restoration of the
Improvements and to permit the completion thereof prior to the Completion Date;

                 (vii)  Borrower shall have deposited with Bank cash in the
amount, estimated by Bank, necessary to pay for the costs of completion of
construction of the Improvements to the extent that the aggregate amount of the
undisbursed Bond proceeds and Borrower's Funds, designated for the payment of
the remaining costs to be incurred in the completion of construction of the
Improvements is, in the opinion of Bank, insufficient therefor;

                 (viii) Advice from Bank's Inspection Department to the effect
that, to date, the Improvements have been constructed in accordance with the
Plans and that the present state of

                                      -16-
<PAGE>

construction of the Improvements will, barring then unforeseen and unknown
delays, permit completion of construction of the Improvements on or before the
Completion Date;

                 (ix)   if Bank so requests, (a) Title Company shall have issued
its continuation endorsement (CLTA Endorsement 122 or comparable endorsement) to
Bank indicating that since the last preceding disbursement to Borrower or
General Contractor, there has been no change in the state of title, that there
are no intervening liens which may now or hereafter take priority over the
disbursement to be made and that there are no survey exceptions not theretofore
approved by Bank; and (b) upon completion of the foundation(s), Title Company
has issued its foundation endorsement (CLTA Endorsement 102.5 or comparable
endorsement) insuring Bank that the foundation(s) is constructed wholly within
the boundaries of the Property and does not encroach on any easements nor
violate any covenants, conditions or restrictions of record; and

                 (x)    with respect to all items of personal property specified
in such requisition, if requested by the Bank, form UCC-1 financing statements
identifying such personal property and duly executed by the Borrower.

          (c)    Prior to authorizing the final disbursement of Bond Proceeds,
the following conditions shall have been satisfied:

                 (i)    No Event of Default, or fact or circumstance which, with
the giving of notice or the passage of time, or both, would constitute an Event
of Default, shall exist hereunder or under any of the Borrower Agreements;

                 (ii)   If Bank requests, it shall have received a list of the
names and addresses of all material dealers, laborers and subcontractors with
whom agreements have been made by the General Contractor and/or Borrower to
deliver materials to and/or perform work on the Improvements;

                 (iii)  The representations and warranties of Borrower made in
Section 5 hereof shall be true and correct in all material respects on and as of
the date of the disbursement with the same effect as if made on such date;

                 (iv)   The Improvements shall not have been materially damaged
by fire or other casualty unless insurance proceeds are available and (when
combined with Borrower's Funds) are sufficient in the Bank's good faith judgment
to effect the satisfactory restoration of the Improvements and to permit the
completion thereof prior to the Completion Date;

                 (v)    Advice from Bank's Inspection Department to the effect
that the Improvements have been completed substantially in accordance with the
Plans, as modified pursuant to any approved Change Orders;

                                      -17-
<PAGE>

                 (vi)   Evidence that Borrower has filed the Notice of
Completion of the Improvements necessary to establish commencement of the
shortest statutory period for the filing of mechanics' and materialmen's liens;

                 (vii)  Subsequent to expiration of the period during which any
lien for labor, services or material may be validly recorded against the
Property or the Improvements, Title Company shall have rewritten and reissued
the Title Policy with such endorsements as Bank may require, including, without
limitation, CLTA Endorsements 100 (unmodified), 102.5, 103.7, 104.7, 110.9,
111.5 and 116, which reissued Title Policy shall insure that the Improvements
have been completed free of all mechanics' and materialmen's liens or claims
thereof;

                 (viii) Evidence of approval of completion of the Improvements
by Borrower; and

                 (ix)   Evidence of the approval by all Governmental Authorities
of the Improvements in their entirety for permanent occupancy, to the extent any
such approval is a condition of the lawful use and occupancy of the
Improvements.

          (d)    The Bond proceeds and Borrower's Funds shall be used only for
the payment of costs of construction of the Improvements and the acquisition and
installation of equipment in accordance with the Plans and other costs related
thereto, as set forth on the Disbursement Schedule, and shall be disbursed as
follows:

                 (i)    Upon satisfaction of the conditions of clause (a) of
this Section 3, Bank shall authorize disbursement of Bond Proceeds in accordance
with the Disbursement Schedule the amounts necessary to pay all costs, charges
and expenses incurred or to be incurred (as estimated by Bank) in connection
with the Letter of Credit and the Bond financing or payable pursuant to this
Agreement or the other Related Documents, excluding direct costs of labor and
materials related to the Improvements, and including but not limited to the
initial fees payable to the Bank (which are deemed earned on the Date of
Issuance and are not refundable in whole or part), predevelopment, permitting
and offsite costs, service charges, title charges, tax and lien service charges,
recording fees, escrow fees, appraisal fees, legal fees, real property taxes and
assessments, insurance premiums, fees payable in connection with any commitment
to provide permanent financing of the Improvements, and any amount required to
pay existing encumbrances affecting the Property and amounts required to
complete the purchase of the Property;

                 (ii)   Upon satisfaction of the conditions of clause (b) of
this Section 3, Bank shall authorize disbursement of Bond Proceeds directly to
Borrower such sums as are required for the payment of the costs and expenses of
constructing, acquiring or installing the Improvements, which disbursements
shall be made in accordance with the applicable provisions of the Disbursement
Schedule. All funds disbursed hereunder to Borrower shall be received by
Borrower in trust and Borrower agrees that the same shall be used only for the
payment of those items contemplated by the particular disbursement; and

                                      -18-
<PAGE>

                 (iii)  The Final Disbursement shall be the payment of any
monies retained from progress payments or draws as set forth in the Disbursement
Schedule. Subject to the provisions of this Agreement, the final disbursement
shall be made only after Borrower has satisfied the conditions of clause (c) of
this Section 3, and delivered or caused to be delivered to Bank, in addition to
the Title Policy and endorsements or coverages required pursuant to the terms
hereof, such additional endorsements to the Title Policy as Bank may require.
Bank may withhold the Final Disbursement until Borrower has furnished Bank with
the written approval of such final disbursement by Title Company and the surety
on any bond required by Bank.

          (e)    The Borrower understands and agrees that in no event shall the
Bank be required to approve aggregate requisitions for more than $8,500,000.
The Borrower acknowledges and agrees that its costs and expenses incurred in
connection with the Project exceed the amounts for which the Bank will approve
requisitions and that the Borrower shall be directly liable for the payment of
such costs.

     SECTION 4.  Obligations of the Borrower.
                 ---------------------------

          (a)    The obligations of the Borrower under this Agreement shall be
absolute, unconditional and irrevocable subject to and in accordance with the
terms of this Agreement, and shall be performed strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:

                 (i)    any lack of validity or enforceability of the Letter of
Credit, the Bonds, the Loan Agreement, the Indenture, the Borrower Agreements or
the Guarantor Agreements (collectively, the "Related Documents");

                 (ii)   any amendment or waiver of or any consent to departure
from all or any of the Related Documents;

                 (iii)  the existence of any claim, set-off, defense or other
rights which the Borrower may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any persons or
entities for whom the Trustee, any such beneficiary or any such transferee may
be acting), the Bank, any Guarantor or any other person or entity, whether in
connection with this Agreement, the Related Documents or any unrelated
transaction;

                 (iv)   any breach of contract or other dispute between the
Borrower and the Trustee, any beneficiary or any transferee of the Letter of
Credit (or any persons or entities for whom the Trustee, any such beneficiary or
any such transferee may be acting), the Issuer, the owners of the Bonds, the
Bank, any Guarantor or any other person or entity;

                 (v)    any statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever; or

                                      -19-
<PAGE>

                 (vi)   payment by the Bank under the Letter of Credit against
presentation of a sight draft or certificate which does not comply with the
terms of the Letter of Credit, provided that such payment shall not have
constituted gross negligence or willful misconduct of the Bank.

          (b)    The Bank shall not be obligated to issue any further credits,
to cure any defaults under the Indenture, the Loan Agreement, any Related
Document or otherwise, or in any other manner to extend any financial
consideration to the Borrower beyond performance by the Bank of its obligations
under the Letter of Credit.

          (c)    The Bank shall not be deemed to have waived or released any of
its rights or remedies (whether specified in or arising under this Agreement or
otherwise available to it by law or agreement) unless it signs a written waiver
or release. Delay or failure to act on the Bank's part shall not constitute a
waiver of or otherwise preclude enforcement of any of its rights and remedies.
All of the Bank's rights and remedies shall be cumulative and may be exercised
singularly or concurrently. The Bank need not resort to any particular right or
remedy before exercising or enforcing any other, and the Bank's resort to any
right or remedy shall not preclude the exercise or enforcement of any other
right and remedy.

     SECTION 5.  Representations and Warranties of the Borrower.  The Borrower
                 ----------------------------------------------
represents and warrants as follows:

          (a)    The Borrower was duly organized and is validly existing under
the laws of the state of its formation and is duly qualified to do business in
and is in good standing under the laws of any other jurisdiction in which the
conduct of its business or the ownership of its properties makes such
qualification necessary.

          (b)    The execution, delivery and performance by the Borrower of this
Agreement and of each of the Related Documents to be executed, delivered and
performed by the Borrower are within the Borrower's powers, have been duly
authorized by all necessary Borrower action, do not contravene (i) the
Borrower's Articles of Organization and its Members Operating Agreement or (ii)
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any indenture, agreement, lease, instrument or other
contractual restriction binding on or affecting the Borrower and (except as
provided in this Agreement) do not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect to
any of its properties other than the liens created by the Borrower Agreements or
any other Related Documents. The Borrower is not in violation of or in default
under (in any material respect) any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease, instrument or other contractual restriction. All legally
required orders, consents, easements, permits or other authorizations or
approvals of any public boards or bodies have been duly and validly issued and
remain in full force and effect, and no additional authorization, approval,
consent, agreement, permit, order or other action by, and no notice to or filing
or registration with, any governmental authority or regulatory body is required
for (1) the due execution, delivery and performance by the Borrower of this
Agreement or any of

                                      -20-
<PAGE>

the Related Documents to be executed, delivered and performed by the Borrower;
or (2) the acquisition, construction and maintenance of the Project.

