ACQUISITION AGREEMENT

This ACQUISITION AGREEMENT (this "Agreement") is made and entered into this 21st day of October, 1996, between Valco Inc., a Colorado corporation ("Seller") Valco Properties, Ltd., a Colorado limited partnership ("Subsidiary"), and Continental Materials Corporation, a Delaware corporation ("Purchaser").

Recitals

Seller is presently engaged in the business (the "Business") of mining, producing, selling and distributing sand, gravel, ready-mix concrete and other aggregate materials and products in and around Pueblo, Colorado. Subsidiary is wholly-owned by Seller and is the owner of certain personal property used by Seller in the business. Seller also is presently engaged in similar activities outside of the area in and around Pueblo, Colorado; the assets used for such other activities, including assets used by Seller for its overall business (including the Business), are not subject to this Agreement.

. Seller desires to Transfer (as defined in Section 1.1) or lease to Purchaser, and Purchaser desires to purchase or lease from Seller: (i) all of the rights, properties and assets owned or held by Seller or used by Seller in connection with the conduct of the Business, other than the Excluded Assets (as defined in Section 1.3), and (ii) all of the partnership interests in Subsidiary, on the terms and subject to the conditions set forth in this Agreement.

. Seller desires to delegate to Purchaser, and Purchaser is willing to assume from Seller, the Assumed Liabilities (as defined in Section 3.1), on the terms and subject to the conditions set forth in this Agreement.

Agreement

. The Acquisition

. Purchase and Sale of Assets. Subject to Section 1.3 regarding the Excluded Assets and except for properties to be leased pursuant to Section 1.2, Seller sells, transfers, grants, conveys, assigns and delivers ("Transfers") to Purchaser, and Purchaser purchases and accepts from Seller, the rights, properties and assets owned by Seller and used by Seller primarily in connection with the conduct of the Business, including the rights, properties and assets described in this
Section 1.1 (collectively the "Assets") free and clear of any Liens (as defined in Section 4.1(g)(i) except Permitted Liens (as defined in Section 4.1(g)(iii)):

() Real Property. The plants and plant sites listed or described on Exhibit 1.1(a) (collectively, the "Plants To Be Sold" and the "Plant Sites" respectively), will be conveyed to Purchaser by special warranty deeds, which special warranty deeds shall convey the Plants to Be Sold and the Plant Sites, together with certain other land to be reconveyed by Purchaser to Seller upon completion of the Resubdivisions (as defined in Section 5.2 of this Agreement) by Purchaser, and will contain a "possibility of reverter" clause providing that title will revert to Seller under the circumstances described in Section 5.2(g) of this Agreement.

(b) Personal Property. All of the partnership interests of Subsidiary, which is the owner of the fixtures, furnishings, furniture, equipment, motor vehicles, tools, supplies, spare parts, computers, printers and copies of all files, books and records reasonably necessary for the continued conduct of the Business by Purchaser, and all other tangible personal property owned and used by Seller primarily in connection with the conduct of the Business, including those items listed or described on Exhibit 1.1(b) (collectively, the "Owned Tangible Property");

(c) Inventory All raw materials, work-in progress of Seller relating to the Business and finished goods inventories relating to the Business, including those items to be described on Exhibit 1.1(c) (collectively, the "Inventory") (which Exhibit shall include quantity and cost information for the Inventory);

(d) Contract Rights. As they relate to the Business, all rights and incidents of interest of Seller in, to or under all leases, licenses, agreements, purchase orders, and contracts (including product warranty claims, rebates and indemnity or other rights of action against any person arising out of acts, omissions or occurrences before the Closing) (collectively, the "Contracts"), all of which Contracts are listed or described on Exhibit 1.1(d);

(e) Governmental Licenses, Permits and Approvals. To the extent Transferable, all rights and incidents of interest of Seller in, to or under all licenses, permits and authorizations (collectively, the "Licenses") issued or requested to be issued by any United States, state, local or other governmental entity or municipality or any subdivision thereof or any authority, department, commission, board, bureau, agency, court, arbitration panel or instrumentality (collectively, "Governmental Entities") used in connection with the conduct of the Business, including the licenses, permits and authorizations listed or described on Exhibit 1.1(e);

(f) Accounts Receivable. All accounts receivable arising from the conduct of the Business, including the accounts receivable to be listed on Exhibit 1.1(f) (the "Accounts Receivable") (which Exhibit shall include an aging of the Accounts Receivable); and

(g) Water Rights. All water rights (including related stock) held in connection with the Real Property (as defined in
Section 4.1(h)(i)), including those water rights set forth on Exhibit 1.1(g), which will be conveyed on a fee-simple conditional basis, providing that title to such water rights will revert to Seller under the circumstances described in Section 5.2(g).

(h) Personal Property Leases. The personal property leases identified on the attached Exhibit 1.1(h) relating to motor vehicles used in connection with the Business.

1.2 Lease. At the Closing, Seller, as lessor, will lease to Purchaser, as lessee, and Purchaser will lease from Seller, the real property described on Exhibit 1.2A (the "Mining Properties") pursuant to a lease in the form of Exhibit 1.2B (the "Lease").

1.3 Excluded Assets. Notwithstanding anything contained in this Agreement to the contrary, the following rights, properties and assets (collectively, the "Excluded Assets") will not be included in the Assets:

(a) Cash. Cash;

(b) Property To Be Leased. The fee simple title to the Mining Properties;

(c) Software. Any and all computer software owned by the Business; and

(d) Other Specified Assets. Any right, property or asset, including any asset leased by Seller pursuant to a Contract, which is listed or described on Exhibit 1.3(d).

II. Purchase Price

2.1 Unadjusted Purchase Price. In addition to assuming the Assumed Liabilities (as defined in Section 3.1), Purchaser will pay for the Assets and the noncompetition covenants described in
Section 6.1(a)(viii) (the "Noncompetition Covenants") a purchase price in the amount of (i) $5,000,000, plus (if such number is a positive number) and minus (if such number is a negative number)
(ii) the difference between (A) the sum of the book value of the Accounts Receivable and Inventory as of the Closing Date (as defined in Section 6.1(a)), and (B) $720,000, subject to adjustment as provided in Section 2.2 and as further provided in Exhibit 2.1, as adjusted, the "Purchase Price"). For purposes of this Section 2.1, Inventory will include only those items normally carried as inventory by Seller under its normal, consistently applied accounting practices.

2.2 Ad Valorem Tax Adjustment. All ad valorem, property and real estate Taxes (as defined in Section 4.1(n)(iii)) imposed by any taxing authority upon the Plants To Be Sold and the Plant Sites (as defined in Section 1.1(a)) or any of the other Total Assets (as defined in Section 3.2) will be prorated between Seller and Purchaser as of the Closing Date based on the most current available tax bills (such prorations to be adjusted when final tax bills are issued by the applicable taxing authority). All such Taxes attributable to the period up to the Closing Date, which remain unpaid as of the Closing Date, shall be deducted from the Purchase Price. An amount equal to the aggregate amount of such Taxes, if any, which are attributable to the period following the Closing Date and which have been paid by the Seller prior to the Closing Date shall be added to the Purchase Price. All adjustments to the Purchase Price will be calculated as of close of business on October 20, 1996. After the Closing, Seller shall continue to be responsible for and pay all ad valorem, property and real estate Taxes imposed by any taxing authority upon the Mining Properties, provided that Purchaser shall pay any mineral production tax attributable to Purchaser's operations and any ad valorem, property and real estate Taxes assessed against the personal property, improvements or fixtures placed on the Mining Properties by Purchaser during the term of the Lease.

2.3 Allocation of Purchase Price.

(a) Allocation To Assets Based Upon Relative Fair Market Values. The aggregate Purchase Price (which shall include, for purposes of this Section 2.3, any liabilities assumed by the Purchaser in connection with the transactions contemplated by this Agreement) shall be allocated among the Assets and the Noncompetition Agreement (as defined in Section 6.1(b)(viii)) in accordance with their respective fair market values and otherwise in accordance with the provisions of Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). For those purposes, the parties agree to value the Noncompetition Agreement at $500,000 and to allocate the Purchase Price thereto in accordance with the provisions of this paragraph. The allocation contemplated hereby shall be based upon the fair market value allocations agreed upon by the parties and set forth on Exhibit 2.3. Within 90 days after the Closing Date, the Purchaser shall prepare and provide to the Seller copies of Internal Revenue Service Form 8594 (together with all exhibits and attachments thereto) (the "Asset Acquisition Statement") which shall set forth an allocation consistent with the values set forth on Exhibit 2.3. The Asset Acquisition Statement shall be deemed accurate in the absence of manifest error. If, after the Closing, events occur which, and based upon applicable provisions of Section 1064 of the Code, require adjustments to the Asset Acquisition Statement, the Purchaser shall prepare and submit to the Seller as quickly as practicable thereafter, an adjusted Asset Acquisition Statement (each an "Adjusted Statement") which sets forth the applicable adjustments consistent with the applicable events. The Purchaser and the Seller expressly covenant and agree that they shall file all tax returns and reports, including, without limitation, all U.S. federal income tax returns, based upon and consistent with the allocations set forth in the Asset Acquisition Statement and any Adjusted Statement.

(b) Section 754 Election. Seller expressly acknowledges and agrees that it has caused Subsidiary to make an election under Code Section 754 to adjust the basis of Subsidiary's assets in accordance with the provisions of Code Sections 743(b). All such adjustments shall be made in accordance with the provisions of Code Section 755 and the applicable Treasury Regulations thereunder. The allocation contemplated hereby shall be based upon the fair market values agreed upon by the parties and set forth on Exhibit 2.3. Within 90 days following the Closing Date, the Purchaser shall prepare and provide to the Seller copies of a schedule setting forth in reasonable detail the allocations described hereunder (the "Partnership Allocation Schedule") which allocations shall be based upon values set forth on Exhibit 2.3. The Purchaser and the Seller expressly covenant and agree that they shall file all tax returns and reports, including, without limitation, all U.S. federal income tax returns, based upon and consistent with the allocations set forth in the Partnership Allocation Schedule.

III. Assumption of Liabilities

3.1 Assumed Liabilities. On the terms and subject to the conditions of this Agreement, as of the Closing, Purchaser will assume and thereafter in due course pay, perform and discharge the following, and only the following, liabilities and obligations of Seller (the "Assumed Liabilities"):

Liabilities under Assumed Contracts. All liabilities and obligations of Seller arising under the terms of the Contracts that are included in the Assets and listed or specifically described on Exhibit 4.1(l)(i) or that, in accordance with Section 4.1(m), are not required to be listed or described on Exhibit 4.1(l)(i) (collectively, the "Assumed Contracts"), but only to the extent such liabilities and obligations arise, accrue or first become due after the Closing Date under the terms of such Contracts; provided, however, that Purchaser will not assume or be responsible for any such liabilities or obligations which arise under or in relation to any insurance policy or contract, any Employee Plan (as defined in Section 4.1(m)(i)) or from any Contract which is not an Assumed Contract or from any breach or default by Seller arising prior to the Closing Date under any Contract, all of which liabilities and obligations will constitute Retained Liabilities (as defined in Section 3.2). Notwithstanding anything to the contrary contained in this Agreement or any document delivered in connection with it, Purchaser's obligations with respect to the Assumed Liabilities will not extend beyond the extent to which Seller was obligated with respect to them and will be subject to Purchaser's right to contest in good faith the nature and extent of any liability or obligation.

3.2 Retained Liabilities. Except as provided in Section 3.1 and except as provided in the Lease, Seller will retain, and Purchaser will not assume, or be responsible or liable with respect to, any liabilities or obligations of Seller or its Affiliates (as defined in Section 8.14) or their respective predecessors-in-interest, whether or not arising out of or relating to the conduct of the Business or associated with or arising from any of the Assets or the Mining Properties (collectively, the "Total Assets") or any other rights, properties or assets used in or associated with the Business at any time, and whether fixed or contingent or known or unknown including, by way of example and without limitation, liabilities arising from the items on Exhibit 4.1(o), 4.1(e), 4.1(h)(vi), 4.1(k)(i), 4.1(k)(ii) and 4.1(p) (collectively "Retained Liabilities").

IV. Representations and Warranties

4.1 Representations and Warranties of Seller. Seller represents and warrants to Purchaser as of the date hereof as follows:

(a) Corporate Matters. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado and has the requisite corporate power and authority to own, lease or otherwise hold the Total Assets and to conduct the Business as presently conducted by it. Seller is duly qualified to conduct business as a foreign corporation in each other jurisdiction in which its ownership or lease of property or conduct of the Business requires such qualification under applicable law. Seller owns the Total Assets except the Owned Tangible Property and conducts the Business directly, and not through any other corporation, partnership or other entity. Subsidiary owns the Owned Tangible Property. Subsidiary conducts no business and has no liabilities.

(b) Authorization and Effect of Agreement. Seller and Subsidiary have the requisite corporate or partnership (as applicable) power to execute and deliver this Agreement and to perform the transactions contemplated by this Agreement to be performed by Seller and Subsidiary. The execution and delivery by Seller and Subsidiary of this Agreement and the performance by Seller and Subsidiary of the transactions contemplated by this Agreement to be performed by Seller and Subsidiary have been duly authorized by all necessary action on the part of Seller and Subsidiary, Seller's and Subsidiary's board of directors, stockholders and partners, as applicable, and, if applicable, holders of Seller's indebtedness. This Agreement has been duly executed and delivered by Seller and Subsidiary and, assuming the due execution and delivery of this Agreement by Purchaser, constitutes a valid and binding obligation of Seller and Subsidiary enforceable in accordance with its terms.

(c) No Restrictions Against Sale of the Assets. Except as listed or described on Exhibit 4.1(c), the execution and delivery of this Agreement by Seller and Subsidiary does not, and the performance by Seller and Subsidiary of the transactions contemplated by this Agreement to be performed by them will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, (i) the articles of incorporation or bylaws of Seller or the partnership agreement of Subsidiary, (ii) any law, statute, rule, regulation, zoning or other ordinance, order, code, arbitration award, judgment, decree, permit or other legal requirement of any Governmental Entity (each a "Law") and collectively, "Laws") to which Seller, Subsidiary or any of the Total Assets is subject, (iii) any of the Contracts or any document or instrument to which Seller or Subsidiary or any of the Total Assets is subject, or (iv) any of the Licenses. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Seller or Subsidiary under any applicable Law in connection with the execution and delivery of this Agreement by Seller or Subsidiary or the performance by Seller or Subsidiary of the transactions contemplated by this Agreement to be performed by Seller and Subsidiary, as applicable.

(d) Financial Statements. Attached as Exhibit 4.1(d) are the statements of divisional operating profit and loss for the Pueblo Division of Seller for the three years ended December 31, 1995, and for the nine month period ended September 30, 1996. Such statements are kept by Seller for its own internal purposes, consistently with the internal accounting practices of Seller, are used by Seller for evaluating the operating costs of the Pueblo Division and fairly present the divisional operating profit and loss of the Pueblo Division consistent with the accounting practices of Seller.

(e) Compliance with Laws. Except as described on Exhibit 4.1(e), Seller is in compliance with all Laws in all material respects. No fact, circumstance, condition or situation exists which, after notice or lapse of time or both, would constitute material noncompliance by Seller or give rise to any material future liability of Seller with respect to any Law heretofore or currently in effect. Except as set forth on Exhibit 4.1(e), Seller is not required to obtain any licenses or permits, or file any notices, applications or reports under regulations related to any matters referred to in this Section 4.1(e) that have not been properly obtained or filed. Except as set forth on Exhibit 4.1(e), Seller has not received notice of any violation of any Law, or any potential liability under any Law, relating to the operation of the Business or to any of the Total Assets, nor, to the best of Seller's knowledge, does there exist any such violation or potential liability. To the best of Seller's knowledge, there does not exist any present requirement of any applicable Law which is due to be imposed on Seller with respect to the Business that is reasonably likely to increase in any material respect the cost of complying with such Law.

(f) Accounts Receivable. Except as set forth on Exhibit 4.1(f), all of the Accounts Receivable are ordinary trade receivables that have arisen from bona fide transactions in the ordinary course, and no payor of any Account Receivable has provided notice to Seller concerning any claim of a defense to payment of such Account Receivable. All of the collectible Accounts Receivable as of the date of this Agreement are disclosed on Exhibit 1.1(f), which Exhibit also sets forth an accurate aging of such Accounts Receivable. Seller and Purchaser have jointly prepared the notice to customers (with procedures to remit amounts to Purchaser), the form of which is included in Exhibit 4.1(f). Upon Seller's receipt of any full or partial payments of any of the Accounts Receivable, Seller shall remit such funds to Purchaser. Seller and Purchaser shall develop such other procedures relating to the Accounts Receivable consistent with normal business practices.

(g) Tangible Personal Property; Assets.

(i) The Owned Tangible Personal Property constitutes in all material respects, all of the tangible property, other than the Excluded Assets, used by Seller in connection with the conduct of the Business. Subsidiary has good, marketable and exclusive title to the Owned Tangible Personal Property, and the Owned Tangible Personal Property is free and clear of all liens, mortgages, claims, charges, security interests, options, preemptive purchase rights or other encumbrances of any kind or nature whatsoever (collectively, "Liens"). Seller (and Thomas E. Brubaker, as to a one percent (1%) limited partnership interest) owns or controls all of the partnership interests of Subsidiary free and clear of any and all Liens and has the valid and enforceable power and unqualified right to Transfer or cause to be transferred such partnership interests to Purchaser

(ii) Exhibit 1.1(c) contains an accurate list of the Inventory. Except as described in Exhibit 1.1(c), all of the Inventory is, to the best of Seller's knowledge, usable or saleable in the ordinary course for its intended purpose.

(iii) The delivery to Purchaser at the Closing of the instruments of Transfer contemplated by this Agreement will vest in Purchaser good, marketable and exclusive title to all the partnership interests of Subsidiary and the other Assets, free and clear of all Liens, except for (A) Liens for current property Taxes or governmental charges or levies which are not yet due and payable and (B) Liens listed or described on Exhibit 4.1(g)(iii) (Liens described in the foregoing clauses (A) and (B) being collectively referred to as "Permitted Liens").

(h) Real Property

(i) The Plants To Be Sold, the Plant Sites and the Mining Properties (collectively, the "Real Property") constitute all of the real property used by Seller primarily or exclusively in connection with the conduct of the Business.

(ii) Seller owns a good, marketable and valid fee simple interest in the Real Property subject only to the Permitted Exceptions (as defined in Section 6.1(a)(ii)(A)).

(iii) Except to the extent set forth on Exhibit 4.1(h)(iii), Seller has not leased or sublet, as lessor or sublessor, and no third party is in possession of,or has the right to use or occupy, any portion of the Real Property. The items set forth in Exhibit 4.1(h)(iii) have not interfered with the operations of the Business.

(iv) To the best of Seller's knowledge, the buildings, structures, improvements, fixtures and facilities included in the Real Property and all components thereof, including the roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, water, waste water, storm water, paving and parking equipment, systems and facilities included therein, are adequate and sufficient for the uses to which they are put in the conduct of the Business, but Seller makes no other warranty or representation regarding such matters, the agreement being that except as expressly provided herein, Purchaser will accept such matters "as is" without warranty express or implied.

(v) To the best of Seller's knowledge, Seller has provided to Purchaser all material information of which Seller has possession (or which is possessed on behalf of Seller) concerning the sand and gravel reserves of the Mining Properties (the "Reserves").

(vi) Except as set forth in Exhibit 4.1(h)(vi), there are no pending or, to Seller's knowledge, threatened condemnation proceedings, lawsuits or administrative actions relating to any parcel of Real Property (including without limitation zoning or other land use proceedings or actions) or other matters materially and adversely affecting the current use, occupancy or value thereof;

(vii) The buildings and improvements located on each parcel of Real Property are located within the boundary lines of such parcel of Real Property;

(viii) All facilities and improvements serving or located on the Real Property have, to Seller's knowledge, received all material approvals of Governmental Entities (including all material Licenses) required in connection with the ownership or operation thereof and have been operated and maintained in substantial accordance with all applicable Laws including, without limitation, all applicable building codes, zoning, subdivision and land use Laws;

(ix) There are no outstanding options or rights of first refusal to purchase any parcel of Real Property, or any portion thereof or interest therein;

(x) Except as described in Exhibit 4.1(h)(x), there are no parties (other than Seller) in possession of any parcel of Real Property;

(xi) Seller has delivered or made available to Purchaser copies of any inspection, soil, engineering, environmental or architectural notices, studies, reports or plans in Seller's possession or control which relate to the physical condition or operation of the Real Property or recommended improvements with respect thereto; and

(xii) None of the Permitted Liens on the Real Property will individually or in combination with any other or others prevent or materially and adversely affect the ability of Purchaser or any successor, assignee or transferee of Purchaser to use and operate the affected parcel of Real Property (including, without limitation, the extraction, whether through surface, subsurface, or open-pit mining of the Reserves located thereon) in the manner and scope in which such parcel of Real Property is now being used and operated or for the extraction, whether through surface, subsurface or open pit mining of the Reserves located therein.

(i) Intellectual Property. There is no unresolved claim or demand asserting a conflict with, and Seller is not infringing on, the rights of others in connection with Seller's use of any patents, copyrights, trademarks, trade names, service marks, trade secrets, know-how and other proprietary rights, whether registered or unregistered, including applications for any of the foregoing (collectively, the "Intellectual Property Rights"). To the best of Seller's knowledge, no person or entity is infringing on or improperly using the Intellectual Property Rights of Seller.

(j) Licenses and Permits.

(i) Exhibit 1.1(e) contains a true and complete list and brief description of all of the Licenses required to permit, in accordance with the rules and regulations of any Governmental Entity, the continued conduct of the Business as now conducted (or proposed to be conducted under existing agreements), and Seller is the authorized legal holder of the Licenses. Each of the Licenses is valid and in full force and effect, and Seller is in compliance with all the provisions of the Licenses in all material respects. To the best of Seller's knowledge, no Governmental Entity has instituted any proceedings for the cancellation, non-renewal or modification of any of the Licenses; and Seller has no knowledge of any reason why any of such Licenses will, upon their scheduled expiration or as a result of the Closing, not be renewable or reissuable in the ordinary course or will be issuable or reissuable only with the imposition of a material condition.

(ii) Except as set forth in Exhibit 4.1(j)(ii), Seller has no knowledge of any reason why any of the Licenses is not assignable or will not become available to Purchaser upon the Closing on the same terms and conditions set forth in the existing Licenses (whether by assignment, cancellation and reissuance, or renewal), or why any of such Licenses that are assignable will not be Transferred to Purchaser by Seller's delivery to Purchaser at the Closing of the instruments of Transfer contemplated by this Agreement, and to the extent they are assignable, will not remain effective as of the consummation of the transactions contemplated by this Agreement.

(k) Litigation; Decrees; Warranty Claims.

(i) Except as listed or described on Exhibit 4.1(k)(i), there are no pending or, to the best of Seller's knowledge, threatened lawsuits, claims, administrative or other proceedings or investigations against Seller arising out of or relating to this Agreement or the transactions contemplated by this Agreement or the conduct of the Business, or otherwise pertaining to or affecting the Total Assets, and, to the best of Seller's knowledge, there do not exist any facts or circumstances that could reasonably be expected to give rise to any such lawsuits, claims, proceedings or investigations. Seller is not in default under any judgment, order or decree of any Government Entity applicable to it or to the conduct of the Business or the ownership or use of the Total Assets.

(ii) All claims, whether in contract or tort, for defective or allegedly defective products or workmanship pending or threatened against Seller and any facts and circumstances relating to any such claim, are listed or described on Exhibit 4.1(k)(ii).

(l) Contract Rights.

(i) Exhibit 4.1(l)(i) contains a true and complete list of all of the Contracts relating to the Business to which Seller is a party or by which Seller is bound or to which any of the Total Assets are subject, other than (A) any of the Contracts entered into with unaffiliated third parties in the ordinary course which are not material to the conduct of the Business, which are terminable without payment of premium or penalty at will or upon not more than 30 days' notice, which impose monetary obligations not in excess of $5,000 and which impose no material non-monetary obligations and (B) Employee Plans (as defined in Section 4.1(m)(i) on Exhibit 4.1(m)(i)). Except as set forth on Exhibit 4.1.(l)(i), none of the Contracts listed or described on Exhibit 4.1(l)(i) has been amended. Seller heretofore has provided Purchaser with true, complete and correct copies of each of the Contracts listed or described on Exhibit 4.1(l)(i) that are written and, to the best of Seller's knowledge, true, complete and correct written summaries of the Contracts listed or described on Exhibit 4.1(l)(i) that are oral.

(ii) Except as set forth on Exhibit 4.1(l)(ii), (A) Seller has performed all obligations required to be performed by it to date under the Contracts, (B) neither Seller nor, to the best of Seller's knowledge, any other party to any Contract has improperly terminated or is in breach or default under such Contract, (C) to the best of Seller's knowledge there exists no condition or event which , after the giving of notice or lapse of time or both, would constitute any such breach, termination or default, (D) each of the Contracts is in full force and effect and is a legal, binding and enforceable obligation of Seller and, to the best of Seller's knowledge, each of the other parties to the Contracts, (E) none of the Contracts is presently being renegotiated, either in whole or in part and (F) each of the Contracts, if performed by Purchaser, would not result in a loss to Purchaser, based on Seller's actual production costs for the twelve months ended on the date of this Agreement and based on the quoted price set forth in, or applicable to, the Contract.

(m) Employee Plans; Labor Relations.