          (c)    This Agreement, the Loan Agreement and each of the Borrower
Agreements have each been duly authorized, executed and delivered and constitute
the legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

          (d)    There is no pending action or proceeding before any court,
governmental agency or arbitrator against or directly involving the Borrower
and, to the best of the Borrower's knowledge, there is no threatened action or
proceeding affecting the Borrower or before any court, governmental agency or
arbitrator which may materially and adversely affect the financial condition or
operations of the Borrower.

          (e)    If the Borrower shall have any employee benefit plan subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") the Borrower shall be in compliance in all material respects
with Part I of Subtitle B of Title I thereof and the regulations and published
interpretations thereunder. No Reportable Event (as defined in Section 4043(b)
of ERISA) shall have occurred with respect to any employee benefit plan, which
is subject to the provisions of Title IV of ERISA and which is maintained for
employees of the Borrower (a "Plan"), administered by the Borrower or any
administrator designated by the Borrower. There shall be no unfunded vested
liability, on an aggregate basis, with respect to the Plans administered by the
Borrower or the administrators designated thereunder as of the date hereof.

          (f)    To the best of Borrower's knowledge after due inquiry, no
information furnished by the Borrower to the Bank in connection with this
Agreement or any Related Document includes any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
made, in the light of the circumstances in which they were made, not misleading.

          (g)    There are no actions, suits or proceedings pending, or to the
knowledge of the Borrower threatened against or affecting the validity or
enforceability of this Agreement or any Borrower Agreement or the priority of
the liens thereof, at law or in equity, or before or by any governmental
authority or local authority.

          (h)    The Borrower has good title to its material assets and the same
are not subject to any liens or encumbrances other than encumbrances as have
been previously disclosed by the Borrower, in writing, to the Bank or reflected
in the financial statements delivered to the Bank.

          (i)    The Borrower possesses all necessary trademarks, trade names,
copyrights, patents, patent rights and licenses to conduct its business as now
operated, without any known conflict with the valid trademarks, trade name,
copyrights, patents and license rights of others.

                                      -21-
<PAGE>

          (j)    Attached hereto as Exhibit "F" is a true, complete and correct
list of all material agreements, contracts, franchises, and permits owned by or
held in the name of the Borrower (collectively the "Material Agreements,"
individually each or any "Material Agreement").

          (k)    The Property and the actual use thereof by Borrower complies in
all material respects with all laws, regulations, orders, building restrictions
and requirements of, and all permits and approvals from, and agreements with and
commitments to, all Governmental Authority, judicial or legal authorities having
jurisdiction over the Property or any business conducted thereon or therefrom,
and with all restrictive covenants and other title encumbrances encumbering the
Property (all collectively, the "Requirements").  Borrower has received no
notices of violations of any Requirements.

          (l)    With the exception of leased equipment used in the ordinary
course of business and equipment owned and provided by the Project operator,
Borrower owns or will own directly, all of the personal property and fixtures
necessary for the operation and management of the Property following
construction of the Improvements for the uses intended to be conducted thereon
or required by Bank as additional security for the Borrower's obligations
hereunder, in each case free and clear of all liens, encumbrances and adverse
claims (other than Permitted Liens) and the security interest of Bank in such
personal property shall be a first lien thereon.

          (m)    Borrower has not received, except from the Bank or the
Authority, financing for either the acquisition of the Project or the
construction and installation of the Improvements.

          (n)    The Plans are satisfactory to Borrower and to the extent
required by applicable law or any effective restrictive covenant, by all
applicable Governmental Authority and the beneficiary of any such covenant
respectively; the Plans so approved have been initialed by Borrower and General
Contractor, all construction, if any, heretofore performed on the Improvements
has been performed within the perimeter of the Property in accordance with the
Plans and any restrictive covenants applicable thereto; there are no structural
defects in the Improvements, and no violation of any Local Requirement exists
with respect thereto.

          (o)    All utility services necessary for the construction of the
Improvements and the operation thereof for their intended purpose are either
available at the boundaries of the Property or all necessary steps have been
taken by Borrower and all governmental authorities having jurisdiction over the
Property to assure the complete construction and installation thereof, including
water supply, storm and sanitary sewer facilities, gas, electric and telephone
facilities.

          (p)    All roads necessary for the full utilization of the
Improvements for their intended purposes have either been completed or the
necessary rights-of-way therefor have either been acquired by applicable
Governmental Authority or have been dedicated to public use and accepted by
applicable Governmental Authority and all necessary steps have been taken by

                                      -22-
<PAGE>

Borrower and applicable Governmental Authority to assure the complete
construction and installation thereof.

          (q)    Borrower has examined, is familiar with, and the Improvements
will in all respects conform to and comply with all covenants, conditions,
restrictions, reservations and zoning ordinances affecting the Property.

          (r)    Borrower has not dealt with any person, firm or corporation who
is or may be entitled to any finder's fee or brokerage commission (other than
the Borrower's financial advisors, underwriters and remarketing agents in
connection with the sale of the Bonds) in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby and
Borrower does hereby indemnify and agree to hold Bank harmless from and against
any and all loss, cost liability or expense, including reasonable attorneys'
fees, Bank may suffer or sustain should such warranty or representation prove
inaccurate in whole or in part.

     SECTION 6.  Affirmative Covenants of the Borrower.  So long as the
                 -------------------------------------
Expiration Date (as defined in the Letter of Credit) has not occurred or so long
as any amount is due and owing to the Bank hereunder, unless the Bank shall
otherwise consent in writing the Borrower will:

          (a)    Maintain its existence and remain qualified to do business in
California and maintain its principal place of business in California.

          (b)    Comply in all material respects with all applicable laws,
rules, regulations and orders of any governmental authority, non-compliance with
which would materially and adversely affect the ability of the Borrower to
perform its obligations hereunder or under any Borrower Agreement, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property, except to the extent compliance with any of the foregoing is
then being contested as provided in Section 17 hereof.

          (c)    Maintain, at its own cost and expense, all of the liens created
under the Borrower Agreements as duly perfected liens on the property encumbered
thereby, subject only to Permitted Liens and such other liens, claims and
exceptions as the Bank shall have consented to in writing.

          (d)    Obtain, maintain and, upon request, furnish or cause to be
furnished to the Bank (i) copies of policies for the insurance required to be
maintained as provided in the Agreement to Furnish Insurance attached hereto as
Exhibit "E"; and, without duplication of the foregoing, (ii) casualty insurance
with fire and extended coverage (with lender's loss payable endorsements in
favor of the Bank); third-party environmental liability and general public
liability insurance naming the Bank as an additional insured and worker's
compensation insurance (but only if and when the Borrower has employees), with
the same coverage amounts, terms and conditions as are currently in existence as
of the date of this Agreement; the insurance company or companies providing such
insurance may be changed upon not less than ten (10) Business Days prior written
notice to the Bank but without having to obtain the Bank's prior written consent
as

                                      -23-
<PAGE>

long as the replacement insurance company has an A.M. Best's rating of B+ or
above; all such policies shall require at least thirty (30) days' prior notice
to the Bank of cancellation or reduction in coverage; and, if requested,
receipts showing payment of all insurance premiums shall be provided to the
Bank.

          (e)    Pay and discharge all lawful claims, including taxes,
assessments and governmental charges or levies imposed upon it or its income or
profits or upon the Project prior to the date upon which penalties attach
thereto; provided that the Borrower shall not be required to pay any such tax,
assessment, charge or levy, the payment of which is being contested as permitted
under Section 17 hereof.

          (f)    Comply promptly with any valid requirement of any Governmental
Authority where noncompliance would materially and adversely affect the ability
of the Borrower to perform its obligation hereunder.

          (g)    The Bank may assume that the statements, facts, information and
representations contained in any affidavits, orders, receipts or other written
instruments which are filed with, or exhibited to, the Bank by or on behalf of
the Borrower are true and correct in all material respects and may rely thereon
without any investigation or inquiry and any action taken by the Bank in
reliance thereon shall conclusively be deemed to be in the discharge of the
Bank's obligations hereunder.

          (h)    At any reasonable time and upon reasonable notice to the
Borrower, from time to time and as may be reasonably requested, permit the Bank
or any agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Borrower and consult with any of its agents and representatives. The Bank
agrees to use reasonable efforts to ensure that any information obtained
pursuant to this paragraph which is not contained in a report or other document
otherwise available to the public generally, to the extent permitted by law and
except as may be required by valid subpoena or in the normal course of business
operations (which shall include the Bank's sharing of its liability under the
Letter of Credit with other banks which give appropriate assurances of
confidential treatment of such information), will be treated confidentially by
the Bank and will not be distributed or otherwise made available by the Bank to
any person or entity, other than their respective employees, authorized agents
or representatives who need to review or be informed of such information in
connection with their employment by Bank.

          (i)    Keep proper books of record and account, in which full and
correct entries shall be made of financial transactions and the assets and
business of the Borrower in accordance with generally accepted accounting
principles.

          (j)    Furnish to the Bank the following: (i) as soon as reasonably
possible, and in any event within ten (10) days, after the occurrence of each
Event of Default (as hereinafter defined) of which the Borrower has knowledge, a
statement signed by the Borrower setting forth the details of such Event of
Default and the action which the Borrower proposes to take with respect thereto;
(ii) upon request, copies of all federal income tax returns of the Borrower

                                      -24-
<PAGE>

promptly after the same are filed with the taxing authorities; (iii) within 45
days of each March 31, June 30 and September 30, balance sheets of the Borrower
(including a reconciliation of net worth) as at said dates and income and
expense statements for the year-to-date period ending on each of said dates,
certified by two members of the Executive Committee of the Borrower accompanied
by the certificate (a "Compliance Certificate") of such two members certifying
(A) that, as at the end of such period there existed no Event of Default
hereunder nor any known event which with notice, lapse of time or both would
constitute an Event of Default hereunder; and (B) compliance by the Borrower
with the financial covenants required under this Agreement and setting forth the
calculations demonstrating such compliance; (iv) within 120 days of the end of
each fiscal year of the Borrower the complete annual financial statements of the
Borrower for such fiscal year, accompanied by a review report thereon of a
nationally or regionally recognized firm of certified public accountants,
together with a Compliance Certificate with respect to such fiscal year then
ending; and (v) such other information respecting the business, properties or
the condition or operations, financial or otherwise, of the Borrower which the
Bank may from time to time reasonably request.  All financial reports and
statements required hereunder shall be prepared in accordance with generally
accepted accounting principles consistently applied.  All financial statements,
tax returns and the information contained therein shall be deemed confidential
and shall be handled in the manner specified in Section 6(h) of this Agreement.

          (k)    From time to time, record, register and file all such notices,
statements and other documents and take such other reasonable steps, including,
but not limited to, the amendment of the Borrower Agreements or the execution of
any other security agreement relating hereto and any instruments perfecting
interests thereunder, as may be necessary or advisable to render fully valid and
enforceable under all applicable laws the rights, liens and priorities of the
Bank with respect to all security from time to time furnished in connection with
this Agreement or intended to be so furnished, in each case in such form and at
such times as shall be satisfactory to the Bank, and pay all fees and expenses
(including reasonable attorneys' fees) incident to compliance with this
paragraph; provided that the amendment to any Borrower Agreements shall not
change the business terms of this Agreement or the transactions contemplated
hereby.

          (l)    Duly and punctually pay or cause to be paid all principal and
interest on the Debt of the Borrower to third parties in excess of $50,000 in
principal amount, comply with and perform all material conditions, terms and
obligations of the notes evidencing such Debt and the security agreements, deeds
of trust and mortgages securing it, promptly inform the Bank of any default, or
anticipated default, under any such material provision of any such note,
security agreement, deed of trust or mortgage, and forward to the Bank a copy of
any notice of default or notice of an event that might result in default under
any such note, security agreement, deed of trust or mortgage; provided that the
Borrower shall not be required to pay any such Debt, the payment of which is
being contested as permitted in Section 17 hereof.

          (m)    At the time and in amounts required by Bank, Borrower shall
deposit Borrower's Funds in the Borrower's Funds Account.  Borrower's Funds
shall be disbursed from such account in the manner provided in Section 3 hereof.
Should it appear at any time that the Bond proceeds then held by the Trustee are
insufficient, in Bank's reasonable judgment, to

                                      -25-
<PAGE>

provide the financing for the completion of the Improvements, Borrower, within
ten (10) days following receipt of written demand by Bank for additional funds,
shall pay to Bank an amount equal to such deficiency as expressed in said demand
for deposit in the Borrower's Funds Account.

          (n)    Borrower shall at its own cost and expense, maintain the Deed
of Trust as a lien on the Property subject in priority only to the lien of the
1997 Deed of Trust such other title exceptions as are approved by the Bank in
writing and deliver or cause to be delivered to Bank from time to time such
endorsements to the Title Policy and such other title insurance coverages as
Bank shall require.

          (o)    Borrower shall allow Bank, or its representatives (and Bank
shall have the right) to enter upon the Property, inspect the Improvements and
all materials to be used in the construction thereof and to examine the Plans
and all detailed plans and shop drawings which are or may be kept at the
construction site and will cooperate, and cause the General Contractor or, if
none, the subcontractors, to cooperate with Bank. Inspection by Bank of
construction shall be for the purpose of protecting the security of Bank and
such inspection is in no way to be construed as a representation that there is a
compliance with the Plans or that the construction is free from faulty material
or workmanship. The Borrower agrees to pay the Bank its standard construction
inspection fee (not to exceed $500) in connection with each such inspection.

          (p)    Unless prior arrangements satisfactory to both Bank and Title
Company have been made, Borrower shall not commence construction of the
Improvements, including grading and site clearance, or undertake any act on the
Property prior to recordation of the Deed of Trust, the result of which would
cause any mechanics' or materialman's lien thereafter filed to take priority
over the lien of the Deed of Trust.  Borrower shall cause construction of the
Improvements to be commenced not more than thirty (30) days after the
recordation of the Deed of Trust.  Following the commencement of construction,
Borrower shall cause the construction of the Improvements to be prosecuted with
diligence and continuity.  In any event, on or before the Completion Date,
Borrower shall cause the construction of the Improvements to be completed
substantially in accordance with the Plans, free and clear of liens or claims
for liens, and shall cause all licenses and permits necessary for the occupancy
and use of the Improvements to be issued.

          (q)    Borrower shall not permit any change in the Plans or the
performance of any work pursuant to any Change Order, which when added to the
cumulative amount of all Change Orders previously agreed to by Borrower and all
increases in the General Contract price resulting from Change Orders heretofore
agreed to by Borrower, will result in a change in the General Contract price or
in the cost of construction of the Improvements in excess of the Cumulative
Change Order Amount, or which will materially reduce the square foot area of the
Improvements, unless it shall have received the specific approval of Bank to
such Change Order and provided that the additional funds necessary to pay for
such Change Orders are provided as Borrower's Funds.  Bank is hereby authorized
to and shall disburse said funds in accordance with the Disbursement Schedule
for the payment of such Change Orders upon completion of such changes to Bank's
satisfaction.

                                      -26-
<PAGE>

          (r)    Borrower shall not modify the Cost Breakdown without Bank's
prior written consent, which consent shall be conditioned upon Bank having
received evidence satisfactory to it that (i) the change in the Cost Breakdown
is reasonably necessary; and (ii) in the opinion of Bank, there remains
sufficient funds in the undisbursed portion of the Loan and of Borrower's Funds
designated herein and allocated on the Disbursement Schedule for the costs of
construction of the Improvements to pay for all remaining costs of completion of
construction of the Improvements.

          (s)    [Intentionally omitted]

          (t)    Borrower shall not execute any contract or become party to any
arrangement for the performance of work on the Property except (1) with the
Principal Contractor or other contractors pursuant to contracts delivered to the
Bank prior to the Date of Issuance; or (2) with the consent of the Bank.

          (u)    Borrower shall deliver to Bank, on demand, any contracts, bills
of sale, statements, receipted vouchers or agreements, under which Borrower
claims title to any materials, fixtures or articles incorporated in the
Improvements.

          (v)    Upon demand of Bank, Borrower shall correct any defect in the
Improvements or any departure from the Plans not approved by Bank; the advance
of any Loan proceeds shall not constitute a waiver of Bank's right to require
compliance with this covenant with respect to any such defects or departures
from the Plans not theretofore discovered by, or called to the attention of
Bank.

          (w)    Borrower shall receive the disbursements to be made hereunder
as a trust fund for the purpose of paying the costs of acquisition, installation
and construction of the Improvements and related soft costs and it will apply
the same first to such payment before using any part thereof for any other
purpose.

          (x)    Borrower shall notify Bank immediately on completion of the
foundation of the Improvements.

          (y)    Borrower shall not install materials, personal property,
equipment, or fixtures subject to any security agreement or other agreement or
contract wherein the right is reserved to any person, firm or corporation to
remove or repossess any such material, equipment or fixtures, or whereby title
to any of the same is not completely vested in Borrower at time of installation,
without Bank's written consent.

          (z)    All easements, declarations of covenants, conditions and
restrictions, and private or public dedications affecting the Property shall be
submitted to Bank for its approval and such approval shall be obtained prior to
the execution or granting of any thereof by Borrower, accompanied by a drawing
or survey showing the precise location of each thereof.

                                      -27-
<PAGE>

          (aa) Borrower shall comply promptly with all Requirements of any
Governmental Authorities having jurisdiction over the Property or the
construction and operation of the Improvements thereon.  Borrower shall obtain,
preserve and maintain in good standing, as applicable, all rights and privileges
necessary or desirable for the operation of the Property and the conduct of
Borrower's business thereon and therefrom.

          (bb) Borrower shall promptly notify Bank in writing of:

               (i)    any litigation affecting the Borrower or the Property that
may reasonably be expected to result in a material adverse change in (i)
Borrower's ability to timely perform any of its obligations hereunder or under
any of the Borrower Agreements, or (ii) the physical condition or operation of
the Property;

               (ii)   any notice that the Improvements or construction thereof,
the Property or Borrower's business fails in any material respect to comply with
any applicable Requirement;

               (iii)  any other circumstance, event or occurrence that results
in a material adverse change in (i) the physical condition or operation of the
Property, (ii) the financial condition of the Borrower, or (iii) Borrower's
ability to perform in a timely manner any of its obligations hereunder or under
any of the Borrower Agreements; and

               (iv)   any material default under any Material Agreement of which
the Borrower obtains knowledge and the Borrower shall advise the Bank in writing
of the action proposed to be taken to cure such default.

    SECTION 7. Negative Covenants of the Borrower.  So long as the Expiration
               ----------------------------------
Date has not occurred or any amount is due and owing to the Bank hereunder,
unless the Bank shall otherwise consent in writing, the Borrower shall not:

        (a     Amendment of Related Documents.  Enter into or consent to any
               ------------------------------
amendment of or supplement to any Related Document.

        (b     Compliance with ERISA.  (i) Voluntarily terminate any Plan (if
               ---------------------
any such Plan is in existence) so as to result in any material (in the
reasonable opinion of the Bank) liability of the Borrower to the Pension Benefit
Guaranty Corporation ("PBGC") or (ii) enter into any Prohibited Transaction (as
defined in Section 4975 of the Internal Revenue Code of 1986, as amended, and in
ERISA) involving any Plan which results in any material (in the reasonable
opinion of the Bank) liability of the Borrower to PBGC, (iii) cause any
occurrence of any Reportable Event (as defined in Section 4043(b) of ERISA)
which results in any material (in the reasonable opinion of the Bank) liability
of the Borrower to PBGC or (iv) allow or suffer to exist any other event or
condition known to the Borrower which results in any material (in the reasonable
opinion of the Bank) liability of the Borrower to PBGC.