(i) For purposes of this Agreement, the term "Employee Plan" means each employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any deferred compensation plans, stock appreciation rights, phantom stock plans, stock option plans and any excess benefit plans, other than a multiemployer plan within the meaning of Section 3(37) of ERISA ("Multiemployer Plan"), sponsored or maintained by Seller, or to which Seller contributes or is obligated to contribute, and under which any person presently employed by Seller (an "Employee") or formerly so employed by Seller or any of its predecessors-in-interest (a "Former Employee") participates or has accrued any rights, or under which Seller is liable in respect of an Employee or a Former Employee. The terms "Employee" and "Former Employee" include, where an Employee Plan provides benefits for beneficiaries or dependents, the beneficiaries and dependents of an Employee or a Former Employee. Exhibit 4.1(m)(i) lists or describes all Employee Plans other than Employee Plans existing or arising as a matter of Law rather than by any of the Contracts. Seller is not legally obligated to contribute to any Multiemployer Plan and does not have any withdrawal liability whatsoever whether or not yet assessed. Those Employee Plans that are employee pension benefit plans (within the meaning of Section 3(2) of ERISA) are intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986 ("Code"), have received a favorable determination letter from the Internal Revenue Service and remain qualified under the Code. Seller has not maintained any Employee Plan in a manner that will result in the imposition of a lien or encumbrance on any of the Total Assets or in a liability of Purchaser with respect to such maintenance during periods prior to the Closing Date, and Seller does not have any direct or indirect liability whatsoever under Title IV of ERISA (including being subject to any statutory lien) regardless of whether as a "substantial employer" or a "contribution sponsor" (as defined, respectively, in Sections 4001(a)(2) and 4001 (a)(13) of ERISA.

(ii) Except as set forth on Exhibit 4.1(m)(ii), (A) Seller is not party to or subject to any collective bargaining agreements with respect to any Employee, (B) there is no information or document showing any obligation to employ any Employee after the Closing Date, or to pay any wages, benefits or other compensation to any Employee, (C) there are no controversies, disputes, complaints, charges, actions, suits, or proceedings pending, or to the best of Seller's knowledge, threatened, between Seller and any Employee (singly or collectively) or labor union(s), (D) there have been no judgments or other findings in the past three years relating to any controversies, disputes, complaints, charges, actions, suits, or proceedings between Seller and any Employee (singly or collectively) or labor union(s), (E) no labor union or other collective bargaining unit represents or claims to represent any Employee, (F) to the best of Seller's knowledge, there is no union campaign being conducted to solicit cards from Employees to authorize a union to request a National Labor Relations Board certification election with respect to any Employee, (G) there have been no strikes or work stoppages of Seller involving or affecting the Pueblo operations in the past ten years (H) Seller has no affirmative action plans; and (I) Seller has never had a "mass layoff" or "plant closing" as defined by the Worker Adjustment and Retraining Notification Act.

(n) Taxes.

(i) Seller has paid all Taxes owed by it when due, except for circumstances in which Seller is contesting the payment of a Tax in good faith under circumstances in which title to or use of the Total Assets by Purchaser will not be adversely affected (such as by the posting of a bond by Seller), and except for Taxes as to which Seller's failure to pay will not result in the imposition of a lien or encumbrance on any of the Total Assets or in any obligation of Purchaser to pay such Taxes, any such exceptions being described on Exhibit
4.1(n). Seller has timely filed all Tax returns and reports.

(ii) Seller is a United States person within the meaning of Section 7701(a)(9) and (a)(1) of the Code. Seller has not entered into any agreement, whether or not written, for the payment of Tax liabilities or entitlement to refunds and related matters with any other party.

(iii) For purposes of this Agreement, the term "Taxes" means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, customs, duties, real estate or other taxes, fees, assessments, or charges of any kind whatever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto, and the term "Tax" means any one of the foregoing Taxes.

(o) Environmental Matters.

(i) Except to the extent specified on Exhibit 4.1(o), (A) neither the Seller nor, to the best of Seller's knowledge, any other person or entity has engaged in or permitted any operations or activities upon, or any use or occupancy of, all or any portion of the Real Property, resulting in the emission, release, discharge, dumping or disposal of any Hazardous Materials (as defined below) on or under the Real Property, (B) to the best of Seller's knowledge, no Hazardous Materials have migrated from the Real Property onto or beneath other properties, and (C) to the best of Seller's knowledge, no Hazardous Materials have migrated from other properties onto or beneath the Real Property.

(ii) Except to the extent specified on Exhibit 4.1(o), (A) there is not, nor has there ever been, constructed, placed, deposited, stored, disposed of or located on the Real Property any asbestos in any form by or on behalf of Seller, or, to the best of Seller's knowledge, any other person or entity, (B) no underground treatment or storage tanks or gas or oil wells, are or have been located on the Real Property, (C) there are no polychlorinated biphenyls (PCBs) or transformers, capacitors or other equipment which contain dielectric fluid containing PCBs at levels in excess of fifty parts per million (50 ppm) constructed, placed, deposited, disposed of or located on the Real Property, (D) the uses of and activities of Seller on the Real Property have at all times complied in all material respects with all Environmental Requirements (as defined below), (E) Seller has obtained all permits necessary under applicable Environmental Requirements to conduct the Business at the Real Property, (F) neither the Seller nor, to the best of Seller's knowledge, any other person or entity has received any notice or other communication from a Governmental Entity concerning any alleged violation of Environmental Requirements, whether or not corrected to the satisfaction of the appropriate authority, or any notice or other communication concerning alleged liability for Environmental Damages (as defined below) in connection with the Real Property, and (G) there exits no judgment, decree, order, writ or injunction outstanding, or litigation, action, suit, claim (including citation or directive) or proceeding pending or, to the best of Seller's knowledge, threatened, relating to the alleged violation of Environmental Requirements, or from the suspected presence of Hazardous Materials thereon or potential migration thereto.

(iii) For purposes of this Agreement, the term "Hazardous Materials" means any substance (A) the presence of which requires remediation under any Environmental Requirements, and (B) which is identified as a hazardous waste or hazardous substance under any applicable Law. "Hazardous Materials" do not include household or ordinary commercial products purchased by Seller ancillary to its business and utilized for their intended use in ordinary quantities, including without limitation janitorial and cleaning supplies, paints, insecticides, and pesticides.

(iv) For purposes of this Agreement, the term "Environmental Requirements" means all applicable Laws and permits of any federal, Colorado or local Governmental Entity in effect on or during any period prior to the Closing Date relating to the protection of human health or the environment, including: (A) all requirements pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges or releases of Hazardous Materials; and (B) all requirements pertaining to the protection of the health of employees or the public.

(v) For purposes of this Agreement, the term "Environmental Damages" means any and all losses which are incurred at any time as a result of (A) the existence of Hazardous Materials, during the ownership of the Real Property by Seller, upon or beneath the Real Property or migrating or threatening to migrate from the Real Property, or (B) the existence on or prior to Closing of a violation of Environmental Requirements pertaining to the Real Property.

(p) Customers and Suppliers. Except as set forth on Exhibit 4.1(p), Seller is not involved in any material claim or controversy with any customer or supplier.

(q) Sufficiency of the Total Assets. The Total Assets constitute all of the properties, assets and rights required for the continued conduct of the Business as presently conducted, except for the owned vehicles listed on Exhibit 4.1(q), software, the computer system in the Rocky Ford, Colorado office, and any other assets used in the Rocky Ford office for general, sales, and administrative purposes in connection with the operation of the Business and any other Excluded Assets. The Hankla, Rancho Colorado and Nepesta properties referred to in Exhibit 1.3(c) have not been used in Valco's Pueblo operations and are not included in the mineral reserve calculation performed by Ted Eyde.

(r) Political Contributions and Other Payments. Neither Seller nor any other person or entity acting on behalf of Seller has, during the past five years, (i) made any payment to any governmental official or other governmental employee or agent (domestic or foreign) to induce the recipient or the recipient's employer to do business with, grant favorable treatment to or compromise or forego any claim against Seller, or (ii) made any significant payment or conferred any benefit which, under prevailing business practices, Seller considers or reasonably should consider to be improper to promote or retain sales or to help, procure or maintain good relations with suppliers.

(s) Brokers, Finders and Agents. Seller has not taken any action that would directly or indirectly obligate Seller, Purchaser or anyone else to anyone acting as a broker, finder, financial advisor or in any other similar capacity in connection with this Agreement or the transactions contemplated by this Agreement.

(t) Certain Transfers. Except as set forth on Exhibit 4.1(t), since May 22, 1996 Seller has not transferred any of the Total Assets (to another operation of Seller, a third party or otherwise) except for sales of inventory in the ordinary course of business consistent with past practice and the transfer of the Owned Tangible Property to Subsidiary, and has conducted the Pueblo operations in the ordinary course of business consistent with past practice.

(u) Insurance. Up until the effective time of the Closing hereunder, Seller has maintained insurance of the types and amounts and on terms which are customary covering liabilities and losses relating to the Business and the Total Assets.

(v) Effect of Disclosures. Any matter expressly set forth in any Exhibit in this Agreement will be deemed to apply to any relevant Exhibit attached pursuant to this Article IV, as long as the relevance of such information to such other Exhibit would be reasonably and clearly apparent to a person not intimately familiar with the business, assets and operations of the Seller. The absence of a breach of a representation or warranty (or the expiration of the period for claims under such representation or warranty under Section 7.1) shall not affect a claim for a breach of another representation or warranty or any covenant hereunder.

4.2 Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller as of the date hereof as follows:

(a) Corporate Matters. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Purchaser is duly qualified to conduct business as a foreign corporation in each jurisdiction in which its ownership or lease of property or conduct of its business requires such qualification under applicable law.

(b) Authorization and Effect of Agreement. Purchaser has the requisite corporate power to execute and deliver this Agreement and to perform the transactions contemplated by this Agreement to be performed by Purchaser. The execution and delivery by Purchaser of this Agreement and the performance by Purchaser of the transactions contemplated by this Agreement to be performed by Purchaser have been duly authorized by all necessary action on the part of Purchaser, Purchaser's board of directors and, if applicable, Purchaser's stockholders and holders of Purchaser's indebtedness. This Agreement has been duly executed and delivered by Purchaser and, assuming the due execution and delivery of this Agreement by Seller, constitutes a valid and binding obligation of Purchaser enforceable in accordance with its terms.

(c) No Conflicts. The execution and delivery of this Agreement by Purchaser does not, and the performance by Purchaser of the transactions contemplated by this Agreement to be performed by it will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligations or to loss of a material benefit under, (i) the articles of incorporation or bylaws of Purchaser, (ii) any Law or judgment, order or award existing or entered into as of the date of this Agreement to which Purchaser is subject, (iii) any contract to which Purchaser is a party, or (iv) any license or permit of Purchaser. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Purchaser under any applicable Law in connection with the execution and delivery of this Agreement by Purchaser or the performance by Purchaser of the transactions contemplated by this Agreement to be performed by it.

(d) Brokers, Finders and Agents. Purchaser has not taken any action that would directly or indirectly obligate Seller, Purchaser or anyone else to anyone acting as a broker, finder, financial advisor or in any other similar capacity in connection with this Agreement or the transactions contemplated by this Agreement.

V. Covenants

5.1 Further Employee Matters.

(a) Employee Benefits. Except as set forth below, Seller will retain all liabilities and obligations in respect of all Employees and any future employees of Seller, including liabilities and obligations under any Employee Plan and applicable Laws. Seller shall be responsible for satisfying the requirements of the Consolidated Budget Reconciliation Act of 1985 with respect to Seller's employees terminated in connection with this Agreement and not rehired by Purchaser, if any. Purchaser will cause each Employee and Former Employee whom it employs at or after the Closing to be covered under Purchaser's existing health care plan that is available for Purchaser's employees generally, such coverage to be effective immediately upon the employment of any such person, subject to the provisions of the plan. Purchaser will have no liability or obligation whatsoever under any Employee Plan, nor will Purchaser have any obligation to provide any employee benefits to any Employees or Former Employees, other than as set forth above.

(b) Future Employment. Purchaser acknowledges that Seller has disclosed to Purchaser the obligation set forth in Article II, Section 4 of the Agreement with Teamsters Construction Workers Local Union No. 13 and in Article I, Section D of the Agreement with Operating Engineers Local No. 9. Seller shall terminate the employment of all Employees employed in connection with the Business, effective the Closing Date. Purchaser intends to offer employment from and after the Closing to all Employees employed by Seller in connection with the Business, on such terms and conditions as Purchaser may, in its sole discretion, determine.

(c) Non-Solicitation By Purchaser. Purchaser agrees not to solicit any employees of Seller not listed on Exhibit 5.1(c) or encourage any such employees to leave the employ of Seller for a period of two (2) years from the date of this Agreement without prior written consent of Seller.

(d) Non-Solicitation By Seller. Seller agrees not to solicit any Employees or Former Employees hired by Purchaser in connection with the Business, or encourage any such employees to leave the employ of Purchaser, for a period of two (2) years from the date of this Agreement without prior written consent of Purchaser.

(e) Employee Information. Upon written authorization from any Employee employed primarily in connection with the Business, Seller will provide to Purchaser, in a timely manner, any information or documents that Purchaser may reasonably request with respect to any such Employee employed primarily in connection with the Business, which relates directly to such Employee's performance, job duties, compensation and benefits while employed by Seller, including, but not limited to, copies of all personnel files relating to such Employee.

5.2 Certain Real Estate Matters.

(a) Title Commitments. At least five (5) days prior to the Closing Date, Seller will deliver to Purchaser title insurance commitments (the "Title Commitments") on each parcel of Real Property issued by the Title Company (as defined in Section 6.1(ii)). Each of the Title Commitments shall contain the Title Company's commitment to provide extended coverage over the standard printed exceptions upon satisfaction by Seller of the Title Company's requirements with respect to providing extended coverage.

(b) Surveys. Prior to the Closing Date, the Purchaser and the Title Company shall have received such surveys of the Real Property, except for the east parcel of the Mining Properties, as are reasonably required by Purchaser (the "Surveys"). Each of the Surveys shall be prepared by a surveyor, engineer or surveying or engineering firm licensed in the State of Colorado.

(c) Certain Leases. Seller will continue as Lessor with respect to the leases set forth in Exhibit 4.1(h)(iii); provided, however, that Seller shall terminate any of such leases (other than the lease with the Division of Wildlife-West Lake) as to any portion of the Property covered by such leases within forty-five (45) days after receipt of notice from Purchaser that Purchaser intends to mine on such property (or portion of such property) and that the continued use of the surface of such property (or portion of such property) is not compatible with such mining. Seller shall insure that said leases do not materially interfere with the Business. Upon any transfer of the Property to Purchaser, Seller shall transfer the Property free and clear of such leases.

(d) Subdivision. The parties acknowledge that the Plants To Be Sold and the Plant Sites are the Concrete Batch Plant located at 201 Lane 26, Pueblo, Colorado (the "Batch Plant") and the Aggregate Crushing and Screening Plant and Batch Plant located at 5475 Hiway 96 West, Pueblo, Colorado (the "Crushing Plant"). Because of the subdivision laws and regulation of Colorado and Pueblo County, neither the property on which the Batch Plant is located (the "Batch Plant Property") nor the property on which the Crushing Plant is located (the "Crushing Plant Property") can be conveyed to Purchaser unless certain additional property located adjacent to the Batch Plant (the "Excess Batch Plant Property") and certain additional property located adjacent to the Crushing Plant (the "Excess Crushing Plant Property") also is conveyed to Purchaser. Accordingly, Seller will convey to Purchaser all of the Batch Plant Property and the Excess Batch Plant Property by a special warranty deed and all of the Crushing Plant Property and the Excess Crushing Plant Property by a second special warranty deed. Promptly after the Closing, Purchaser shall take such actions as are reasonably necessary to subdivide the Batch Plant Property and the Excess Batch Plant Property into a two lot subdivision (the "Batch Plant Subdivision") and the Crushing Plant Property and the Excess Crushing Plant Property into a second two lot subdivision (the "Crushing Plant Subdivision. Upon completion of the Batch Plant Subdivision and the Crushing Plant Subdivision, which Purchaser shall use all reasonable efforts to complete within two (2) years after the Closing Date, Purchaser shall convey the Excess Batch Plant Property and the Excess Crushing Plant Property to Seller by special Warranty Deed and, upon such conveyance, the Excess Batch Plant Property and the Excess Crushing Plant Property shall be added to the property leased to Purchaser under the Lease. The parties acknowledge that the Batch Plant Property is comprised of approximately acres, the Excess Batch Plant Property is comprised of approximately acres, the Crushing Plant Property is comprised of approximately 13 acres, and the Excess Crushing Plan Property is comprised of approximately acres.

(e) Deed of Trust. In order to secure Purchaser's obligation to reconvey the Excess Batch Plant Property and the Excess Crushing Plant Property to Seller, Purchaser shall execute and deliver to Seller at closing a deed of trust, in form and substance acceptable to Purchaser and Seller encumbering the Excess Batch Plant Property and the Excess Crushing Plant Property (the "Deed of Trust"). The Deed of Trust shall provide, among other things, that Seller may exercise its rights under the Deed of Trust only after the Batch Plant Subdivision and the Crushing Plant Subdivision have been completed and Purchaser has refused, after receiving a written request from Seller, to convey the Excess Batch Plant Property and/or the Excess Crushing Plant Property to Seller. Except for the Deed of Trust, Purchaser will not, without Seller's prior written consent, grant, permit or suffer to exist any mortgage lien or similar encumbrance upon the Excess Batch Plant Property or the Excess Crushing Plant Property, except for liens and encumbrances caused by Seller's actions.

(f) Option to Purchase. Contemporaneously with the execution of this Agreement, Valco Inc. and Purchaser have executed and delivered that certain Option to Purchase Agreement (the "Option Agreement"), a copy of which is attached hereto as Exhibit 5.2(f). The Option Agreement grants to Valco Inc. the right to purchase the Batch Plant Property and the Crushing Plant Property and the improvements then existing on the Batch Plant Property and the Crushing Plant Property on the terms and subject to the conditions contained in the Option Agreement in the event the Lease is terminated by Seller as a result of a default by Purchaser.

(g) Water Rights. The bargain and sale deed for Seller's water rights also shall contain a possibility of reverter which will provide that the water rights shall revert to Seller upon the termination of the Lease, except for those water rights attributable to or associated with the Batch Plant Property and/or the Crushing Plant Property; provided, however, that if the Batch Plant Property and the Crushing Plant Property are purchased by Seller pursuant to the Option Agreement, such water rights shall revert to or be conveyed to Seller, but the value of such water rights shall be included in the determination of the fair market value of the Batch Plant Property and the Crushing Plant Property for purposes of the Option Agreement.

5.3 Certain Tax Matters.

(a) Any sales, use, transfer, vehicle transfer, stamp, conveyance, value added or other similar Taxes that may be imposed by any Governmental Entity, and all recording or filing fees and notarial fees with respect to the purchase and sale of the Assets, the lease of the Mining Properties or otherwise on account of this Agreement or the transactions contemplated by this Agreement, will be borne by Purchaser (and Purchaser shall indemnify Seller therefrom); provided, however, that Seller shall pay all Taxes that are imposed on the income or gain that Seller realizes as a result of the transactions contemplated by this Agreement. Seller will indemnify Purchaser against any Liability, direct or indirect, for any Taxes (other than Taxes prorated between Seller and Purchaser pursuant to Section 2.2) imposed on Purchaser or on or with respect to any of the Total Assets or the Business that are attributable to any taxable period which ends on or prior to the Closing Date or with respect to the allocable portion of any taxable period that includes but does not end on the Closing Date.

(b) Seller will cause to be included in its income Tax returns for all periods or portions thereof ending on or before the Closing Date, all revenue and expense relating to the operations of the Business during such periods or portions thereof. Seller will prepare and timely file or cause to be prepared and timely filed all such Tax returns with the appropriate Governmental Entities. Seller will make all payments of Tax shown to be due and owing in such Tax returns.

(c) Seller and Purchaser will (i) each provide the other with such assistance as may reasonably be requested by any of them in connection with the preparation of any tax return to the extent such tax return relates to the allocation of the Purchase Price to the Assets (including related depreciation and amortization), audit or other examination by any taxing authority or judicial or administrative proceedings relating to liability for Taxes, (ii) each retain and provide the other with any records or other information that may be relevant to such tax return, audit or examination, proceeding or determination, and
(iii) each provide the other with any final determination of any such audit or examination, proceeding or determination that affects any amount required to be shown on any such tax return of the other for any period. In addition, Seller will retain until the applicable statutes of limitations (including any extensions) have expired copies of all such tax returns, supporting work schedules, and other records or information that may be relevant to such tax returns for all tax periods or portions thereof ending on or before or which include the Closing Date and will not destroy or otherwise dispose of any such records (to the extent they relate to such matters) without first providing Purchaser with notice and a reasonable opportunity to review and copy the same.

5.4 Transition Assistance. Seller shall provide Purchaser with such assistance as may reasonably be requested by Purchaser to implement and effectuate the terms hereof and the transfer of the Business contemplated hereby including assistance to accomplish the transfer of the Licenses to Purchaser on the same terms and conditions currently in effect. Purchaser will reimburse Seller for any reasonable out-of-pocket costs incurred by Seller in connection with the foregoing.

5.5 MLRD Bond. Promptly after the Closing, Purchaser will take all necessary steps to replace each of the bonds described in Exhibit 5.5 (the "Bonds"), to cause Seller to be released from all liability on the Bonds, and in any event to cause such replacement and release to occur not later than September 19, 1997. Until the Bonds are so replaced and Seller is so released, Purchaser will pay Seller, in advance on the first day of each month, the sum of $225 and will indemnify Seller from any liability arising under the Bonds after the Closing Date as a result of the actions of Purchaser.

VI. The Closing

6.1 The Closing.

(a) The parties shall consummate the transactions contemplated hereby ("Closing") on October 21, 1996 ("Closing Date") as follows: The parties will execute and deliver this Agreement, the Lease and the closing documents contemplated hereby on October 21, 1996; provided, however, that the purchase price adjustments for Accounts Receivable and Inventory as provided in Section 2.1 shall be made as of the close of business on October 20, 1996 and the delivery of the balance of the Purchase Price shall occur on October __, 1996 as provided in subsection (c) below (so that the parties may determine and effectuate the adjusted Purchase Price on October __ and __, 1996 as contemplated by Article II above).

(b) Seller will deliver to Purchaser, at the expense of Seller, the following (collectively, "Seller's Closing Documents"):

(i) Opinion of Counsel. The opinion of Seller's counsel, dated as of the Closing Date and addressed to Purchaser, in substantially the form of Exhibit 6.1(b)(i).

(ii) Title Insurance. Owner's and Lessee's Policies of Title Insurance for each item of the Plants To Be Sold, the Plant Sites and the Mining Properties, respectively, each of which policies (the "Title Policies") will (A) be issued by Transnation Title Insurance Company (the "Title Company") without any exceptions, other than the Permitted Liens and such exceptions as are acceptable to Purchaser (the "Permitted Exceptions"), (B) be in the amount of the market value for that property as reasonably determined by Purchaser, (C) name Purchaser as the insured owner or lessee of such property or interest, and (D) insure that, as of the Closing Date, (1) in the case of each of the Plants To Be Sold and the Plant Sites, Purchaser is the owner of good and marketable title in fee simple to such property or interest subject only to the Permitted Exceptions that affect such Plants To Be Sold and the Plant Sites, and (2) in the case of each item of the Mining Properties, Purchaser is the owner of a good and indefeasible leasehold estate (with reasonable specificity as to the lease or other agreement creating such leasehold estate) in and to such property or interest, subject only to the Permitted Exceptions that affect such Mining Properties. Each of the Title Policies shall contain such endorsements as Purchaser shall reasonably request.

(iii) Lease. With respect to the Mining Properties, a Lease, in the form of Exhibit 1.2B, duly executed by Seller as lessor.

(iv) Transfer Documents. A special warranty deed to the Batch Plant Property, the Excess Batch Plant Property, the Crushing Plant Property and the Excess Crushing Plant Property, a Bill of Sale and Assignment for the Inventory, Contracts, Licenses, Accounts Receivable, a bargain and sale deed for the water rights as described in Section 1.1(g), an assignment of the water rights lease with the municipality of Pueblo, Colorado and a copy of the assignment or bill of sale from Seller to Subsidiary of the Owned Tangible Property.

(v) FIRPTA Affidavits. Affidavits pursuant to
Section 1445(b)(2) of the Code in substantially the form of Exhibit 6.1(b)(vi), duly executed by Seller.

(vi) Receipts. Such receipts, duly executed by Seller, as Purchaser may reasonably request.

(vii) Noncompetition Agreement. Seller and Thomas E. Brubaker shall each have entered a Noncompetition and Non-Disclosure Agreement, in substantially the form of Exhibit 6.1(b)(viii), with Purchaser.

(viii) Tax Release. Such consents, releases and approvals from the Colorado Department of Revenue or other taxing authority sufficient to release Purchaser from any Colorado, state or local, Tax obligation of Seller that arose prior to the Closing.

(ix) Subsidiary Assignments. Assignments (executed by Seller and Thomas E. Brubaker) of the entire interest in Subsidiary.

(c) Purchaser will deliver to Seller, at the expense of Purchaser, the following (collectively, "Purchaser's Closing Documents"):

(i) Payment of Purchase Price. An amount equal to the Purchase Price by wire transfer as follows: (i) for the transfer of funds on October 21, 1996 in the amount $5,000,000, subject to the adjustments provided in Article II and on Exhibit 2.1, and (ii) the balance of the Purchase Price by wire transfer on October __, 1996 (reflecting the adjusted Purchase Price, i.e., the Inventory and Accounts Receivable adjustments).