                                      -28-
<PAGE>

          (c   Limitation on Distributions.  Permit any distributions to its
               ---------------------------
members (including both distributions actually paid and distributions which are
accrued and payable) unless (i) Borrower's Net Cash Balance exceeds (both before
and after any such distribution) Five Hundred Thousand Dollars ($500,000); and
(ii) Borrower shall not be in default in the payment or performance of any of
its obligations or covenants hereunder; and (iii) no Event of Default shall have
occurred and be continuing hereunder.

          (d   Liens and Encumbrances.  Create, incur, assume or permit to
               ----------------------
exist, any mortgage, deed of trust, lien, security interest (whether possessory
or nonpossessory) or other encumbrance of any kind (including without limitation
the charge upon property purchased under a conditional sale or other title
retention agreement) upon property of any kind, whether real, personal or mixed,
now owned or hereafter acquired by the Borrower or upon the income or profits
thereof, except to Bank and except for (a) Permitted Liens existing as of the
date hereof; (b) future purchase money security interests encumbering only the
property (other than inventory) purchased; (c) liens arising in connection with
leases of specific items of equipment; (d) liens for taxes, fees, assessments or
other governmental charges or levies, either not delinquent or are being
contested in good faith by appropriate proceedings, provided the same (except
for real property taxes or assessments) have no priority over any of Bank's
security interests; (e) liens of materialmen, mechanics, warehousemen, carriers,
or other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent or are being contested in good faith by
appropriate proceedings; (f) liens arising out of a judgment or award not
exceeding One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered
by insurance) with respect to which an appeal is being prosecuted, a stay of
execution pending appeal having been secured; (g) leases or subleases and
licenses granted to others not interfering in any material respect with the
business of Borrower; (h) easements, rights of way, servitudes or zoning or
building restrictions and other minor encumbrances on real property and
irregularities in the title to such property which do not in the aggregate
materially impair the use or value of such property or risk the loss or
forfeiture of title thereto; (i) liens which constitute banker's liens, rights
of setoff or similar rights and remedies as to deposit accounts or other funds
maintained with any bank or other financial institution, whether arising by
operation of law or pursuant to contract and (j) liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by liens
of the type described in clauses (a) through (c) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.

          (e   Acquisitions.  During any fiscal year, acquire whether through
               ------------
the purchase of assets or the purchase of shares, partnership interests or other
ownership interests, a controlling interest in any entity or substantially all
the assets of any entity or sole proprietorship (an "Acquisition") unless, prior
thereto, the Bank has, in its sole discretion, approved such Acquisition in
writing.

          (f   Quarterly Net Profit Before Tax.  Permit its Net Profit Before
               -------------------------------
Tax to be less than Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal
quarter.

                                      -29-
<PAGE>

          (g   Maximum Leverage Ratio.  Permit the Leverage Ratio to be greater
               ----------------------
than the following ratios during the following respective periods:

               Closing through 12/30/00:     4.00:1.0
               12/31/00 through 12/30/01:    3.50:1.0
               12/31/01 through 12/30/02:    3.00:1.0
               12/31/02 through 12/30/03:    2.75:1.0
               12/31/03 through 12/30/04:    2.50:1.0
               12/31/04 through 12/30/05:    2.25:1.0
               12/31/05 through 12/30/06:    2.00:1.0
               12/31/06 through 12/30/07:    1.75:1.0
               12/31/07 and thereafter:      1.50:1.0

          (h)  Limitation on Aggregate Debt.  Permit aggregate outstanding Debt
               ----------------------------
to exceed One Million Dollars ($1,000,000).

          (i)  Limitation on Capital Expenditures.  Pay or incur Capital
               ----------------------------------
Expenditures in an aggregate amount in excess of the following amounts during
the following fiscal years:  (i) $1,000,000 for fiscal year 1999, (ii)
$10,000,000 for fiscal year 2000, and (iii) $500,000 for each fiscal year
thereafter; provided however, that the maximum Capital Expenditures limit for
any fiscal year shall be increased by the amount of any unutilized portion of
the maximum Capital Expenditures limit from the immediately preceding fiscal
year (as the same may have been increased by any amounts, if any, previously
carried forward).

          (j)  Minimum Debt Service Coverage Ratio.  Permit its Debt Service
               -----------------------------------
Coverage Ratio, in any fiscal quarter, to be less than 2.00:1.0.

    SECTION 8. Events of Default.  The occurrence of any of the following
               -----------------
events shall be an "Event of Default" hereunder unless waived by the Bank in
writing:

          (a   The Borrower shall fail to pay when due any amount due hereunder
and such failure shall continue for five (5) days after such due date;

          (b   Any representation or warranty made by the Borrower hereunder or
under any Borrower Agreement or in any statement, certificate or document
delivered by the Borrower in connection with this Agreement or any Related
Document shall prove to have been incorrect in any material respect when made;
or

          (c   The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or any of the Borrower
Agreements and any such failure shall be impossible for the Borrower to remedy
or which shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to the Borrower by the Bank; provided

                                      -30-
<PAGE>

however any such failure which is not impossible to cure but which is not
reasonably susceptible of cure within a 30-day period shall not constitute an
Event of Default hereunder unless either (A) the Borrower shall fail to initiate
and diligently pursue all action necessary to remedy such failure; or (B) such
failure is not remedied within sixty (60) days after written notice thereof to
the Borrower from the Bank; or

          (d   An Event of Default specified in any of the Borrower Agreements
shall have occurred; or

          (e   An Event of Default (as defined in the Indenture) shall have
occurred under the Indenture; or

          (f   A Loan Default Event (as defined in the Loan Agreement) shall
have occurred under the Loan Agreement; or

          (g   Any material provision of this Agreement or any Borrower
Agreement shall at any time for any reason cease to be valid and binding on the
Borrower, or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Borrower or any governmental
agency or authority (other than the Issuer) and the happening of the events
heretofore set forth in this paragraph (g) shall materially and adversely affect
the Bank's rights under this Agreement, or the Borrower shall deny that it has
any or further liability or obligation under this Agreement or any Borrower
Agreement; or

          (h   The Borrower shall (i) fail to make any payment, equal to or
exceeding $50,000 of any principal of or interest or premium on any Debt (as
defined below) when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt, or (ii) fail to perform or observe any material term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any Debt when required to be performed or
observed, and such failure shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of, the
maturity of any Debt, the unpaid principal amount of which then equals or
exceeds $50,000. "Debt" of the Borrower (which shall not include any
indebtedness hereunder) means (A) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which the Borrower
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss and (B)
obligations under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases in respect
of which obligations the Borrower is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations the Borrower
assures a creditor against loss; or

          (i   Any membership interests in the Borrower shall be held by any
person or entity other than KRC, KVI, BWI or WVRT; or

                                      -31-
<PAGE>

          (j   The Borrower or any Guarantor shall become insolvent or generally
fail to pay, or admit in writing its inability to pay, debts as they become due
or the Borrower or any Guarantor applies for, consents to, or acquiesces in the
appointment of, a trustee, receiver or other custodian for the Borrower or any
Guarantor and property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for the Borrower or any
Guarantor, or for a substantial part of the property thereof and is not
discharged within 45 days; or any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of the Borrower
or any Guarantor, or any event shall occur similar to any of the foregoing under
the laws of any jurisdiction, and if such case or proceeding is not commenced by
the Borrower or any Guarantor, it is consented to or acquiesced in by the
Borrower or any Guarantor or remains for 45 days undismissed; or the Borrower or
any Guarantor takes any action to authorize, or in furtherance of, any of the
foregoing; or

          (k   the occurrence of a Payment Event of Default under the Kaiser
Guaranty; or

          (l   Borrower or Principal Contractor shall fail to (i) commence
construction of the Improvements within the time periods required in this
Agreement; (ii) proceed diligently and continuously with the construction of the
Improvements or the construction of the Improvements is otherwise discontinued
for a period of ten (10) consecutive business days or more, for any reason other
than Force Majeure Delay; or (iii) complete the construction of the Improvements
and cause the issuance of all licenses and permits necessary for the occupancy,
use or sale of the Improvements, on or before the Completion Date; or

          (m   Borrower voluntarily suspends the transaction of business or
there is an attachment, execution or other judicial seizure of any portion of
Borrower's assets and such seizure is not discharged within ten (10) business
days; or

          (n   Any person obtains an order or decree in any court of competent
jurisdiction enjoining the construction of the Improvements or enjoining or
prohibiting Borrower or Bank or either of them from performing this agreement,
and such proceedings are not discontinued and such decree is not vacated within
ten (10) days after the granting thereof; or

          (o   Borrower neglects, fails or refuses to keep in full force and
effect any permit or approval with respect to the construction of the
Improvements or the use and occupancy thereof; or

          (p   If any bonded notice to withhold in connection with the Project
is served on Bank in accordance with the provision of California law and within
five (5) business days of the receipt of such notice the claim set forth therein
is not discharged or, if the amount claimed is disputed in good faith by
Borrower or Principal Contractor, an appropriate counter bond or equivalent
acceptable to Bank is filed with Bank; or

                                      -32-
<PAGE>

          (q   The imposition, voluntary or involuntary, of any lien or
encumbrance upon the Property without Bank's written consent or unless an
adequate counter bond is provided and such lien is accordingly released within
ten (10) days of the imposition of such lien; or

          (r   Bank fails to have an enforceable first lien on or security
interest in any property given as security for the Borrower's obligations
hereunder.

    SECTION 9. Rights and Remedies.
               -------------------

          (a   Defaults under this Agreement.  Upon the occurrence of an Event
               -----------------------------
of Default hereunder, or at any time thereafter while such default continues,
the Bank, in its sole discretion, may:

               (i)    send notice to the Trustee of the occurrence of such Event
of Default (in substantially the form attached hereto as Exhibit G) whereupon
the Trustee shall immediately declare a mandatory redemption of the Bonds under
Section 7.01 of the Indenture; and

               (ii)   exercise any rights and remedies available to it by law,
hereunder under any Related Document or under any other agreement including,
without limitation, the Borrower Agreements, and any agreement executed pursuant
to Section 6(k) hereof; and

               (iii)  enter the Property and take possession of it, whether in
person, by agent or by court-appointed receiver, perform any and all work and
labor necessary to complete the Improvements substantially in accordance with
the Plans, collect rents and otherwise protect its collateral and rights
hereunder or under the Borrower Agreements.  If Bank exercises any of the rights
or remedies provided in this subparagraph (iii), that exercise shall not make
Bank a partner or joint venturer of Borrower.  All sums which are expended by
Bank in completing the Improvements or in preserving its collateral shall be
considered a loan to Borrower secured by the Deed of Trust and bearing interest
at the Default Rate; and

               (iv)   terminate all disbursements of Borrower's Funds or Bond
proceeds; and

               (v)    take possession of all funds and deposits of Borrower on
hand or deposit in any account at Bank or any branch at Bank and apply said
funds in such order at priority as Bank may elect in connection with the
obligations of Borrower under the Loan Documents.

          (b   Default under Other Documents.  The Bank may cure an Event of
               -----------------------------
Default under any Related Document, provided, however, that nothing contained
herein shall obligate the Bank to cure such an Event of Default.

          (c   Requirement of Full Collateralization.  Upon the occurrence and
               -------------------------------------
during the continuance of an Event of Default hereunder, an amount equal to the
sum of (i) the then Stated Amount of the Letter of Credit, (ii) any unreimbursed
drawings thereunder, and (iii) any and all

                                      -33-
<PAGE>

amounts due to the Bank under the Letter of Credit, this Agreement or any of the
Related Documents shall become immediately due and payable by the Borrower to
the Bank, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by the Borrower, and such amount
shall be immediately deposited by the Borrower into a special interest bearing
account with the Bank as collateral security to be held for the benefit of the
Bank for the reimbursement of any drawings under the Letter of Credit and other
amounts due and payable under this Agreement. Effective one hundred twenty-six
(126) days following the receipt of the full amount due and owing under this
Agreement, the Bank shall execute such releases with respect to the obligations
to it of the Borrower as are necessary and appropriate and this Agreement shall
thereupon terminate, provided that no event described in Section 8(i) hereof has
occurred before or during such one hundred twenty-six (126) day period. The Bank
shall cause any cash collateral received by it to be invested in a manner so as
not to cause the Bonds to be treated as "arbitrage bonds" under the Code and the
Regulations.

          (d   Curing of Default by Disbursement.  Upon the occurrence of a
               ---------------------------------
default which may be cured by the payment of money, the Bank, without waiving
any right of enforcement or foreclosure under the Borrower Agreements which the
Bank may have by reason of such default, or any other right the Bank may have
against the Borrower because of such default, shall have the right to make such
payment from any account of Borrower maintained with Bank thereby curing the
default.

          (e   Remedies are Cumulative.  All remedies of the Bank provided for
               -----------------------
herein are cumulative and shall be in addition to any and all other rights and
remedies provided in any Related Document or any other document or by law.  The
exercise of any rights of the Bank hereunder shall not in any way constitute a
cure or waiver of a default hereunder or elsewhere, or invalidate any act done
pursuant to any notice of default, or prejudice the Bank in the exercise of any
of its other rights hereunder or elsewhere, or invalidate any act done pursuant
to any notice of default, or prejudice the Bank in the exercise of any of its
other rights hereunder or elsewhere unless, in the exercise of said rights, the
Bank realizes all amounts owed to it hereunder and under any Related Document or
any other document.  This Agreement hereby incorporates any alternative dispute
resolution agreement previously, concurrently or hereafter executed between the
Borrower and the Bank.

          (f   Power of Attorney.  Upon the occurrence of an Event of Default,
               -----------------
Borrower hereby constitutes and appoints Bank its true and lawful attorney in
fact with the power and authority, including full power of substitution, as
follows:

               (i)    To take possession of the Property and complete the
Improvements.

               (ii)   To use any of Borrower's Funds and any Bond proceeds which
may remain undisbursed under the Indenture for the purpose of completing the
Improvements and for other costs related thereto.

                                      -34-
<PAGE>

               (iii)  To make such additions and changes and corrections in the
Plans as may be necessary or desirable as Bank in its sole discretion deems
proper to complete the Improvements.

               (iv)   To employ such contractors, subcontractors and agents,
architects and inspectors as are required to complete the Improvements.

               (v)    To employ security personnel to protect the Property and
Improvements from injury.

               (vi)   To pay, settle or compromise all existing bills and claims
against Borrower's Funds or any Bond proceeds which may remain undisbursed under
the Indenture or as may be necessary or desirable, as Bank in its sole
discretion deems proper, for the completion of the Improvements or for
protection or clearance of title to the Property and Personal Property or for
the protection of Bank's interest with respect thereto.

               (vii)  To prosecute and defend all actions and proceedings in
connection with the construction of the Improvements.

               (viii) As Bank in its sole discretion deems proper, to execute,
acknowledge, and deliver all instruments and documents in the name of Borrower
which may be necessary or desirable to do and to do any and every act with
respect to the construction of the Improvements which Borrower might do on its
own behalf.  This Power of Attorney is a power coupled with an interest and
cannot be revoked and any costs or expenses incurred by Bank in connection with
any acts by Bank under or pursuant to this Section 9(f) shall be at the cost and
expense of Borrower, repayable on demand by Borrower to Bank with interest
thereon at the Default Rate, with any such advances made or costs or expenses
incurred by Bank to be secured by the Deed of Trust and the Borrower Agreements.

          (g   Disclaimer.  WHETHER OR NOT BANK ELECTS TO EMPLOY ANY OR ALL OF
                ----------
THE REMEDIES AVAILABLE TO IT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, BANK
SHALL NOT BE LIABLE FOR THE CONSTRUCTION OF OR FAILURE TO CONSTRUCT OR COMPLETE
OR PROTECT THE IMPROVEMENTS OR FOR PAYMENT OF ANY EXPENSE INCURRED IN CONNECTION
WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO BANK OR FOR THE CONSTRUCTION OR
COMPLETION OF THE IMPROVEMENTS OR FOR THE PERFORMANCE OR NON-PERFORMANCE OF ANY
OTHER OBLIGATION OF BORROWER.

     SECTION 10.  Amendments, Etc.  No amendment or waiver of any provision of
                  ----------------
this Agreement nor consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Bank or its authorized representative, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.

                                      -35-
<PAGE>

     SECTION 11.  Addresses For Notices.  All notices and other communications
                  ---------------------
provided for hereunder shall be in writing and, if to the Borrower, mailed or
delivered to it, addressed to it at West Valley MRF, LLC, c/o Burrtec Waste
Industries, Inc., 9890 Cherry Avenue, Fontana, California 92335, Attn:  Mr. Eric
Herbert, Vice President; and Kaiser Ventures Inc., 3633 E. Inland Empire Blvd.,
Suite 850, Ontario, CA 91764, Attn:  Mr. James F. Verhey, Senior Vice President,
or if to the Bank, mailed or delivered to it, addressed to it at 530 B Street,
4th Floor, San Diego, California  92101, Attention: Regional Office, or at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and other communications shall, when mailed, be
effective five (5) days after the date of deposit in the mails, addressed as
aforesaid.

     SECTION 12.  No Waiver; Remedies; Set-off-.
                  -----------------------------

          (a   No failure on the part of the Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

          (b   Upon the occurrence and during the continuance of any Event of
Default hereunder, the Bank is hereby authorized at any time and from time to
time, without notice to the Borrower (any such notice being expressly waived by
the Borrower) to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
hereunder, irrespective of whether or not the Bank shall have made any demand
hereunder and although such obligations may be contingent and unmatured.

          (c   The rights and authorization granted to the Bank in the foregoing
paragraph (b) shall be available to any bank or financial institution acquiring
a participation in, or otherwise reimbursing the Bank for drawings made under,
the Letter of Credit to the same extent as if such bank or financial institution
had issued a letter of credit hereunder on behalf of the Borrower in the amount
of such participation or reimbursement.

     SECTION 13.  Indemnification.  The Borrower shall indemnify and hold the
                  ---------------
Bank harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which the Bank may incur (or which may be claimed
against the Bank by any person or entity whatsoever) by reason of or in
connection with (a) any breach by the Borrower of any representation, warranty
or covenant contained in this Agreement; (b) the execution and delivery or
transfer (to a successor trustee) of, or payment or failure to pay under, the
Letter of Credit; provided, however, that the Borrower shall not be required to
                  --------  -------
indemnify the Bank for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of the Bank in determining whether a sight draft
or certificate presented under the Letter of Credit complied with the terms of
the Letter of Credit or (ii) the Bank's grossly negligent or willful failure to
pay under the Letter of Credit after the presentation to it by the Trustee or a
successor trustee of a sight draft or certificate strictly