(ii) Lease. With respect to the Mining Properties, a Lease, in the form of Exhibit 1.2B, duly executed by Purchaser, as lessee.

("Purchaser's Closing Documents" and "Seller's Closing Documents" individually referred to as "Closing Document", collectively, "Closing Documents").

VII. Survival and Indemnification

7.1 Survival of Representations, Warranties and Covenants. The representations and warranties contained in Sections 4.1(n), "Taxes" and 4.1(o), "Environmental Matters" will survive the Closing Date and will remain operative and in full force and effect until the expiration of the applicable statute of limitations (giving effect to any tolling, waiver or extension thereof). The representations and warranties contained in
Section 4.1(a), "Corporate Matters," Section 4.1(b) "Authorization and Effect of Agreement," Section 4.1(c), "No Restrictions Against Sale of the Assets," Section 4.1(e), "Compliance with Laws," Sections 4.1(g)(i) and (iii), "Tangible Personal Property; Assets," Sections 4.1(h)(ii)-(v), (vii),
(viii), (ix) and (xii) "Real Property," and the several covenants of the parties contained in this Agreement (or in any document delivered in connection with it) will remain operative and in full force and effect without any time limitation, except as any such covenant will be limited in duration by the express terms of this Agreement. All other representations and warranties in this Agreement will remain operative and in full force and effect for a period of one year after the Closing Date. The representations and warranties will not be affected or reduced as a result of any investigation or knowledge of Purchaser; provided, however, that prior to the Closing Purchaser shall notify Seller in writing to the extent James Gidwitz, Joseph J. Sum, Mark S. Nichter, Nancy O'Connell, Bud Herskind or Bill Lehmpuhl has actual knowledge that Seller is in breach of any representation or warranty of Seller contained in this Agreement; and the failure of Purchaser to give Seller such notice shall constitute a waiver by Purchaser of any such breach by Seller.

7.2 Indemnification by Purchaser. From and after the Closing, Purchaser will indemnify, defend and hold Seller, its Affiliates, and their respective directors, officers, representatives, employees and agents harmless from and against, and compensate and pay Seller for, any and all claims, actions, suits, demands, assessments, judgments, losses, liabilities, damages, costs and expenses (including interest, penalties, attorneys' fees, accounting fees and investigation costs) (collectively, "Liabilities") whether direct or indirect and whether or not involving a Third Party Claim (as defined below) resulting or arising from, relating to or incurred in connection with: (a) any failure of Purchaser to pay, perform and discharge any of the Assumed Liabilities, (b) any breach of any representation or warranty of Purchaser contained in this Agreement or in any other document delivered by Purchaser in connection with it, or (c) any breach of any covenant of Purchaser contained in this Agreement or in any other document delivered by Purchaser in connection with it.

7.3 Indemnification by Seller. From and after the Closing, Seller will indemnify, defend and hold Purchaser, its Affiliates, and their respective directors, officers, representatives, employees and agents harmless from and against, and compensate and pay Purchaser for, any and all Liabilities whether direct or indirect and whether or not involving a Third Party Claim resulting or arising from, relating to or incurred in connection with: (a) any failure of Seller to pay, perform and discharge any of the Retained Liabilities, (b) any breach of any representation or warranty of Seller contained in this Agreement or in any other document delivered by Seller in connection with it, (c) any breach of any covenant of Seller contained in this Agreement or in any other document delivered by Seller in connection with it,
(d) any failure to comply with the laws of any jurisdiction relating to bulk transfers which may be applicable in connection with the transactions contemplated by this Agreement, (e) the business of Seller (including the Business) transacted prior to the Closing Date, (f) any pre-closing use of any Total Asset, (g) liabilities relating to environmental matters arising from the activities of Seller or as to which Seller had knowledge at or before the Closing, or (h) products manufactured or sold or work performed by Seller prior to the Closing Date.

7.4 Notice of Claim; Right to Participate in and Defend Third Party Claim.

(a) If any indemnified party receives notice of the assertion of any claim, the commencement of any suit, action or proceeding, or the imposition of any penalty or assessment by a third party in respect of which indemnity may be sought under this Agreement (a "Third Party Claim"), and the indemnified party intends to seek indemnity under this Agreement, then the indemnified party will promptly provide the indemnifying party with prompt written notice of such Third Party Claim, but in any event not later than 30 calendar days after receipt of such notice of Third Party Claim. The failure by an indemnified party to notify an indemnifying party of a Third Party Claim will not relieve the indemnifying party of any indemnification responsibility under this Article VII, except to the extent, if any, that such failure prejudices the ability of the indemnifying party to defend such Third Party Claim.

(b) The indemnifying party will have the right to control the defense, compromise or settlement of a Third Party Claim with its own counsel (reasonably satisfactory to the indemnified party) if the indemnifying party delivers written notice to the indemnified party within seven days following the indemnifying party's receipt of notice of a Third Party Claim from the indemnified party which either acknowledges its obligations to indemnify the indemnified party with respect to such Third Party Claim in accordance with this Article VII or unqualifiedly assumes the obligation to defend any Third Party Claim, provided, however, that the indemnifying party will not enter into any settlement of any Third Party Claim which would impose or create any obligation or any financial or other liability on the part of the indemnified party if such liability or obligation (i) requires more than the payment of a liquidated sum or (ii) is not covered by the indemnification provided to the indemnified party under this Agreement. In its defense, compromise or settlement of any Third Party Claim, the indemnifying party will timely provide the indemnified party with such information with respect to such defense, compromise or settlement as the indemnified party may request, and will not assume any position or take any action that would impose an obligation of any kind on, or restrict the actions of, the indemnified party. The indemnified party will be entitled (at the indemnified party's expense) to participate in, but not control, the defense by the indemnifying party of any Third Party Claim with its own counsel.

(c) In the event that the indemnifying party does not undertake the defense, compromise or settlement of a Third Party Claim in accordance with subsection (b) of this Section 7.4, the indemnified party will have the right to control the defense or settlement of such Third Party Claim with counsel of its choosing; provided, however, that the indemnified party will not settle or compromise any Third Party Claim without the indemnifying party's prior written consent (which consent shall not be unreasonably withheld), unless the terms of such settlement or compromise release the indemnified party or the indemnifying party from any and all liability with respect to the Third Party Claim. The indemnifying party will be entitled (at the indemnifying party's expense) to participate in the defense of any Third Party Claim with its own counsel.

(d) The indemnified party will assert any indemnifiable claim under this Agreement that is not a Third Party Claim by promptly delivering notice of such claim to the indemnifying party. If the indemnifying party does not respond to such notice within 60 days after its receipt, it will have no further right to contest the validity of such claim.

7.5 Basket and Deductible. No indemnified party will be entitled to indemnification from an indemnifying party under Sections 7.2(b) or 7.3(b) for a breach of a representation or warranty unless and until the aggregate amount of Liabilities with respect to which such indemnified party and its Affiliates, and their respective directors, officers, representatives, employees and agents, would otherwise be entitled to assert under
Section 7.2(b) or 7.3(b), whichever is applicable, exceeds $100,000 (the "Basket Amount"). When the aggregate amount of Liabilities exceed the Basket Amount, the indemnified party will be entitled to indemnification for all Liabilities, including those within the Basket Amount.

7.6 Intentionally Omitted.

7.7 Limitations. In no event shall any indemnifying party be liable under this Agreement for breaches of representations or warranties which, individually or in the aggregate, exceed the Purchase Price; the remedies set forth in this Article VII constitute the exclusive remedy by either party for breach of contract with respect to this Agreement by the other party, absent fraud; provided, however, that nothing in this Agreement shall exculpate the Seller or Purchaser from any liability either of them may have to the other or to any other person or entity under the Lease, any other agreement or any state or federal law arising independently from this Agreement (e.g., a statutory right to seek contribution under an environmental law).

VIII. Miscellaneous Provisions

8.1 Notices. All notices and other communications required or permitted under this Agreement will be in writing and, unless otherwise provided in this Agreement, will be deemed to have been duly given when delivered in person or when dispatched by telegram or electronic facsimile transfer (confirmed in writing by mail simultaneously dispatched) or one business day after having been dispatched by a nationally recognized overnight courier service to the appropriate party at the address specified below.

(a) If to Purchaser or the lessee under the Lease to:

Continental Materials Corporation 225 West Wacker Drive
Chicago, IL 60606-1229
Facsimile No.: 312/541-8089 Telephone No.: 312/541-7222 Attention: Chief Financial Officer

with a copy to:

Jerry J. Burgdoerfer, Esq.

Donald S. Horvath, Esq.

Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Facsimile No.: (312) 527-0484 Telephone No.: (312) 222-9350

(b) If to Seller, to:

Valco Inc.
P.O. Box 550
200 South 17th Street
Rocky Ford, Colorado 81087 Facsimile No.: (719) 254-7468 Telephone No.: (719) 254-7464 Attention: Thomas E. Brubaker

with a copy to:

James F. Wood, Esq.

Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, Colorado 80202

Facsimile No.: (303) 298-0940 Telephone No.: (303) 297-2900

or to such other address or addresses as any such party may from time to time designate as to itself by like notice.

8.2 Expenses. Except as otherwise expressly provided in this Agreement, Seller and Purchaser each will pay any expenses incurred by it incident to this Agreement and in preparing to consummate and consummating the transactions provided for in it.

8.3 Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns, but will not be assignable or delegatable by any party without the prior written consent of the other party; provided, however, that nothing in this Agreement is intended to limit Purchaser's ability to (a) assign the Lease as provided therein, or (b) transfer any of the Total Assets following the Closing Date.

8.4 Waiver. Either Purchaser or Seller by written notice to the other may (a) extend the time for performance of any of the obligations or other actions of the other under this Agreement, (b) waive any inaccuracies in the representations or warranties of the other contained in this Agreement or in any Closing Document, (c) waive compliance with any of the conditions or covenants of the other contained in this Agreement, or (d) waive performance of any of the obligations of the other under this Agreement. Except as provided in the immediately preceding sentence, no action taken pursuant to this Agreement will be deemed to constitute a waiver of compliance with any representations, warranties or covenants contained in this Agreement and will not operate or be construed as a waiver of any subsequent breach, whether of a similar or dissimilar nature.

8.5 Entire Agreement. This Agreement (including the Exhibits) supersedes any other agreement, whether written or oral, that may have been made or entered into by any party to this Agreement or any of their respective Affiliates (or by any director, officer or representative thereof) relating to the matters contemplated by this Agreement. This Agreement
(including the Exhibits and documents contemplated hereby) constitutes the entire agreement by and among the parties to this Agreement and there are no agreements or commitments by or among such parties or their Affiliates except as expressly set forth in this Agreement.

8.6 Amendments, Supplements, Etc.. This Agreement may be amended or supplemented at any time by additional written agreements as may mutually be determined by Purchaser and Seller to be necessary, desirable or expedient to further the purposes of this Agreement, or to clarify the intention of the parties to this Agreement.

8.7 Rights of the Parties. Except as provided in Article VII or in Section 8.3, nothing expressed or implied in this Agreement is intended or will be construed to confer upon or give any person or entity other than the parties to this Agreement any rights or remedies under or by reason of this Agreement or any transaction contemplated by this Agreement.

8.8 Further Assurances. From time to time, as and when requested by any party to this Agreement, the other party will execute and deliver, or cause to be executed or delivered, all such documents and instruments as may be reasonably necessary to consummate and fully effectuate the transactions contemplated by this Agreement.

8.9 Bulk Sales. In consideration of the indemnity provided by Seller under Section 7.3(d) of this Agreement, Purchaser waives compliance by Seller with the provisions of the so-called bulk sales law of any jurisdiction.

8.10 Transfers. Purchaser and Seller will cooperate and take such action as may be reasonably requested by the other in order to effect an orderly Transfer and lease of the Total Assets and the Business with a minimum of disruption to the operations of the Business.

8.11 Applicable Law; Jurisdiction. This Agreement and the legal relations among the parties to this Agreement will be governed by and construed in accordance with the substantive laws of the State of Colorado, without giving effect to the principles of conflict of laws thereof.

8.12 Titles and Headings. Titles and headings to Sections in this Agreement are inserted for convenience of reference only, and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

8.13 Passage of Title and Risk of Loss. Legal title, equitable title and risk of loss with respect to the Assets will not pass to Purchaser until such Assets are Transferred or leased at the Closing, which transfer, once it has occurred, will be deemed effective for tax, accounting and other computational purposes as of the close of business (Mountain Time) on the Closing Date.

8.14 Certain Interpretive Matters and Definitions.

(a) Unless the context otherwise requires, (i) all references to Sections, Articles and Exhibits are to Section, Articles or Exhibits of or to this Agreement, (ii) each term defined in this Agreement has the meaning assigned to it, (iii) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in the singular include the plural and vice versa, (vi) the terms "Subsidiary" and "Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of 1934, as amended, (vii) the phrase "liabilities and obligations" means all such matters of any nature, whether fixed or contingent, known or unknown, or arising under Contract, law, equity, or otherwise, (viii) the word "including" and similar terms following any statement will not be construed to limit the statement to the matters listed after such word or term, whether or not a phrase of nonlimitation such as "without limitation" is used; and (ix) any matter disclosed in any Exhibit of or to this Agreement by Seller will be deemed also to have been included in any other Exhibit of or to this Agreement to the extent such information or matter is pertinent to such other Exhibit. All references to "$" or dollar amounts will be to lawful currency of the United States of America.

(b) No provision of this Agreement will be interpreted in favor of, or against, any of the parties to this Agreement by reason of the extent to which any such party or its counsel participated in the drafting or by reason of the extent to which any such provision is inconsistent with any prior draft.

(c) As to any matter represented in this Agreement as being within Seller's knowledge, to the best of Seller's knowledge, to the knowledge or best knowledge of Seller or any equivalent limitation, such knowledge shall be deemed to exist only if the matter is within the actual knowledge of any officer, director or shareholder of Seller or Tom Brubaker, Reid Jones, Mark Klune, Bill Pope or Richard Hervatin, after reasonable inquiry of the employees of Seller who have within their job responsibilities the duty to monitor such matter.

8.15 Execution in Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement.

8.16 Remedies Not Exclusive. Subject to Section 7.7, no remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each remedy will be cumulative and will be in addition to every other remedy given under this Agreement or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies will not constitute a waiver of the right to pursue other available remedies.

The parties to this Agreement have executed this agreement the day and year first above written.

VALCO PROPERTIES, LTD.             VALCO INC.


By:_____________________      By:_________________________
     Name:                         Name:
     Title:                        Title:


                              CONTINENTAL MATERIALS CORPORATION


                              By:_________________________
                                   Name:

Title:

NON-COMPETITION AND NON-DISCLOSURE AGREEMENT

THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT ("Agreement") is made this 21st day of October, 1996, by Valco Inc., a Colorado corporation ("Valco") and Thomas E. Brubaker ("Brubaker"), in favor of Continental Materials Corporation, a Delaware corporation ("CMC").

Preliminary Recitals:

WHEREAS, that certain Acquisition Agreement dated the date hereof (the "Acquisition Agreement") by Valco and CMC, provides for the acquisition by CMC of certain rights, properties, assets (including a partnership interest) owned or held by Valco;

WHEREAS, that certain Fee Sand And Gravel Lease dated the date hereof (the "Lease") between Valco and CMC provides for the lease by Valco to CMC of certain property containing sand and gravel deposits in Pueblo County, Colorado;

WHEREAS, Brubaker is presently President and a stockholder of Valco;

NOW, THEREFORE, in consideration of CMC's agreements and covenants contained in the Acquisition Agreement and the Lease and to induce CMC to consummate the purchase and lease provided for in the Acquisition Agreement and the Lease, Valco and Brubaker hereby covenant and agree with CMC as follows:

1. Preamble; Preliminary Recitals

The preamble and preliminary recitals set forth above are by this reference incorporated in and made a part of this Agreement.

2. Non-competition

(a) Without the prior written consent of CMC (which may be withheld in CMC's sole discretion), for a period of ten (10) years from and after the date hereof, neither Valco nor Brubaker shall, directly or indirectly, whether as a stockholder, individual, partner, agent, representative, employee, employer, director, officer, principal, consultant, advisor, or independent contractor, or through any of the foregoing, or in any other relation or capacity whatsoever: (I) engage in the business relating to sand and gravel mining or sales of ready mix concrete, asphalt and construction aggregates, in Pueblo and/or El Paso Counties, Colorado; (ii) operate or own a concrete batch plant, aggregates operation or asphalt plant in Teller County, Colorado; or (iii) except to Valco's present customers and prospective customers in similar businesses, make any sales to any customers in Teller County, Colorado.

(b) Without the prior written consent of CMC (which may be withheld in CMC's sole discretion), for a period of two (2) years from and after the date hereof, neither Valco nor Brubaker shall, directly or indirectly, whether as a stockholder, individual, partner, agent, representative, employee, employer, director, officer, principal, consultant, advisor, or independent contractor, or through any of the foregoing, or in any other relation or capacity whatsoever, solicit employment of any of Valco's current or former Pueblo area employees who are retained by CMC or any of its subsidiaries in connection with the Pueblo operations, or encourage any such employees to leave the employ of CMC or any of its subsidiaries.

3. Non-disclosure

(a) Except as provided in Subsection (b) below, each of Valco and Brubaker agrees that, for a period of ten (10) years from and after the date hereof, all information previously or hereafter disclosed to any of them by CMC in connection with the transactions contemplated by the Acquisition Agreement and Lease and information relating to Valco's (after the date hereof CMC's) Pueblo operations is confidential (collectively, "Confidential Information") and shall be held in strict confidence and not disclosed to any person or entity.

(b) Valco and Brubaker shall have no requirement to keep information confidential, and no such information shall be considered Confidential Information, to the extent any of the following applies: (I) the information was within the public domain at the time it was first known or provided to Valco and Brubaker; (ii) the information was published or otherwise became part of the public domain after it was first known or provided to Valco and Brubaker through no fault of either of them or their respective directors, officers, agents employees or affiliates; or (iii) the information is required to be disclosed (x) by any federal or state law, rule or regulation, (y) by any applicable judgment, order or decree of any court, governmental agency or arbitrator having or purporting to have jurisdiction in the matter, or (z) pursuant to any subpoena or other discovery request in any litigation, arbitration or other proceeding; provided, however, that if any of Valco and Brubaker proposes to disclose the information in accordance with (x), (y) or (z), such party shall, to the extent feasible, first give CMC reasonable prior notice of the proposed disclosure of any such information to the application of such law, rule or regulation, or to appear before any court, governmental agency or arbitration order to contest the disclosure, as the case may be.

(c) Valco may disclose, on a need to know basis, Confidential Information to directors, officers, employees, attorneys and accountants, subject to the last sentence of this paragraph (c). With CMC's prior written consent (which will not be unreasonably withheld), Valco and Brubaker may disclose, on a need to know basis, Confidential Information to consultants, advisors and institutional lenders, subject to the last sentence of this paragraph (c). Valco also may disclose, on a need to know basis, and subject to the last sentence of this paragraph
(c), to any bona fide acquirer (whether by purchase, exchange, merger or otherwise) of the stock, of substantially all of the assets of Valco, or of the interest of Valco under the Lease, the formula under the Lease for determining the Production Royalty Rate, the historical revenues received under the Lease, the total tonnage mined (on an aggregate and not product type basis) under the Lease and total remaining tons to be mined under the Lease, and with CMC's prior written consent (not

to be unreasonably withheld), any other information concerning the Lease, but CMC may withhold such consent in its sole discretion as to such other information if in CMC's sole judgment a recipient of such other information is or could be expected to become a competitor of CMC in the Pueblo area. In the case of any permitted disclosure of Confidential Information under this paragraph (c), Valco and Brubaker shall inform such persons of the existence of this Agreement and take all reasonable steps to ensure that such persons comply with the provisions of this Agreement applicable to Valco and Brubaker.

4. Enforcement; Damages; Construction

(a) Valco's and Brubaker's obligations hereunder shall be joint and several as long as Brubaker controls Valco. If Brubaker no longer controls Valco, Valco's and Brubaker's obligation herein shall be several. Each of Valco and Brubaker recognizes that it would be impossible to measure in money all the damages which will accrue to CMC by reason of a failure to comply with the restrictions and perform the obligations under this Agreement. Each of Valco and Brubaker hereby acknowledges that CMC would lack an adequate remedy at law and CMC shall, in addition to and not in lieu of money damages, be entitled to specific performance and injunctive relief against Valco and Brubaker in an action or procedure to enforce the provisions hereof. Valco and Brubaker shall reimburse CMC for its expenses, including reasonable attorney's fees, incurred in connection with the enforcement of the provisions hereof relating to a breach of this Agreement by Valco or Brubaker.

(b) No waiver or amendment to this Agreement shall be valid unless signed in writing by each of Valco, Brubaker and CMC. If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, or as applied to any circumstance, under the laws of any jurisdiction which may govern for such purpose, then such provision shall be deemed to be modified or restricted to the extent and in a manner necessary to render the same valid and enforceable, either generally or as applied to such circumstance, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.

(c) This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of each of Valco, Brubaker and CMC.

(d) The captions used in this Agreement are for convenience only and shall not be construed to limit or define the scope or intent of any paragraph.

(e) This Agreement has been executed and delivered in Colorado Springs, Colorado and the validity and interpretation hereof shall be governed in all respects by the laws of the State of Colorado.

IN WITNESS WHEREOF, each of Valco and Brubaker has executed this Agreement on the day and year first above written.

VALCO INC.

By: ___________________________

Name: Thomas E. Brubaker
Title: President

THOMAS E. BRUBAKER

By: ___________________________

Thomas E. Brubaker

FEE SAND AND GRAVEL LEASE

THIS FEE SAND AND GRAVEL LEASE (this "Lease") is made and is effective as of October 21, 1996 by and between the parties hereinafter named, for the term and upon and under the terms and conditions hereinafter set forth.

. Parties. The parties to this Lease, and their addresses for all purposes hereof, are: (a) LESSOR: Valco Inc., whose address is 200 South 17th Street, Rocky Ford, Colorado 81067; and (b) LESSEE: Continental Materials Corporation, whose address is 225 West Wacker Drive, Suite 1800, Chicago, Illinois 60606.

. Grant of Lease.

() Lessor represents and warrants that it is the owner in fee of certain lands situated in Pueblo County, Colorado, more particularly described on Exhibit A attached hereto (the "Lands"). Within the Lands are located certain plant site improvements. The plant site improvements, together with the parcel of land on which they are located, are referred to herein as the "Improved Real Property." The Improved Real Property is more fully described in the Acquisition Agreement (as defined below) between the parties executed concurrently with this Lease. In addition, there are water rights appurtenant to the Lands. Pursuant to the terms of that certain Acquisition Agreement of even date herewith between Lessor and Lessee (the "Acquisition Agreement"), the Improved Real Property and the water rights that are appurtenant to the Lands and to the Improved Real Property, respectively, are being sold by Lessor to Lessee. The Lands, excluding the Improved Real Property and the appurtenant water rights, but together with the sand and gravel reserves, other minerals, overburden, topsoil, loose rock or any combination thereof on or contained within the Lands or formed in association therewith and any portion or part of any earth, rock, or other material that may be attached, combined with, or constitute a part thereof ("Leased Sand and Gravel"), to the extent that any of the foregoing occur and are found between the surface and top of the uppermost underlying shale formation (the "Leased Strata"), are the subject of this Lease and are hereinafter referred to together as the "Property." The Property also shall include all sand and gravel reserves, other minerals, overburden, top soil, loose rock or any combination thereof in, on and under all land or interests owned or claimed by Lessor contiguous or appurtenant to the Property and located within the same strata as the Leased Strata.

() For and in consideration of the payment of the Minimum Royalty (as defined in Paragraph 6), the Production Royalty (as defined in Paragraph 5) and the covenants herein agreed to be paid and performed by Lessee, and subject to the terms and conditions hereof, Lessor hereby grants, leases and lets the Property exclusively unto Lessee, its successors and permitted assigns, to have and to hold the same for the term hereof, and warrants the title to the same, subject to the Permitted Exceptions which are contained in Exhibit 2(b), unto Lessee, its successors, and permitted assigns against all those who may claim the same by and through the Lessor, its successors and assigns, and further warrants that except as stated hereinafter in Paragraph 7, there are no, and during the term of this Lease Lessor will not create any outstanding non-operating interests in the Property (such as overriding royalty interests) or liens on the Property securing obligations of Lessor or its affiliates that are not subordinated to this Lease. Lessee will not during the term of this Lease create any non-operating interests in the Property (such as overriding royalty interests).

() Lessor reserves unto itself, its successors and assigns, Lessor's reversionary interest in the Property, together with the royalties reserved herein, the estates in all minerals and all deposits other than the Leased Sand and Gravel, and all other estates and interests in the Property that are not the subject of this Lease or the subject of the concurrent sale of the Improved Real Property and the appurtenant water rights.

() In connection with and as a part of the leasehold interests hereby granted, Lessee shall have and may exercise, the following rights with respect to the Property: (i) the right to conduct operations for exploring, developing and mining the Leased Sand and Gravel, performing such exploration, development and mining in any manner deemed necessary or convenient by Lessee, whether by surface or other mining methods; (ii) the right to stockpile and store on or within the Lands or permanently to remove from the Lands, sell, use and dispose of the Leased Sand and Gravel, including sand and gravel contained in existing dumps or piles on the Lands, (iii) the right to construct and operate on the Lands, if and solely to the extent that the same are permitted uses, asphalt plants and concrete plants, (iv) the right, subject to any provisions herein on commingling, to stockpile sand and gravel on the Lands from other sites without incurring royalties on subsequent removal or use of same from the Lands; (v) the right to use the Lands for processing plants, scale houses, sales offices, crushing and screening plants, washing and settling facilities, and storage of related equipment, to the extent permitted by applicable government regulations; (vi) such rights of access for personnel, equipment, supplies, utilities and water as may be necessary or convenient for the conduct of Lessee's operations on the Lands, including access upon and across any other intervening or contiguous land owned or controlled by Lessor or over which Lessor may have dominion or control; and (vii) the right to mine, extract, sort, process, mix, convert to marketable concrete or other products ("Aggregate Products"), or otherwise prepare for market and to market and sell the Leased Sand and Gravel, together with such other rights as are related to or incidental to the exercise of the foregoing rights. As used herein, the term Leased Sand and Gravel includes Aggregate Products and the term Aggregate Products includes Leased Sand and Gravel and all other commercial products containing Leased Sand and Gravel located in the Leased Strata or produced from the Leased Sand and Gravel. Notwithstanding the foregoing, provided that Lessee pays the Minimum Royalty during each Lease Year (as defined in Paragraph 3) or period, Lessee shall not be obligated in any Lease Year or period to conduct operations for exploring, developing or mining the Leased Sand and Gravel or to produce or remove any Aggregate Product on or from the Property, but if Lessee does not conduct sand and gravel mining operations for a period of at least six months in any Lease Year (beginning with the first Lease Year), then the Production Royalty Rate (as defined in Paragraph 5) for the next Lease Year in which Lessee conducts operations and the Minimum Royalty for the next Lease Year shall be adjusted by the Pueblo Inflation Factor (as defined in Paragraph 5) or by the PPI Factor (as defined below), whichever would result in the higher Production Royalty Rate or Minimum Royalty, as applicable. The "PPI Factor" will be the percentage increase or decrease in the Producer Price Index #1442-58 [Construction gravel-Western Region-Mountain sub-region] (indexed at June 1982 = 100) for the Lease Year during which no such substantial Sand and Gravel mining operations were conducted.

. Term. The Term of this Lease shall commence on the date first written above and, unless sooner terminated either by Lessor or by Lessee in accordance with Paragraph 12, shall be perpetual; provided, however, that if the foregoing grant (including any options contained in this Lease) shall violate any so-called rule against perpetuities now or at any time hereinafter in effect, then the term of this Lease shall be for one hundred (100) years or such shorter term as to make this Lease non-violative of the rule against perpetuities, subject to Lessee's right to renew and extend the term for such additional periods on the same terms and conditions set forth herein as Lessee may elect. Except with respect to Production Royalty and Minimum Royalty calculations, in which calendar years are used, references hereinafter to a "year" of the Lease shall be deemed to be references to a "Lease Year," which is hereby defined to be a calendar year of 365 days (366 days in leap years). The first Lease period shall commence on the date first written above and shall end on December 31, 1996. The first Lease Year shall begin on January 1, 1997 and shall end on December 31, 1997. The dates of beginning and ending of each subsequent Lease Year shall be reckoned in the same manner.

. Representations.

Lessee makes the following representations to Lessor.

() Lessee is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware and is authorized to conduct business in the State of Colorado.

() Lessee has the requisite power and authority to enter into and perform its obligations under this Lease.

() The person or persons executing this Lease on behalf of Lessee are duly authorized by Lessee to do so.

() Lessee is not in violation of any law, regulation, license, permit, or order, which violation would prevent, hinder or delay the transfer to Lessee of any licenses or permits necessary to the performance of Lessee's obligations under the Lease.

. Production Royalty.

() Lessee shall pay to Lessor a quarterly production royalty (the "Production Royalty") at the initial rate of $0.37 per ton (the "Production Royalty Rate") of Leased Sand and Gravel produced and removed from the Property or contained in Aggregate Products produced and removed from the Property (herein sometimes referred to as "Production"). Prior to the beginning of the Lease term, Lessor was producing a total of fourteen Aggregate Products, which are listed in Exhibit 5(a), attached hereto and made a part hereof. Lessee may, subject to the provisions hereof, cease producing one or more Aggregate Products or add Aggregate Products to the list of Aggregate Products on Exhibit 5(a).

() The amount of Leased Sand and Gravel produced and removed from the Property shall be determined on the basis of certifiable scale tickets. The amounts of Leased Sand and Gravel contained in Aggregate Products produced and removed from the Property, whether commercially measured by weight or volume, shall be determined by Lessee by calculation of the weight of Leased Sand and Gravel in representative samples.

() The initial Production Royalty Rate of $0.37 per ton shall apply during calendar year 1996, which shall be the initial base year, and during calendar year 1997. The first adjustment of the Production Royalty Rate will be made at the end of calendar year 1997 to determine the Production Royalty Rate for calendar year 1998. Beginning with calendar year 1998, and each calendar year thereafter, at the beginning of the calendar year, the Production Royalty Rate shall be adjusted upward or downward for a "Pueblo Inflation Factor," as hereinafter provided, but shall never be less than $0.37 per ton.

() As indicated above, but subject to the last sentence of Paragraph 2(d), the Production Royalty Rate shall be adjusted for calendar year 1998 and each calendar year thereafter for the "Pueblo Inflation Factor" which shall be determined in the following manner:

() The total tonnage of Production, the total net sales price and the average net sales price per ton, F.O.B. Lessor's Pueblo, Colorado plants, received with respect to each of Lessor's thirteen existing Aggregate Products sold to third parties during the period from January 1, 1996 to the date of this Lease are set forth on Exhibit 5(d)(i) attached hereto. Lessee shall have the right to audit such data. The average net sales price per ton for calendar 1996 (weighted by actual sales, determined on a product-by-product basis, by Lessor and Lessee in 1996) shall be deemed to be the 1996 initial base year average net sales price per ton for each of the Aggregate Products.

() At the end of calendar year 1997, Lessee shall calculate and furnish to Lessor the total tonnage of Production, the total net sales price and the average net sales price per ton, F.O.B. the Pueblo, Colorado plants, received with respect to each of the same fourteen existing Aggregate Products during calendar year 1997. The average net sales price per ton thus determined (weighted by actual sales, determined on a product-by-product basis, by Lessee during such year) shall be deemed to be the 1997 average net sales price per ton for each of the Aggregate Products.

() The calendar year 1998 Production Royalty Rate shall be increased or decreased by the percentage increase or decrease in the average net sales price for the preceding calendar year (calendar year 1997) as compared with the previous preceding calendar year (the 1996 base year) and shall be determined by calculating an escalation factor (the "Pueblo Inflation Factor") as follows: The total net sales revenue received for all Aggregate Products during the preceding calendar year (1997) shall be divided by the total net sales revenue that would have been received for all Aggregate Products in the preceding calendar year (1997) at the 1996 base year average net sales prices per ton. The Pueblo Inflation Factor thus determined shall then be multiplied by the Production Royalty Rate in effect in the preceding year (calendar year 1997) to determine the new Production Royalty Rate for the next year (calendar year 1998).

() At the end of each subsequent calendar year the Production Royalty Rate for the next calendar year shall be determined in like manner, using actual production tonnages and average net sales prices per ton for the calendar year just ended for comparison with actual production tonnages for the year just ended, as if they had been sold at the average net sales prices for the preceding calendar year. The manner and method of calculation is set forth in an illustration using hypothetical figures for calendar years 1996, 1997, 1998 and 1999, which is attached hereto as Exhibit 5(d)(iv).

() In the calculation of average net sales prices no amounts of any Production sold to or used by Lessee or any affiliate of Lessee shall be included.

() Neither the cessation of production and removal of any Aggregate Product listed on Exhibit 5(a) nor the production and removal of any new Aggregate Product not listed on Exhibit 5(a), nor the resumption of production, sale and removal of any Aggregate Product that Lessee has ceased to produce, sell, and remove from the Property shall affect the Production Royalty Rate retroactively, but any such cessation, addition or resumption shall result in a recalculation of the tonnages and average net sales prices for the years that would otherwise be affected thereby in such a manner as to eliminate the effect of such cessation on the calculation of the Production Royalty Rate for future years and/or to bring the addition or resumption into the Production Royalty Rate calculation for future years.

() In no event shall the adjustment of the Production Royalty Rate result in a Production Royalty Rate less than $0.37 per ton.

() Production Royalty shall continue to be payable until either the Agreed Sand and Gravel Reserves within the Property stated in Paragraph 6 below, have been produced and removed from the Property and Production Royalty thereon paid, or the sum of the amount of Leased Sand and Gravel produced and removed from the Property and the remaining number of tons of Leased Sand and Gravel on which Lessee has paid Minimum Royalty equals the Agreed Sand and Gravel Reserves within the Property, after which time Lessee shall have the right of election to continue mining operations on the Property hereunder free of either Minimum Royalty or Production Royalty or to terminate the Lease as provided in Paragraph 12(b)(2).

() Payment of the Production Royalty shall be made quarterly within thirty days after the end of each calendar quarter for Production occurring during such calendar quarter. Lessee shall be entitled to a credit against Production Royalty due for such quarter in the amount of the Minimum Royalty paid as provided in Paragraph 6, below. Each Production Royalty payment shall be accompanied by a statement showing weights of the Leased Sand and Gravel produced and removed from the Property or contained in Aggregate Products produced and removed from the Property during the calendar quarter, together with a calculation of the amount of Production Royalty for the calendar quarter and the amount of deduction therefrom for Minimum Royalty previously paid. On the thirtieth day following the end of each calendar year Lessee shall provide Lessor with a statement showing calculations of the amounts of Production during the calendar year and Production Royalty paid on such Production, together with a statement showing amounts of Minimum Royalty paid and credited against Production Royalty for the calendar year. If no written objection is made by Lessor to the correctness of the calendar year statement within one hundred twenty (120) days from the date thereof, such statement, absent fraud, shall be conclusively deemed to be correct and such Production Royalty payment deemed sufficient and complete.

() In case of any dispute or question as to the ownership of any royalty interest payment or any part thereof, to be made by Lessee under this Lease, Lessee may deposit the disputed amounts in escrow until the dispute is finally resolved.

() All payments due hereunder shall be payable to Lessor and may be made by check, draft, wire or electronic funds transfer sent or delivered to Lessor on or before the date the same is due.

() Use of Scale. Quantities of the Leased Sand and Gravel that are removed from the Property will be measured as follows. Lessee shall maintain a scale or scales which are certified by the State of Colorado, over which all Leased Sand and Gravel removed from the Property shall be weighed, and shall keep accurate records of all weights of such Leased Sand and Gravel, including date and time when weighed, and including empty weights of the trucks or other vehicles transporting such Leased Sand and Gravel, and a reasonable identification of such vehicles, which records shall be available for inspection by Lessor at all reasonable times during business hours upon twenty-four hours advance notice. If the Leased Sand and Gravel on which royalties are due are mixed with other materials prior to weighing (for example, in case of mixing gravel with asphalt or water and Portland cement prior to removal) then an appropriate deduction from the weight of the mixed materials shall be made for the weight of the materials added; provided, however, no deduction shall be made for the normal amount of water contained in the Leased Sand and Gravel. Similarly, the weight of materials brought onto the property by Lessee and mixed with the Leased Sand and Gravel, such as asphalt, sand, gravel or sand and gravel from other sites, may be deducted from the weights of the Leased Sand and Gravel, provided that Lessee establishes procedures, including methods of identification and segregation of such materials and the maintenance of separate stockpiles of such materials, and keeps records to substantiate the same to enable accurate deductions of weight therefor. There shall be no requirement to weigh mixed concrete exiting the Property in trucks and sold by volume, but Lessee shall calculate the weight of materials in such mixed concrete on which royalties are due based on the weight of such materials in representative samples of mixed concrete.

() Records to be Kept. In addition to records ordinarily maintained by commercial sand and gravel operators Lessee shall keep accurate records of quantities, nature and weights of the Leased Sand and Gravel removed from the Property and materials added to the Leased Sand and Gravel removed from the Property, which records shall be available for inspection by Lessor at all reasonable times during business hours upon twenty-four hours advance notice. Lessee shall be permitted to make the adjustments for materials added based upon total materials added to those on which royalties are due over the course of a quarter, rather than making an individual record and calculation on each vehicle load.

() Retention of Records. Records for each Lease Year shall be kept for ten years and may be destroyed after the end of each such ten-year period.

() Audit; Cost. Lessor may cause an annual audit of Lessee's books and records to be made by an independent auditor selected by Lessor for purposes of verifying the amount of royalties due to Lessor. All reasonably necessary records shall be made available to Lessor or its agents for such purposes. The fees of the auditor shall be paid by Lessor, unless an understatement of the royalties properly due to Lessor in excess of five percent (5%) of the amount of the royalties reported occurs (giving effect to any agreement or determination pursuant to paragraphs (m) or (n) below, as applicable), in which event Lessee shall pay the fees of the auditor.

() Within ten (10) days after Lessor's audit is completed, Lessor shall deliver a copy of Lessor's audit to Lessee, together with a statement demanding payment of the amount of royalties that Lessor's audit indicates were properly due and payable for the calendar year in question ("Lessor's Statement"). If Lessee agrees with the amount of royalties demanded by Lessor in Lessor's Statement, then Lessee shall promptly pay Lessor the difference between the amount of royalties demanded by Lessor for such calendar year and the amount of royalties previously paid by Lessee for such calendar year pursuant to this Paragraph 5 (or if Lessor's audit indicates an overpayment, Lessor shall promptly refund the excess to Lessee). If Lessee does not agree with the amount of royalties demanded by Lessor in Lessor's Statement, then Lessor and Lessee shall attempt to resolve such dispute within ten (10) days after Lessee receives Lessor's Statement. If Lessor and Lessee cannot reach agreement within such ten (10) day period, then either Lessor or Lessee may demand that the matter be resolved by arbitration. Within fourteen (14) days after any such demand, the parties shall select a mutually acceptable arbitrator to resolve the dispute. If the parties cannot agree upon a mutually acceptable arbitrator within such fourteen (14) day period, then Lessor's independent auditor and Lessee's independent auditor shall select the arbitrator within ten (10) days thereafter, and the arbitrator selected by the independent auditors shall determine the amount of royalties payable by Lessee to Lessor in the manner set forth below. If Lessor's and Lessee's independent auditors cannot agree upon an arbitrator, then the parties shall apply to the American Arbitration Association for the appointment of an arbitrator within five (5) days after the expiration of the foregoing ten
(10) day period.

() Once the arbitrator is selected or appointed, then as soon thereafter as practicable but in any case within fourteen (14) days, the arbitrator shall select either Lessor's determination of the amount of royalties payable for such calendar year as contained in Lessor's Statement or Lessee's calculation of the royalties payable for such calendar year as determined under this Paragraph 5. The arbitrator's selection shall be rendered in writing to both Lessor and Lessee and shall be final and binding upon them. The party whose determination of the amount of royalties payable is not chosen shall pay the costs of the arbitrator.

() Promptly after receipt of the arbitrator's decision, Lessee shall pay the additional amount of royalties, if any, due to Lessor.

. Minimum Royalty.

() Lessee agrees to pay Lessor as minimum royalty (the "Minimum Royalty") each calendar year the sum of $300,000. The Minimum Royalty for a calendar year shall be payable in that calendar year in four equal installments on January 1, April 1, July 1, and October 1 or the first business day immediately succeeding such dates. Minimum Royalty paid at the beginning of a calendar quarter shall be deemed an advance upon, and credited against the Production Royalty that would be payable at the end of that calendar quarter. Lessee shall be entitled to recoup such Minimum Royalty paid by direct deduction of the amount paid for the calendar quarter from Production Royalty that would otherwise be payable for the same calendar quarter. The amount by which Minimum Royalty paid at the beginning of any calendar quarter exceeds the amount of Production Royalty that would otherwise have been payable on Production in that calendar quarter, (the "Excess Minimum Royalty") shall be carried forward and shall offset Production Royalty otherwise payable on Production in the next and subsequent calendar quarters; provided, however, that no Excess Minimum Royalty paid during any calendar year shall be carried forward beyond the end of such calendar year. The Minimum Royalty for 1996 shall be prorated for the portion of the calendar year covered by this Lease. The Minimum Royalty for calendar year 1997 shall be $300,000. For calendar year 1998 and each succeeding year the Minimum Royalty shall, subject to Paragraph 2(d), be adjusted by the Pueblo Inflation Factor, as determined pursuant to Paragraph 5, but in no calendar year shall the Minimum Royalty be less than $300,000. The Minimum Royalty shall continue to be payable until Lessee has paid royalties (Minimum Royalty and/or Production Royalty) on the total agreed sand and gravel reserves on the Property (the "Agreed Sand and Gravel Reserves") of fifty (50) million tons of 2,000 pounds, each; provided, however, that if Lessor does not acquire from the State of Colorado the property legally described on Exhibit
6(a)(1) (the "State Property") in exchange for the property owned by Lessor (and leased hereunder) and legally described on Exhibit
6(a)(2) (the "Valco Exchange Property") on or before the second anniversary of the date hereof pursuant to that certain exchange transaction presently being negotiated with the State of Colorado (the "Exchange Transaction"), the "Agreed Sand and Gravel Reserves" shall be reduced by 700,000 tons to a total of 49.3 million tons. For this purpose the Minimum Royalty amount for each calendar year shall be deemed to be the equivalent of 810,811 tons of Leased Sand and Gravel (202,703 tons of Leased Sand and Gravel per calendar quarter). The number of tons adopted herein as the amount of the Agreed Sand and Gravel Reserves will apply notwithstanding any event, occurrence or condition, including but not limited to, any event of force majeure, except as provided in Paragraphs 12(b)(3) and 12(b)(4) below.

() Lessor agrees to use all reasonable efforts to complete the Exchange Transaction prior to the second anniversary of the date hereof. Upon completion of the Exchange Transaction, the parties shall execute an amendment to this Lease which will add the State Property to the Property and delete the Valco Exchange Property from the Property. Lessor agrees that, at the time the State Property is added to the Property, the State Property shall not be subject to any lien, encumbrance, covenant, condition, restriction, right-of-way, easement or other matter affecting title other than the Permitted Exceptions.

() The parties acknowledge that the Property does not presently include the property described on Exhibit 6(b)(1) attached hereto (the "Quiet Title Property"). Lessor agrees to commence a quiet title action with respect to the Quiet Title Property (the "Quiet Title Action"), promptly after the execution of this Lease and to complete the Quiet Title Action prior to the third anniversary of the date hereof. Upon completion of the Quiet Title Action, the parties shall execute an amendment to this Lease which will add the Quiet Title Property to the Property. Lessor agrees that, at the time the Quiet Title Property is added to the Property, the Quiet Title Property shall not be subject to any lien, encumbrance, covenant, condition, restriction, right-of-way, easement or other matter affecting title other than the Permitted Exceptions.

() If Lessor does not complete the Quiet Title Action within such three year period, the Agreed Sand and Gravel Reserves shall be reduced by the total number of tons of Agreed Sand and Gravel Reserves reasonably estimated by Lessee to be located on or under the Quiet Title Property.

. Helmsing, Nelson and Fountain Encumbrances.

Lessor represents and warrants that portions of the Lands are encumbered by notes and deeds of trust with respect to three parcels, denominated the Helmsing parcel, the Nelson parcel, and the Fountain parcel. A legal description of each parcel is attached hereto as Exhibits 7(1), 7(2), and 7(3). The total amount of the encumbrances against the three parcels does not, and during the term of this Lease will not, exceed $150,000. Lessor agrees to indemnify, defend and hold Lessee harmless against any claim or demand whatsoever that is or may be brought against Lessee for or on account of the outstanding indebtedness, the notes, or the deeds of trust. Any claim or demand by any or all of the holders of the foregoing notes and deeds of trust shall be treated as a Third Party Claim (as defined in Paragraph 10) and Lessor's indemnification and other obligations described in Paragraph 10 shall extend to any such claim or demand.

. Operations.

() Lessor shall not take any action which interferes in any material respect with Lessee's operations pursuant to its interest in this Lease.

() By executing this Lease Lessee agrees to conduct its operations hereunder in a good, safe and minerlike manner and in compliance in all material respects with all applicable laws, regulations, licenses, permits and orders of any governmental entity relating to (1) operations on the Property,
(2) the marketing of any product thereof, or (3) labor relations in connection with such operations or marketing, including, but not limited to, all laws, regulations, permits, bonds, orders and required governmental consents pertaining to mining operations, mined land reclamation, local land use regulation, and environmental regulation and control. Lessee shall be deemed to be in compliance with governmental regulations and orders while Lessee is contesting any alleged or cited noncompliance in good faith in circumstances in which Lessor's interest is not jeopardized. Lessee may bring asphalt onto the Property for recycling, but no asphalt shall be buried or disposed of on the Property.

() The Minimum Royalty and Production Royalty set forth above shall be deemed full payment to Lessor for any damages to the surface of the Property or the Leased Strata which may be caused by Lessee's operations hereunder, if and so long as Lessee conducts its operations in a reasonable and prudent manner and reasonably maintains the plant site improvements on the Property.

() Use of Water.

() Lessee shall have the right to initiate, appropriate and devote to its own use such water rights as are necessary for Lessee's operations; provided, however, that Lessee shall at all times comply with the provisions of applicable state law.

() In addition, Lessee shall be entitled to utilize on the Property the appurtenant water rights acquired by purchase from Lessor pursuant to the Acquisition Agreement concurrently with this Lease for existing wells, gravel pit wells, ditches, flumes, pipelines, ponds, reservoirs, water and water rights. Lessee acknowledges and agrees that Lessee shall be solely responsible for obtaining new substitute supply plans or extending existing substitute supply plans or for obtaining court decreed plans for augmentation of all groundwater wells and sand and gravel pit wells and maintaining the well permits therefor. Upon termination of this Lease, Lessee shall be in compliance with all applicable laws, regulations, orders, permits, substitute supply plans, plans for augmentation, and court decrees affecting the use of water on the Property. Prior to any termination of the Lease, Lessee shall have provided, to the satisfaction of the Colorado State Engineer, the Division Engineer for Water Division No. 2 and the water court for Water Division No. 2, as evidenced by a decreed plan or plans for augmentation, for the ongoing requirements, if any, for water for augmentation, exchange, or other like purposes on the Property after termination of the Lease.

() If this Lease is terminated for any reason, subject to payment of royalties, Lessee may remove all stockpiled Leased Sand and Gravel and Aggregate Products from the Property within twelve months after such termination. All such items not removed within twelve months shall, at Lessor's option, become the property of Lessor.

() Lessor shall take no action, directly or indirectly, which would cause or encourage the loss or restriction of Lessee's right under applicable governmental regulations to mine and remove Leased Sand and Gravel from the Property in the maximum quantity available from the Property, provided that this subparagraph shall not limit Lessor's right to terminate this Lease for default.

. Taxes and Encumbrances.

() All property and other taxes assessed against the Property shall be paid when due by Lessor except that Lessee shall pay property taxes when due on the surface estate of the Improved Real Property. Lessee shall be responsible for and pay when due any mineral production tax and any tax assessed against the personal property, improvements or fixtures hereafter placed on the Property by Lessee. All taxes for 1996 and the final Lease Year of the term shall be prorated, as applicable, based on the actual number of days in each such Lease Year that Lessee is in possession or control of the Property pursuant to the terms of this Lease. Notwithstanding the foregoing, Lessee shall be responsible for property and other taxes assessed against the Property which accrue after the transfer of the Property to Lessee pursuant to Sections 12(b)(5) or 13 below.

() Each party (the "Paying Party") shall have the right, but not the obligation, at any time to pay on behalf of the other party (the "Defaulting Party") any tax or to satisfy and remove any lien on the Property in the event of default of payment or other obligation by the Defaulting Party and the Paying Party shall be entitled to reimbursement of amounts paid together with an interest charge at the rate of 12% per annum or the highest rate allowed by law, whichever is less, which amounts, including amounts for interest shall be added to any amounts of money payable to Paying Party or deducted from any amounts of money payable to Defaulting Party under the terms hereof.

. Indemnification.

() Indemnification by Lessee. Lessee will indemnify, defend, and hold Lessor, its directors, officers, representatives, employees, and agents harmless from and against any and all claims, actions, suits, demands, assessments, judgments, losses, liabilities, damages, costs and expenses (including interest, penalties, attorneys' fees, accounting fees, and investigation costs (collectively "liabilities") resulting or arising from, relating to or incurred in connection with: (1) any failure of Lessee to pay, perform, and discharge any obligation of Lessee under this Lease, any environmental liabilities arising from operations or activities (of Lessee or third parties) during the term hereof, ongoing and final reclamation obligations, and water augmentation requirements, (2) any breach of any representation of warranty of Lessee contained herein or in any other document delivered to Lessor in connection herewith, (3) any breach of any covenant of Lessee contained herein or in any other document delivered to Lessor in connection herewith, and
(4) injury to or death of persons or for damage to property resulting from the Lessee's negligence. Nothing contained in this Lease will exculpate Lessee from any liability to Lessor or to any other person or entity that it has or may have under state or federal law or under common law.