                                      -36-
<PAGE>

complying with the terms and conditions of the Letter of Credit; (c) any failure
by the Borrower, the Issuer or any underwriter to comply with applicable federal
and state laws and regulations pertaining to the offer and sale of the Bonds
including in particular any such laws applicable to the Letter of Credit; and
(d) the Project, or the conditions, occupancy, use, possession, conduct or
management of, or work done in or about, or from the planning, design,
acquisition, installation or construction of the Project or any part thereof
(including liability arising from loss or damage to any property or injury to or
death of any person occurring on or about or resulting from any defect in the
Project); (e) the issuance of any Bonds or any certifications or representations
made in connection therewith (except those made by the Bank) and the carrying
out of any of the transactions contemplated by the Loan Agreement; or (f) any
untrue statement or alleged untrue statement of any material fact or omission or
alleged omission to state a material fact necessary to make the statements made,
in light of the circumstances under which they were made, not misleading in any
official statement or other offering circular utilized by the Issuer in
connection with the sale of any Bonds, except with respect to statements or
omissions which are the result of information provided by the Bank. The Borrower
further covenants and agrees, to the extent permitted by law, to pay or to
reimburse the Bank for any and all costs, reasonable attorneys' fees,
liabilities or expenses incurred in connection with investigating, defending
against or otherwise arising or incurred in connection with any such losses,
claims, damages, liabilities, expenses or actions. Promptly upon obtaining
actual knowledge that it has incurred any such damages, costs, fees, liabilities
or expenses, the Bank shall give notice thereof to the Borrower. The provisions
of this Section shall survive the expiration of the Letter of Credit. Promptly
after receipt of notice of commencement of any action, suit or proceeding
against the Bank in respect of which a claim is to be made against the Borrower
under this Section 13, the Bank shall notify the Borrower of the commencement of
such action, suit or proceeding, enclosing a copy of all papers served, but the
omission so to notify the Borrower of any such action, suit or proceeding shall
not relieve it from any liability which it may have to the Bank otherwise than
under this Section 13. In case any such action, suit or proceeding shall be
brought against the Bank and it shall notify the Borrower of the commencement
thereof, the Borrower shall be entitled to participate in, and to assume the
defense thereof, with counsel satisfactory to the Bank and after notice from the
Borrower to the Bank of the Borrower's election so to assume the defense thereof
the Borrower shall not be liable to the Bank for any legal or other expenses,
other than reasonable costs of investigation subsequently incurred by the Bank
in connection with the defense thereof. The Bank shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of the Bank, unless (i) the employment of counsel by the
Bank has been authorized by the Borrower, (ii) the Bank shall have reasonably
concluded that there may be a conflict of interest between the Borrower and the
Bank in the conduct of the defense of such action (in which case the Borrower
shall not have the right to direct the defense of such action on behalf of the
Bank), or (iii) the Borrower shall not in fact have employed counsel to assume
the defense of such action. The Borrower shall not be liable for any settlement
of any action or claim effected without its consent. For the purposes of this
Section 13, the term "Bank" shall include, and the Borrower's indemnity
hereunder shall run to the benefit of, the directors, officers, employees and
agents of the Bank. The indemnification in this Section 13 is in addition to
(but not in duplication of) the Borrower's reimbursement obligation contained in
Section 1 hereof.

                                      -37-
<PAGE>

     SECTION 14.  Continuing Obligation.  This Agreement is a continuing
                  ---------------------
obligation and shall (i) be binding upon the Borrower, its successors and
assigns, and (ii) inure to the benefit of and be enforceable by the Bank and its
successors, transferees and assigns; provided, however, that the Borrower may
not assign all or any part of this Agreement without the prior written consent
of the Bank.

     SECTION 15.  Transfer of Letter of Credit; Reduction of Letter of Credit
                  -----------------------------------------------------------
Commitment and Related Matters.
------------------------------

          (a   The Letter of Credit may be transferred in accordance with the
provisions set forth therein.

          (b   If the Letter of Credit Commitment is reduced as provided in the
Letter of Credit on account of the payment, prepayment or redemption of the
Bonds, then the Bank shall have the right to require the Trustee (at no charge
to the Borrower or the Trustee) to surrender the outstanding Letter of Credit to
the Bank on or before the tenth (10th) business day following the effective date
of such partial reduction of the Letter of Credit Commitment and to accept on
such date, in substitution for the then outstanding Letter of Credit, a
substitute irrevocable letter of credit in the form of Exhibit A hereto, dated
such date, in a Stated Amount equal to the amount to which the Letter of Credit
Commitment shall have been so reduced but otherwise having terms identical to
the then outstanding Letter of Credit.

     SECTION 16.  Liability of the Bank.  The Borrower assumes all risks of the
                  ---------------------
acts or omissions of the Trustee and any transferee of the Letter of Credit with
respect to its use of the Letter of Credit; provided, however, this assumption
with respect to the Bank is not intended to, and shall not, preclude the
Borrower's pursuing such rights and remedies as it may have against the Trustee
or any transferee at law or under any other agreement. Neither the Bank nor any
of its officers, employees, agents or directors shall be liable or responsible
for: (a) the use which may be made of the Letter of Credit or for any acts or
omissions of the Trustee and any transferee of the Letter of Credit in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement(s) thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Bank against presentation of documents which do not comply with
the terms of the Letter of Credit, including failure of any documents to bear
any reference or adequate reference to the Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit; provided, however, anything in the preceding clauses (a) (b), (c) and
(d) to the contrary notwithstanding, the Borrower shall have a claim against the
Bank, and the Bank shall be liable to the Borrower, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by (i) the Bank's willful
misconduct or gross negligence or (ii) the Bank's willful failure to pay under
the Letter of Credit after the presentation to it by the Trustee (or a successor
trustee under the Indenture to whom the Letter of Credit has been transferred in
accordance with its terms) of a sight draft and certificate strictly complying
with the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or

                                      -38-
<PAGE>

information to the contrary; provided, however, that if the Bank shall receive
                             --------  -------
written notification at 1980 Saturn Street, Monterey Park, California,
Attention: Letter of Credit Department (with a copy to the Bank at 530 B Street,
Fourth Floor, San Diego, California 92101, Attn: Commercial Markets Group) from
both the Trustee and the Borrower that sufficiently identified (in the
reasonable opinion of the Bank) documents to be presented to the Bank are not to
be honored, the Bank agrees that, upon being indemnified to its satisfaction by
the Trustee and the Borrower, it will not honor such documents thereafter.

     SECTION 17.  Permitted Contests.  The Borrower shall not be required to (a)
                  ------------------
pay any tax, assessment or other charge or comply with any statute, law, rule,
regulation or ordinance referred to in Section 6 hereof, or (b) make any payment
of any Debt referred to in paragraph (h) of Section 8 hereof, or (c) pay any
Debt referred to in Section 6(l) hereof so long as the Borrower shall (i)
contest, in good faith, the existence, amount or validity thereof, the amount of
damages caused thereby or the extent of its liability therefor, by appropriate
proceedings which shall operate during the pendency thereof to prevent (A) the
collection of, or other realization upon, the tax, assessment, charge, lien,
encumbrance, indebtedness, or obligation so contested, or (B) the sale,
forfeiture or loss or any collateral therefor or any property of the Borrower or
any part thereof, and (ii) give such security to the Bank as may be demanded by
the Bank or, in the alternative, provide the Bank with evidence satisfactory to
the Bank in its good faith judgment of sufficient bonding to ensure payment and
to ensure compliance with the foregoing provisions of this Section 17. The
Borrower shall give prompt written notice to the Bank of the commencement of any
contest referred to in this Section 17.

     SECTION 18.  Governing Law.  This Agreement shall be governed by, and
                  -------------
construed and interpreted in accordance with, the laws of the State of
California.

     SECTION 19.  Assignment by the Bank. The Bank may assign, negotiate, pledge
                  ----------------------
or otherwise hypothecate, or grant participations in, all or any portion of its
rights and security hereunder, including, without limitation, the instruments
securing the Borrower's obligations hereunder. In case of such assignment, the
Borrower shall accord full recognition thereto and agree that all rights and
remedies of the Bank in connection with the interest so assigned shall be
enforceable against the Borrower by such assignee with the same force and effect
and to the same extent as the same would have been enforceable by the Bank, but
for such assignment. No such assignment by the Bank, however, will relieve the
Bank of its obligations under this Agreement either voluntarily or by operation
of law. In connection with any proposed assignment, the Bank may disclose to the
proposed assignee any information that the Borrower is required to deliver to
the Bank pursuant to this Agreement; provided, however, in the event of any such
disclosure, the Bank shall obtain from the proposed assignee appropriate
assurances of confidential treatment of the disclosed information.

     SECTION 20.  Representations and Warranties of the Bank. The Bank
                  ------------------------------------------
represents and warrants that the Letter of Credit and this Agreement are valid
and enforceable against the Bank except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

                                      -39-
<PAGE>

     SECTION 21.  Headings.  Section headings in this Agreement are included
                  --------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.

     SECTION 22.  Further Assurances.  The Borrower agrees to do such further
                  ------------------
acts and things and to execute and deliver to the Bank such additional
assignments, agreements, powers and instruments, as the Bank may require or deem
advisable to carry into effect the purposes of his Agreement or to better assure
and confirm unto the Bank its rights, powers and remedies hereunder.  Bank shall
have the right, in its reasonable discretion, to obtain new appraisals or update
existing appraisals at any time while the Letter of Credit remains outstanding.
Borrower agrees to cooperate with Bank and the appraiser (and use best efforts
to cause the tenants on the Project to cooperate with Bank and the appraiser) in
permitting access to the Property and in obtaining operating and other relevant
information on the Property.  Following an Event of Default hereunder or in the
case of a request to transfer the Property pursuant to the Deed of Trust,
Borrower shall pay all reasonable appraisal fees and related expenses incurred
by Bank in obtaining such appraisal reports.

     SECTION 23.  Survival of Representations and Warranties.  All agreements,
                  ------------------------------------------
representations and warranties made in this Agreement and in any certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement and the issuance of the Letter of Credit hereunder until any and all
sums payable under this Agreement, or which are secured by the Borrower
Agreements have been paid in full.

     SECTION 24.  Severability of Provisions.  Any provision of this Agreement
                  --------------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

     SECTION 25.  Execution in Counterparts.  This Agreement may be executed in
                  -------------------------
any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.

                                      -40-
<PAGE>

     SECTION 26.  Time. Time is of the essence of this Agreement, and each and
                  ----
every provisions hereof in which time is an element.

     IN WITNESS WHEREOF, the parties hereto have caused this Reimbursement
Agreement to be duly executed and delivered as of the date first above written.