() Indemnification by Lessor. Lessor will indemnify, defend, and hold Lessee, its affiliates, and their respective directors, officers, representatives, employees, and agents harmless from and against any and all liabilities resulting or arising from, relating to, or incurred in connection with: (1) any failure of Lessor to pay, perform or discharge any of Lessor's obligations under the Lease, any environmental liabilities arising from operations or activities (of Lessor and, if Lessor had knowledge prior to the date hereof, of third parties) prior to the date hereof, (2) any breach of any representation or warranty of Lessor contained herein or in any other document delivered by Lessor in connection herewith, (3) any breach of any covenant of Lessor contained herein or in any other document delivered by Lessor in connection herewith, and
(4) injury to or death of persons or for damage to property resulting from Lessor's negligence. Nothing contained in this Lease will exculpate Lessor from any liability to Lessee or to any other person or entity that it has or may have under any state or federal law or under common law.

() Promptly after any party receives notice of any claim, the commencement of any suit, action or proceeding, or the imposition of any penalty or assessment by a third party in respect of which indemnity may be sought hereunder (a "Third Party Claim") and such party intends to seek indemnity hereunder, such party will give prompt written notice of such Third Party Claim to the other party, but the failure of such party to give such notice promptly shall not relieve the other party from its obligations under this Paragraph except to the extent, if any, that such failure materially prejudices the ability of the indemnifying party to defend such Third Party Claim.

() The indemnifying party will have the right to control the defense, compromise, or settlement of the Third Party Claim with its own counsel (reasonably satisfactory to the indemnified party) if the indemnifying party delivers written notice to the indemnified party within seven days following the indemnifying party's receipt of notice of the Third Party Claim from the indemnified party acknowledging its obligation to indemnify the indemnified party (which acknowledgment may include a reservation by the indemnifying party concerning the obligation of the indemnifying party to indemnify the indemnified party for the Third Party Claim, other than costs of defense); provided, however, that the indemnifying party will not enter into any settlement of any Third Party Claim which would impose any obligation or other liability on the part of the indemnified party if such liability or obligation (1) requires more than the payment of a liquidated sum or (2) is not covered by the indemnification provided to the indemnified party hereunder. In its defense, compromise, or settlement of any Third Party Claim, the indemnifying party will timely provide the indemnified party with such information with respect to such defense, compromise, or settlement as the indemnified party may request, and will not assume any position or take any action that would impose an obligation of any kind on, or restrict the actions of, the indemnified party. The indemnified party will be entitled (at the indemnified party's expense) to participate in the defense by the indemnifying party of any Third Party Claim with its own counsel.

() In the event that the indemnifying party does not undertake the defense, compromise, or settlement of a Third Party Claim in accordance with subparagraph (d) the indemnified party will have the right to control the defense or settlement of such Third Party Claim with counsel of its choosing; provided, however, that the indemnified party will not settle or compromise any such Third Party Claim without the indemnifying party's prior written consent, unless (1) the terms of such settlement or compromise release the indemnified party or the indemnifying party from any and all liability with respect to the Third Party Claim or (2) the indemnifying party will not have acknowledged its obligations to indemnify the indemnified party with respect to such Third Party Claim in accordance with this Paragraph. The indemnifying party will be entitled (at the indemnifying party's expense) to participate in the defense of any Third Party Claim with its own counsel.

() Any indemnifiable claim hereunder that is not a Third Party Claim will be asserted by the indemnified party by promptly delivering notice thereof to the indemnifying party. If the indemnifying party does not respond to such notice within 60 days after its receipt, it will have no further right to contest the validity of the claim.

. Assignment.

() Except for an assignment or sublease pursuant to Paragraph 11(b), below, there shall be no assignment or subleasing by Lessee except to a person or entity who has demonstrated to Lessor's reasonable satisfaction such person or entity's general business reputation and that such person or entity possesses knowledge, experience and competence in the business of sand and gravel mining. Any assignment or sublease of this Lease to a non-affiliated third party must apply as to the entire leasehold interest of Lessee. No partial mortgage, assignment or sublease or mortgage, assignment or sublease of undivided interests or retention or reservation of overriding royalties will be recognized by Lessor; and the effect, if any, of any such transactions will be strictly and only as between the parties thereto, and outside the terms of this Lease, and no dispute between parties to any such transactions shall operate to relieve Lessee from performance of any terms or conditions hereof or to postpone the time therefor. A partial mortgage, assignment or sublease shall not deprive Lessor of any of its benefits under this Lease. Furthermore, no mortgage, assignment, or sublease of this Lease will be valid as against Lessor unless the mortgagee, assignee, or sublessee has executed an agreement, reasonably satisfactory to Lessor in form and substance, to the effect that the mortgagee, assignee, or sublessee, as the case may be, agrees that it is responsible for performance of Lessee's obligations under this Lease (or, as to a mortgagee only, that the mortgagee's interests in the Lease are fully subordinate to the rights of Lessor). Furthermore, no mortgage, assignment or sublease shall be effective upon the Lessor until the mortgaging, assigning or subleasing party has given written notice and copies of the mortgage, assignment or sublease documents to the Lessor. Subject to Paragraph 11(d) below, Lessor may assign, convey, sell, mortgage, pledge or otherwise dispose of Lessor's reversionary interest and/or Lessor's reserved royalty and other interests in the Property or any portion thereof with ninety (90) days prior notice to Lessee.

() Lessee may assign this Lease to an assignee or sublessee that is controlled by Lessee and who assumes all the obligations of the Lease and any provisions of the Acquisition Agreement adopted herein, and may sublease this Lease to any wholly-owned subsidiary of Lessee, and such subsidiary may further sublease the leasehold interest to any other subsidiary of Lessee, provided that Lessor's approval shall not be required and provided further that Lessee shall remain primarily liable and responsible for the full performance of all provisions of the Lease by such assignee or sublessee. If Lessee assigns this Lease to any such assignee or sublessee that is controlled by Lessee or to any wholly-owned subsidiary of Lessee, then any transfer, other disposition, or change in any other fact or circumstances such that Lessee ceases to control such assignee or sublessee or wholly-owned subsidiary shall be treated as an assignment of this Lease and shall therefore be subject to the provisions of Paragraph 11(a).

() In addition to the applicable requirements of subparagraph (a) above Lessee may assign this lease to an assignee or sublessee who is an entity that is incorporated or organized under the laws of one of the United States and whose consolidated net worth is certified to Lessor by an independent accounting firm to be at least $25 million, under general accounting principles, in which case Lessee shall be released of all of its obligations hereunder.

() Lessor will not sell its reversionary interest or its reserved royalty or other interest in the Property (an "Interest") without first complying with the provisions set forth in this Paragraph 11(d). Lessor will give Lessee thirty (30) days advance notice that it desires to sell an Interest. The notice will state the nature of the Interest and the minimum purchase price (the "Minimum Price") proposed by Lessor. If Lessee makes an offer to purchase the Interest, then Lessee will have sixty (60) days from the date of its offer to pay for the Interest at the Minimum Price. In the event of any breach by Lessee in the payment for the Interest, Lessor shall have available to it the remedy of specific performance in addition to any damages that it may incur, and Lessor shall have no further obligations under this Paragraph 11(d) with respect to any proposed sale of any Interest of Lessor in the Property. If Lessee fails to give the notice within the 30-day period referred to above, then Lessor shall be free to sell the Interest at no less than the Minimum Price for a period of six months after the expiration of the period within which Lessee could have made the offer. The provisions of this Paragraph 11(d) do not apply to
(i) any bona fide pledge of Lessor's interest in this Lease and any transfer arising in connection with such pledge; provided that such pledgee and/or transferee shall take subject to the provisions of this Lease, including the right of first refusal under this Paragraph 11(d) as to reconveyances by the pledgee or the pledgee's successors or assigns, or (ii) any sale or other disposition of any of Lessor's Interest in the Property to Tom Brubaker or Reid Jones, any sibling of Tom Brubaker, any shareholder of Lessor holding not less than 5% of Lessor's shares for a period of at least one year, or any spouse or descendant of any of the foregoing, or to any trust or estate created for the benefit of any of the foregoing, or to any entity controlled by any of the foregoing. In any event, Lessor agrees that any sale or other disposition of any of Lessor's Interest in the Property shall not materially and adversely affect Lessee's interest in this Lease.

() If Lessee mortgages its leasehold estate, such mortgage shall be subordinate to the interest of Lessor in the Property. Lessor agrees to enter into such agreements with the mortgagee or holder of the deed of trust as shall be reasonably acceptable to Lessor including, without limitation, providing estoppel certificates to such mortgagee or holder of a deed of trust and/or making such amendments or modifications to this Lease as may be reasonably acceptable to Lessor, provided that such amendments or modifications are reasonable and customarily required in similar financings and do not affect the financial or economic terms of this Lease or otherwise materially and adversely affect Lessor's interest in the Property or this Lease.

. Termination, Condemnation and Force Majeure.

() Termination by Lessor.

(1) Termination by Lessor for Lessee's default. Failure by Lessee to perform or comply with any of the terms or conditions of this Lease, including provisions concerning timeliness of payments, shall not automatically terminate this Lease nor render the Lease null and void; but in case of such default, Lessor may notify Lessee in writing specifying the nature and particulars of such default, and Lessee shall have a period of 30 days after receipt of such notice in which to cure such default and if such default shall not have been cured within such time, Lessor may, but shall not be required to elect to terminate this Lease by giving written notice to Lessee, provided, however, that if the default is other than a payment default and cannot practically be corrected within said 30-day period and Lessee has commenced corrective action and is making all practical prompt efforts to correct the same, the 30-day period shall be extended for so long as is reasonably required to correct the default, but not longer than ninety (90) days. Lessor shall have the right to elect to enforce the Lease and seek money damages or any other remedy available at law or in equity rather than to terminate the Lease for default.

(2) Contemporaneously with the execution and delivery of this Lease, the parties have executed that certain Option to Purchase Agreement (the "Option Agreement"), a copy of which is attached hereto as Exhibit 12(a)(2). The Option Agreement grants to Lessor the right to purchase the Improved Real Property and the improvements then existing on the Improved Real Property on the terms and subject to the conditions contained in the Option Agreement in the event this Lease is terminated by Lessor as a result of a default by Lessee.

() Termination by Lessee.

() Default by Lessor. If Lessor fails to perform or comply with any of the terms or conditions of this Lease, or breaches any representation or warranty made by Lessor in Lessee shall have the right to give Lessor written notice to correct any such default within 30 days of such written notice. In the event such default is not corrected within such period, the Lessee may cure the default at Lessor's expense or in the event Lessor fails to reimburse Lessee within ten (10) days of Lessor's receipt of invoices itemizing such expenses, by set-off against any moneys owed by Lessee to Lessor herein. If Lessor's breach or default is such as practically to prevent Lessee from mining and removing Leased Sand and Gravel under this Lease, Lessee shall have the right to terminate this Lease by written notice upon termination of the 30-day period; provided, however, that if the default cannot be practically corrected within the 30-day period and Lessor has commenced corrective action and is making all practical and prompt efforts to correct same, the 30-day period shall be extended for so long as is reasonably required to correct the default, but not longer than ninety (90) days, and during and for such period the minimum royalty obligation will be suspended. Lessee shall also have such other rights and remedies available at law or in equity.

() Payment of Royalty. This Lease may be terminated by Lessee pursuant to Paragraph 5(e) upon thirty (30) days' written notice to Lessor.

() Total Condemnation. If during the Term Lessee's right under this Lease to mine and remove Leased Sand and Gravel or remove, mine or produce Aggregate Products is completely denied as the result of a condemnation, Lessee may elect to (i) terminate this Lease in which case Lessee shall be released of all of its obligations hereunder and shall assign its claims against the condemning authority arising from the condemnation (other than claims for costs of removal of equipment) to Lessor, or (ii) continue this Lease, in which case Lessor shall assign all of its claims against the condemning authority arising from the condemnation to Lessee. For purposes of this subparagraph 12(b)(3) and subparagraph 12(b)(4), a "condemnation" is intended to mean a judicial proceeding initiated by a governmental authority, or a private right of condemnation under the constitution of the State of Colorado, and is not intended to include a change in governmental regulation or a change in the manner in which such governmental regulation is interpreted or enforced, even if any such change has the same effect as a condemnation.

(4) Partial Condemnation. If during the Term Lessee's right under the Lease to mine and remove Leased Sand and Gravel or remove, mine or produce Aggregate Products is partially denied as the result of a condemnation, an equitable adjustment to the remaining Agreed Sand and Gravel Reserves shall be made, which may have the effect of adjusting the remaining aggregate Minimum Royalty and aggregate Production Royalty due hereunder; provided, however, that in the event of a partial condemnation the annual Minimum Royalty rate of payments (for as long as they continue to be due in the context of the adjusted Agreed Sand and Gravel Reserves) and the Production Royalty Rate shall not be adjusted as a result thereof. Any condemnation award received in connection with a partial condemnation of the Property shall be divided as follows: (a) Lessor shall receive the lesser of (i) the condemnation award or (ii) the net present value (using a six percent (6%) discount rate) of the future royalties that would have been paid under this Lease with respect to the portion of the Property condemned, determined by multiplying the Production Royalty Rate in effect at the time the condemnation award is paid times the Agreed Sand and Gravel Reserves reasonably attributable to the portion of the Property so condemned (using for this purpose the Gravel Reserve Estimate prepared by GSA Resources in August, 1996) that remain on the portion of the Property condemned (the "Production Award"); and
(b) Lessee shall receive the remainder, if any, of the condemnation award. In the event the total condemnation award is less than the Production Award (the "Condemnation Deficit"), then Lessee shall pay the difference to Lessor in one payment upon the expiration of this Lease (the "Additional Compensation"). The Additional Compensation due and payable upon the expiration of this Lease shall be determined by multiplying (y) the Production Royalty Rate in effect at the time of expiration of this Lease by
(z) the result obtained by dividing the Condemnation Deficit by the Production Royalty Rate in effect at the time of the condemnation. The calculation of the present value of the Production Award shall be based upon the number of years
(beginning with the date on which the condemnation award is paid) that it would have taken to deplete the Agreed Sand and Gravel Reserves attributable to the condemned portion of the Property (using the annual Minimum Royalty). An example of the calculation of the Condemnation Deficit is attached hereto as Exhibit 12(b)(4). In no event will the Lessor be compensated for more than 50,000,000 tons or such lesser amount as adjusted in accordance with Section 6(a), Section 6(d,) Section 18 and/or this Section 12(b)(4) whether in the form of Minimum Royalty, Production Royalty, Production Award or Additional Compensation or any combination thereof.

Notwithstanding the foregoing, as to any portion of the Property that is condemned and at the time of the condemnation all of the Agreed Sand and Gravel Reserves on such portion of the Property have been removed or extracted, then the condemnation award with respect to such portion of the Property shall be divided between the parties as follows: (a) Lessor shall receive the portion of the award attributable to the fee simple interest in such portion of the Property (as if such property were not improved) and (b) Lessee shall receive the portion of the award relating to any improvements then existing on such portion of the Property.

(5) Force Majeure. If during the term Lessee's right under the Lease to mine and remove Leased Sand and Gravel or remove, mine or produce Aggregate Products is materially diminished or reduced as a result of any Force Majeure Event, and such diminishment or reduction is or is reasonably expected to be permanent (as to which the burden of proof shall be Lessee's), Lessee's obligations under this Lease shall continue; provided, however, that Lessee shall have the option to purchase the Property on the terms and determined as provided in Paragraph 13 below (except that the purchase price shall be equal to 100% of the net present value (determined using a six percent (6%) discount rate) of the future royalties to be paid under the Lease) such option to be exercised by Lessee's written notice to Lessor. Upon Lessee's acquisition of the Property, this Lease shall terminate.

For purposes of this Lease, the term "Force Majeure Event" shall mean any of the following: any material change in government regulations or the manner in which such government regulations are interpreted or enforced; Lessee's inability to obtain required permits or approvals after commercially reasonable efforts; any other event beyond Lessee's reasonable control including, without limitation, any order, decree, or direction by any governmental law, executive order, rule, regulation, or request enacted or promulgated under color of authority; by scarcity or inability to obtain equipment, material, power or fuel; by strike or lockout with respect to a supplier or other third party upon which Lessee depends and can not reasonably be substituted, or industrial disturbance; or by any act of God (including, without limitation, lightning, earthquake, fire, storm, flood, or washout).

() Except in the case of a termination of this Lease under Paragraph 12(b)(5), upon the termination of this Lease, Lessee shall surrender possession of the Property to Lessor, shall execute and deliver to Lessor a recordable written release of all of Lessee's right, title and interest in this Lease. Upon request by Lessor and at its expense, Lessee shall also use its best efforts to obtain transfers of all existing licenses and permits issued for the Property and held in Lessee's name upon the same terms and conditions as set forth in the existing documents. In the case of a termination pursuant to Paragraph 12(b)(5), Lessor shall convey the Property to Lessee by special warranty deed (subject to the title exceptions shown in the title policy delivered to Lessee pursuant to the Acquisition Agreement and other matters as may have arisen as a result of Lessee's operations on the Property during the term hereof.

() Upon termination of this Lease for any reason, in addition to any liability of one party to the other arising from such termination, Lessee shall be responsible for compliance with applicable laws and regulations relating to Lessee's operations on the Property, including mining operations, mined land reclamation, local land use regulation, water augmentation and environmental regulation and control; subject, however, to Lessor's obligations for periods prior to the commencement of the term of this Lease for compliance with all such laws and regulations, except laws and regulations (and attendant obligations) relating to mined land reclamation and water augmentation. Lessor shall grant Lessee reasonable access to the Property to carry out post-termination reclamation or other activities that may be required or permitted to be performed by Lessee after termination.

. Net Worth Covenant. If, during the term of this Lease, () the consolidated net worth of Lessee falls below $15 million, and () such net worth remains below $15 million for a period of six months Lessor, provided that Lessor is not in material default under the Lease or, being in default, has failed to cure as provided in Paragraph 12(b)(1), shall have the right (the "Put Right") to require Lessee to purchase the Property at a price equal to 105% of the net present value (determined using a six percent (6%) discount rate) of the future royalties to be paid under this Lease determined by multiplying the Production Royalty Rate that is in effect at the time the Put Right is exercised times the Agreed Sand and Gravel Reserves less the number of tons of Leased Sand and Gravel on which Minimum Royalty and Production Royalty have been paid prior to the closing of the Put Right (an example of the foregoing is attached as Exhibit 13). The term "net worth" as used herein means the consolidated net worth under general accounting principles of Continental Materials Corporation. Upon request (but not more often than annually) of Lessor, Lessee will cause its outside accounting firm (presently Coopers & Lybrand, L.L.P.) to certify to Lessor that Lessee is in compliance with this net worth covenant. Lessor, at its cost, shall have the right to have an independent public accounting firm verify such certification; provided, however, that such firm shall keep confidential all information discovered in such verification process except the result of its determination that there is or is not compliance with this net worth covenant. Transfer of title under this Paragraph shall be by special warranty deed (subject to the title exceptions shown in the title policy delivered to Lessee pursuant to the Acquisition Agreement and such other matters as may have arisen as a result of Lessee's operations on the Property during the term hereof) to be delivered at closing within thirty days (30) after notice by Lessor of its election to exercise the Put Right.

. Notices. Any notice required or permitted to be given hereunder shall be deemed properly given as provided in the Acquisition Agreement.

. Reclamation. Rules and Regulations of the Colorado Division of Minerals and Geology, the Mined Land Reclamation Board and the Mined Land Reclamation Office, or their successors, for reclamation of mined land will apply where applicable to the Property. Variations or waivers may be granted, accepted or agreed to only with Lessor's approval which shall not be unreasonably withheld.

. Inspection. During business hours and upon three
(3) business days advance notice to Lessee, Lessor, or its duly authorized agent shall be and hereby is authorized to go on the Property and to examine, inspect and survey the same. All conveniences necessary for said inspection or survey shall be furnished to Lessor, or its agent, by Lessee, at Lessor's expense; provided, however, that Lessor's exercise of the rights reserved herein shall not unreasonably interrupt or interfere with Lessee's operations on the Property.

. Maps. Lessor, at its own expense and with three
(3) business days advance notice to Lessee, may authorize an engineer or surveyor duly licensed by the State of Colorado, together with a mapping party of not more than three persons, to come onto the Property once each year for the purpose of preparing a map of the workings herein authorized to be made. The mapping party shall enter and remain on the Property at its own risk and Lessor shall indemnify and hold Lessee harmless against any claim for personal injury or property damage to said mapping party or otherwise arising as a result of said mapping visits to the Property. Said map shall be of a scale of not less than 100 feet to the inch, showing vertical and horizontal dimensions of all excavations, fills, stockpiles, and other disturbances of the surface, by means of accurate contour lines (not more than five-foot interval) or cross-sections, all to be correctly related to a base line which is properly located in relation to known section lines; said map to show county, section, township and range, the North point, the scale to which the map is drawn with an explanatory legend, and the certificate of the engineer or surveyor as to its accuracy. The engineer or surveyor shall show clearly upon said map the cubic yards of material displaced and removed by operations since the previous survey, map and report. A copy of said map shall be delivered to Lessee not later than thirty days after its preparation. If Lessee causes such a map or similar map to be prepared periodically or from time to time for Lessee's purposes, Lessee shall provide a copy of such map to Lessor within thirty days after its preparation, without charge therefor. Lessee shall also provide Lessor a copy of Lessee's annual report to the Colorado Division of Minerals and Geology or successor agency, within 30 days after filing said report.

. East Mining Property Survey Adjustment. Lessee may, at its expense, cause a survey to be conducted for the east portion of the Property at any time during the one-year period following the date hereof for the purpose of confirming its right to mine the full amount of the Agreed Sand and Gravel Reserves. If the survey indicates a decrease or an increase in the amount of minable Agreed Sand and Gravel Reserves (based solely on a change in the outside boundaries of the Property, determined on a parcel by parcel basis) in excess of three percent (3%), then the amount of the remaining Agreed Sand and Gravel Reserves shall be adjusted to reflect such impairment or increase; provided, however, that in the case of an increase, the Agreed Sand and Gravel Reserves shall only be increased to the extent that the additional reserves in tons exceeds the dollar cost of the survey divided by .37.

. Other Minerals Not Covered by this Lease. In the event other minerals are found on the Property below the Leased Strata, Lessor reserves the right to lease the Property for the removal of such minerals but Lessee shall not be required to forego or delay Lessee's operations under this Lease for the removal of Leased Sand and Gravel and any operations conducted by or for Lessor for the removal of such minerals shall be subordinated to Lessee's operations and shall not unreasonably interrupt or interfere with the operations of Lessee on the Property.

. Insurance. Lessee shall obtain and maintain during the term hereof workers' compensation insurance; employer's liability insurance with minimum limits of not less than $1,000,000 each accident; automobile liability insurance with minimum limits of not less than $1,000,000 combined single limit per occurrence; and general liability insurance with minimum limits of not less than $1,000,000 single limit per occurrence. The general liability insurance shall cover Lessee, Lessee's agents, employees, and contractors and, shall name Lessor as an additional insured.

. Binding Effect. This Lease and all its terms, conditions and stipulations shall extend to and be binding on all successors and permitted assigns of the parties.

. Interest on Unpaid Amounts. Interest at the prime rate plus three points shall be payable on all amounts payable under this Lease from and after the date on which such amounts are due until they are paid in full. The prime rate shall be the prime rate quoted by the Wall Street Journal on the date the amount is due and payable.

. Governing Law; Venue. This Lease and its interpretation and all disputes pertaining thereto (other than disputes to be settled by arbitration pursuant to subparagraphs 5(l) through (o), above) or to any issue in respect of the performance or non-performance of this Lease shall be governed by the laws and decisions of courts of the State of Colorado. Any action or proceeding at law or in equity by a party against another party to this Lease may be brought in any District Court in which venue is proper under the Colorado Rules of Civil Procedure, notwithstanding that venue may also be proper in the District Court for another county.

. Attorneys' Fees. Except as otherwise provided herein in connection with the provisions of this Lease regarding indemnification of parties, in any action or proceeding at law or in equity by a party against another party to this Lease, the prevailing party shall be entitled to reasonable attorneys' fees and expenses.

. Depletion Allowance. The parties acknowledge that all payments made pursuant to Paragraphs 5 and 6 of this Lease are in the form of royalties and not lease, rent or production payments. Further, the parties acknowledge that the Leased Sand and Gravel which are the subject of this Lease are natural resources which are the subject of a tax deduction of a reasonable allowance for depletion of such materials, which presently requires an equitable apportionment between the Lessor and Lessee.

. Memorandum for Recording. Simultaneous with the execution of this Lease the parties have executed a memorandum for recording ("Memorandum for Recording"). Either party may record the Memorandum for Recording but neither party shall record this Lease without the prior written consent of the other.

. Construction of Document. The parties do not intend that this Lease be characterized as a sale of real property. However, if any court of competent jurisdiction should characterize this Lease as a sale of real property, then the parties intend that, upon such event, this Lease should be treated as a mortgage, pursuant to which Lessee has granted to Lessor a lien on the Property. In such event, the parties agree to record an additional Memorandum for Recording containing the necessary information to cause such Memorandum for Recording to be effective as a mortgage.

IN WITNESS WHEREOF, the undersigned have executed this Lease on the day and year first above written.

LESSOR:

VALCO INC.