                              WEST VALLEY MRF, LLC,
                              a California limited liability company

                              By:  Kaiser Recycling Corporation,
                                   a Delaware corporation, member

                                   By:  /s/ James F. Verhey
                                        -------------------------------
                                           Name:  James F. Verhey
                                           Title:  Vice President

                              By:  West Valley Recycling & Transfer, Inc.,
                                   a California corporation, member

                                   By:  /s/ Eric D. Herbert
                                        -------------------------------
                                           Name:  Eric D. Herbert
                                           Title:  Vice President

                              UNION BANK OF CALIFORNIA, N.A.

                              By:  /s/ Myra S. Juetten
                                   ------------------------------------
                                      Name:  Myra S. Juetten
                                      Title:  Regional Vice President

                                      -41-
<PAGE>

                  Exhibits Available Upon The Written Request
                  ===========================================

                                     of the
                                     ======

                       Securities and Exchange Commission
                       ==================================

                                      -42-<PAGE>

                                                                  EXHIBIT 10.4.4
                                                                  ==============
[LOGO OF UNION BANK OF CALIFORNIA]

LOAN AGREEMENT

     THIS LOAN AGREEMENT ("Agreement"), dated as of May 1, 2000, is made and
entered into by and between West Valley MRF, LLC, a California limited liability
company ("Borrower") and UNION BANK OF CALIFORNIA, N.A. ("Bank").

     SECTION 1.   THE LOAN

               1.1.1  The Equipment Loan. Bank will loan to Borrower an amount
not to exceed Two Million Dollars ($2,000,000) outstanding in the aggregate at
any one time (the "Equipment Loan"). Borrower may borrow all or part of the
Equipment Loan in amounts of not less than One Hundred Thousand Dollars
($100,000) in accordance with the terms of the Equipment Note. All borrowings of
the Equipment Loan must be made before ___________, 19___, at which time all
unpaid principal under the Equipment Loan shall be converted to a fully
amortizing loan as set forth in subsection ________. In the event of a
prepayment of principal after such conversion and payment of any resulting fees,
any prepaid amounts shall be applied to the scheduled principal payments in the
reverse order of their maturity. The Equipment Loan shall be evidenced by a
promissory note (the "Equipment Note") on the standard form used by Bank for
commercial loans. Bank shall enter each amount borrowed and repaid in Bank's
records and such entries shall be deemed to be the amount of the Equipment Loan
outstanding. Omission of Bank to make any such entries shall not discharge
Borrower of its obligation to repay in full with interest all amounts borrowed.

               1.1.2  The Term Loan. Solely to repay the Equipment Loan, Bank
will loan to Borrower the sum outstanding at the maturity of the Equipment Loan
in one disbursement on or before ________________, 19___ (the "Term Loan"). In
the event of a prepayment of principal and payment of any resulting fees, any
prepaid amounts shall be applied to the scheduled principal payments in the
reverse order of their maturity. The Term Loan shall be evidenced by a
promissory note (the "Term Note") on the standard form used by Bank for
commercial loans.

          1.2  Terminology.

               As used herein the word "Loan" shall mean, collectively, all the
credit facilities described above.

                                      -1-
<PAGE>

               As used herein the word "Note" shall mean, collectively, all the
promissory notes described above.

               As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.

          1.3  Purpose of Loan.  The proceeds of the Equipment Loan shall be
used to finance equipment used in Borrowers business.

          1.4  Interest. The unpaid principal balance of the Equipment Loan
shall bear interest at the rate or rates provided in the Equipment Note and
selected by Borrower.  The Equipment Loan may be prepaid in full or in part only
in accordance with the terms of the Equipment Note and any such prepayment shall
be subject to the prepayment fee provided for therein.

          1.5  Unused Commitment Fee.  On the last calendar day of the third
month following the execution of this Agreement and on the last calendar day of
each three-month period thereafter the termination of the Loan, Borrower shall
pay to Bank a fee of .25% or 25 basis points on the daily average unused portion
of the Equipment Loan for the preceding quarter computed on the basis of actual
days elapsed of a year of 360 days.

          1.6  Disbursement.  Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.

          1.7  Security.  Prior to any disbursement of the Loan,  Borrower shall
have executed a security agreement, on Bank's standard form, and a financing
statement, suitable for filing in the office of the Secretary of State of the
State of California and any other state designated by Bank, granting to Bank a
first priority security interest in such of Borrower's property as is described
in said security agreement.  Exceptions to Bank's first priority, if any, are
permitted only as otherwise provided in this Agreement. At Bank's request,
Borrower will also obtain executed landlord's and mortgagee's waivers on Bank's
form covering all of Borrower's property located on leased or encumbered real
property.

          1.8  Controlling Document.  In the event of any inconsistency between
the terms of this Agreement and any Note or any of the other Loan Documents, the
terms of such Note or other Loan Documents will prevail over the terms of this
Agreement.

     SECTION 2.   CONDITIONS PRECEDENT

     Bank shall not be obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such disbursement,
the following conditions have been fulfilled to Bank's satisfaction:

                                      -2-
<PAGE>

          2.1  Compliance.  Borrower shall have performed and complied with all
terms and conditions required by this Agreement to be performed or complied with
by it prior to or at the date of the making of such disbursement and shall have
executed and delivered to Bank the Note and other documents deemed necessary by
Bank.

          2.2  Guaranties.  Kaiser Ventures, Inc., Kaiser Recycling Corporation,
Burrtec Waste Industries, Inc and West Valley Recycling & Transfer, Inc.
("Guarantors") shall have executed and delivered to Bank their respective
continuing guaranties in form and amount satisfactory to Bank.  Borrower shall
cause each Guarantor to submit to Bank not later than ______ (120) days after
the end of each fiscal  year each such Guarantor's financial statements in form
satisfactory to Bank.

          2.3  Borrowing Resolution.  Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents.  Such resolutions
shall also designate the persons who are authorized to act on Borrower's behalf
in connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.

          2.4  Termination Statements.  Borrower shall have provided Bank with
UCC-2 termination statements executed by such secured creditors as may be
required by Bank suitable for filing with the Secretary of State in each state
designated by Bank.

          2.5  Continuing Compliance.  At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.

          2.6  Eligible Invoices supporting each and every loan advance.
Eligible Invoices shall mean documentation in form and substance satisfactory to
the Bank, including, without limitation, paid invoices, payment receipts and
purchase orders, evidencing the payment by a Borrower of the purchase prince of
equipment or rolling stock and the acceptance and possession by  Borrower of
such equipment or rolling stock.

     SECTION 3.   REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants that:

          3.1  Business Activity.  The principal business of Borrower is a solid
waste transfer station and materials recovery facility.

          3.2  Affiliates and Subsidiaries.  Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least a 25% ownership interest) and their addresses, and the names of
Borrower's principal shareholders, are as

                                      -3-
<PAGE>

provided on a schedule delivered to Bank on or before the date of this
Agreement.

          3.3   Authority to Borrow.  The execution, delivery and performance of
this Agreement, the Note and all other agreements and instruments required by
Bank in connection with the Loan are not in contravention of any of the terms of
any indenture, agreement or undertaking to which Borrower is a party or by which
it or any of its property is bound or affected.

          3.4   Financial Statements.  The financial statements of Borrower,
including both a balance sheet at  December 31, 1999_, together with supporting
schedules, and an income statement for the  twelve (12) months ended December
31, 1999, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period covered
thereby.  Since December 31, 1999, there has been no material adverse change in
the financial condition or operations of Borrower.

          3.5   Title.  Except for assets which may have been disposed of in the
ordinary course of business, Borrower has good and marketable title to all of
the property reflected in its financial statements delivered to Bank and to all
property acquired by Borrower since the date of said financial statements, free
and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.

          3.6   Litigation.  There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.

          3.7   Default. Borrower is not now in default in the payment of any of
its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.

          3.8   Organization.  Borrower is duly organized and existing under the
laws of the state of its organization, and has the power and authority to carry
on the business in which it is engaged and/or proposes to engage.

          3.9   Power.  Borrower has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.

          3.10  Authorization.  This Agreement and all things required by this
Agreement have been duly authorized by all requisite action of Borrower.

          3.11  Qualification.  Borrower is duly qualified and in good standing
in any jurisdiction where such qualification is required.

                                      -4-
<PAGE>

          3.12  Compliance With Laws.  Borrower is not in violation with respect
to any applicable laws, rules, ordinances or regulations that materially affect
the operations or financial condition of Borrower.

          3.13  ERISA.  Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.

          3.14  Regulation U.  No action has been taken or is currently planned
by Borrower, or any agent acting on its behalf, which would cause this Agreement
or the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect.  Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock as one of its important
activities and none of the proceeds of the Loan will be used directly or
indirectly for such purpose.

          3.15  Continuing Representations.  These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.

     SECTION 4.   AFFIRMATIVE COVENANTS

     Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrower agrees that:

          4.1  Use of Proceeds.  Borrower will use the proceeds of the Loan only
as provided in subsection 1.3 above.

          4.2  Payment of Obligations.  Borrower will pay and discharge promptly
all taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.

          4.3  Maintenance of Existence.  Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities

                                      -5-
<PAGE>

in good order, condition and repair. Bank may, at reasonable times, visit and
inspect any of the properties of Borrower.

          4.4  Records.  Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours.  Costs for such audits shall be paid by Borrower.