                    By:/s/Thomas E. Brubaker
                         Thomas E. Brubaker
                         President

ATTEST:

By:____________________________
Name:__________________________
Its:___________________________

LESSEE:

CONTINENTAL MATERIALS CORPORATION

                    By:/s/ Joseph J. Sum
                         Joseph J. Sum
                         Vice President and Chief Financial
                         Officer

ATTEST:

By:____________________________
Name:__________________________
Its:___________________________

[SEAL]                        ____________________________
                              Notary Public

                              ____________________________
                              Address:
                              ____________________________
                              ____________________________

STATE OF COLORADO )

) ss.

COUNTY OF _________ )

Acknowledged before me this 21st day of October, 1996, by Joseph J. Sum and ______________, the Vice President and Chief Financial Officer and __________________ , respectively, of Continental Materials Corporation.

WITNESS my hand and official seal.

My commission expires:__________________________.

[SEAL]                        ____________________________
                              Notary Public

                              ____________________________
                              Address:
                              ____________________________
                              ____________________________

AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

Dated as of October 21, 1996

CONTINENTAL MATERIALS CORPORATION, a corporation organized under the laws of the state of Delaware (the "Borrower"), THE NORTHERN TRUST COMPANY, an Illinois banking corporation, as administrative agent and as a lender (Northern in its capacity as administrative agent referred to in this Agreement as "Agent" and in its capacity as a lender as "Northern") and LASALLE NATIONAL BANK as a lender("LaSalle Bank)" (Northern and LaSalle Bank each referred to individually in this Agreement as a "Lender" and collectively as the "Lenders"), agree as follows:

RECITALS:

A.The parties hereto have previously entered into that certain Revolving Credit and Term Loan Agreement dated as of February 28, 1996 (said Revolving Credit and Term Loan Agreement being the "Original Agreement").

B.Pursuant to the Original Agreement, the Lenders have issued the following described letters of credit (the "Existing Letters of Credit") for the account of the Borrower:

Issuing Lender No.       Beneficiaries
Northern      S262251W  St. Paul Fire & Marine Insurance
Northern      S250188W  CNA Insurance Company
Northern      S250189W  CNA Insurance Company
Northern      S258180W  The Home Insurance Co.
LaSalle     9200002188  St. Paul Fire & Marine Insurance
LaSalle     9260137087  CNA Insurance Company
LaSalle     9260237088  CNA Insurance Company
LaSalle     9200000426  The Home Insurance Co.

C.The Original Agreement, the promissory notes of the Borrower issued and remaining unpaid thereunder (the "Existing Notes"), the Existing Letters of Credit, and the documents related to or referenced therein are referred to herein as the "Prior Documents".

D.Pursuant to that certain Acquisition Agreement dated October __, 1996, (the "Acquisition Agreement") the Borrower wishes to acquire certain assets of Valco, Inc. on the terms and conditions and for the consideration set forth therein (the acquisition by Borrower being the "Acquisition," and the date of consummation of the Acquisition being the "Acquisition Date."

E.The parties to and/or bound by the Prior Documents wish to consolidate and amend and restate the Prior Documents in their entirety in order to provide for the Acquisition and certain other changes, and to restate their agreements with respect to the subject matter hereof.

NOW, THEREFORE, the parties hereto amend and restate the Original Agreement in its entirety to read as follows:

SECTION 1 DEFINITIONS

SECTION 1.1 GENERAL. As used herein:

The term "affiliate" means any corporation of which the Borrower owns directly or indirectly 20% or more, but less than 50%, of the outstanding voting stock, or any partnership, joint venture, trust or other legal entity of which the Borrower has effective control, by contract or otherwise.

The term "Agent-Related Person" shall mean the Agent and any successor thereto appointed pursuant to Section 9.8 or otherwise succeeding the Agent, together with their respective affiliates, and the officers, directors, employees, agents and attorneys-in fact of such entities and affiliates.

The term "Applicable LIBOR Margin," for purposes of determining the interest rate on:

(a) a Revolving LIBOR Loan, shall mean (1) prior to the first semi-annual adjustment pursuant to clause (2) of this subparagraph (a), 1.5% (the "Normal Revolving LIBOR Margin"); and
(2) the Normal Revolving LIBOR Margin as modified by semi-annual adjustments (such adjusted Normal Revolving LIBOR Margin, the "Applicable Revolving LIBOR Margin") determined as follows:

If EBITDA, as determined no later than March 31, 1997, for the period of four fiscal quarters ended December 28, 1996 is:

                                   Applicable Revolving
                                       LIBOR Margin is:

greater than $7,000,000                     1.25%
$6,000,000 to $7,000,000                    1.50%
$5,000,000 to 5,999,999                     1.75%
$3,750,000 to 4,999,999                     2.00%
less than $3,750,000                        2.50%

If EBITDA, as determined no later than September 30, 1997, for the period of four fiscal quarters ended June 28, 1997 is:

                                   Applicable Revolving
                                       LIBOR Margin is:

greater than $7,500,000                     1.25%
$6,500,000 to $7,500,000                    1.50%
$5,500,000 to 6,499,999                     1.75%
$4,250,000 to 5,499,999                     2.00%
less than $4,250,000                        2.50%

If EBITDA, (A) as determined no later than March 31, 1998, for the period of four fiscal quarters ended January 3, 1998, and (B) as determined no later than September 30, 1998 and no later than March 31 and September 30 (March 31 and September 30 of any year are each referred to hereinafter as an "Applicable LIBOR Margin Reset Date") of each year occurring after September 30, 1998, for the period of four fiscal quarters, which (i) in the case of an Applicable LIBOR Margin Reset Date occurring on March 31, ends on the same date as the end of the fourth fiscal quarter of the Borrower's immediately preceding fiscal year, and (ii) in the case of an Applicable LIBOR Margin Reset Date occurring on September 30, ends on the same date as the end of the second fiscal quarter of the Borrower's then current fiscal year, is:

                                   Applicable Revolving
                                       LIBOR Margin is:

greater than $8,000,000                     1.25%
$7,000,000 to $8,000,000                    1.50%
$6,000,000 to 6,999,999                     1.75%
$4,750,000 to 5,999,999                     2.00%
less than $4,750,000                        2.50%;

(b) a Term LIBOR Loan, shall mean either (1) the Normal Revolving LIBOR Margin plus .25%, or (2) the Applicable Revolving LIBOR Margin, plus .25%, in each case as determined in accordance with subparagraph (a) hereof.

Not later than twenty (20) days after the Agent's receipt of the quarterly financial statements required by Section 6.2(a) hereof for the Borrower's second and fourth fiscal quarters, accompanied by a certificate of the chief accounting officer or Treasurer of the Borrower computing EBITDA for the period of the four fiscal quarters ending on the same date as the end of such second and fourth fiscal quarters, Agent will determine whether such financial information indicates such a change in EBITDA as would justify a change in the Applicable LIBOR Margin and shall then notify the Borrower and the Lenders of such determination and of any change in the Applicable LIBOR Margin resulting therefrom. Any change in the Applicable LIBOR Margin, and in the rate of interest applicable to LIBOR loans resulting therefrom, shall be effective prospectively as of the first day after the relevant Applicable LIBOR Margin Reset Date, and with such new Applicable LIBOR Margin to continue in effect until the effectiveness of the next redetermination thereof. Any determination by Agent of EBITDA shall be conclusive and binding upon the Borrower and the Lenders provided that it has been made reasonably and in good faith, absent manifest error. If the Borrower fails to timely submit the quarterly financial statements and certificate referred to above, the rate of interest applicable to LIBOR Loans as of the next determination date of the Applicable LIBOR Margin shall be determined and based upon the Default Rate.

The term "Borrowing" shall mean the total of Loans of a single type (i.e. LIBOR Loan or Prime Rate Loan) made by the Lenders to the Borrower on a single date and for a single Interest Period. Borrowings of Loans are made ratably from each of the Lenders according to their respective commitments.

The term "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in Chicago, Illinois are authorized to close, and with respect to LIBOR Loans, a day on which dealings in United States Dollars may be carried on by the Reference Bank in the London interbank eurodollar market.

The term "Commitment - Revolving Credit" shall mean each such amount set forth below across from the name of each Lender:

Lender                       Amount

Northern                $6,750,000
LaSalle Bank            $6,750,000

Provided that the Commitment-Revolving Credit of each Lender shall permanently reduce to a maximum of $5,750,000 on June 30, 1997.

The term "Commitment - Term Loan" shall mean each such amount set forth below across from the name of each Lender:

  Lender                       Amount

Northern                $4,250,000
LaSalle Bank            $4,250,000

The term "EBITDA", with reference to any period, shall mean, on a consolidated basis, the sum of the Borrower's:

(i) consolidated net income or loss after all provisions or credits for any Federal, state or other income taxes, plus

(ii) Federal, state and other income taxes deducted in the determination of consolidated net income, plus

(iii) Interest Expense deducted in the determination of consolidated net income, plus

(iv) depreciation and amortization expense deducted in the determination of consolidated net income, and minus

(v) any items of gain which are extraordinary items to the extent reflected in the determination of consolidated net income.

The term "Fixed Charges" for any Measurement Period shall mean, on a consolidated basis, the Interest Expense and scheduled principal payments (including capitalized lease obligations) of the Borrower.

The term "Fixed Charge Coverage Ratio" shall mean, for any period (a "Measurement Period") consisting of the four fiscal quarters of the Borrower ending as of the end of each fiscal quarter of the Borrower, the ratio of Income Available for Fixed Charges to Fixed Charges.

The term "Funded Debt" shall mean Indebtedness which by its terms or by the terms of any instrument or agreement relating thereto matures more than one year from, or is directly renewable or extendible at the option of the debtor to a date more than one year (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year) from the date of creation thereof; provided, however, that in any event "Funded Debt" includes all Revolving Credit Loans.

The term "Income Available for Fixed Charges" for any Measurement Period shall mean on a consolidated basis, the sum of the Borrower's:

(i) consolidated net income or loss before all provisions or credits for any Federal, state or other income taxes, plus

(ii) depreciation, depletion and amortization (other than amortization of debt discount expense), plus

(iii) Interest Expense, minus

(iv) capital expenditures (but excluding therefrom capital expenditures (a) financed with that portion of Revolving Credit Loans converted, or intended or anticipated to be converted, to the Term Loan pursuant to
Section 2.2(A) hereof, and (b) incurred by the Borrower in order to fund all or any part of the Acquisition).

The term "Indebtedness" of any entity or consolidated group means, without duplication:

(i) all obligations, contingent or otherwise, of such entity for borrowed money and all obligations of such entity evidenced by bonds, debentures, notes or other similar instruments;

(ii) all obligations of such entity as lessee under leases which have been or should be, in accordance with generally accepted accounting principles, recorded as capitalized lease liabilities;

(iii) all guaranties, whether direct or indirect, secured or unsecured, of Indebtedness of another person by such entity or any of its subsidiaries;

(iv) net liabilities of such entity under all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and all other agreements or arrangements designed to protect such entity against fluctuations in interest rates or currency exchange rates;

(v) whether or not so included as liabilities in accordance with generally accepted accounting principles, all obligations of such entity to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a lien on property owned or being purchased by such entity (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such entity or is limited in recourse; and

(vi) all contingent liabilities of such entity in respect of any of the foregoing.

For all purposes of this Agreement, the Indebtedness of any entity shall include its pro rata share of Indebtedness of any partnership or joint venture in which such entity is a general partner or a joint venturer, except that any and all Indebtedness of Oracle Ridge Mining Partners ("Oracle Ridge") shall be excluded from the definition of Indebtedness for purposes of this Agreement, if and so long as the Borrower is not the majority owner of Oracle Ridge, Oracle Ridge is not consolidated with the Borrower for financial reporting purposes, and the Borrower is not legally responsible for said Indebtedness of Oracle Ridge.

The term "Interest Expense" shall mean, for any Measurement Period of the Borrower, all interest accrued (whether or not actually paid) during such period on Indebtedness of the Borrower and its subsidiaries (determined on a consolidated basis), provided that the term "Interest Expense" also shall include (without limitation) (i) dividends paid on any preferred or special stock issued by the Borrower, (ii) amortized discount in respect to Indebtedness of the Borrower and its subsidiaries issued at a discount and (iii) imputed interest on capitalized lease obligations of the Borrower and its subsidiaries.

The term "Interest Period" shall mean the period commencing on the date a Borrowing of LIBOR Loans is made and ending on the date, as the Borrower may select, 30 days, 60 days, 90 days or 180 days thereafter; provided, however, that:

(a) the Borrower may not select an Interest Period that extends beyond the Termination Date; and

(b) whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day.

The term "LIBOR Loan" shall mean either a Revolving LIBOR Loan or a Term LIBOR Loan (each as hereinafter defined), as applicable.

The term "Loan Document" shall mean any instrument, document, note, agreement, or guaranty delivered to either Lender in connection with the Loans.

The term "Prime Rate" shall mean the rate of interest per year announced from time to time by Agent called its prime rate, which may or may not at any time be the lowest rate of interest charged by Agent. Changes in the rate of interest resulting from a change in the Prime Rate shall take effect on the date set forth in each announcement.

The term "Prime Rate Loan" shall mean either a Term Prime Rate Loan or a Revolving Prime Rate Loan (each as hereinafter defined), as applicable.

The term "Reference Bank" shall mean Agent.

The term "Revolving LIBOR Loan" shall mean a Revolving Credit Loan bearing interest at a rate determined by reference to Adjusted LIBOR.

The term "Revolving Prime Rate Loan"shall mean a Revolving Loan bearing interest at a rate determined by reference to the Prime Rate.

The term "subsidiary" means any corporation, partnership, joint venture, trust, or other legal entity of which the Borrower owns directly or indirectly 50% or more of the outstanding voting stock or interest, or of which the Borrower has effective control, by contract or otherwise.

The term "Tangible Net Worth" means, at any date, net stockholders' equity, minus goodwill, patents, trademarks, service marks, trade names, copyrights, and all other intangible assets and all items that are treated as intangible assets under generally accepted accounting principles.

The term "Termination Date" shall mean June 15, 1998, subject to any extension thereof pursuant to Section 2.1(A) hereof.

The term "Term LIBOR" Loan" shall mean a Term Loan bearing interest at a rate determined by reference to Adjusted LIBOR.

The term "Term Prime Rate Loan"shall mean a Term Loan bearing interest at a rate determined by reference to the Prime Rate.

The term "Unmatured Event of Default" means an event or condition which would become an Event of Default with notice or the passage of time or both.

SECTION 1.2 APPLICABILITY OF SUBSIDIARY AND AFFILIATE REFERENCES. Terms hereof pertaining to any subsidiary or affiliate shall apply only during such times as the Borrower has any subsidiary or affiliate.

SECTION 1.3 ACCOUNTING TERMS. Except as and unless otherwise specifically provided herein, all accounting terms in this Agreement shall have the meanings given to them by generally accepted accounting principles and shall be applied and all reports required by this Agreement shall be prepared, in a manner consistent with generally accepted accounting principles consistently applied.

SECTION 2 LOANS

SECTION 2.1 REVOLVING CREDIT LOANS. Subject to the terms and conditions of this Agreement, each Lender, severally and not jointly, agrees to make loans to the Borrower, from time to time from the date of this Agreement through the Termination Date, at such times and in such amounts, not to exceed the amount of each such Lender's Commitment - Revolving Credit, at any one time outstanding, as the Borrower may request (the "Revolving Credit Loan(s)"). During such period, the Borrower may borrow, repay and reborrow hereunder. Each borrowing shall be in the amount of at least $25,000.00 or the remaining unused amount of the Commitment - Revolving Credit. Notwithstanding the generality of the foregoing, neither Lender shall make any Revolving Credit Loans under this Agreement or the Revolving Credit Note (as hereinafter defined) if at any time the sum of: (a) the aggregate principal amount outstanding under the Revolving Credit Notes and due such Lender plus (b) the aggregate face amount of all Letters of Credit (as hereinafter defined) issued by such Lender for the benefit of the Borrower and any drawn and unpaid amounts thereunder equals or exceeds such Lender's Commitment - Revolving Credit.

SECTION 2.1(A) EXTENSIONS OF THE TERMINATION DATE. The Borrower may advise the Lenders in writing of its desire to extend the Termination Date for an additional one year, provided
(i) such request is made no later than 90 days prior to such Termination Date, (ii) not more than one such request for the extension of the Termination Date may be made in any one calendar year, and (iii) in no event shall the Termination Date be extended beyond June 15, 1999. Each Lender shall notify the Borrower, the other Lender and the Agent, in writing within 45 days after such Lender receives such request from the Borrower, whether such Lender in its sole discretion agrees to such extension. In the event that a Lender shall fail to so notify the Borrower, the other Lender and the Agent within such 45 day period, whether it agrees to such extension, such Lender shall be deemed to have refused to grant the requested extension. Upon receipt by the Borrower, the Agent and all Lenders of the consent of all Lenders within such 45 day period, the Termination Date shall be automatically extended for an additional one year, and the Agent shall confirm such automatic extension in writing to the Borrower and the Lenders. In the event the Borrower and all Lenders do not consent to the requested extension of the Termination Date, such Termination Date shall take place as scheduled.

SECTION 2.2 REVOLVING CREDIT NOTE. The Revolving Credit Loans shall be evidenced by a revolving credit note (the "Revolving Credit Note"), substantially in the form of Exhibit A, with appropriate insertions, dated the date hereof, payable to the order of each Lender, in the principal amount of the Commitment - Revolving Credit of each such Lender, and with the amounts borrowed and repaid and the balance indorsed on the grid by such Lender. As long as such Lender is the holder of such Revolving Credit Note it may, at its option, in lieu of endorsing the grid, record the amounts borrowed and repaid under and the balance due on the Revolving Credit Note in each such Lender's respective books and records, which books and records may treat each borrowing as a separate Revolving Credit Loan; such endorsement or recording by such Lender shall be rebuttably presumptive evidence of the principal balance due on each Revolving Credit Note. Subject to Section 2.2(A) hereof, the principal of each Revolving Credit Note shall be payable in full on the Termination Date.

SECTION 2.2(A) CONVERSION OF PORTIONS OF REVOLVING CREDIT LOANS. At any time on or before June 30, 1997, the Borrower may advise the Lenders in writing (the "Conversion Notice(s)") of its election to convert up to $1,000,000 of each Lender's Revolving Credit Loans to such Lender's Term Loan. Any Conversion Notice must be delivered to the Lenders no later than June 15, 1997, and not more than one such election may be made. The Conversion Notice must specify: (i) the amount of each Lender's Revolving Credit Loans to be converted to such Lender's Term Loan (the "Converted Amount", which cannot exceed $1,000,000 and which must be the same amount for each Lender); and (ii) the date on which the Converted Amount is to be converted to the relevant Term Loan, which date (the "Conversion Date") cannot be less than seven nor more than thirty days after the date on which the Conversion Notice(s) is received by the Lenders, but in any event can be no later than June 30, 1997. Any Conversion Notice(s), and the election set forth therein, is irrevocable, but is ineffective if an Event of Default has occurred and is continuing on either the date of the Conversion Notice(s) or the Conversion Date. From and after the Conversion Date, the Converted Amount payable to each Lender shall be and become part of the Term Loan payable to such Lender, and is repayable and bears interest as set forth herein and in the Term Note of such Lender. From and after the Conversion Date, each Lender's Commitment - Revolving Credit is permanently reduced by $1,000,000.

SECTION 2.3 LETTERS OF CREDIT. Subject to the terms of this Agreement, each Lender shall issue stand-by and/or commercial letters of credit for the account of the Borrower (collectively, the "Letter(s) of Credit"), from time to time from the date of this Agreement through the Termination Date or such later date as may from time to time be agreed upon in writing by the Borrower and the Lenders, with a maturity date on any Letter of Credit no later than the Termination Date, at such times and in such amounts, as the Borrower may request, up to a maximum amount not in excess of: (a) $13,500,000 minus (b) the aggregate amount of Revolving Credit Loans outstanding under the Revolving Credit Notes minus (c) the unexpired portion of all outstanding Letters of Credit and any amount drawn under any such Letters of Credit (including without limitation, any draft drawn under a Letter of Credit and accepted by such Lender for which the Lender has not been reimbursed). At any time the Borrower determines that it desires the issuance of a Letter of Credit, the Borrower may request such Letter of Credit from the Agent, which request shall be in writing and irrevocable as to the Borrower. At the time the Agent receives a request by the Borrower for the issuance of a Letter of Credit, the Agent will inform the Lenders in writing of the request and, subject to the terms hereof and each Lender's respective internal rules regarding the issuance of letters of credit, each Lender will each issue a Letter of Credit for one half the face amount requested by the Borrower. Notwithstanding the generality of the foregoing, neither Lender will issue a Letter of Credit unless the other Lender agrees in writing to simultaneously issue an identical Letter of Credit. The Borrower shall execute, and be subject to, such documentation in form and substance as may be required by each Lender. The Borrower shall pay each Lender its standard fees, charges, commissions, and discounts in connection with any Letter of Credit or any draft drawn under any Letter of Credit, which, subject to the terms and provisions of the forementioned documents, is three-quarters of one percent (3/4%) per annum for each Letter of Credit with a $250.00 minimum, said fee(s) being payable quarterly in arrears. Any draft drawn under a Letter of Credit not paid on or before its maturity shall constitute a Revolving Credit Loan and shall bear interest at the rate and be payable as provided for other Revolving Credit Loans. The Borrower shall not request the issuance of any Letter of Credit and the Lenders shall not issue any Letters of Credit if: (a) the aggregate face amount of all unexpired Letters of Credit issued by all Lenders (including without limitation, any draft drawn under a Letter of Credit and accepted by any Lender for which the Lender has not been reimbursed), equals or exceeds $5,000,000, or (b) issuance of a new Letter of Credit in the amount contemplated by the Borrower would cause the aggregate face amount of all unexpired Letters of Credit issued by all Lenders (including without limitation, any draft drawn under a Letter of Credit and accepted by any Lender for which the Lender has not been reimbursed) to exceed $5,000,000. For all purposes hereof, each Existing Letter of Credit shall be deemed to be a Letter of Credit issued hereunder.
SECTION 2.4 TERM LOAN. Subject to the terms and conditions of this Agreement, each Lender, severally and not jointly, agrees to lend to the Borrower, and the Borrower agrees to borrow from each Lender, on the date hereof, the amount of each Lender's Commitment - Term Loan (the "Term Loan"; the Revolving Credit Loans and the Term Loan, collectively, the "Loans"). Any amount of Term Loans repaid may not be reborrowed.

SECTION 2.5 TERM NOTE. The Term Loan shall be evidenced by a term note (the "Term Note"; the Revolving Credit Notes and the Term Notes, collectively, the "Notes"), substantially in the form of Exhibit B, with appropriate insertions, dated the date hereof, payable to the order of each Lender, in the principal amount of the Commitment - Term Loan of each such Lender. The principal balance of the Term Loan is payable in ten (10) principal payments as follows: (a) one (1) payment in the amount of $500,000, due on December 15, 1996; (b) four (4) payments, each in the amount of $750,000, due on June 15, 1997, December 15, 1997, June 15, 1998 and December 15, 1998; (c) four (4) payments, each in the amount of $1,000,000, due June 15, 1999, December 15, 1999, June 15, 2000 and December 15, 2000; with all then unpaid principal, due in full on June 15, 2001. Provided, however, that if and when any Converted Amount is added to the Term Loans of each Lender pursuant to Section 2.2(A) hereof, that portion of such Term Loans is payable as follows: commencing on the first semi-annual principal payment date (June 15 and December 15) after the Conversion Date, and continuing on each such principal payment date thereafter, each principal payment of the Term Loan and Term Note (as set forth in this Section 2.5) then due shall be increased by an amount equal to ten percent (10.0%) of the Converted Amount.

SECTION 2.6 GUARANTY. The Loans and all of the Borrower's other liabilities, obligations and indebtedness to each of the Lenders, direct or indirect, absolute or contingent, due or to become due, now or hereafter existing with respect to principal, and interest accrued thereon, whether under this Agreement or any other agreement with either or both of the Lenders or note payable to either or both of the Lenders, shall be guaranteed by:

(a) Transit Mix Concrete Co., a Colorado corporation ("Transit Mix"), by execution and delivery of a Guaranty in the form of Exhibit C hereto with appropriate insertions (the foregoing Guaranty, and all amendments, restatements, and replacements, if any, thereto or therefor, collectively, the "Transit Mix Guaranty");

(b) Phoenix Manufacturing, Inc., an Arizona corporation ("Phoenix"), by execution and delivery of a Guaranty in the form of Exhibit D hereto with appropriate insertions (the foregoing Guaranty, and all amendments, restatements, and replacements, if any, thereto or therefor, collectively, the "Phoenix Guaranty");

(c) Williams Furnace Co., a Delaware corporation ("Williams"), by execution and delivery of a Guaranty in the form of Exhibit E hereto with appropriate insertions (the foregoing Guaranty, and all amendments, restatements, and replacements, if any, thereto or therefor, collectively, the "Williams Guaranty");
(d) Castle Concrete Company, a Colorado corporation ("Castle"), by execution and delivery of a Guaranty in the form of Exhibit F hereto with appropriate insertions (the foregoing Guaranty, and all amendments, restatements, and replacements, if any, thereto or therefor, collectively, the "Castle Guaranty"); and

(e) Transit Mix of Pueblo, Inc., a Colorado corporation ("Pueblo"), by execution and delivery of a Guaranty in the form of Exhibit G hereto with appropriate insertions (the foregoing Guaranty, and all amendments, restatements, and replacements, if any, thereto or therefor, collectively, the "Pueblo Guaranty").

SECTION 3 INTEREST AND FEES

SECTION 3.1 INTEREST. The Borrower may elect that each Borrowing of Loans be made by means of a Prime Rate Loan or a LIBOR Loan; provided, however, that there shall not be more than six Borrowings of LIBOR Loans outstanding at any time.

(a) Prime Rate Loans. Each Prime Rate Loan made by the Lenders shall bear interest on the unpaid principal amount thereof from the date such Loan is made until maturity (whether by acceleration or otherwise) at a rate per annum equal to the Prime Rate from time to time in effect.

(b) LIBOR Loans. Each LIBOR Loan made by the Lenders shall bear interest on the unpaid principal amount thereof from the date such Loan is made until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable LIBOR Margin from time to time in effect plus the Adjusted LIBOR.

"Adjusted LIBOR" means, for any Borrowing of LIBOR Loans, a rate per annum determined in accordance with the following formula:

LIBOR
Adjusted LIBOR = 100% - Eurodollar Reserve Percentage

"LIBOR" means, for an Interest Period for a Borrowing of LIBOR Loans, the rate of interest per annum (rounded upwards, if necessary, to nearest 1/100 of 1%) at which deposits in U.S. dollars in immediately available funds are offered by the Reference Bank at approximately 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by prime banks in the interbank eurodollar market for a period equal to such Interest Period and in an amount equal or comparable to the principal amount of the LIBOR Loans scheduled to be made by the Lenders as part of such Borrowing.

"Eurodollar Reserve Percentage" means, for any Borrowing of LIBOR Loans, the daily average for the applicable Interest Period of the maximum rate at which reserves (including, without limitation, any supplemental, marginal and emergency reserves) are imposed during such Interest Period by the Board of Governors of the Federal Reserve System (or any successor) under Regulation D on "eurocurrency liabilities," as defined in such Board's Regulation D, (or in respect of any other category of liabilities that includes deposits by reference to which the interest rate on LIBOR Loans is determined or any category of extension of credit or other assets that include loans by non-United States offices of any Lender to United States residents) subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto. For purposes of this definition, the LIBOR Loans shall be deemed to be "eurocurrency liabilities" as defined in Regulation D.

(c) Rate Determinations. The Agent shall determine each interest rate applicable to the Loans hereunder, and its determination thereof shall be conclusive and binding except in the case of manifest error.

SECTION 3.2 MINIMUM AND MAXIMUM BORROWING AMOUNTS. Each
Borrowing of Prime Rate Loans (other than an L/C Refinancing Borrowing) shall be in an amount not less than $25,000 or any larger amount that is an integral multiple of $25,000. Each Borrowing of LIBOR Loans shall be in an amount not less than $500,000, or any larger amount that is an integral multiple of $100,000.

SECTION 3.3 BASIS OF COMPUTATION. Interest on all Loans shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days, including the date a Loan is made and excluding the date a Loan or any portion thereof is paid or prepaid.

SECTION 3.4 INTEREST PAYMENT DATES. Accrued interest on Prime Rate Loans shall be paid on the fifteenth (15th) day of each March, June, September and December of each year, at maturity and upon payment in full, beginning with the first of such dates to occur after the date of the first such Loan hereunder. Accrued interest on LIBOR Loans shall be paid on the last day of the applicable Interest Period and at maturity and, if the applicable Interest Period is longer than ninety (90) days, on each day occurring ninety (90) days after the date such LIBOR Loan is made. After maturity, whether by acceleration or otherwise, accrued interest on all Loans shall be paid upon demand.

SECTION 3.5 DEFAULT RATE. If the Borrower is in default under any of the financial requirements set forth in Section 6.4 hereof, or if any payment of principal on any Loan or other monetary obligation is not made when due (whether by acceleration or otherwise), such Loan or other monetary obligation shall bear interest, after as well as before judgment, from the date such payment was due until paid in full, payable on demand, at a rate per annum (the "Default Rate") equal to:

(a) with respect to any Prime Rate Loan, the sum of two percent (2%) plus the interest rate from time to time in effect with respect to such Prime Rate Loan pursuant to Section 3.1(a); and

(b) with respect to any LIBOR Loan, the sum of two percent (2%) plus the rate of interest in effect thereon at the time of such default until the end of the Interest Period applicable thereto and, thereafter, at a rate per annum equal to the sum of two percent (2%) plus the Prime Rate from time to time in effect; and

(c) with respect to other monetary obligations for which a Default Rate is not otherwise specified, the sum of two percent (2%) plus the Prime Rate from time to time in effect.

SECTION 3.6 CLOSING FEE. The Borrower agrees to pay each Lender, on the date of execution hereof, a closing fee of $6,250.

SECTION 3.7 COMMITMENT FEE, REDUCTION OF COMMITMENT. The Borrower agrees to pay each Lender a commitment fee (the "Commitment Fee") of three-eighths of one percent (3/8%) per year on the average daily unused amount of each Lender's Commitment Revolving Credit. The Commitment Fee shall commence to accrue on the date of this Agreement and shall be paid on the fifteenth
(15th) day of each March, June, September and December in each year, beginning with the first of such dates to occur after the date of this Agreement, at maturity and upon payment in full. At any time or from time to time, upon at least ten days' prior written notice, which shall be irrevocable, the Borrower may reduce each Lender's Commitment - Revolving Credit in the amount of at least $25,000.00 or in full, provided, however, that all such reductions of Commitment - Revolving Credit shall reduce the Commitment - Revolving Credit of each Lender on a pro rata basis based on the Commitment - Revolving Credit of each Lender immediately prior to such reduction. Upon any such reduction of any part of the unused Commitment - Revolving Credit, the Commitment Fee on the part reduced shall be paid in full as of the date of such reduction.

SECTION 3.8 ADMINISTRATIVE AGENT FEE. The Borrower agrees to pay the Agent an administrative agent fee of $2,500.00 per year. Such administrative agent fee shall be paid in arrears in four
(4) equal payments of $625.00 due on March 15, June 15, September 15 and December 15 of each year. The first such payment shall be due on December 15, 1996

SECTION 4 PAYMENTS AND PREPAYMENTS.

SECTION 4.1 PAYMENTS. All payments and prepayments of principal, interest, closing fees and Commitment Fee shall be made in immediately available funds to each respective Lender at its main banking office in Chicago, Illinois.

SECTION 4.2 MANNER OF BORROWING. The Borrower shall give the Agent written or telephonic prior irrevocable notice (a "Borrowing Notice") by 11:00 a.m., Chicago, Illinois time, (i) on the date at least three (3) Business Days prior to the date of each requested Borrowing of LIBOR Loans and (ii) on the date of any requested Borrowing of Prime Rate Loans. Each such notice shall specify the date of Borrowing, which must be a Business Day, the aggregate amount of the requested Borrowing, the type of Loans to comprise such Borrowing and, if such Borrowing is to be comprised of LIBOR Loans, the Interest Period applicable thereto. The Agent will then notify the Lenders in writing or by telephone by 12:00 noon on the date of receipt of the foregoing notice (which such notice in the case of LaSalle Bank, if it relates to Revolving Credit Loan Borrowings constituting Prime Rate Loans, may be made before or after Northern has funded its 50% portion of such requested Loans) and, if such notice requests the Lenders to make LIBOR Loans, the Agent shall give notice to the Borrower and to the Lenders of the interest rate applicable thereto promptly after the Agent has made such determination. The Lenders, on the date of Borrowing of any Revolving Credit Loan, shall each remit 50% of any requested Revolving Credit Loan to the Borrower's account, except to the extent such Borrowing is either a reborrowing, in whole or in part, of the principal amount of a maturing Borrowing of Loans (a "Refunding Borrowing") or an L/C Refinancing Borrowing, in which case each Lender shall record the Loan made by it as a part of such Refunding Borrowing or L/C Refinancing Borrowing, as the case may be, on its books or records or on a schedule to the appropriate Note, and shall effect the repayment, in whole or in part, as appropriate, of its maturing Loan or reimbursement obligation through the proceeds of such new Loan. At the time Northern has made a Revolving Credit Loan, LaSalle Bank shall be deemed to have funded its 50% share of such Revolving Credit Loan and the obligation to remit to Northern on such day its 50% of the Revolving Credit Loan shall be absolute and irrevocable. Each borrowing from the Lenders under this Agreement shall be made on a pro rata basis of their respective Commitment - Revolving Credit and Commitment - Term Loan. Each payment and prepayment made by the Borrower shall be made to the Lenders pro rata on the basis of the respective amounts of the Loans outstanding immediately prior to such payment or prepayment. In the event the Borrower fails to give notice pursuant to this Section 4.2 of the reborrowing of the principal amount of any maturing Borrowing or of a Borrowing to refinance a reimbursement obligation with respect to a Letter of Credit (an "L/C Refinancing Borrowing") and has not notified the Agent by 11:00 a.m. (Chicago time) on the day such Borrowing matures or such reimbursement obligation becomes due that it intends to repay such Borrowing or such reimbursement obligation with funds not borrowed hereunder, the Borrower shall be deemed to have requested a Borrowing of Prime Rate Loans on such day in the amount of the maturing Borrowing or of the reimbursement obligation then due, which new Borrowing shall be applied to pay, as the case may be, the maturing Borrowing or reimbursement obligation then due.

Each LIBOR Loan shall mature and become due and payable by the Borrower on the last day of the Interest Period applicable thereto.

SECTION 4.3 CHANGE IN CIRCUMSTANCES, ETC. (a) The Borrower agrees to pay to each Lender such amounts as will compensate each Lender for any increase in the cost to such Lender of making or maintaining any Loans hereunder or of maintaining its Commitment
- - Revolving Credit to make Revolving Credit Loans hereunder, caused by any change in any reserve, tax, capital guidelines, special deposit, or similar requirement with respect to assets of, deposits with or for the account of, or credit extended by, or commitments extended by, such Lender which are imposed on such Lender and which are caused by any change in law, treaty, rule, regulation (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System), any interpretation thereof by any governmental, fiscal, monetary or other authority charged with the administration thereof or having jurisdiction over such Loan or such Lender, or any requirement imposed by any such authority, whether or not having the force of law. Such additional amounts shall be payable on demand. Such Lender's calculation of such additional amounts shall be final and binding absent manifest error.

(b) Notwithstanding any other provisions of this Agreement or any Note, if at any time after the date hereof any change in applicable law or in the interpretation thereof makes it unlawful for any Lender to make or continue to maintain LIBOR Loans or to give effect to its obligations as contemplated hereby, such Lender shall promptly give notice thereof to the Borrower, with a copy to the Agent and the other Lender, and such Lender's obligations to make or maintain LIBOR Loans under this Agreement shall terminate until it is no longer unlawful for such Lender to make or maintain LIBOR Loans. The Borrower shall prepay on demand the outstanding principal amount of any such affected LIBOR Loans, together with all interest accrued thereon and all other amounts then due and payable to such Lender under this Agreement; provided, however, subject to all of the terms and conditions of this Agreement, the Borrower may then elect to borrow the principal amount of the affected LIBOR Loan from such Lender by means of a Prime Rate Loan from such Lender that shall not be made ratably by the Lenders but only from such affected Lender.

(c) If on or prior to the first day of any Interest Period for any Borrowing of LIBOR Loans:

(i) The Agent advises the Borrower that deposits in United States Dollars (in the applicable amounts) are not being offered to it in the interbank eurodollar market, for such Interest Period, or

(ii) either Lender advises the Borrower that LIBOR as determined by the Agent will not adequately and fairly reflect the cost to such Lender of funding its LIBOR Loans for such Interest Period, then, until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of the Lenders to make LIBOR Loans shall be suspended.

SECTION 4.4 FUNDING INDEMNITY. In the event any Lender shall incur any loss, cost or expense (including, without limitation, any loss of profit, and any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund or maintain any LIBOR Loan or the relending or reinvesting of such deposits or amounts paid or prepaid to such Lender) as a result of:

(a) any payment (including prepayment) of a LIBOR Loan on a date other than the last day of its Interest Period for any reason, whether before or after default, and whether or not such payment is required by any provisions of this Agreement, or

(b) any failure (because of a failure to meet the conditions of borrowing or otherwise) by the Borrower to borrow a LIBOR Loan on the date specified in a Borrowing Notice,

then, upon the demand of such Lender, the Borrower shall pay to such Lender such amount as will reimburse such Lender for such loss, cost or expense. If any Lender makes such a claim for compensation, it shall provide to the Borrower, with a copy to the Agent and the other Lender, a certificate executed by an officer of such Lender setting forth the amount of such loss, cost or expense in reasonable detail (including an explanation of the basis for and the computation of such loss, cost or expense) and the amounts shown on such certificate shall be deemed rebuttably presumptive evidence of the correctness thereof.

SECTION 4.5 DISCRETION OF LENDERS AS TO MANNER OF FUNDING. Notwithstanding any other provision of this Agreement, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if each Lender had actually funded and maintained each LIBOR Loan through the purchase of deposits in the relevant market having a maturity corresponding to such Loan's Interest Period and bearing an interest rate equal to LIBOR, for such Interest Period.

SECTION 4.6 PREPAYMENTS. The Borrower shall have the privilege of prepaying without premium or penalty and in whole or in part (but, if in part, then: (i) in an amount not less than $250,000 and in integral multiples of $25,000 in the case of Prime Rate Loans, and in an amount not less than $500,000 and in integral multiples of $100,000 in the case of LIBOR Loans and
(ii) in an amount such that the minimum amount required for a Borrowing pursuant to Section 3.2 hereof remains outstanding) on any Business Day upon prior notice to the Lenders which must be received by the Lenders by no later than 11:00 a.m. (Chicago time) on the date of such prepayment in the case of Prime Rate Loans and by no later than 11:00 a.m. (Chicago time) on the date three Business Days in advance of the date of such prepayment in the case of LIBOR Loans, such prepayment to be made by the payment of the principal amount to be prepaid and, in the case of LIBOR Loans, any compensation required by Section 4.4 hereof. Partial prepayments of any outstanding type of Loan shall be applied to the various Borrowings thereof in the inverse order of their maturity. Partial prepayments of the Term Loans shall be applied to installments thereof in the inverse order of their maturity. Unless otherwise designated by the Borrower, prepayments of any outstanding type of Loan shall be deemed paid with respect to such Loans which are Prime Rate Loans.

SECTION 4.7 MANDATORY REPAYMENT. If at any given time from and after the date of this Agreement, the amount of Revolving Credit Loans plus all outstanding and unpaid Letters of Credit issued by all Lenders exceeds the then aggregate amount of the Commitments-Revolving Credit of all Lenders, THEN the Borrower shall immediately repay to the Lenders that amount necessary to reduce the unpaid and outstanding principal amount of the Revolving Credit Loans such that the amount of Revolving Credit Loans plus all outstanding and unpaid Letters of Credit issued by all Lenders is equal to or less than the then aggregate amount of the Commitments-Revolving Credit of all Lenders. All repayments of principal under this Section 4.7 shall include interest accrued to the date of repayment on the principal amount repaid.

SECTION 5 REPRESENTATIONS AND WARRANTIES

To induce each Lender to make each of the Loans, the Borrower represents and warrants, and at the time the Borrower requests or accepts any Loan, the Borrower shall be deemed to represent and warrant, to each Lender that:

SECTION 5.1 ORGANIZATION. The Borrower is a corporation existing and in good standing under the laws of the state of Delaware; any subsidiary is a corporation duly existing and in good standing under the laws of the state of its formation as indicated on Exhibit H; the Borrower and any subsidiary are duly qualified, in good standing and authorized to do business in each jurisdiction where, because of the nature of their activities or properties, such qualification is required and failure to qualify could have a material adverse effect on the Borrower and its Subsidiaries taken as a whole; and the Borrower and any subsidiary have the power and authority to own their properties and to carry on their businesses as now being conducted.

SECTION 5.2 AUTHORIZATION; NO CONFLICT. The borrowings hereunder, the execution and delivery of the Notes and the performance by the Borrower of its obligations under this Agreement and the Notes are within the Borrower's corporate powers, have been authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law or of the charter or by-laws of the Borrower or any subsidiary or of any agreement binding upon the Borrower or any subsidiary.

SECTION 5.3 FINANCIAL STATEMENTS. The Borrower's audited consolidated financial statement as at December 30, 1995 and its unaudited consolidated financial statement as at June 29, 1996, copies of which have been furnished to the Agent, have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year, and accurately present the financial condition of the Borrower and any subsidiary as at such dates and the results of their operations for the respective periods then ended. Since the date of those financial statements, no material, adverse change in the business, properties, assets, operations, conditions or prospects of the Borrower or any subsidiary has occurred of which the Agent has not been advised in writing before this Agreement was signed. There is no known contingent liability of the Borrower or any subsidiary which is known to be in an amount in excess of $100,000.00 which is not reflected in such financial statements or in Exhibit J hereto or of which the Agent has not been advised in writing before this Agreement was signed.

SECTION 5.4 TAXES. The Borrower and any subsidiary have filed or caused to be filed all federal, state and local tax returns which, to the knowledge of the Borrower or any subsidiary, are required to be filed, and have paid or have caused to be paid all taxes as shown on such returns or on any assessment received by them, to the extent that such taxes have become due (except for current taxes not delinquent and taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been provided on the books of the Borrower or the appropriate subsidiary, and as to which no foreclosure, distraint, sale or similar proceedings have been commenced). The Borrower and any subsidiary have set up reserves which are adequate for the payment of additional taxes for years which have not been audited by the respective tax authorities.

SECTION 5.5 LIENS. None of the assets of the Borrower or any subsidiary are subject to any mortgage, pledge, title retention lien, or other lien, encumbrance or security interest, except for: (a) current taxes not delinquent or taxes being contested in good faith and by appropriate proceedings; (b) liens arising in the ordinary course of business for sums not due or sums being contested in good faith and by appropriate proceedings, but not involving any deposits or advances or borrowed money or the deferred purchase price of property or services; (c) to the extent specifically shown in the financial statements referred to above; and (d) liens existing on the date hereof as listed in Exhibit I hereto.

SECTION 5.6 ADVERSE CONTRACTS. Neither the Borrower nor any subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction, nor is it subject to any judgment, decree or order of any court or governmental body, which may have a material and adverse effect on the business, assets, liabilities, financial condition, operations or business prospects of the Borrower and its subsidiaries taken as a whole or on the ability of the Borrower to perform its obligations under this Agreement or the Notes. Neither the Borrower nor any subsidiary has, nor with reasonable diligence should have had, knowledge of or notice that it is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any such agreement, instrument, restriction, judgment, decree or order.

SECTION 5.7 REGULATION U. The Borrower is not engaged principally in, nor is one of the Borrower's important activities, the business of extending credit for the purpose of purchasing or carrying "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereinafter in effect.

SECTION 5.8 LITIGATION AND CONTINGENT LIABILITIES, No litigation (including derivative actions), arbitration proceedings or governmental proceedings are pending or threatened against the Borrower which would (singly or in the aggregate), if adversely determined, have a material and adverse effect on the financial condition, continued operations or prospects of the Borrower or any subsidiary, except as set forth (including estimates of the dollar amounts involved) in Exhibit J hereto.

SECTION 5.9 SUBSIDIARIES. Attached hereto as Exhibit H is a correct and complete list of all subsidiaries and affiliates of the Borrower.

SECTION 5.10 PURPOSE. The Borrower shall use the proceeds of the Loans to refinance the amounts owing under the Prior Documents, to finance the Acquisition, for working capital purposes, and for general corporate purposes, including capital expenditures.

SECTION 6 COVENANTS

Until all obligations of the Borrower hereunder and under the Notes are paid and fulfilled in full, and as a condition precedent to the Borrower requesting the Term Loans and any Revolving Credit Loan, the Borrower agrees that it shall, and shall cause any subsidiary to, comply with the following covenants, unless the Lenders consent otherwise in writing:

SECTION 6.1 CORPORATE EXISTENCE, MERGERS, ETC. The Borrower and any subsidiary shall preserve and maintain its corporate existence, rights, franchises, licenses and privileges, and will not liquidate, dissolve, or merge, or consolidate with or into any other corporation, or sell, lease, transfer or otherwise dispose of all or a substantial part of its assets, except that:

(a) Any subsidiary may merge or consolidate with or into any one or more wholly-owned subsidiaries;

(b) Any subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Borrower or one or more wholly-owned subsidiaries; and

(c) The Borrower may liquidate, dissolve, sell, lease, transfer, or otherwise dispose of the net assets of any subsidiary whose net assets constitute ten percent (10%) or less of the Borrower's consolidated net assets. For purposes of this Section 6.1(c), the Borrower's consolidated net assets shall be determined immediately prior to any such liquidation, dissolution, sale, lease, transfer, or other disposition, and the ten percent limitation applies on a cumulative basis to all such dispositions during the period beginning on the date hereof and ending on the Termination Date.

SECTION 6.2 REPORTS, CERTIFICATES AND OTHER INFORMATION. The Borrower shall furnish to Agent, with sufficient copies for each Lender:

(a) Interim Reports. Within 45 days after the end of each quarter of each fiscal year of the Borrower, a copy of an unaudited financial statement of the Borrower and any subsidiary prepared on a consolidated basis consistent with the audited consolidated financial statements of the Borrower and any subsidiary referred to above, signed by an authorized officer of the Borrower and consisting of at least (i) a balance sheet as at the close of such quarter and (ii) a statements of earnings and cash flows for such quarter and for the period from the beginning of such fiscal year to the close of such quarter.

(b) Audit Report. Within 100 days after the end of each fiscal year of the Borrower, a copy of an annual audit report of the Borrower and any subsidiary prepared on a consolidated basis and in conformity with generally accepted accounting principles applied on a basis consistent with the audited consolidated financial statements of the Borrower and any subsidiary referred to above, duly certified by independent certified public accountants of recognized standing satisfactory to the Lender, accompanied by an opinion without significant qualification.

(c) Certificates. Contemporaneously with the furnishing of a copy of each quarterly report provided for in this Section, a certificate dated the date of such quarterly report and signed by either the President, the Chief Accounting officer or the Treasurer of the Borrower, to the effect that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and containing (except in the case of the certificate dated the date of the annual report) a computation of, and showing compliance with, any financial ratio or restriction contained in this Agreement, and also containing a description of the amount and type of capital expenditures which are excluded from capital expenditures pursuant to the parenthetical in clause (iv) of the definition of Income Available for Fixed Charges.

(d) Reports to SEC and to Shareholders. Copies of each filing and report made by the Borrower or any subsidiary with or to any securities exchange or the Securities and Exchange Commission, except in respect of any single shareholder, and of each communication from the Borrower or any subsidiary to Borrower's shareholders generally, promptly upon the filing or making thereof.

(e) Notice of Default, Litigation and ERISA Matters. Immediately upon learning of the occurrence of any of the following, written notice describing the same and the steps being taken by the Borrower or any subsidiary affected in respect thereof: (i) the occurrence of an Event of Default or an Unmatured Event of Default; or (ii) the institution of, or any adverse determination in, any litigation, arbitration or governmental proceeding which is material to the Borrower or any subsidiary on a consolidated basis; or (iii) the occurrence of a reportable event under, or the institution of steps by the Borrower or any subsidiary to withdraw from, or the institution of any steps to terminate, any employee benefit plans as to which the Borrower or any of its subsidiaries may have any liability.

(f) Subsidiaries. Promptly from time to time a written report of any changes in the list of its subsidiaries.
(g) Other Information. From time to time such other information, financial or otherwise, concerning the Borrower or any subsidiary as the Agent or either Lender may reasonably request.

SECTION 6.3 INSPECTION. The Borrower and any subsidiary shall permit the Agent or any Lender and their agents at any time during normal business hours to inspect their properties and to inspect and make copies of their books and records.

SECTION 6.4 FINANCIAL REQUIREMENTS. Until all of the obligations of the Borrower under this Agreement and the Notes are fully paid and performed, neither the Borrower nor any subsidiary will, unless at any time both Lenders shall otherwise expressly consent in writing:

(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio, as determined as of December 28, 1996 and as of the end of each fiscal quarter thereafter of the Borrower's fiscal year, in all instances for the period of the four fiscal quarters then ending, to be less than 1.25:1.0;

(b) Current Ratio. Permit the ratio of consolidated current assets to current liabilities (with current liabilities not including the final installment on the Term Loans due on June 15, 2001) as determined as of the end of each fiscal quarter of the Borrower's fiscal year, to be less than 1.75:1.0;

(c) Tangible Net Worth. Permit the Borrower's consolidated Tangible Net Worth, determined as of the end of each fiscal quarter of the Borrower's fiscal year, to be less than $25,000,000, plus fifty percent (50%) of the Borrower's cumulative consolidated net income (disregarding losses) for all periods subsequent to December 28, 1996.

(d) Leverage Ratio. Permit the Borrower's ratio of (i) consolidated Funded Debt as at the end of each fiscal quarter of the Borrower's fiscal year, to (ii) EBITDA for the Measurement Period ending at the last day of such quarter, to exceed 2.5:1.0 as at the end of each fiscal quarter ending after September 28, 1996.

SECTION 6.5 INDEBTEDNESS, LIENS AND TAXES. The Borrower and any subsidiary shall:

(a) Indebtedness. Not incur, permit to remain outstanding, assume or in any way become committed for Indebtedness in respect of borrowed money, except (i) Indebtedness incurred hereunder or to either Lender; (ii) Indebtedness existing on the date of this Agreement shown on the financial statements furnished to both Lenders before this Agreement was signed;
(iii) other Indebtedness existing on the date hereof as listed in Exhibit K hereto; (iv) other Indebtedness to which the Lenders give the Borrower prior written consent; and (v) Indebtedness in the aggregate amount not greater than five percent (5%) of the Tangible Net Worth of the Borrower at any time or from time to time.