          4.5  Information Furnished.  Borrower will furnish to Bank:

               (a)  Within forty five (45) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its unaudited balance
sheet as of the close of such fiscal quarter, its unaudited income and expense
statement with supportive schedules and statement of retained earnings for that
fiscal [month/quarter], prepared in accordance with generally accepted
accounting principles;

               (b)  Within one hundred twenty days (120) days after the close of
each fiscal year, a copy of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on a reviewed basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous year;

               (c)  As soon as available, copies of such financial statements
and reports as Borrower may file with any state or federal agency, including all
state and federal income tax returns;

               (d)  Such other financial statements and information as Bank may
reasonably request from time to time;

               (e)  In connection with each financial statement provided
hereunder, a statement executed by the chief financial officer or the general
partner of Borrower, certifying that no default has occurred and no event exists
which with notice or the lapse of time, or both, would result in a default
hereunder;

               (f)  In connection with each fiscal year-end statement required
hereunder, any management letter of Borrower's certified public accountants;

               (g)  Within forty five (45) days after each fiscal quarter ending
March, June and September and one hundred twenty days (120) days after each
fiscal quarter ending December, a certification of compliance with all covenants
under this Agreement, executed by Borrower's chief financial officer or other
duly authorized officer of Borrower, in form acceptable to Bank;

                                      -6-
<PAGE>

               (h)  Prompt written notice to Bank of all events of default under
any of the terms or provisions of this Agreement or of any other agreement,
contract, document or instrument entered, or to be entered into with Bank; and
of any litigation which, if decided adversely to Borrower, would have a material
adverse effect on Borrower's financial condition; and of any other matter which
has resulted in, or is likely to result in, a material adverse change in its
financial condition or operations; [and]

               (i)  Prior written notice to Bank of any changes in Borrower's
officers and other senior management; Borrower's name; and location of
Borrower's assets, principal place of business or chief executive office.

          4.6  Debt to Net Worth.  Borrower will at all times maintain a ratio
of total liabilities to Book Net Worth of the following:

          Closing through 12/30/00:     4.00:1.0
          12/31/00 through 12/30/01:    3.50:1.0
          12/31/01 through 12/30/02:    3.00:1.0
          12/31/02 through 12/30/03:    2.75:1.0
          12/31/03 through 12/30/04:    2.50:1.0
          12/31/04 through 12/30/05:    2.25:1.0
          12/31/05 through 12/30/06:    2.00:1.0
          12/31/06 through 12/30/07:    1.75:1.0
          12/31/07  and thereafter      1.50:1.0

          Book Net Worth shall be defined as the excess of total assets less
total liabilities, all to be determined on a consolidated basis in accordance
with generally accepted accounting principals.

          4.7  Profitability.   Borrower will maintain its net profit before
provision for income taxes, at not less than Two Hundred Fifty Thousand Dollars
($250,000) for any fiscal quarter.

          4.8  EBITDA to Debt Service Ratio. Borrower will maintain a ratio of
EBITDA to Debt Service of not less than 2.00:1.0. "EBITDA" shall mean earnings
before interest, depreciation, and amortization. "Debt Service" shall mean the
sum of 1) scheduled payments on long term debt coming due during the twelve (12)
months following the date of calculation; 2) interest expenses, inclusive of
letter of credit fees, for the preceding twelve (12) months, whether paid or
accrued; plus 3) non-financed capital expenditures during the twelve (12) months
preceding the date of calculation. Compliance with this subsection shall be
measured as of the end of each of the Borrower's fiscal quarters for the quarter
then ended.

          4.9  Insurance.  Borrower will keep all of its insurable property,
real, personal or mixed, insured by companies and in amounts approved by Bank
against fire and

                                      -7-

<PAGE>

such other risks, and in such amounts, as is customarily obtained by companies
conducting similar business with respect to like properties. Borrower will
furnish to Bank statements of its insurance coverage, will promptly furnish
other or additional insurance deemed necessary by and upon request of Bank to
the extent that such insurance may be available and hereby assigns to Bank, as
security for Borrower's obligations to Bank, the proceeds of any such insurance.
Prior to any disbursement of the Loan, Bank will be named loss payee on all
policies insuring collateral and such policies shall require at least ten (10)
days' written notice to Bank before any policy may be altered or cancelled.
Borrower will maintain adequate worker's compensation insurance and adequate
insurance against liability for damage to persons or property.

          4.10  Insurance.  Borrower will keep all of its insurable property,
real, personal or mixed, insured by good and responsible companies against fire
and such other risks as are customarily insured against by companies conducting
similar business with respect to like properties.  Borrower will maintain
adequate worker's compensation insurance and adequate insurance against
liability for damages to persons and property.

          4.11  Additional Requirements.  Borrower will promptly, upon demand by
Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other information
concerning its affairs as Bank may request from time to time.

          4.12  Litigation and Attorneys' Fees.  Borrower will pay promptly to
Bank upon demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced.  If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.

          4.13  Bank Expenses.  Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of appraisals, insurance
and attorneys' fees, including the reasonable estimate of the allocated costs
and expenses of in-house legal counsel and legal staff.

          4.14  Reports Under Pension Plans.  Borrower will furnish to Bank, as
soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take

                                      -8-
<PAGE>

with respect thereto.

     SECTION 5.   NEGATIVE COVENANTS

     Until the Note and all other sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:

          5.1  Encumbrances and Liens.   Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.  All of such permitted
personal property liens shall not exceed, in the aggregate, One Million Dollars
($1,000,000) at any time.

          5.2  Borrowings.  Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services.  Borrower will not borrow any money, become continently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except pursuant to agreements made with Bank.

          5.3  Sale of Assets, Liquidation or Merger.  Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another.

          5.4  Loans, Advances and Guaranties.  Borrower will not, except in the
ordinary course of business as currently conducted, make any loans or advances,
become a guarantor or surety, pledge its credit or properties in any manner or
extend credit.

          5.5  Investments.  Borrower will not purchase the debt or equity of
another person or entity except for savings accounts and certificates of deposit
of Bank, direct U.S. Government obligations and commercial paper issued by
corporations with the top ratings of Moody's or Standard & Poor's, provided all
such permitted investments shall mature within one year of purchase.

          5.6  Payment of Dividends.  So long as Borrower's Cash Balance
(excluding restricted cash) exceeds $500,000 and Borrower is in compliance with
all covenants, then Borrower may make distributions or pay dividends to its
members any Cash Balances in

                                      -9-
<PAGE>

excess of $500,000, provided however, that such payment does not result in a
Cash Balance of less than $500,000. For the purpose of this covenant, Cash
Balance shall be defined as cash as reflected on Borrowers balance sheet
supported by a bank statement of like date, excluding any Restricted Cash.
Restricted Cash shall be defined as such cash deposited into the Debt Service
Reserve accounts for the repayment of bonds with regards to the Reimbursement
Agreement between Borrower and Bank of even date herewith.

          5.7  Retirement of Stock.  Borrower will not acquire or retire any
share of its capital stock for value.

          5.8  Parent and Subsidiary Property.  Borrower will not transfer any
property to its parent or any affiliate of its parent, except for value received
in the normal course of business as business would be conducted with an
unrelated or unaffiliated entity.  In no event shall management fees or fees for
services be paid by Borrower to any such direct or indirect affiliate without
Bank's prior written approval.

          5.9  Capital Expenditures.  Borrower shall not pay or incur capital
expenditures in a aggregate amount in excess of the following amounts during the
following fiscal years:  (i) $1,000,000 for fiscal 1999, (ii) 10,000,000 for
fiscal 2000, and (iii) $500,000 for each fiscal year thereafter; provided
however, that the maximum capital expenditures limit for any fiscal year shall
be increased by the amount of any unutilized portion of the maximum capital
expenditures limit from the immediately preceding fiscal years (as the same may
have been increased by any amounts, if any, previously carried forward).
Borrower shall only make such expenditures as are necessary for Borrower in the
conduct of its ordinary course of business.  Each said expenditure shall be
needed by Borrower in the ordinary course of its business.  Expenditures as used
in this subsection shall include the current expense portion of all leases
whether or not capitalized and shall also include the current portion of any
debt used to finance capital expenditures.

     SECTION 6.   EVENTS OF DEFAULT

     The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:

          6.1  Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan Documents; or

          6.2  Any default shall occur under the Note; or

          6.3  Borrower shall default in the due performance or observance of
any

                                      -10-

<PAGE>

covenant or condition of the Loan Documents; or

          6.4  Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or any Guarantor or subordinating creditor
dies, disavows or attempts to revoke or terminate such guaranty or subordination
agreement; or

          6.5  There is a change in ownership or control of ten percent (10%) or
more of the issued and outstanding stock of Borrower or any Guarantor, or (if
Borrower is a partnership) there is a change in ownership or control of any
general partner's interest.

     SECTION 7.   MISCELLANEOUS PROVISIONS

          7.1  Additional Remedies.  The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.

          7.2  Nonwaiver.  Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof.  No waiver shall be effective unless
it is in writing and signed by an officer of Bank.

          7.3  Inurement.  The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment by Borrower without Bank's consent shall be null
and void.

          7.4  Applicable Law.  This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.

          7.5  Severability.  Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.  In the event of any conflict between the
provisions of this Agreement and the provisions of any note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such note or
reimbursement agreement shall prevail.

          7.6  Integration Clause.  Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.

          7.7  Construction.  The section and subsection headings herein are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                                      -11-
<PAGE>

          7.8  Amendments.  This Agreement may be amended only in writing signed
by all parties hereto.

          7.9  Counterparts.  Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
when together shall be one and the same instrument.

     SECTION 8.   SERVICE OF NOTICES

          8.1  Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.

          8.2  The addresses to which notices or demands are to be given may be
changed from time to time by notice delivered as provided above.

     THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.

UNION BANK OF CALIFORNIA, N.A.

By:  /s/ Myra S. Juetten
     ---------------------------------
      Name:  Myra S. Juetten
      Title: Regional Vice President

By:  /s/
     ---------------------------------
      Name:
      Title:

                      [Signatures Continue on Next Page]

                                      -12-
<PAGE>

WEST VALLEY MRF, LLC,
a California limited liability company

By:  Kaiser Recycling Corporation,
     a Delaware corporation,
     member

     By: /s/ James F. Verhey
         -----------------------------
          Name: James F. Verhey
          Title: Vice President

WEST VALLEY RECYCLING & TRANSFER, INC.,
a California corporation,
member

     By: /s/ Eric D. Herbert
         -----------------------------
     Name:  Eric D. Herbert
     Title:  Vice President

                                      -13-

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