(b) Liens. Not create, suffer or permit to exist any lien or encumbrance of any kind or nature upon any of their assets now or hereafter owned or acquired, or acquire or agree to acquire any property or assets of any character under any conditional sale agreement or other title retention agreement, but this
Section shall not be deemed to apply to: (i) liens existing on the date of this Agreement which are listed on Exhibit I hereto or of which the Lenders have been advised in writing before this Agreement was signed; (ii) liens of landlords, contractors, laborers or supplement, tax liens, or liens securing performance or appeal bonds or other similar liens or charges arising out of the Borrower's business, provided that tax liens are removed before related taxes become delinquent and other liens are promptly removed, in either case unless contested in good faith and by appropriate proceedings, and as to which adequate reserves shall have been established; and
(iii) liens securing borrowings or advances from the Borrower to wholly-owned subsidiaries.

(c) Taxes. Pay and discharge all taxes, assessments and governmental charges or levies imposed upon them, upon their income or profits or upon any properties belonging to them, prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies when due, except that no such tax, assessment, charge, levy or claim need be paid which is being contested in good faith by appropriate proceedings and as to which adequate reserves shall have been established, and as to which no foreclosure, distraint, sale or similar proceedings have commenced.

(d) Keep Well Agreements. Except as set forth in Exhibit J hereto, not assume, guarantee, indorse or otherwise become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services, or otherwise) with respect to the obligation of any other person or entity, except by the endorsement of negotiable instruments for deposit or collection in the ordinary course of business and except as permitted by this Agreement.

SECTION 6.6 INVESTMENTS AND LOANS. Neither the Borrower nor any subsidiary shall make any loan, advance, extension of credit or capital contribution to, or purchase or otherwise acquire for a consideration, evidences of indebtedness, capital stock or
other securities of, or all or substantially all of the assets of, any person in an aggregate amount greater than $1,500,000 (as determined for the period beginning on the date hereof and ending on the Termination Date), except that the Borrower and any subsidiary may:

(a) purchase or otherwise acquire and own short-term money market items;

(b) extend credit upon customary terms to their customers in the ordinary course of their business; and

(c) extend credit to officers and employees in accordance with policies in effect on the date of this Agreement of which the Lenders have been advised in writing.

SECTION 6.7 CAPITAL STRUCTURE AND DIVIDENDS. Neither the Borrower nor any subsidiary shall purchase or redeem, or obligate itself to purchase or redeem, any shares of the Borrower's capital stock, of any class, issued and outstanding from time to time, provided, however, that the Borrower may purchase an amount of shares of the Borrower's capital stock in a total amount not to exceed $1,000,000 in the aggregate (as determined for the period beginning on the date hereof and ending on the Termination Date); or declare or pay any dividend (other than dividends payable in its own common stock or to the Borrower) or make any other distribution in respect of such shares other than to the Borrower. The Borrower shall continue to own, directly or indirectly, the same (or greater) percentage of the stock of each subsidiary that it held on the date of this Agreement, and no subsidiary shall issue any additional securities other than to
the Borrower.

SECTION 6.8 MAINTENANCE OF PROPERTIES. The Borrower and any subsidiary shall maintain, or cause to be maintained, in good repair, working order and condition, all their properties (whether owned or held under lease), and from time to time make or cause to be made all needed and appropriate repairs, renewals, replacements, additions, betterments and improvements thereto, so that the business carried on in connection therewith may be properly and advantageously conducted at all times.

SECTION 6.9 INSURANCE. The Borrower and any subsidiary shall maintain insurance in responsible companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general area in which the Borrower or its subsidiaries operate. The Lenders agree that the Borrower may self-insure certain risks and that the levels of such self-insurance shall be reasonably and prudently determined solely by the Borrower.

SECTION 6.10 USE OF PROCEEDS.

(a) General. The Borrower and any subsidiary shall not use or permit any proceeds of the Loans to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying any margin stock' within the meaning of Regulations U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. If requested by either Lender, the Borrower and any subsidiary will furnish to such Lender a statement in conformity with the requirements of Federal Reserve Form U-1 to the foregoing effect. No part of the proceeds of the Loans will be used for any purpose which violates or is inconsistent with the provisions of Regulation U or X of the Board of Governors.

(b) Tender Offers and Going Private. Neither the Borrower nor any subsidiary shall use (or permit to be used) any proceeds of the Loans to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended, or any regulations or rulings thereunder.

SECTION 6.11 PURPOSE. The Borrower shall use the proceeds of the Loans as set forth in Section 5.10 above.

SECTION 6.12 ACCOUNTING PERIODS. The Borrower shall not alter the method by which it establishes the dates on which its fiscal year and fiscal quarters end without prior written notice to the Agent.

SECTION 7 CONDITIONS OF LENDING

The obligation of each Lender to make the Term Loan and each of the Revolving Credit Loans is subject to the following conditions precedent:

SECTION 7.1 DOCUMENTATION; FIRST LOAN. In addition to the conditions precedent set forth in Section 7.2 hereinbelow, the obligation of both Lenders to make the Term Loan and the first Revolving Credit Loan is subject to the conditions precedent that both Lenders shall have received all of the following, each duly executed and dated the date of this Agreement, in form and substance satisfactory to the Lenders and their counsel, at the expense of the Borrower, and in such number of signed counterparts as each Lender may request (except for the Notes, of which only the original of each shall be signed):

(a) Revolving Credit Note. Revolving Credit Notes in the form of Exhibit A, with appropriate insertions, each payable to each Lender for the face amount of such Lender's Commitment
- Revolving Credit;

(b) Term Note. Term Notes in the form of Exhibit B, with appropriate insertions, each payable to each Lender for the face amount of such Lender's Commitment - Term Loan;

(c) Resolutions. A copy of a resolution of the Board of Directors of the Borrower authorizing or ratifying the execution, delivery and performance, respectively, of this Agreement, the Notes and the other documents provided for in this Agreement, certified by the Secretary of the Borrower; copies of the resolutions of the Board of Directors of each subsidiary authorizing or ratifying the execution, delivery and performance of its guaranty, certified by its Secretary;

(d) Articles of Incorporation and By-laws; Good Standing Certificates. A copy of the articles of incorporation and by laws of the Borrower and each subsidiary, certified by the Secretary of the Borrower and each subsidiary, respectively, or, in lieu thereof, certification by the Secretary of the Borrower and each subsidiary that there have been no changes to said articles of incorporation and by-laws since the date(s) when certified copies thereof were last furnished to the Lenders; good standing certificates issued by the Secretary of State of each state in which the Borrower or such subsidiary is incorporated and qualified to do business;

(e) Certificates of Incumbency. A certificate of the Secretary of the Borrower and each subsidiary certifying the names of the officer or officers of the Borrower or such subsidiary authorized to sign this Agreement, the Notes, its guaranty and the other documents provided for in this Agreement to be signed by the Borrower and such subsidiary, together with a sample of the true signature of each such officer (the Lender may conclusively rely on such certificate until formally advised by a like certificate of any changes therein);

(f) Guaranties. The Transit Mix Guaranty in the form of Exhibit C, with appropriate insertions; the Phoenix Guaranty in the form of Exhibit D, with appropriate insertions; the Williams Guaranty in the form of Exhibit E, with appropriate insertions; and the Castle Guaranty in the form of Exhibit F, and the Pueblo Guaranty in the form of Exhibit G with appropriate insertions;

(g) Certificate of No Default. A certificate signed by the Chairman of the Board of Directors, the Chief Financial Officer, the Treasurer or the Secretary of the Borrower to the effect that: (i) no Event of Default or Unmatured Event of Default has occurred and is continuing or will result from the making of the Term Loan and the first Revolving Credit Loan; and (ii) the representations and warranties of the Borrower contained herein are true and correct as at the date of the Term Loan and the first Revolving Credit Loan as though made on that date;

(h) Opinion of Counsel to the Borrower and Subsidiaries. An opinion of counsel to the Borrower and its subsidiaries to such effect as the Lenders may require;

(i) Acquisition Agreement. A certified copy of the Acquisition Agreement;

(j) Acquisition. The Agent shall have received evidence, reasonably satisfactory to the Agent, that the Acquisition has been completed on terms and conditions satisfactory to the Lenders;

(k) Certificate of Financial Compliance. A certificate signed by the Chairman of the Board of Directors, the Chief Financial Officer, the Treasurer or the Secretary of the Borrower, showing that as of September 28, 1996, the Borrower was in full compliance with any financial ratio or restriction contained in the Original Agreement and also containing a description of the amount and type of capital expenditures which are excluded from capital expenditures pursuant to the parenthetical in clause (iv) of the definition of Income Available for Fixed Charges as set forth in the Original Agreement; and

(l) Miscellaneous. Such other documents and certificates as the Agent or the Lenders may request.

SECTION 7.2 REPRESENTATIONS AND WARRANTIES: NO DEFAULT.

(a) Representations and Warranties. At the date of the Term Loan and each Revolving Credit Loan, the Borrower's representations and warranties set forth herein shall be true and correct as at such date with the same effect as though those representations and warranties had been made on and as at such date.

(b) No Default. At the time of the Term Loan and each Revolving Credit Loan, and immediately after giving effect to the Term Loan and each Revolving Credit Loan, the Borrower shall be in compliance with all the terms and provisions set forth herein on its part to be observed or performed, and no Event of Default or Unmatured Event of Default shall have occurred and be continuing at the time of any Loan, or would result from the making of any Loan.

SECTION 7.3 SUCCEEDING LOANS. The application by the Borrower for any Revolving Credit Loan other than the first shall be deemed a representation and warranty by the Borrower that the statements in Section 7.2 are true and correct on and as of the date of each such Loan.

SECTION 8 DEFAULT

SECTION 8.1 EVENTS OF DEFAULT. Each of the following occurrences is hereby defined as an "Event of Default":

(a) Nonpayment or Non-Compliance with Financial Requirements. The Borrower shall fail to make any payment of principal, interest, or other amounts payable hereunder when and as due, or shall fail to be in compliance with any of the Financial requirements set forth at Section 6.4 hereof; or

(b) Default under Related Documents. Any default, event of default, or similar event shall occur or continue beyond any applicable grace or notice period under any Loan Document, or any Loan Document shall not be, or shall cease to be, enforceable in accordance with its terms; or

(c) Cross-Default. There shall occur any default or event of default, or any event which might become such with notice or the passage of time or both, or any similar event, or any event which requires the prepayment of borrowed money or the acceleration of the maturity thereof, under the terms of any evidence of indebtedness or other agreement issued or assumed or entered into by the Borrower or any subsidiary or under the terms of any indenture, agreement or instrument under which any such evidence of indebtedness or other agreement is issued, assumed, secured or guaranteed, and such event shall continue beyond any applicable period of grace; or

(d) Dissolutions, etc, The Borrower shall fail to comply with any provision concerning its existence or that of any subsidiary or any prohibition against dissolution, liquidation, merger, consolidation or sale of assets; or

(e) Warranties. Any representation, warranty, schedule, certificate, financial statement, report, notice or other writing furnished by or on behalf of the Borrower or to the Agent or to either Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or

(f) Change in Control. A transfer of or an accumulation of a majority of the outstanding capital stock of the Borrower shall be acquired, directly or indirectly, by a person or entity, or group of persons or entities acting in concert, who own on the date hereof less than 5% of such voting stock; or

(g) ERISA. Any reportable event shall occur under the Employee Retirement Income Security Act of 1974, as amended, in respect of any employee benefit plan maintained for employees of the Borrower or any subsidiary; or

(h) Litigation. Any suit, action or other proceeding (judicial or administrative) commenced against the Borrower or any subsidiary, or with respect to any assets of the Borrower or any subsidiary, shall threaten to have a material and adverse effect on the future operations of the Borrower or any subsidiary; or a final judgment or settlement shall be entered in, or agreed to in respect of, any such suit, action or proceeding and said final judgment or settlement is for or in an amount which would have a material adverse effect on the Borrower and its subsidiaries taken as a whole; or

(i) Noncompliance with this Agreement. The Borrower shall fail to comply with any material provision hereof, which failure does not otherwise constitute an Event of Default, and such failure shall continue for thirty days after notice thereof to the Borrower by the Agent or either Lender or any other holder of a Note; or

(j) Guaranty. Any guaranty of the Loans (specifically including but not limited to the Transit Mix Guaranty, the Phoenix Guaranty, the Williams Guaranty, the Castle Guaranty or the Pueblo Guaranty) shall be repudiated or become unenforceable or incapable of performance; or

(k) Voluntary Bankruptcy. The Borrower or any subsidiary shall file a petition or answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy law or other similar law, or the Borrower or any subsidiary shall consent to the institution of proceedings thereunder or the filing of any such petition or to the appointment or taking possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Borrower or any subsidiary; or

(l) Involuntary Bankruptcy. There shall be entered a decree or order by a court constituting an order for relief in respect of the Borrower or any subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Borrower or any subsidiary or of any substantial part of their respective properties, or ordering the winding-up of or liquidation of the affairs of the Borrower or any subsidiary and any such decree or order shall continue unstayed and in effect for a period of forty-five
(45) consecutive calendar days; or

(m) Insolvency. The Borrower or any subsidiary shall become insolvent or shall fail or be unable to pay its debts as they mature, shall admit in writing its inability to pay its debts as they mature, shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business.

SECTION 8.2 REMEDIES. Upon the occurrence of any Event of Default set forth in subsections
(a)-(j) of Section 8.1 and during the continuance thereof, Agent shall, at the request of, or may, with the consent of the Lenders declare the Notes and any other amounts owed to the Lenders, including without limitation any accrued but unpaid Commitment Fee, to be immediately due and payable, whereupon the Notes and any other amounts owed to the Lenders shall forthwith become due and payable. Upon the occurrence of any Event of Default set forth in subsections (k)
(m) of Section 8.1, all of the Notes and any other amounts owed to both Lenders, including without limitation any accrued but unpaid Commitment Fee, shall be immediately and automatically due and payable without action of any kind on the part of either Lender or any other holder of a Note. Upon the occurrence of any Event of Default, any obligation of either Lender to make Loans shall immediately and automatically terminate without action of any kind on the part of the Agent or either Lender until such Event of Default is waived by the Lenders, if ever. The Borrower expressly waives presentment, demand, notice or protest of any kind in connection herewith. The Agent shall promptly give the Borrower written notice of any such declaration, but failure to do so shall not impair the effect of such declaration. No delay or omission on the part of the Agent, the Lenders or any holder of a Note in exercising any power or right hereunder or under such Note shall impair such right or power or be construed to be a waiver of any Event of Default or any acquiescence therein, nor shall any single or partial exercise of any power or right hereunder preclude other or further exercise thereof, or the exercise of any other power or right.

SECTION 9 THE AGENT

SECTION 9.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Documents or otherwise exist against the Agent.

SECTION 9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

SECTION 9.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct) or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Borrower, or any subsidiary or affiliate of the Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any of the Borrower's subsidiaries or affiliates.

SECTION 9.4 RELIANCE BY AGENT. (a) the Agent shall be entitled to rely, and shall be fully protected in relying upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document until it shall have first received such advice or concurrence of the Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting under this Agreement or any other Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders.

(b) for purposes of determining compliance with the conditions specified in Section 7.1 hereof, each Lender shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender.

SECTION 9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default, except with regard to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Event of Default and stating that such notice is a "notice of default." The Agent shall promptly notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Event of Default as may be requested by the Lenders in accordance with Section 8 hereof; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Lenders.

SECTION 9.6 CREDIT DECISION. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower and its subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and its subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Borrower which may come into the possession of any of the Agent Related Persons.

SECTION 9.7 INDEMNIFICATION OF AGENT. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrower and without limiting the obligation of the Borrower to do so), pro rata, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including legal fees) of any kind or nature whatsoever which may at any time (including at any time following the repayment of the Loans, the termination of the Letters of Credit or the resignation or replacement of the Agent) be imposed on, incurred by or asserted against such Agent-Related Persons in any way relating to or arising out of this Agreement, or any Loan document, or any of the transactions contemplated hereby, or any action taken or omitted by such Agent-Related Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding relating to or arising out of this Agreement or the Loans or the Letters of Credit or the use of the proceeds thereof, whether or not the Agent-Related Person so indemnified is a party thereto; provided, however, that the Lenders shall have no obligation hereunder to indemnify any Agent-Related Person under this Section 9.7 with respect to obligations resulting solely from the gross negligence or willful misconduct of such Agent-Related Person. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including legal fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive the payment of all obligations hereunder and the resignation or replacement of the Agent.

SECTION 9.8 AGENT IN INDIVIDUAL CAPACITY. Northern and its affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its subsidiaries and affiliates as though Northern were not the Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Northern or its affiliates may receive information regarding the Borrower or its subsidiaries (including information that may be subject to confidentiality obligations in favor of the Borrower or such subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, Northern shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent.

SECTION 9.9 SUCCESSOR AGENT. The Agent may, and at the request of the Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the Agent resigns under this Agreement, the Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Borrower, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the applicable provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by its while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Lenders appoint a successor agent as provided for above.

SECTION 10 MISCELLANEOUS

SECTION 10.1 WAIVER OF DEFAULT. The Lenders may, by written notice to the Borrower, at any time and from time to time, waive any default in the performance or observance of any condition, covenant or other term hereof, or any Event of Default, which shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, the Lenders and the Borrower shall be restored to their former position and rights hereunder and under the Notes, respectively, and any default or Event of Default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to or impair any right consequent thereon or to any subsequent or other default or Event of Default.

SECTION 10.2 NOTICES. All notices, requests and demands to or upon the respective parties hereto shall be deemed to have been given or made when deposited in the mail, postage prepaid, or when sent if sent by facsimile, addressed:

(a) if to the Borrower to 225 West Wacker Drive, Chicago, Illinois 60606 (Attention: Treasurer)

(b) if to Northern, in its capacity as Agent, or in its capacity as a Lender, to 50 South LaSalle Street, Chicago, Illinois 60675, (Attention: Joseph M. Kunze, Vice President)

(c) if to LaSalle Bank to 120 South LaSalle Street, Chicago, Illinois 60603, (Attention: Michael Foster, Senior Vice President)

or to such other address as may be hereafter designated in writing by the respective parties hereto.

SECTION 10.3 NONWAIVER: CUMULATIVE REMEDIES. No failure to exercise, and no delay in exercising, on the part of the Agent or either or all of the Lenders of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Lenders herein provided are cumulative and not exclusive of any rights or remedies provided by law.

SECTION 10.4 SURVIVAL OF AGREEMENTS. All agreements, representations and warranties made herein shall survive the delivery of the Notes and the making of any Loan hereunder.

SECTION 10.5 SUCCESSORS; PARTICIPATIONS. This Agreement shall, upon execution and delivery by the Borrower, and acceptance by the Lenders in Chicago, Illinois, become effective and shall be binding upon and inure to the benefit of the Borrower, the Agent, the Lenders and their respective successors and assigns, except that the Borrower may not transfer or assign any of its rights or interest hereunder without the prior written consent of all Lenders. The Lenders may, without notice or consent of any kind, sell, assign, transfer or grant participations in all or any of the Loans. In such event each and every immediate and successive assignee, transferee or holder of or participant in all or any of the Loans shall have the right to enforce this Agreement, the Notes, and all of the other document or instrument executed in connection herewith, by suit or otherwise, for the benefit of such assignee, transferee, holder or participant as fully as if such assignee, transferee, holder or participant were herein by name specifically given such rights, powers and benefits, but the Lenders shall have an unimpaired right, prior and superior to that of any assignee, transferee or holder to enforce this Agreement, the Notes, and all of the other documents or instrument executed in connection herewith for the benefit of the Lenders or any such participant,
as to so much of the Loans as it has not sold, assigned or transferred.

SECTION 10.6 CAPTIONS. Captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. References herein to Sections or provisions without reference to the document in which they are contained are references to this Agreement.

SECTION 10.7 SINGULAR AND PLURAL. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the others where appropriate.

SECTION 10.8 COUNTERPARTS. This Agreement may be executed by the parties on any number of separate counterparts, and by each party on separate counterparts; each counterpart shall be deemed an original instrument; and all of the counterparts taken together shall be deemed to constitute one and the same instrument.

SECTION 10.9 FEES. The Borrower agrees, upon demand of the Lenders, to pay or reimburse the Lenders for all reasonable costs, expenses (including attorneys' fees and legal costs and expenses, and time charges of attorneys who may be employees of either of the Lenders, in each case both in and out of court and in original, appellate and bankruptcy proceedings), and disbursements incurred or paid by the Lenders in connection with the preparation, negotiation, documentation, administration, amendment, modification, waiver or interpretation of this Agreement, and/or in enforcing or preserving its rights hereunder or under the Notes or any document or instrument executed in connection herewith. Notwithstanding the foregoing, the Borrower shall not be obligated to pay expenses of the Lenders pertaining to any lawsuit initiated by the Lenders if the Lender's complaint shall be dismissed with prejudice or if judgment shall be rendered, in whole, against the Lenders (and shall not be reversed on appeal).

SECTION 10.10 CONSTRUCTION; PROVISIONS SEVERABLE, This Agreement, the Notes and any document or instrument executed in connection herewith shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of Illinois, and shall be deemed to have been executed in the State of Illinois. If any term or provision of this Agreement, the Notes, or any other documents or instrument executed in connection herewith shall be unenforceable or invalid, such unenforceability or invalidity shall not render any other term or provision hereof unenforceable or invalid, and all other terms and provisions of this Agreement, the Notes, and any other documents or instrument executed in connection herewith shall be enforceable and valid.

SECTION 10.11 SUBMISSION TO JURISDICTION; VENUE. To induce the Lenders to make the Loans, as evidenced by the Notes and this Agreement, the Borrower irrevocably agrees that, subject to the Lender's sole and absolute election, all suits, actions or other proceedings in any way, manner or respect, arising out of or from or related to this Agreement, the Notes or any document or instrument executed in connection herewith, shall be subject to litigation in courts having situs within Chicago, Illinois. The Borrower hereby consents and submits to the jurisdiction of any local, state or federal court located within Chicago, Illinois. The Borrower hereby waives any right it may have to transfer or change the venue of any suit, action or other proceeding brought against the Borrower by the Lenders in accordance with this Section.

SECTION 10.12 SET-OFF. At any time and without notice of any kind, any account, deposit or other indebtedness owing by either Lender to Borrower, and any securities or other property of Borrower delivered to or left in the possession of either Lender or its nominee or bailee, may be set off against and applied in payment of any obligation hereunder (whether as Loans or Letters of Credit), whether due or not. The Lenders hereby agree that if either shall, through the exercise of any right of counterclaim, set-off, banker's lien, or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to its participation in the Loans that is greater than the proportion received by the Lenders in respect of the aggregate amount of principal and interest due with respect to its pro rata share in the Loans, the party receiving such proportionately greater payment shall increase (the "Set-Off Increase") its Commitment - Revolving Credit or Commitment - Term Loan (which it shall be deemed to have done simultaneously upon receipt of such payment) in the Revolving Credit Loans or Term Loan, respectively, so that all such recoveries of principal and interest with respect to all Loans and Letters of Credit shall be on a pro rata basis. If at any time either Lender is required to return or refund all or any part of a payment, then after its refund or repayment, its increased Commitment - Revolving Credit or Commitment Term Loan shall be computed as if it had never received such payment.

SECTION 10.13 DOCUMENTATION. Both Lenders represent, warrant, and covenant to the other Lender that:

(a) In making its decision to enter into this Agreement and the Notes:

(i) it independently has taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Borrower;

(ii) it has made an independent credit judgment;

(iii) it has not relied upon any representation by the other Lender; and

(iv) neither Lender shall be responsible or liable to the other Lender for any statements in or omissions from this Agreement, the Notes, or any other document or instrument executed by the Borrower or by and among the Borrower and the Lenders and document or instrument received by either Lender from the Borrower or concerning the Borrower, and

(b) With respect to the Loans and Letters of Credit and so long as any portion of the Loans and Letters of Credit, respectively, remains outstanding, each Lender will continue to make its own independent evaluation of the financial conditions and affairs of the Borrower.

SECTION 10.14 LENDERS. The Lenders agree that neither Lender may amend, waive, alter or agree to any other modification of this Agreement, the Notes and all other documents or instruments executed in connection herewith without the prior written consent and agreement of the other Lender.

SECTION 10.15 MERGER AND INTEGRATION. Commencing as of the date of this Agreement, this Agreement, the Notes, the Letters of Credit, the Guaranties referred to herein, and the other documents and instruments referred to herein contain the entire agreement among the parties hereto and thereto with respect to the subject matter hereof and thereof, and specifically supersede, amend and restate in their entirety the Prior Documents and the commitments thereunder shall be deemed terminated. Notwithstanding the foregoing and without limiting any other rights that may have accrued under the Prior Documents prior to the date hereof, all rights of the Lenders under the Prior Documents to payment under the Prior Documents that have accrued or arose on or prior to the date hereof, shall survive the termination of commitments under the Prior Documents, and the principal amount of all advances made under the Prior Documents shall not, however, be deemed paid in full but rather transferred as provided herein. All Notes issued hereunder are, to the extent of such outstanding indebtedness, in substitution for, and not in repayment of, the principal indebtedness evidenced by the Original Agreement.

CONTINENTAL MATERIALS CORPORATION

By:
Its:

THE NORTHERN TRUST COMPANY

By:
Its:

LASALLE NATIONAL BANK

By:
Its: