SEC Filing | L.B. Foster Company

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 2004 ------------- Commission File Number 0-10436 ------- L. B. Foster Company -------------------- (Exact name of Registrant as specified in its charter) Pennsylvania 25-1324733 ------------ ---------- (State of Incorporation) (I. R. S. Employer Identification No.) 415 Holiday Drive, Pittsburgh, Pennsylvania 15220 ------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (412) 928-3417 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] Indicate the number of shares of each of the registrant's classes of common stock as of the latest practicable date. Class Outstanding at August 2, 2004 ----- ----------------------------- Common Stock, Par Value $.01 10,014,770 Shares

L.B. FOSTER COMPANY AND SUBSIDIARIES INDEX ----- PART I. Financial Information Page - ------------------------------ ---- Item 1. Financial Statements: Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk 21 Item 4. Controls and Procedures 21 PART II. Other Information - --------------------------- Item 1. Legal Proceedings 21 Item 4. Results of Votes of Security Holders 21 Item 6. Exhibits and Reports on Form 8-K 22 Signature 25

3 L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) June 30, December 31, 2004 2003 -------------- -------------- ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 2,723 $ 4,134 Accounts and notes receivable: Trade 46,043 34,668 Other 345 105 -------------- -------------- 46,388 34,773 Inventories 37,330 36,894 Current deferred tax assets 1,413 1,413 Other current assets 1,142 877 Property held for resale - 446 -------------- -------------- Total Current Assets 88,996 78,537 -------------- -------------- Property, Plant & Equipment - At Cost 70,832 70,814 Less Accumulated Depreciation (38,902) (37,679) -------------- -------------- 31,930 33,135 -------------- -------------- Other Assets: Goodwill 350 350 Other intangibles - net 508 585 Investments 14,202 13,707 Deferred tax assets 4,073 4,095 Other assets 418 750 -------------- -------------- Total Other Assets 19,551 19,487 -------------- -------------- TOTAL ASSETS $ 140,477 $ 131,159 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 481 $ 611 Accounts payable - trade 27,783 23,874 Accrued payroll and employee benefits 3,271 2,909 Current deferred tax liabilities 1,749 1,749 Other accrued liabilities 2,756 2,550 -------------- -------------- Total Current Liabilities 36,040 31,693 -------------- -------------- Long-Term Borrowings 21,000 17,000 -------------- -------------- Other Long-Term Debt 3,623 3,858 -------------- -------------- Deferred Tax Liabilities 3,653 3,653 -------------- -------------- Other Long-Term Liabilites 3,070 4,411 -------------- -------------- STOCKHOLDERS' EQUITY: Common stock 102 102 Paid-in capital 35,030 35,018 Retained earnings 39,581 38,399 Treasury stock (985) (2,304) Accumulated other comprehensive loss (637) (671) -------------- -------------- Total Stockholders' Equity 73,091 70,544 -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 140,477 $ 131,159 ============== ============== See Notes to Condensed Consolidated Financial Statements.

4 L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) Three Months Six Months Ended Ended June 30, June 30, -------------------------------- -------------------------------- 2004 2003 2004 2003 -------------------------------- -------------------------------- (Unaudited) (Unaudited) Net Sales $ 76,827 $ 75,796 $ 142,279 $ 135,315 Cost of Goods Sold 67,494 66,600 126,964 119,186 --------------- -------------- --------------- -------------- Gross Profit 9,333 9,196 15,315 16,129 Selling and Administrative Expenses 7,054 6,830 13,455 13,397 Interest Expense 469 578 932 1,157 Other Income (350) (54) (1,044) (374) --------------- -------------- --------------- -------------- 7,173 7,354 13,343 14,180 --------------- -------------- --------------- -------------- Income From Continuing Operations Before Income Taxes 2,160 1,842 1,972 1,949 Income Taxes 865 719 790 762 --------------- -------------- --------------- -------------- Income From Continuing Operations 1,295 1,123 1,182 1,187 Discontinued Operations: Loss From Operations of Foster Technologies - (60) - (440) Income Tax Benefit - (23) - (173) --------------- -------------- --------------- -------------- Loss on Discontinued Operations - (37) - (267) --------------- -------------- --------------- -------------- Net Income $ 1,295 $ 1,086 $ 1,182 $ 920 =============== ============== =============== ============== Basic & Diluted Earnings (Loss) Per Common Share: From Continuing Operations $ 0.13 $ 0.12 $ 0.12 $ 0.12 From Discontinued Operations, Net of Tax - - - (0.03) --------------- -------------- --------------- -------------- Basic & Diluted Earnings Per Common Share $ 0.13 $ 0.11 $ 0.12 $ 0.10 =============== ============== =============== ============== See Notes to Condensed Consolidated Financial Statements.

5 L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Six Months Ended June 30, 2004 2003 ------------- ------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations $ 1,182 $ 1,187 Adjustments to reconcile net income to net cash (used) provided by operating activities: Depreciation and amortization 2,595 2,597 (Gain) loss on sale of property, plant and equipment (308) 6 Unrealized (gain) loss on derivative mark-to-market (374) 110 Change in operating assets and liabilities: Accounts receivable (11,615) (4,831) Inventories (436) (7,765) Other current assets (265) (426) Other noncurrent assets (163) (347) Accounts payable - trade 3,909 10,260 Accrued payroll and employee benefits 362 189 Other current liabilities 580 786 Other liabilities (1,285) 145 ------------- ------------- Net Cash (Used) Provided by Operating Activities (5,818) 1,911 ------------- ------------- Net Cash Provided by Discontinued Operations - 245 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment 982 2 Capital expenditures on property, plant and equipment (1,541) (1,281) ------------- ------------- Net Cash Used by Investing Activities (559) (1,279) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds (repayments) of revolving credit agreement borrowings 4,000 (2,000) Exercise of stock options and stock awards 1,331 246 Repayments of long-term debt (365) (457) ------------- ------------- Net Cash Provided (Used) by Financing Activities 4,966 (2,211) ------------- ------------- Net Decrease in Cash and Cash Equivalents (1,411) (1,334) Cash and Cash Equivalents at Beginning of Period 4,134 3,653 ------------- ------------- Cash and Cash Equivalents at End of Period $ 2,723 $ 2,319 ============= ============= Supplemental Disclosure of Cash Flow Information: Interest Paid $ 827 $ 1,071 ============= ============= Income Taxes Paid $ 173 $ 260 ============= ============= During the first six months of 2004 the Company did not finance any capital expenditures through the execution of capital leases. During the first six months of 2003, the Company financed $158,000 of capital expenditures through the execution of capital leases. See Notes to Condensed Consolidated Financial Statements.

6 L. B. FOSTER COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. FINANCIAL STATEMENTS - ----------------------- The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all estimates and adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. Amounts included in the balance sheet as of December 31, 2003 were derived from our audited balance sheet. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2003. 2. ACCOUNTING PRINCIPLES - ------------------------ In December 2003, the FASB issued Statement of Financial Accounting Standard No. 132 (Revised 2003) - "Employers' Disclosures about Pensions and Other Post-retirement Benefits" (SFAS 132R), that replaces existing FASB disclosure requirements for pensions and other post-retirement benefit plans. SFAS 132R requires companies to provide more complete details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. In addition to expanded disclosures, the standard improves information available to investors in interim financial statements. With certain exceptions, SFAS 132R was effective for fiscal years ending after December 31, 2003 and for quarters beginning after December 31, 2003. See Note 6 for the additional disclosures required by SFAS 132R. Stock-based compensation - ------------------------ The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), and applies the intrinsic value method of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been recognized. The following table illustrates the effect on the Company's income from continuing operations and earnings per share had compensation expense for the Company's stock option plans been applied using the method required by SFAS 123. Three Months Ended Six Months Ended June 30, June 30, In thousands, except per share amounts 2004 2003 2004 2003 - ----------------------------------------------------------------------------------------------------------------------------- Income from continuing operations, as reported $1,295 $1,123 $1,182 $1,187 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects - - - - Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects 45 79 96 141 - ----------------------------------------------------------------------------------------------------------------------------- Pro forma income from continuing operations $1,250 $1,044 $1,086 $1,046 ============================================================================================================================= Earnings per share from continuing operations: Basic, as reported $0.13 $0.12 $0.12 $0.12 Basic, pro forma $0.13 $0.11 $0.11 $0.11 Diluted, as reported $0.13 $0.12 $0.12 $0.12 Diluted, pro forma $0.12 $0.11 $0.11 $0.11 =============================================================================================================================

7 Pro forma information regarding net income and earnings per share for options granted has been determined as if the Company had accounted for its employee stock options under the fair value method of Statement No. 123. The fair value of stock options used to compute pro forma net income and earnings per share disclosures is the estimated present value at grant date using the Black-Scholes option-pricing model. There were no stock options granted to employees in the first or second quarter of 2004. The following weighted-average assumptions were used for grants in the second quarter of 2003: risk-free interest rates of 3.56%; dividend yield of 0.0%; volatility factors of the expected market price of the Company's Common stock of .32; and a weighted-average expected life of the option of ten years. The weighted-average fair value of the options granted in the second quarter of 2003 was $2.11. 3. ACCOUNTS RECEIVABLE - ---------------------- Credit is extended on an evaluation of the customer's financial condition and, generally, collateral is not required. Credit terms are consistent with industry standards and practices. Trade accounts receivable at June 30, 2004 and December 31, 2003 have been reduced by an allowance for doubtful accounts of ($960,000) and ($827,000), respectively. Bad debt expense was $133,000 and $85,000 for the six-month periods ended June 30, 2004 and 2003, respectively. 4. INVENTORIES - -------------- Inventories of the Company at June 30, 2004 and December 31, 2003 are summarized as follows in thousands: June 30, December 31, 2004 2003 - -------------------------------------------------------------------------------- Finished goods $ 19,375 $ 20,216 Work-in-process 8,012 7,379 Raw materials 11,897 11,133 - -------------------------------------------------------------------------------- Total inventories at current costs 39,284 38,728 (Less): LIFO reserve (1,354) (1,234) Inventory valuation reserve (600) (600) - -------------------------------------------------------------------------------- $ 37,330 $ 36,894 ================================================================================ Inventories of the Company are generally valued at the lower of last-in, first-out (LIFO) cost or market. Other inventories of the Company are valued at average cost or market, whichever is lower. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end levels and costs. 5. PROPERTY HELD FOR RESALE - --------------------------- In August 2003, the Company reached an agreement to sell, modify, and install the Company's former Newport, KY pipe coating machinery and equipment and reclassified these assets as "held for resale". During the first quarter of 2004, the Company recognized a $493,000 gain on net proceeds of $939,000 from the sale of these assets.

8 6. RETIREMENT PLANS - ------------------- Substantially all of the Company's hourly paid employees are covered by one of the Company's noncontributory, defined benefit plans and defined contribution plans. Substantially all of the Company's salaried employees are covered by a defined contribution plan established by the Company. The Company's funding policy for defined benefit plans is to contribute the minimum required by the Employee Retirement Income Security Act of 1974. Net periodic pension costs for the three months and six months ended June 30, 2004 and 2003 are as follows: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2004 2003 2004 2003 - ------------------------------------------------------------------------------- Service cost $ 14 $ 15 $ 28 $ 30 Interest cost 51 49 102 98 Expected return on plan assets (44) (34) (88) (68) Amortization of prior service cost 2 2 4 4 Amortization of net loss 13 13 26 26 - ------------------------------------------------------------------------------- Net periodic benefit cost $ 36 $ 45 $ 72 $ 90 =============================================================================== The Company expects to contribute $360,000 to its defined benefit plans in 2004. As of June 30, 2004, $253,250 of contributions have been made. The Company's defined contribution plan for the salaried employees allows all eligible participants to contribute up to 41% (30% maximum on a pre-tax basis and 11% maximum on an after-tax basis, subject to IRS limitations) of their compensation to the Plan. The Plan calls for the Company to contribute 1% of the employee's compensation plus $0.50 for each $1.00 contributed by the employee, subject to a maximum of from 4% to 6% of the employee's compensation, based on the years of service. The expense associated with the defined contribution plans for the six months ended June 30 was $307,000 in 2004 and $267,000 in 2003. 7. BORROWINGS - ------------- On September 26, 2002, the Company entered into a new credit agreement with a syndicate of three banks led by PNC Bank, N.A. The agreement provides for a revolving credit facility of up to $60,000,000 in borrowings to support the Company's working capital and other liquidity requirements. The revolving credit facility, which matures in September 2005, is secured by substantially all of the inventory and trade receivables owned by the Company. Availability under the agreement is limited by the amount of eligible inventory and accounts receivable applied against certain advance rates. At June 30, 2004, the remaining available borrowings under this agreement were approximately $24,365,000. Interest on the credit facility is based on LIBOR plus a spread ranging from 1.75% to 2.50%. The agreement includes financial covenants requiring a minimum net worth and a minimum level for the fixed charge coverage ratio. The agreement also restricts dividends, investments, indebtedness, and the sale of certain assets. On September 8, 2003, the first amendment to this agreement allowed for the sale of the Company's equity interest in a specialty trackwork supplier. For more information regarding the transaction, see "Other Matters" in the Management's Discussion and Analysis section of this report. As of June 30, 2004, the Company was in compliance with all of the agreement's covenants.

9 8. DISCONTINUED OPERATIONS - -------------------------- In February 2003, substantially all of the assets of the Rail segment's rail signaling and communication device business were sold for $300,000. The operations of the rail signaling and communication device business qualified as a "component of an entity" under Statement of Financial Accounting Standards No 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and thus, the operations were classified as discontinued and prior periods have been restated. Net sales and loss from discontinued operations were as follows: Three Months Ended Six Months Ended In thousands June 30, 2003 June 30, 2003 - -------------------------------------------------------------------------------- Net sales $ - $ 1 - -------------------------------------------------------------------------------- Pretax operating loss $ (60) $ (370) Pretax loss on disposal - (70) Income tax benefit 23 173 - -------------------------------------------------------------------------------- Loss from discontinued operations $ (37) $ (267) ================================================================================ 9. EARNINGS (LOSS) PER COMMON SHARE - ----------------------------------- The following table sets forth the computation of basic and diluted earnings (loss) per common share: Three Months Ended Six Months Ended June 30, June 30, (in thousands, except earnings per share) 2004 2003 2004 2003 - ------------------------------------------------------------------------------------------------------------------------ Numerator: Numerator for basic and diluted earnings (loss) per common share - net income (loss) available to common stockholders: Income from continuing operations $ 1,295 $ 1,123 $ 1,182 $ 1,187 Loss from discontinued operations - (37) - (267) - ------------------------------------------------------------------------------------------------------------------------ Net income $ 1,295 $ 1,086 $ 1,182 $ 920 ======================================================================================================================== Denominator: Weighted average shares 9,945 9,568 9,876 9,546 - ------------------------------------------------------------------------------------------------------------------------ Denominator for basic earnings per common share 9,945 9,568 9,876 9,546 Effect of dilutive securities: Contingent issuable shares - - - 2 Employee stock options 309 103 326 85 - ------------------------------------------------------------------------------------------------------------------------ Dilutive potential common shares 309 103 326 87 Denominator for diluted earnings per common share - adjusted weighted average shares and assumed conversions 10,254 9,671 10,202 9,633 ======================================================================================================================== Basic and diluted earnings (loss) per common share: Continuing operations $ 0.13 $ 0.12 $ 0.12 $ 0.12 Discontinued operations - (0.00) - (0.03) - ------------------------------------------------------------------------------------------------------------------------ Basic and diluted earnings per common share $ 0.13 $ 0.11 $ 0.12 $ 0.10 ========================================================================================================================

10 10. COMMITMENTS AND CONTINGENT LIABILITIES - ------------------------------------------ The Company is subject to laws and regulations relating to the protection of the environment and the Company's efforts to comply with environmental regulations may have an adverse effect on its future earnings. In the opinion of management, compliance with the present environmental protection laws will not have a material adverse effect on the financial condition, results of operations, cash flows, competitive position, or capital expenditures of the Company. The Company is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, these proceedings will not materially affect the financial position of the Company. At June 30, 2004, the Company had outstanding letters of credit of approximately $2,913,000. 11. BUSINESS SEGMENTS - --------------------- The Company is organized and evaluated by product group, which is the basis for identifying reportable segments. The Company is engaged in the manufacture, fabrication and distribution of rail, construction and tubular products. The following tables illustrate revenues and profits/(losses) of the Company by segment: Three Months Ended Six Months Ended June 30, 2004 June 30,2004 ----------------------------------------------------------------------------- Net Segment Net Segment (in thousands) Sales Profit Sales Profit/(Loss) - ---------------------------------------------------------------------------------------------------------- Rail products $ 39,099 $ 1,377 $ 74,686 $ 1,994 Construction products 32,421 157 59,196 (899) Tubular products 5,307 756 8,397 759 - ---------------------------------------------------------------------------------------------------------- Total $ 76,827 $ 2,290 $ 142,279 $ 1,854 ========================================================================================================== Three Months Ended Six Months Ended June 30, 2003 June 30,2003 ----------------------------------------------------------------------------- Net Segment Net Segment (in thousands) Sales Profit Sales Profit - ---------------------------------------------------------------------------------------------------------- Rail products $ 37,709 $ 1,195 $ 69,335 $ 1,876 Construction products 33,469 808 57,433 281 Tubular products 4,618 558 8,547 923 - ---------------------------------------------------------------------------------------------------------- Total $ 75,796 $ 2,561 $ 135,315 $ 3,080 ========================================================================================================== Segment profits, as shown above, include internal cost of capital charges for assets used in the segment at a rate of, generally, 1-% per month. There has been no change in the measurement of segment profit/(loss) from December 31, 2003. Accounts receivable for the Rail segment increased approximately $6,900,000 from year-end, primarily related to an increase in sales of new rail distribution products.

11 The following table provides a reconciliation of reportable net profit to the Company's consolidated total: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2004 2003 2004 2003 - ------------------------------------------------------------------------------------------------------------------- Income for reportable segments $ 2,290 $ 2,561 $ 1,854 $ 3,080 Cost of capital for reportable segments 2,682 2,662 5,080 5,087 Interest expense (469) (578) (932) (1,157) Other income 350 54 1,044 374 Corporate expense and other unallocated charges (2,693) (2,857) (5,074) (5,435) - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations, before income taxes $ 2,160 $ 1,842 $ 1,972 $ 1,949 =================================================================================================================== 12. COMPREHENSIVE INCOME - ------------------------ Comprehensive income represents net income plus certain stockholders' equity changes not reflected in the Condensed Consolidated Statements of Operations. The components of comprehensive income, net of tax, were as follows: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2004 2003 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------ Net income $ 1,295 $ 1,086 $ 1,182 $ 920 Unrealized derivative gains on cash flow hedges 16 14 28 24 Foreign currency translation gains 24 - 6 8 Reclassification adjustment for foreign currency translation losses included in net income - - - 48 - ------------------------------------------------------------------------------------------------------------------------------ Comprehensive income $ 1,335 $ 1,100 $ 1,216 $ 1,000 ============================================================================================================================== 13. RISKS AND UNCERTAINTIES - --------------------------- The Company's CXT Rail operations and Allegheny Rail Products division are dependent on a Class I railroad for a significant portion of their business. An agreement to supply concrete ties to this railroad expired in September 2003. The Company is still selling ties to this customer, although there are no longer annual minimum quantity requirements. In December 2003, the Company bid on a new concrete tie supply agreement that is expected to be a 5 to 8 year commitment. If the bid is successful, the Company will be required to establish one or more new facilities to service this agreement, which would require a significant capital investment. If the Company is unsuccessful in the bidding process, it may cause the value of its two existing tie facilities with total net assets of approximately $7,055,000 to be partially impaired. Although an agreement has not yet been signed, the Company expects to have a new agreement in place by the end of the third quarter. 14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES - ----------------------------------------------------------- The Company does not purchase or hold any derivative financial instruments for trading purposes. The Company uses derivative financial instruments to manage interest rate exposure on variable-rate debt, primarily by using interest rate collars and variable interest rate swaps. The Company's primary source of variable-rate debt comes from its revolving credit agreement. In conjunction with the Company's debt refinancing in the third quarter of 2002, the Company discontinued cash flow hedge accounting treatment for its interest rate collars and has applied mark-to-market accounting prospectively.

12 The Company has a LIBOR-based interest rate collar agreement, which became effective in March 2001 and expires in March 2006, with a notional value of $15,000,000, a maximum annual interest rate of 5.60% and a minimum annual interest rate of 5.00%. The counterparty to the collar agreement has the option, on March 6, 2005, to convert the $15,000,000 collar to a one-year, fixed-rate instrument with interest payable at an annual rate of 5.49%. The fair value of this collar agreement was a liability of $611,000 as of June 30, 2004. The Company also had a LIBOR-based interest rate collar agreement, which became effective in April 2001 and would have expired in April 2006, with a notional value of $10,000,000, a maximum annual interest rate of 5.14%, and a minimum annual interest rate of 4.97%. The counter-party to the collar agreement had the option, on April 18, 2004, to convert the $10,000,000 collar to a two-year fixed-rate instrument with interest payable at an annual rate of 5.48%. In April 2004, prior to the counter-party option, the Company terminated this interest rate collar agreement by purchasing it for its fair value of $707,000. The Company records the mark-to-market adjustments on these interest rate collars in its Condensed Consolidated Statements of Operations. During the second quarter of 2004 and 2003, the Company recognized $416,000 of income and $121,000 of expense, respectively, to adjust these instruments to fair value. For the six months ended June 2004 and 2003, the Company recognized $374,000 of income and $110,000 of expense, respectively, to adjust these instruments to fair value. The Company continues to apply cash flow hedge accounting to interest rate swaps. The Company recognizes all derivative instruments on the balance sheet at fair value. Fluctuations in the fair values of derivative instruments designated as cash flow hedges are recorded in accumulated other comprehensive income, and reclassified into earnings as the underlying hedged items affect earnings. To the extent that a change in interest rate derivative does not perfectly offset the change in value of the interest rate being hedged, the ineffective portion is recognized in earnings immediately. The Company is not subject to significant exposures to changes in foreign currency exchange rates. The Company will, however, manage its exposure to changes in foreign currency exchange rates on firm sales and purchase commitments by entering into foreign currency exchange contracts. The Company's risk management objective is to reduce its exposure to the effects of changes in exchange rates on these transactions over the duration of the transaction.

13 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - ------------- Overview -------- General - ------- L. B. Foster Company is a manufacturer, fabricator and distributor of products utilized in the transportation infrastructure, construction and utility markets. The Company is comprised of three business segments: Rail products, Construction products and Tubular products. Recent Developments - ------------------- In April 2004, we terminated an interest rate collar agreement by purchasing it for its fair market value of $0.7 million. See the "Market Risk and Risk Management Policies" section of this Management's Discussion and Analysis for more information on this matter. Critical Accounting Policies ---------------------------- The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or method of its application, is generally accepted, management selects the principle or method that is appropriate in the Company's specific circumstances. Application of these accounting principles requires management to make estimates about the future resolution of existing uncertainties. As a result, actual results could differ from these estimates. In preparing these financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements giving due regard to materiality. There have been no material changes in the Company's policies or estimates since December 31, 2003. For more information regarding the Company's critical accounting policies, please see the discussion in Management's Discussion & Analysis of Financial Condition and Results of Operations in Form 10-K for the year ended December 31, 2003. New Accounting Pronouncements ----------------------------- In December 2003, the FASB issued Statement of Financial Accounting Standard No. 132 (Revised 2003) - "Employers' Disclosures about Pensions and Other Post-retirement Benefits" (SFAS 132R), that replaces existing FASB disclosure requirements for pensions and other post-retirement benefit plans. SFAS 132R requires companies to provide more complete details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. In addition to expanded disclosures, the standard improves information available to investors in interim financial statements. With certain exceptions, SFAS 132R is effective for fiscal years ending after December 31, 2003 and for quarters beginning after December 31, 2003. See Note 6 to the consolidated financial statements in this 10-Q which presents the additional disclosures required by SFAS 132R.

14 Results of Operations --------------------- Three Months Ended Six Months Ended June 30, June 30, ----------------------------------- ---------------------------------- 2004 2003 2004 2003 ----------------------------------- ---------------------------------- (Dollars in thousands) Net Sales: Rail Products $ 39,099 $ 37,709 $ 74,686 $ 69,335 Construction Products 32,421 33,469 59,196 57,433 Tubular Products 5,307 4,618 8,397 8,547 ----------------------------------- ---------------------------------- Total Net Sales $ 76,827 $ 75,796 $ 142,279 $ 135,315 =================================== ================================== Gross Profit: Rail Products $ 4,676 $ 4,222 $ 8,098 $ 8,008 Construction Products 3,992 4,357 6,525 7,163 Tubular Products 1,205 1,050 1,640 1,852 Other (540) (433) (948) (894) ----------------------------------- ---------------------------------- Total Gross Profit 9,333 9,196 15,315 16,129 ----------------------------------- ---------------------------------- Expenses: Selling and administrative 7,054 6,830 13,455 13,397 expenses Interest expense 469 578 932 1,157 Other income (350) (54) (1,044) (374) ----------------------------------- ---------------------------------- Total Expenses 7,173 7,354 13,343 14,180 ----------------------------------- ---------------------------------- Income From Continuing Operations Before Income Taxes 2,160 1,842 1,972 1,949 Income Tax Expense 865 719 790 762 ----------------------------------- ---------------------------------- Income From Continuing Operations 1,295 1,123 1,182 1,187 Discontinued Operations: Loss From Operations of Foster Technologies - (60) - (440) Income Tax Benefit - (23) - (173) ----------------------------------- ---------------------------------- Loss on Discontinued Operations - (37) - (267) ----------------------------------- ---------------------------------- Net Income $ 1,295 $ 1,086 $ 1,182 $ 920 =================================== ================================== Gross Profit %: Rail Products 12.0% 11.2% 10.8% 11.5% Construction Products 12.3% 13.0% 11.0% 12.5% Tubular Products 22.7% 22.7% 19.5% 21.7% Total Gross Profit 12.1% 12.1% 10.8% 11.9%

15 Second Quarter 2004 Results of Operations - ----------------------------------------- Net income for the second quarter of 2004 was $1.3 million ($0.13 per diluted share) on net sales of $76.8 million. These results compare favorably to the second quarter of 2003 in which net income was $1.1 million ($0.11 per diluted share) on net sales of $75.8 million. Net sales for the second quarter of 2004 were $1.0 million higher than the same period in 2003. This improvement came primarily from our Rail and Tubular segments. Rail segment sales increased 3.7% due primarily to an increase in concrete tie sales. Also increasing, but to a lesser extent, were our rail distribution and transit products businesses. Construction products' net sales declined 3.1% as the lack of a new federal highway and transit bill continues to hurt our fabricated products business. Additionally, delays in federal spending for concrete buildings, due to wildfire concerns, contributed to the decline of Construction products sales. Tubular products' sales increased 14.9% and can be attributed to increases in threaded product sales to the water well market. The Company's gross profit margin remained steady at 12.1% in the second quarters of 2004 and 2003. Rail products' profit margin increased 0.8 percentage points, primarily due to improvements in the concrete tie and rail distribution businesses mentioned above. The 0.7 percentage point decline in Construction products' margin was due, in part, to decreased margins at our fabricated products business as heightened competition for less business has decreased selling prices and lower volumes have created plant inefficiencies at the concrete building plants as well as the fabricated products facilities. Tubular products' gross profit margin held steady at 22.7% in the second quarter comparisons. Selling and administrative expenses increased 3.3% compared to the second quarter of 2003. Interest expense declined 18.9% from the prior year due principally to the April 2004 retirement of a $10.0 million notional amount LIBOR-based interest rate collar agreement. See "Market Risk and Risk Management Policies" for more details on this matter. Other Income increased $0.3 million primarily as a result of the mark-to-market adjustment we recorded related to our remaining interest rate collar. The second quarter 2004 effective tax rate was 40% compared to 39% in last year's second quarter. First Six Months of 2004 Results of Operations - ---------------------------------------------- For the first six months of 2004, net income was $1.2 million ($0.12 per diluted share) on net sales of $142.3 million. Net income for the first six months of 2003 was $0.9 million ($0.10 per diluted share) on net sales of $135.3 million. The prior year results include a net loss from discontinued operations of $0.3 million ($0.03 per diluted share). Net sales for 2004 increased 5.1% over the first six months of 2003. Rail segment sales increased 7.7% due primarily to an increase in rail distribution, transit, and concrete tie sales. Construction products' net sales increased 3.1% due to an increase in H-beam piling sales. Tubular products' sales declined 1.8% from last year's first six months due to delays in natural gas transmission pipeline projects. While the high cost of steel is partially responsible for the 50% increase in threaded pipe sales, it has also caused these pipeline delays and, in turn, our coated pipe sales have declined approximately 50%. The Company's six month gross profit margin declined 1.1 percentage points to 10.8%. All three of the Company's segments contributed to the decline. Rail products' profit margin declined 0.7 percentage points due to the mix of products sold and low volume inefficiencies at our Niles, OH trackwork facility. The 1.5 percentage point decline in Construction products' margin was due, in part, to weaker sales of higher margin fabricated highway products and low volume inefficiency costs at our Spokane, WA concrete buildings plant. Tubular products' gross profit margin declined 2.2 percentage points due to the higher steel costs mentioned above. Selling and administrative expenses remained at 2003 levels. Interest expense declined 19.4% from the prior year as a result of the previously mentioned collar retirement and a reduction in average borrowing levels during the current year. Other Income increased $0.7 million primarily as a result of the

16 previously mentioned second quarter mark-to-market adjustment recorded by the Company related to our remaining interest rate collar and the first quarter gain on the sale of the Company's former Newport, KY pipe coating machinery and equipment which had been classified as "held for resale." The effective tax rate during the first half of 2004 was 40% compared to 39% for the same period last year. Liquidity and Capital Resources ------------------------------- The Company's capitalization is as follows: June 30, December 31, (in thousands) 2004 2003 - ------------------------------------------------------------------------------ Debt: Revolving credit facility $ 21,000 $ 17,000 Capital leases 1,283 1,616 Other (primarily revenue bonds) 2,821 2,853 - ------------------------------------------------------------------------------ Total Debt 25,104 21,469 - ------------------------------------------------------------------------------ Equity 73,091 70,544 - ------------------------------------------------------------------------------ Total Capitalization $ 98,195 $ 92,013 ============================================================================== Debt as a percentage of capitalization (debt plus equity) increased to 26% from 23% at the 2003 year end. Working capital was $53.0 million at June 30, 2004 compared to $46.8 million at December 31, 2003. The Company's liquidity needs arise from seasonal working capital requirements, capital expenditures, acquisitions and debt service obligations. The following table summarized the impact of these items: June 30, (in thousands) 2004 2003 - ----------------------------------------------------------------------------- Liquidity needs: Working capital and other assets and liabilities $ (8,913) $ (1,989) Capital expenditures, net of asset sales (559) (1,279) Scheduled debt service obligations - net (365) (457) Cash interest 827 1,071 - ----------------------------------------------------------------------------- Net liquidity requirements (9,010) (2,654) - ----------------------------------------------------------------------------- Liquidity sources (uses): Internally generated cash flows before interest 2,268 2,829 Credit facility activity 4,000 (2,000) Equity transactions 1,331 246 Other - 245 - ----------------------------------------------------------------------------- Net liquidity sources 7,599 1,320 - ----------------------------------------------------------------------------- Net Change in Cash $ (1,411) $ (1,334) ============================================================================= Capital expenditures were $1.5 million for the first six months of 2004 compared to $1.3 million in the same period of 2003. The amount of capital spending in 2004 will depend upon the outcome of the Company's bid on a concrete tie contract, as a successful outcome will require the construction of one or more facilities. Excluding business acquisitions and the potential concrete tie facilities, capital expenditures for 2004 are expected to be approximately $4.0 million, and funded by cash flow from operations and available external financing sources. The Company's Board of Directors has authorized the purchase of up to 1,500,000 shares of its Common stock at prevailing market prices. No purchases have been made since the first quarter of 2001. From August 1997 through March 2001, the Company had repurchased 973,398 shares at a cost of

17 approximately $5.0 million. The timing and extent of future purchases will depend on market conditions and options available to the Company for alternate uses of its resources. The Company has an agreement that provides for a revolving credit facility of up to $60.0 million in borrowings to support the Company's working capital and other liquidity requirements. The revolving credit facility, which matures in September 2005, is secured by substantially all of the Company's inventory and trade receivables. Availability under this agreement is limited by the amount of eligible inventory and accounts receivable applied against certain advance rates. Interest on the credit facility is based on LIBOR plus a spread ranging from 1.75% to 2.5%. Total revolving credit agreement borrowings at June 30, 2004 were $21.0 million, an increase of $4.0 million from December 31, 2003. At June 30, 2004, remaining available borrowings under this facility were approximately $24.4 million. Outstanding letters of credit at June 30, 2004 were approximately $2.9 million. The letters of credit expire annually and are subject to renewal. Management believes its internal and external sources of funds are adequate to meet anticipated needs for the foreseeable future. The credit agreement includes financial covenants requiring a minimum net worth and a minimum fixed charge coverage ratio. The primary restrictions to this agreement include investments, indebtedness, and the sale of certain assets. On September 8, 2003, the first amendment to this agreement allowed for the sale of the Company's equity interest in a specialty trackwork supplier. For more information regarding the transaction, see "Other Matters". As of June 30, 2004, the Company was in compliance with all of the agreement's covenants. Off-Balance Sheet Arrangements ------------------------------ The Company's off-balance sheet arrangements include operating leases, purchase obligations and standby letters of credit. A schedule of the Company's required payments under financial instruments and other commitments as of December 31, 2003 are included in "Liquidity and Capital Resources" section of the Company's 2003 Annual Report filed on Form 10-K. There have been no significant changes to the Company's contractual obligations relative to the information presented in the Form 10-K. These arrangements provide the Company with increased flexibility relative to the utilization and investment of cash resources. Dakota, Minnesota & Eastern Railroad ------------------------------------ The Company maintains a significant investment in the Dakota, Minnesota & Eastern Railroad Corporation (DM&E), a privately held, regional railroad, which controls over 2,500 miles of track in eight states. At June 30, 2004, the Company's investment was comprised of $0.2 million of DM&E common stock, $1.5 million of Series B Preferred Stock and warrants, $6.0 million of Series C Preferred Stock and warrants, $0.8 million of Preferred Series C-1 Stock and warrants, and $0.5 million of Series D Preferred Stock and warrants. In addition, the Company has a receivable for accrued dividend income on Preferred Stock of approximately $5.2 million. The Company owns approximately 13.6% of the DM&E. In June 1997, the DM&E announced its plan to build an extension from the DM&E's existing line into the low sulfur coal market of the Powder River Basin in Wyoming and to rebuild approximately 600 miles of its existing track (the Project). The estimated cost of this project is expected to be in excess of $2.0 billion. The Surface Transportation Board (STB) approved the Project in January 2002. In October 2003, however, the 8th U.S. Circuit Court of Appeals remanded the matter to the STB and instructed the STB to address, in its environmental impact statement, the Project's effects on air quality, noise and vibration, and preservation of historic sites. On January 30, 2004, the 8th U. S. Circuit Court of Appeals denied petitions seeking a rehearing of the case. If the Project proves to be viable, management believes that the value of the Company's investment in the DM&E could increase significantly. If the Project does not come to fruition, management believes that the value of the Company's investment is supported by the DM&E's existing business.

18 In December 2003, the DM&E received a Railroad Rehabilitation and Improvement Financing (RRIF) Loan in the amount of $233.0 million from the Federal Railroad Administration. Funding provided by the 25-year loan was used to refinance debt and upgrade infrastructure along parts of its existing route. Other Matters ------------- Specialty trackwork sales of the Company's Rail segment have declined since a decision was made to terminate our relationship with a principal trackwork supplier during the third quarter of 2002. In the third quarter of 2003, we exchanged our minority ownership interest and advances to this supplier for a $5.5 million promissory note from the supplier's owner, with principal and accrued interest to be repaid beginning in January 2008. The value of this note has been fully reserved and no gain or loss was recorded on this transaction. During the first six months of 2004 and 2003, the volume of business the supplier conducted with the Company was approximately $1.6 million and $6.5 million, respectively. Most of the combined order backlog was completed in 2003 and approximately $0.4 million remained at June 30, 2004. If this supplier is unable to perform, it could have a further negative impact on earnings and cash flows. During the first quarter of 2003, the Company sold certain assets and liabilities of its Foster Technologies subsidiary, engaged in the rail signaling and communication device business, for $0.3 million. This subsidiary had been classified as a discontinued operation in December 2002. The loss from this business in the first six months of 2003 was principally due to losses incurred up to the sale date, as well as certain charges taken for employee severance costs and lease obligations. We continue to evaluate the overall performance of our operations. A decision to down-size or terminate an existing operation could have a material adverse effect on near-term earnings but would not be expected to have a material adverse effect on the financial condition of the Company. Outlook ------- Our CXT Rail operations and Allegheny Rail Products division are dependent on a Class I railroad for a significant portion of their business. Our agreement to supply concrete ties to this railroad expired in September 2003. We are still selling ties to this customer, although there are no longer annual minimum quantity requirements. In December 2003, we bid on a new concrete tie supply agreement that is expected to be a 5 to 8 year commitment. If our bid is successful, we will be required to establish one or more new facilities to service this agreement, which would require a significant capital investment. If we are unsuccessful in the bidding process, it may cause the value of our two existing tie facilities with total net assets of approximately $7.1 million to be partially impaired. Although an agreement has not yet been signed, the Company expects to have a new agreement in place by the end of the third quarter. Steel is a key component in the products that we sell. In the past year, the price of scrap steel, which is used by mini-mills to manufacture many steel products, has more than doubled. Although steel scrap prices moderated somewhat in June, they have risen significantly during the month of July. Producers and other suppliers continue to quote high prices or are quoting monthly price surcharges. Some of our suppliers are experiencing supply problems. Since many of the Company's projects can be six months to twenty-four months in duration, we find ourselves caught in the middle of some of these pricing and availability issues. While we believe this highly unusual situation to be temporary in nature, it could have a negative impact on the Company's sales volumes, results of operations and cash flows until the market normalizes. In 2003, we received an increased but still limited supply of sheet piling from our exclusive supplier. The sheet piling supply is still not adequately consistent and reliable for our piling business to grow profitably. We expect this year to be pivotal in determining whether sheet piling will contribute to the future growth of this business.

19 Last year we began implementing Lean Enterprise (Lean) across the organization. Lean is a methodology as well as a mindset, utilized in managing a business that focuses on the execution and continuous improvement of all business processes with the objective of maximizing speed and flexibility at the lowest cost. Proper implementation of Lean can lead to other benefits such as better quality control and improved worker safety. Lean has commenced at all of our manufacturing facilities and the preliminary results have been positive, with significant improvement in productivity in several manufacturing processes. For these improvements to make a significant impact on our financial results, we must experience increased volumes at these facilities. A substantial portion of the Company's operations is heavily dependent on governmental funding of infrastructure projects. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on the operating results of the Company. The most recent extension of the federal highway and transit bill (TEA-21) is to expire in September, 2004, as reauthorization of a successor bill continues to be delayed. A new highway and transit bill is important to the future growth and profitability of many of the Company's businesses. Additionally, government actions concerning taxation, tariffs, the environment, or other matters could impact the operating results of the Company. The Company's operating results may also be affected negatively by adverse weather conditions. Although backlog is not necessarily indicative of future operating results, total Company backlog at June 30, 2004, was approximately $119.4 million. The following table provides the backlog by business segment: Backlog -------------------------------------------------- June 30, December 31, June 30, (In thousands) 2004 2003 2003 - -------------------------------------------------------------------------------- Rail Products $ 37,702 $ 37,529 $ 41,023 Construction Products 78,030 67,100 74,780 Tubular Products 3,639 1,035 4,421 - -------------------------------------------------------------------------------- Total $119,371 $105,664 $120,224 ================================================================================ The increase in Construction segment backlog from December 31, 2003, resulted from increases in concrete buildings and earth retention walls, and piling backlog. Increases in threaded pipe and pipe coating services improved the Tubular segment backlog from 2003 year end. The decline in Rail segment backlog from June 30, 2003 reflects a reduction in transit products backlog, while the increase in Construction products' backlog resulted primarily from an increase in concrete earth retention wall backlog. Market Risk and Risk Management Policies ---------------------------------------- The Company does not purchase or hold any derivative financial instruments for trading purposes. The Company uses derivative financial instruments to manage interest rate exposure on variable-rate debt, primarily by using interest rate collars and variable interest rate swaps. The Company's primary source of variable-rate debt comes from its revolving credit agreement. In conjunction with the Company's debt refinancing in the third quarter of 2002, the Company discontinued cash flow hedge accounting treatment for its interest rate collars and has applied mark-to-market accounting prospectively. The Company has a LIBOR-based interest rate collar agreement, which became effective in March 2001 and expires in March 2006, with a notional value of $15,000,000, a maximum annual interest rate of 5.60% and a minimum annual interest rate of 5.00%. The counterparty to the collar agreement has the option, on March 6, 2005, to convert the $15,000,000 collar to a one-year, fixed-rate instrument with interest payable at an annual rate of 5.49%. The fair value of this collar agreement was a liability of $611,000 as of June 30, 2004. The Company also had a LIBOR-based interest rate collar agreement, which became effective in April 2001 and expires in April 2006, with a notional value of $10,000,000, a maximum annual interest rate of 5.14%, and a minimum annual interest rate of 4.97%. The counter-party to the collar agreement had the option, on

20 April 18, 2004, to convert the $10,000,000 collar to a two-year fixed-rate instrument with interest payable at an annual rate of 5.48%. In April 2004, prior to the counter-party option, the Company terminated this interest rate collar agreement by purchasing it for its fair value of $707,000. Although these derivatives are not deemed to be effective hedges of the new credit facility in accordance with the provisions of SFAS 133, the Company retained these instruments as protection against interest rate risk associated with the new credit agreement and the Company records the mark-to-market adjustments on these interest rate collars in its consolidated statements of operations. During the second quarter of 2004 and 2003, the Company recognized $416,000 of income and $121,000 of expense, respectively, to adjust these instruments to fair value. For the six months ended June 2004 and 2003, the Company recognized $374,000 of income and $110,000 of expense, respectively, to adjust these instruments to fair value. The Company continues to apply cash flow hedge accounting to interest rate swaps. The Company recognizes all derivative instruments on the balance sheet at fair value. Fluctuations in the fair values of derivative instruments designated as cash flow hedges are recorded in accumulated other comprehensive income, and reclassified into earnings as the underlying hedged items affect earnings. To the extent that a change in interest rate derivative does not perfectly offset the change in value of the interest rate being hedged, the ineffective portion is recognized in earnings immediately. The remaining interest rate collar agreement has a minimum annual interest rate of 5.00% to a maximum annual interest rate of 5.60%. Since the interest rate on the revolving credit agreement floats with the short-term market rate of interest, the Company is exposed to the risk that these interest rates may decrease below the minimum annual interest rate on the interest rate collar agreement. The effect of a 1% decrease in the applicable interest rate below the 5.00% minimum annual interest rate on $21.0 million of outstanding floating rate debt would result in increased annual interest costs of approximately $0.2 million. The Company is not subject to significant exposures to changes in foreign currency exchange rates. The Company will, however, manage its exposure to changes in foreign currency exchange rates on firm sales and purchase commitments by entering into foreign currency exchange contracts. The Company's risk management objective is to reduce its exposure to the effects of changes in exchange rates on these transactions over the duration of the transaction. Forward-Looking Statements -------------------------- Statements relating to the potential value or viability of the DM&E or the Project, or management's belief as to such matters, are forward-looking statements and are subject to numerous contingencies and risk factors. The Company has based its assessment on information provided by the DM&E and has not independently verified such information. In addition to matters mentioned above, factors which can adversely affect the value of the DM&E, its ability to complete the Project or the viability of the Project include the following: labor disputes, the outcome of certain litigation, any inability to obtain necessary environmental and government approvals for the Project in a timely fashion, the DM&E's ability to continue to obtain interim funding to finance the Project, the expense of environmental mitigation measures required by the Surface Transportation Board, an inability to obtain financing for the Project, competitors' response to the Project, market demand for coal or electricity and changes in environmental laws and regulations. The Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements and other written communications (including the preceding sections of this Management's Discussion and Analysis), as well as oral statements, such as references made to the future profitability, made from time to time by representatives of the Company. Additional delays in a Virginia steel mill's production of sheet piling products, or failure to produce substantial quantities of sheet piling products could adversely impact the Company's earnings. The inability to successfully negotiate a new sales contract with a current Class I railroad customer could have a negative impact on the operating results of the Company. The Company's businesses could be affected adversely by continued price increases in the steel scrap market. Except for historical information, matters

21 discussed in such oral and written communications are forward-looking statements that involve risks and uncertainties, including but not limited to general business conditions, the availability of material from major suppliers, the impact of competition, the seasonality of the Company's business, the adequacy of internal and external sources of funds to meet financing needs, taxes, inflation and governmental regulations. Sentences containing words such as "anticipates", "expects", or "will" generally should be considered forward-looking statements. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------ See the "Market Risk and Risk Management Policies" section under Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 4. CONTROLS AND PROCEDURES a) As of the end of the period covered by this report, L. B. Foster Company (the Company) carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rules 13a - 15(e) and 15d - 15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to timely alert them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. b) There have been no significant changes in the Company's internal controls over financial reporting that occurred in the period covered by this report that have materially affected or are likely to materially affect the Company's internal controls over financial reporting. PART II OTHER INFORMATION ------------------------- Item 1. LEGAL PROCEEDINGS - ------------------------- See Note 10, "Commitments and Contingent Liabilities", to the Condensed Consolidated Financial Statements. Item 4. RESULTS OF VOTES OF SECURITY HOLDERS - -------------------------------------------- At the Company's annual meeting held on May 26, 2004, the following individuals were elected to the Board of Directors: For Withheld Name Election Authority - -------------------------------------------------------------------------------- Lee B. Foster II 9,411,804 36,174 Stan L. Hasselbusch 9,365,949 82,029 Henry J. Massman IV 9,411,990 35,988 Diane B. Owen 9,411,990 35,988 John W. Puth 9,388,108 59,870 William H. Rackoff 9,411,890 36,088

22 Item 6. EXHIBITS AND REPORTS ON FORM 8-K - ---------------------------------------- a) EXHIBITS Unless marked by an asterisk, all exhibits are incorporated by reference: 3.1 Restated Certificate of Incorporation, filed as Exhibit 3.1 to Form 10-Q for the quarter ended March 31, 2003. 3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit 3.2 to Form 10-K for the year ended December 31, 2002. 4.0 Rights Amendment, dated as of May 15, 1997 between L. B. Foster Company and American Stock Transfer & Trust Company, including the form of Rights Certificate and the Summary of Rights attached thereto, filed as Exhibit 4.0 to Form 10-K for the year ended December 31, 2002. 4.0.1 Amended Rights Agreement dated as of May 14, 1998 between L.B. Foster Company and American Stock Transfer and Trust Company, filed as Exhibit 4.0.1 to Form 10-Q for the quarter ended March 31, 2003. 4.0.2 Revolving Credit and Security Agreement dated as of September 26, 2002, between L. B. Foster Company and PNC Bank, N. A., filed as Exhibit 4.0.2 to Form 10-Q for the quarter ended September 30, 2002. 4.0.3 First Amendment to Revolving Credit and Security Agreement dated September 8, 2003, between the Registrant and PNC Bank, N.A, filed as Exhibit 4.0.3 to Form 10-Q for the quarter ended September 30, 2003. 10.12 Lease between CXT Incorporated and Pentzer Development Corporation, dated April 1, 1993, filed as Exhibit 10.12 to Form 10-K for the year ended December 31, 1999. 10.12.1 Second Amendment dated March 12, 1996 to lease between CXT Incorporated and Crown West Realty, LLC, successor, filed as Exhibit 10.12.1 to Form 10-K for the year ended December 31, 1999. 10.12.2 Third Amendment dated November 7, 2002 to lease between CXT Incorporated and Crown West Realty, LLC, filed as Exhibit 10.12.2 to Form 10-K for the year ended December 31, 2002. 10.12.3 Fourth Amendment dated December 15, 2003 to lease between CXT Incorporated and Crown West Realty, LLC, filed as Exhibit 10.12.3 to Form 10-K for the year ended December 31, 2003. 10.13 Lease between CXT Incorporated and Crown West Realty, L. L. C., dated December 20, 1996, filed as Exhibit 10.13 to Form 10-K for the year ended December 31, 1999. 10.13.1 Amendment dated June 29, 2001 between CXT Incorporated and Crown West Realty, filed as Exhibit 10.13.1 to Form 10-K for the year ended December 31, 2002. 10.15 Lease between CXT Incorporated and Union Pacific Railroad Company, dated February 13, 1998, and filed as Exhibit 10.15 to Form 10-K for the year ended December 31, 1999. 10.15.1 Renewal Rider for lease between CXT Incorporated, Union Pacific Railroad Company and Nevada Railroad Materials, Inc., dated December 17, 2003, and filed as Exhibit 10.15.1 to Form 10-K for the year ended December 31, 2003.

23 10.15.2 Renewal Rider for lease between CXT Incorporated and Union Pacific Railroad Company dated December 17, 2003 and filed as Exhibit 10.15.2 to Form 10-K for the year ended December 31, 2003. * 10.16 Lease between Registrant and Suwanee Creek Business Center, LLC dated February 13, 2004. 10.17 Lease between Registrant and the City of Hillsboro, TX dated February 22, 2002, filed as Exhibit 10.17 to Form 10-K for the year ended December 31, 2002. 10.19 Lease between Registrant and American Cast Iron Pipe Company for pipe-coating facility in Birmingham, AL dated December 11, 1991, filed as Exhibit 10.19 to Form 10-K for the year ended December 31, 2002. 10.19.1 Amendment to Lease between Registrant and American Cast Iron Pipe Company for pipe-coating facility in Birmingham, AL dated November 15, 2000, and filed as Exhibit 10.19.2 to Form 10-K for the year ended December 31, 2000. 10.20 Equipment Purchase and Service Agreement by and between the Registrant and LaBarge Coating LLC, dated July 31, 2003, and filed as Exhibit 10.20 to Form 10-Q for the quarter ended September 30, 2003. * 10.21 Stock Purchase Agreement, dated June 3, 1999 by and among the Registrant and the shareholders of CXT Incorporated. 10.33.2 Amended and Restated 1985 Long-Term Incentive Plan as of February 26, 1997, filed as Exhibit 10.33.2 to Form 10-Q for the quarter ended March 31, 2003. ** 10.34 Amended and Restated 1998 Long-Term Incentive Plan as of February 2, 2001, filed as Exhibit 10.34 to Form 10-K for the year ended December 31, 2000. ** 10.45 Medical Reimbursement Plan effective January 1, 2004, filed as Exhibit 10.45 to Form 10-K for the year ended December 31, 2003. ** * 10.46 Leased Vehicle Plan as amended and restated on June 9, 2004. ** 10.51 Supplemental Executive Retirement Plan, filed as Exhibit 10.51 to Form 10-K for the year ended December 31, 2002. ** 10.52 Outside Directors' Stock Award Plan, filed as Exhibit 10.52 to Form 10-K for the year ended December 31, 2002. ** 10.53 Directors' resolutions dated May 13, 2003, under which directors' compensation was established, filed as Exhibit 10.53 to Form 10-Q for the quarter ended June 30, 2003. ** 10.55 2004 Management Incentive Compensation Plan, filed as Exhibit 10.55 to Form 10-K for the year ended December 31, 2003. 19 Exhibits marked with an asterisk are filed herewith. * 31.1 Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. * 32.0 Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

24 ** Identifies management contract or compensatory plan or arrangement required to be filed as an Exhibit. b) Reports on Form 8-K On April 20, 2004, the Registrant filed a current report on Form 8-K under Item 12 announcing first quarter results. On July 21, 2004, the Registrant filed a current report on Form 8-K under Item 12 announcing second quarter results.

25 SIGNATURE --------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. L.B. FOSTER COMPANY ------------------- (Registrant) Date: August 12, 2004 By: /s/David J. Russo --------------- --------------------- David J. Russo Senior Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer of Registrant)

INDUSTRIAL LEASE Basic Lease Information Date: February 13, 2004 Landlord: SUWANEE CREEK BUSINESS CENTER, LLC, a Delaware limited liability company. Tenant: LB FOSTER COMPANY, a Pennsylvania corporation Guarantor: N/A Premises (section 1.1): The space(s) in the building(s) outlined in Exhibit A, containing approximately 14,000 square feet (more or less) of building area, the street address(es) of which is (are) known as Suite A, Building 100, 130 Satellite Boulevard NE, Suwanee, Georgia 30024 Property (section 1.1): The land and the building(s) outlined in Exhibit A, containing approximately 172,800 square feet (more or less) of total building area, located in Gwinnett County, Georgia, and known as Suwanee Creek Business Park, 130, 140 and 150 Satellite Boulevard NE, Suwanee, Georgia 30024 Term (section 2.1): One Hundred Twenty-Seven (127) Months Commencement Date (section 2.1): March 1, 2004 Expiration Date (section 2.1): September 30, 2014 Monthly Base Rent (dollars per month) (section 3.1(a)): Period Monthly Installments ------ ------------ 03/01/04 - 02/28/05 $6,277.00 03/01/05 - 02/28/06 $6,465.00 03/01/06 - 02/28/07 $6,659.00 03/01/07 - 02/29/08 $6,858.00 03/01/08 - 02/28/09 $7,064.00 03/01/09 - 02/28/10 $7,276.00 03/01/10 - 02/28/11 $7,495.00 03/01/11 - 02/29/12 $7,720.00 03/01/12 - 02/28/13 $7,951.00 03/01/13 - 02/28/14 $8,190.00 03/01/14 - 09/30/14 $8,435.00

ii Tenant's Percentage Share of Property (section 3.1(b)): 8.12% Tenant's Percentage Share of Building (section 3.1(b)): 20.83% Initial Additional Monthly Rent Estimate (dollars per month) (section 3.2(a)): $1237.33 Security Deposit (section 3.3): $6,277.00 Rent Payment Address (section 3.7): CalEast Industrial Investors, LLC, Atlanta Suwanee, 4518 Collections Center Drive, Chicago, Illinois 60693 Permitted Use of the Premises (section 4.1): Office/warehouse and product testing for parts and equipment related to the railroad industry and matters reasonably similar or related thereto Landlord's Address (section 14.1): c/o LaSalle Investment Management, Inc., 3500 Piedmont Road, Suite 600, Atlanta, Georgia 30305, Attn. Laurence Christopher Harris, and a copy simultaneously to (i) LaSalle Investment Management, Inc., 65 East State Street, Suite 1750, Columbus, Ohio 43215, Attn: Russ Blackwell and to (ii) Trammell Crow Company, Five Concourse Parkway, Suite 1600, Atlanta, Georgia 30328 Tenant's Address (section 14.1): LB Foster Company, 415 Holiday Drive, Pittsburgh, Pennsylvania 15220, Attn.: Steve Hart and a copy simultaneously to LB Foster Company, 415 Holiday Drive, Pittsburgh, Pennsylvania 15220, Attn.: General Counsel. Guarantor's Address (section 14.1): N/A Real Estate Broker(s) (section 15.5): TC Atlanta, Inc. -- Representing Landlord Alliance Partners, Inc. -- Representing Tenant Exhibit A - Plan(s) Outlining the Premises and the Property Exhibit B - Description of Landlord's work Exhibit C - Form of Memorandum Confirming Term Exhibit D - Permitted Use of Hazardous Substances Addendum to Industrial Lease [BALANCE OF THIS PAGE IS INTENTIONALLY BLANK]

iii The foregoing Basic Lease Information is incorporated in and made a part of the Lease to which it is attached. If there is any conflict between the Basic Lease Information and the Lease, the Basic Lease Information shall control. TENANT: LANDLORD: LB FOSTER COMPANY, a Pennsylvania SUWANEE CREEK BUSINESS CENTER LLC, corporation Delaware limited liability company By: /s/Stan L. Hasselbusch By: CalEast Industrial Investors, LLC, Name: Stan L. Hasselbusch a California limited liability company, Title: CEO & President its Member [CORPORATE SEAL] By: LaSalle Investment Management, Inc., a Maryland corporation, its Manager By:/s/Laurence Christopher Harris Laurence Christopher Harris, Vice President (CORPORATE SEAL) By: TC Suwanee Creek, Inc., a Delaware corporation, its Member By:/s/Patty Name: Title: (CORPORATE SEAL)

i Table of Contents Page ARTICLE 1 Premises..................................................1 1.1 Lease of Premises.........................................1 1.2 Relocation of Premises....................................1 ARTICLE 2 Term......................................................1 2.1 Term of Lease.............................................1 2.2 Improvements..............................................2 2.3 Adjustment of Commencement Date...........................2 2.4 Holding Over..............................................2 ARTICLE 3 Rent......................................................3 3.1 Base Rent and Additional Rent.............................3 3.2 Procedures................................................3 3.3 Security Deposit..........................................4 3.4 Late Payment..............................................4 3.5 Other Taxes Payable by Tenant.............................4 3.6 Certain Definitions.......................................5 3.7 Rent Payment Address......................................5 3.8 No Accord and Satisfaction................................5 ARTICLE 4 Use of the Premises.......................................6 4.1 Permitted Use.............................................6 4.2 Environmental Definitions.................................6 4.3 Environmental Requirements................................6 4.4 Compliance With Law.......................................7 4.5 Rules and Regulations.....................................7 4.6 Entry by Landlord.........................................7 ARTICLE 5 Utilities and Services....................................7 5.1 Tenant's Responsibilities.................................7 ARTICLE 6 Maintenance and Repairs...................................8 6.1 Obligations of Landlord...................................8 6.2 Obligations of Tenant.....................................8 ARTICLE 7 Alteration of the Premises................................9 7.1 No Alterations by Tenant..................................9 7.2 Landlord's Property.......................................9 ARTICLE 8 Indemnification and Insurance............................10 8.1 Damage or Injury.........................................10 8.2 Insurance Coverages and Amounts..........................10 8.3 Insurance Requirements...................................10 8.4 Subrogation..............................................11 8.5 Landlord Insurance Requirements..........................11 ARTICLE 9 Assignment or Sublease...................................11 9.1 Prohibition..............................................11

ii TABLE OF CONTENTS (continued) 9.2 Landlord's Consent or Termination........................12 9.3 Completion...............................................12 9.4 Tenant Not Released......................................12 ARTICLE 10 Events of Default and Remedies...........................13 10.1 Default by Tenant........................................13 10.2 Landlord's Remedies......................................13 10.3 Continuation.............................................14 10.4 Remedies Cumulative......................................14 10.5 Tenant's Primary Duty....................................15 10.6 Abandoned Property.......................................15 10.7 Landlord Default.........................................15 10.8 Landlord's Lien..........................................15 ARTICLE 11 Damage or Destruction....................................15 11.1 Restoration..............................................15 11.2 Termination of Lease.....................................16 ARTICLE 12 Eminent Domain...........................................16 12.1 Condemnation.............................................16 12.2 Award....................................................16 12.3 Temporary Use............................................17 12.4 Definition of Taking.....................................17 ARTICLE 13 Subordination and Sale...................................17 13.1 Subordination............................................17 13.2 Sale of the Property.....................................17 13.3 Estoppel Certificate.....................................17 ARTICLE 14 Notices..................................................18 14.1 Method...................................................18 ARTICLE 15 Miscellaneous............................................18 15.1 General..................................................18 15.2 No Waiver................................................18 15.3 Attorneys' Fees..........................................18 15.4 Exhibits.................................................18 15.5 Broker(s)................................................18 15.6 Waivers of Jury Trial and Certain Damages................19 15.7 Entire Agreement.........................................19 15.8 No Estate................................................19 15.9 No Recordation of Lease..................................19 Exhibit A - Plan(s) Outlining the Premises and the Property Exhibit B - Description of Landlord's Work Exhibit C - Form of Memorandum Confirming Term Exhibit D - Permitted Use of Hazardous Materials Addendum to Industrial Lease

1 INDUSTRIAL LEASE THIS LEASE, made as of the date specified in the Basic Lease Information, by and between SUWANEE CREEK BUSINESS CENTER LLC, a Delaware limited liability company ("Landlord"), and the tenant specified in the Basic Lease Information ("Tenant"), W I T N E S S E T H: ARTICLE 1 Premises 1.1 Lease of Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, for the term and subject to the covenants hereinafter set forth, to all of which Landlord and Tenant hereby agree, the space(s) in the building(s) specified in the Basic Lease Information (the "Premises") located on the real property specified in the Basic Lease Information (the "Property"), all as outlined on the plan(s) attached hereto as Exhibit A. The Property includes the land and the building(s) in which the Premises is located. Landlord and Tenant agree that, for purposes of this Lease, the Premises and the Property, respectively, each contains the number of square feet of building area specified in the Basic Lease Information and Tenant's Percentage Share specified in the Basic Lease Information is the ratio of such building area of the Premises to such building area of the Property. During the term of this Lease, Tenant shall have the nonexclusive right, in common with other tenants of the Property, to use only for their intended purposes the common areas (such as driveways, sidewalks, parking areas, loading areas and access roads) in the Property that are designated by Landlord as common areas and not leased to or allocated for the exclusive use of another tenant of the Property. Landlord shall have the right from time to time to change the size, location, configuration, character or use of any such common areas, construct additional improvements or facilities in any such common areas, or close any such common areas. Tenant shall not interfere with the rights of Landlord and other tenants of the Property to use such common areas. 1.2 Relocation of Premises. [Intentionally Deleted]. ARTICLE 2 Term 2.1 Term of Lease. The term of this Lease shall be the term specified in the Basic Lease Information, which shall commence on the commencement date specified in the Basic Lease Information (the "Commencement Date") and, unless sooner terminated as hereinafter provided, shall end on the expiration date specified in the Basic Lease Information (the "Expiration Date"). If Landlord, for any reason whatsoever, does not deliver possession of the Premises to Tenant on the Commencement Date, this Lease shall not be void or voidable and Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, but, in such event, the Commencement Date shall be postponed until the date on which Landlord delivers possession of the Premises to Tenant and the Expiration Date shall be extended for an equal period (subject to adjustment in accordance with section 2.3 hereof). Tenant acknowledges that Tenant has inspected the Premises and the Property or has had the Premises and the Property inspected by professional consultants retained by Tenant, Tenant is familiar with the condition of the Premises and the Property, the Premises and the Property are suitable for Tenant's purposes, and, except for the improvements to be constructed or installed by Landlord pursuant to Exhibit B (if any), the condition of the Premises and the Property is acceptable to Tenant. Except for the improvements to be constructed or installed by Landlord pursuant to Exhibit B (if any), Landlord shall have no obligation to construct or install any improvements in the Premises or the Property or to remodel, renovate, recondition, alter or improve the Premises or the Property in any manner, and Tenant shall accept the Premises "as is" on the Commencement Date. Landlord and Tenant expressly agree that there are and shall be no implied warranties of merchantability, habitability, fitness, for a particular purpose or of any other kind arising out of this Lease and there are no warranties which extend beyond those expressly set forth in this Lease. 2.2 Improvements. This section 2.2 shall apply only if Landlord is required to construct or install improvements in the Premises or the Property pursuant to Exhibit B. Landlord shall construct or install the improvements to be constructed or installed by Landlord pursuant to Exhibit B. Landlord shall deliver possession of

2 the Premises to Tenant on the Commencement Date or the date of substantial completion of the improvements, whichever is later, and Tenant shall accept such delivery of the Premises. Notwithstanding section 2.1 hereof, the term of this Lease shall not commence until Landlord has substantially completed the improvements pursuant to Exhibit B attached hereto and delivered possession of the Premises to Tenant. The date of substantial completion of the improvements shall be the date on which construction is sufficiently complete, substantially in accordance with the plans and specifications, so the improvements may be used or occupied for their intended purpose as permitted under this Lease. If Landlord is delayed in substantially completing the improvements by any cause of delay for which Tenant is responsible, then Tenant shall pay to Landlord, as additional rent, the monthly Base Rent (based on the first month for which the Base Rent is to be paid) and the additional monthly rent payable under section 3.1 hereof, calculated on a per diem basis, multiplied by the number of days of such delay, which shall be due and payable on the Commencement Date specified in the Basic Lease Information for such delay before such date and monthly in arrears on the first day of each month thereafter for such delay after such date. If the improvements are substantially complete and the Premises is ready for occupancy by Tenant prior to the Commencement Date, Tenant shall have the right to take early occupancy of the Premises prior to the Commencement Date and the term of this Lease shall commence on such date of early occupancy by Tenant, in which event the Commencement Date shall be advanced to such date of early occupancy, the Expiration Date shall be advanced by an equal period (subject to adjustment in accordance with section 2.3 hereof), and each of the Monthly Base Rent adjustment dates set forth in the Basic Lease Information shall also be advanced accordingly. Tenant shall give Landlord written notice of Tenant's determination to take early occupancy of the Premises at least ten (10) days in advance, which notice shall specify the date of such early occupancy. 2.3 Adjustment of Commencement Date. If the Commencement Date as determined in accordance with section 2.1 or section 2.2 hereof would not be the first day of the month and the Expiration Date would not be the last day of the month, then the actual Commencement Date shall be the first day of the next calendar month following the date so determined and the actual Expiration Date shall be the last day of the appropriate calendar month so the term of this Lease shall be the full term specified in the Basic Lease Information. The period of the fractional month between the date so determined and the actual Commencement Date shall be on and subject to all of the covenants in this Lease and, on the actual Commencement Date, Tenant shall pay to Landlord, as additional rent, the monthly Base Rent (based on the first month for which the Base Rent is to be paid) and the additional monthly rent payable under section 3.1 hereof, calculated on a per diem basis, for such period. Landlord and Tenant each shall, promptly after the actual Commencement Date and the actual Expiration Date have been determined, execute and deliver to the other a Memorandum Confirming Term in the form of Exhibit C attached hereto, which shall set forth the actual Commencement Date and the actual Expiration Date for this Lease, but the term of this Lease shall commence and end in accordance with this Lease whether or not the Memorandum Confirming Term is executed. 2.4 Holding Over. In the event that Tenant shall continue in occupancy of the Premises after the expiration of the Term, such occupancy shall not be deemed to extend or renew the term of this Lease, but such occupancy shall continue as a tenancy at will upon the covenants, provisions and conditions herein contained at a daily Base Rental equal to one twentieth (1/20th) of the monthly Base Rental in effect at the expiration of the term of this Lease. Landlord may terminate such tenancy at any time on the later of three (3) days' written notice or the minimum notice period, if any, required under applicable law. ARTICLE 3 Rent 3.1 Base Rent and Additional Rent. Tenant shall pay to Landlord the following amounts as rent for the Premises: (a) During the term of this Lease, Tenant shall pay to Landlord, as base monthly rent, the amount of monthly Base Rent specified in the Basic Lease Information. (b) During each calendar year (or part thereof) during the term of this Lease, Tenant shall pay to Landlord, as additional monthly rent:

3 (i) Tenant's Percentage Share specified in the Basic Lease Information of all CAM Expenses paid or incurred by Landlord in such year, provided, however, that beginning with the second full calendar year of the term of this Lease, Tenant's additional rent obligation under this Section 3.1(b)(i) as it relates to those items of CAM Expenses that lie within the reasonable control of Landlord (but not any items of CAM Expenses that are not within the reasonable control of Landlord) shall not increase by more than five percent (5%) per annum; (ii) Tenant's Percentage Share specified in the Basic Lease Information of all Property Taxes paid or incurred by Landlord in such year; and (iii) Tenant's Percentage Share specified in the Basic Lease Information of all Insurance Costs paid or incurred by Landlord in such year. (c) Throughout the term of this Lease, Tenant shall pay, as additional rent, all other amounts of money and charges required to be paid by Tenant under this Lease, whether or not such amounts of money or charges are designated "additional rent." As used in this Lease, "rent" shall mean and include all Base Rent, additional monthly rent and additional rent payable by Tenant in accordance with this Lease. 3.2 Procedures. The additional monthly rent payable by Tenant pursuant to section 3.1(b) hereof (CAM Expenses, Property Taxes and Insurance Costs) shall be calculated and paid in accordance with the following procedures: (a) Prior to the execution of this Lease, and on or before the first day of each subsequent calendar year during the term of this Lease, or as soon thereafter as practicable, Landlord shall give Tenant written notice of Landlord's estimate of the amounts payable under section 3.1(b) hereof for the balance of the first calendar year after the Commencement Date or for the ensuing calendar year, as the case may be. Landlord's estimate of the initial monthly rent payable by Tenant under section 3.1(b) hereof each month for the balance of the first calendar year after the Commencement Date is specified in the Basic Lease Information. Tenant shall pay such estimated amounts to Landlord in equal monthly installments, in advance, on or before the Commencement Date and on or before the first day of each month during such balance of the first calendar year after the Commencement Date or during such ensuing calendar year, as the case may be. If such notice is not given for any calendar year, Tenant shall continue to pay on the basis of the prior year's estimate until the month after such notice is given, and subsequent payments by Tenant shall be based on Landlord's current estimate. If, at any time, Landlord determines that the amounts payable under section 3.1(b) hereof for the current calendar year will vary from Landlord's estimate, Landlord may, by giving written notice to Tenant, revise Landlord's estimate for such year, and subsequent payments by Tenant for such year shall be based on such revised estimate. (b) Within a reasonable time after the end of each calendar year, Landlord shall give Tenant a written statement of the amounts payable by Tenant under section 3.1(b) hereof for such calendar year certified by Landlord. If such statement shows a total amount owing by Tenant that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall credit the excess to the next monthly installments of the amounts payable by Tenant under section 3.1(b) hereof (or, if the term of this Lease has ended, Landlord shall refund the excess to Tenant with such statement). If such statement shows a total amount owing by Tenant that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of such statement. Tenant or Tenant's authorized agent or representative shall have the right once each calendar year to inspect the books of Landlord relating to CAM Expenses, Property Taxes and Insurance Costs for the prior calendar year, after giving reasonable prior written notice to Landlord and during the business hours of Landlord at the office of Landlord's property manager for the Property, for the purpose of verifying the information in such statement. Failure by Landlord to give any notice or statement to Tenant under this section 3.2 shall not waive Landlord's right to receive, or Tenant's obligation to pay, the amounts payable by Tenant under section 3.1(b) hereof. (c) If the term of this Lease commences or ends on a day other than the first or last day of a calendar year, respectively, the amounts payable by Tenant under section 3.1(b) hereof applicable to the calendar year in which such term commences or ends shall be prorated according to the ratio which the number of days during the term of this Lease in such calendar year bears to three hundred sixty-five (365). Termination of this Lease shall not

4 affect the obligations of Landlord and Tenant pursuant to section 3.2(b) hereof to be performed after such termination. 3.3 Security Deposit. Upon signing this Lease, Tenant shall pay to Landlord (a) an amount equal to the Base Rent for the first month of the term of this Lease for which the Base Rent is to be paid, which amount Landlord shall apply to the Base Rent for such first month, and (b) the amount of the security deposit specified in the Basic Lease Information (the "Security Deposit"). The Security Deposit shall be held by Landlord as security for the performance by Tenant of all of the covenants of this Lease to be performed by Tenant, and Tenant shall not be entitled to interest thereon. If Tenant fails to perform any of the covenants of this Lease to be performed by Tenant, then Landlord shall have the right, but no obligation, to apply the Security Deposit, or so much thereof as may be necessary, to cure any such failure by Tenant. If Landlord applies the Security Deposit or any part thereof to cure any such failure by Tenant, then Tenant shall immediately pay to Landlord the sum necessary to restore the Security Deposit to the full amount required by this Section 3.3. Provided Tenant performs all of its obligations under this Lease as provided herein, Landlord shall return any remaining portion of the Security Deposit to Tenant within thirty (30) days after termination of this Lease. Upon termination of the original Landlord's or any successor owner's interest in the Premises, the original Landlord or such successor owner shall be released from further liability with respect to the Security Deposit upon the original Landlord's or such successor owner's transferring the Security Deposit to the new owner. 3.4 Late Payment. Tenant acknowledges that the late payment by Tenant of any monthly installment of Base Rent or additional monthly rent will cause Landlord to incur costs and expenses, the exact amount of which is extremely difficult and impractical to fix. Such costs and expenses will include administration and collection costs and processing and accounting expenses. Therefore, if any monthly installment of Base Rent or additional monthly rent is not received by Landlord within ten (10) days after such installment is due, Tenant shall immediately pay to Landlord a late charge equal to five percent (5%) of such delinquent installment. Landlord and Tenant agree that such late charge represents a reasonable estimate of such costs and expenses and is fair reimbursement to Landlord. In no event shall such late charge be deemed to grant to Tenant a grace period or extension of time within which to pay any monthly rent or prevent Landlord from exercising any right or enforcing any remedy available to Landlord upon Tenant's failure to pay each installment of monthly rent due under this Lease when due, including the right to terminate this Lease and recover all damages from Tenant. All amounts of money payable by Tenant to Landlord hereunder, if not paid when due, shall bear interest from the due date until paid at the lesser of (a) the rate of twelve percent (12%) per annum and (b) the maximum rate permitted by law, and Tenant shall pay such interest to Landlord on written demand. 3.5 Other Taxes Payable by Tenant. Tenant shall reimburse Landlord upon written demand for all taxes, assessments, excises, levies, fees and charges, including all payments related to the cost of providing facilities or services, whether or not now customary or within the contemplation of Landlord and Tenant, that are payable by Landlord and levied, assessed, charged, confirmed or imposed by any public or government authority upon, or measured by, or reasonably attributable to (a) the cost or value of Tenant's furniture, fixtures, equipment and other personal property located in the Premises or the cost or value of any improvements made in or to the Premises by or for Tenant, regardless of whether title to such improvements is vested in Tenant or Landlord, (b) any rent payable under this Lease, including any gross income tax or excise tax levied by any public or government authority with respect to the receipt of any such rent so long as such tax is a tax on rent, (c) the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or (d) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. Such taxes, assessments, excises, levies, fees and charges shall not include net income (measured by the income of Landlord from all sources or from sources other than solely rent) or franchise taxes of Landlord, unless levied or assessed against Landlord in whole or in part in lieu of, as a substitute for, or as an addition to any such taxes, assessments, excises, levies, fees and charges. All taxes, assessments, excises, levies, fees and charges payable by Tenant under this section 3.5 shall be deemed to be, and shall be paid as, additional rent. 3.6 Certain Definitions. As used in this Lease, certain words are defined as follows: (a) "CAM Expenses" shall mean all direct and indirect costs and expenses paid or incurred by Landlord in connection with the ownership, management, operation, maintenance or repair of the Property or providing services in accordance with this Lease, including permit and inspection fees; electricity, gas, fuel, steam,

5 heat, light, power, water, sewer and other utilities; management fees and expenses (not exceeding three percent [3%] of Landlord's annual gross income for the Property); security, guard, extermination, water treatment, garbage and waste disposal, rubbish removal, plumbing and other services; snow and ice removal; maintenance of the fire suppression systems; landscape maintenance; supplies, tools, materials and equipment; accounting and other professional fees and expenses; painting the exterior of the Property; maintaining and repairing the exterior walls and roof, the parking and loading areas, the sidewalks, landscaping and common areas, and the other parts of the Property; costs and expenses required by or resulting from compliance with any laws, ordinances, rules, regulations or orders applicable to the Property; and costs and expenses of contesting by appropriate proceedings any matter concerning managing, operating, maintaining or repairing the Property, or the validity or applicability of any law, ordinance, rule, regulation or order relating to the Property, or the amount or validity of any Property Taxes. CAM Expenses shall not include Property Taxes, Insurance Costs, charges payable by Tenant pursuant to section 3.5 hereof, depreciation on the Property, costs of tenants' improvements, real estate brokers' commissions, interest, or capital costs for major roof, major parking lot replacement, foundation or masonry wall replacement or restoration work necessitated by fire or other casualty damage to the extent of net insurance proceeds received by Landlord with respect thereto. (b) "Property Taxes" shall mean all taxes, assessments, excises, levies, fees and charges (and any tax, assessment, excise, levy, fee or charge levied wholly or partly in lieu thereof or as a substitute therefor or as an addition thereto) of every kind and description, general or special, ordinary or extraordinary, foreseen or unforeseen, secured or unsecured, whether or not now customary or within the contemplation of Landlord and Tenant, that are levied, assessed, charged, confirmed or imposed by any public or government authority on or against, or otherwise with respect to, the Property or any part thereof or any personal property used in connection with the Property. Property Taxes shall not include net income (measured by the income of Landlord from all sources or from sources other than solely rent) or franchise taxes of Landlord, unless levied or assessed against Landlord in whole or in part in lieu of, as a substitute for, or as an addition to any Property Taxes. Property Taxes shall not include charges payable by Tenant pursuant to section 3.5 hereof. (c) "Insurance Costs" shall mean all premiums and other charges for all property, earthquake, flood, loss of rental income, business interruption, liability and other insurance relating to the Property carried by Landlord. 3.7 Rent Payment Address. Tenant shall pay all Base Rent and additional monthly rent under section 3.1 hereof to Landlord, in advance, on or before the first day of each and every calendar month during the term of this Lease. Tenant shall pay all rent to Landlord without notice, demand, deduction or offset, in lawful money of the United States of America, at the address for the payment of rent specified in the Basic Lease Information, or to such other person or at such other place as Landlord may from time to time designate in writing. 3.8 No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount of monthly Base Rent and additional rent or any other sum due hereunder, shall be deemed to be other than on account of the earliest due rent or payment, nor shall any endorsement or statement on any check or any letter accompanying any such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or payment or pursue any other remedy available in this Lease, at law or in equity. Landlord may accept any partial payment from Tenant without invalidation of any contractual notice required to be given herein (to the extent such contractual notice is required) and without invalidation of any notice required by any law pertaining to eviction or summary remedy for regaining possession of real property in the event of tenant default. ARTICLE 4 Use of the Premises 4.1 Permitted Use. Tenant shall use the Premises only for the Permitted Use of the Premises specified in the Basic Lease Information and for lawful purposes incidental thereto, and no other purpose whatsoever. Tenant shall not do or permit to be done in, on or about the Premises, nor bring or keep or permit to be brought or kept therein, anything which is prohibited by or will in any way conflict with any law, ordinance, rule, regulation or order now in force or which may hereafter be enacted, or which is prohibited by any insurance policy carried by Landlord for the Property, or will in any way increase the existing rate of, or disallow any fire rating or sprinkler

6 credit, or cause a cancellation of, or affect any insurance for the Property. If Tenant causes any increase the premium for any insurance covering the Property carried by Landlord, Tenant shall pay to Landlord, on written demand as additional rent, the entire amount of such increase. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of Landlord or other tenants of the Property, or injure or annoy them. Tenant shall not use or allow the Premises to be used for any improper, immoral, unlawful or objectionable activity, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises or commit or suffer to be committed any waste in, on or about the Premises. Tenant shall not store any materials, equipment or vehicles outside the Premises and agrees that no washing of any type (including washing vehicles) shall take place in or outside the Premises. Tenant shall not receive, store or otherwise handle any product or material that is explosive or highly inflammable. Tenant shall not install any signs on the Premises without the prior written consent of Landlord. Tenant shall, at Tenant's expense, remove all such signs prior to or upon termination of this Lease, repair any damage caused by the installation or removal of such signs, and restore the Premises to the condition that existed before installation of such signs. 4.2 Environmental Definitions. As used in this Lease, "Hazardous Material" shall mean any substance that is (a) defined under any Environmental Law as a toxic substance, hazardous substance, hazardous waste, hazardous material, pollutant or contaminant, (b) a petroleum hydrocarbon, including crude oil or any fraction or mixture thereof, (c) hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive, carcinogenic or a reproductive toxicant, or (d) otherwise regulated pursuant to any Environmental Law. As used in this Lease, "Environmental Law" shall mean all federal, state and local laws, statutes, ordinances, regulations, rules, judicial and administrative orders and decrees, permits, licenses, approvals, authorizations and similar requirements of all federal, state and local governmental agencies or other governmental authorities pertaining to the protection of human health and safety or the environment, now existing or later adopted during the term of this Lease. As used in this Lease, "Permitted Activities" shall mean the lawful activities of Tenant that are part of the ordinary course of Tenant's business in accordance with the Permitted Use specified in the Basic Lease Information. As used in this Lease, "Permitted Materials" shall mean the materials, which are not Hazardous Materials, handled by Tenant in the ordinary course of conducting Permitted Activities and any Hazardous Material that is listed by name and maximum quantity and approved by Landlord on Exhibit D attached hereto. 4.3 Environmental Requirements. Tenant hereby agrees that: (a) Tenant shall not conduct, or permit to be conducted, on the Premises any activity which is not a Permitted Activity; (b) Tenant shall not use, store or otherwise handle, or permit any use, storage or other handling of, any Hazardous Material which is not a Permitted Material on or about the Premises; (c) Tenant shall obtain and maintain in effect all permits and licenses required pursuant to any Environmental Law for Tenant's activities on the Premises, and Tenant shall at all times comply with all applicable Environmental Laws; (d) Tenant shall not engage in the storage, treatment or disposal on or about the Premises of any Hazardous Material except for any temporary accumulation of waste generated in the course of Permitted Activities; (e) Tenant shall not install any aboveground or underground storage tank or any subsurface lines for the storage or transfer of any Hazardous Material, except for the lawful discharge of waste to the sanitary sewer, and Tenant shall store all Hazardous Materials in a manner that protects the Premises, the Property and the environment from accidental spills and releases; (f) Tenant shall not cause or permit to occur any release of any Hazardous Material or any condition of pollution or nuisance on or about the Premises, whether affecting surface water or groundwater, air, the land or the subsurface environment; (g) Tenant shall promptly remove from the Premises any Hazardous Material introduced, or permitted to be introduced, onto the Premises by Tenant which is not a Permitted Material and, on or before the date Tenant ceases to occupy the Premises, Tenant shall remove from the Premises all Hazardous Materials and all Permitted Materials handled by or permitted on the Premises by Tenant; (h) if any release of a Hazardous Material to the environment, or any condition of pollution or nuisance, occurs on or about or beneath the Premises as a result of any act or omission of Tenant or its agents, officers, employees, contractors, invitees or licensees, Tenant shall immediately notify Landlord and, where required by law, appropriate governmental authorities, and shall, at Tenant's sole cost and expense, promptly undertake all remedial measures required to clean up and abate or otherwise respond to the release, pollution or nuisance in accordance with all applicable Environmental Laws; and (i) Tenant shall not use, store or handle any chlorinated solvent except for de minimus amounts contained in cleaning supplies provided that such chlorinated solvents and their de minimus amounts are listed and approved by Landlord on Exhibit D attached hereto and incorporated herein by reference and are used in conformance with Environmental Laws and good environmental practice. Landlord and Landlord's representatives shall have the right, but not the obligation, to enter the Premises at any reasonable time for the purpose of inspecting the storage, use and handling of any Hazardous Material on the Premises in order to determine

7 Tenant's compliance with the requirements of this Lease and applicable Environmental Law. If Landlord gives written notice to Tenant that Tenant's use, storage or handling of any Hazardous Material on the Premises may not comply with this Lease or applicable Environmental Law, Tenant shall correct any such violation within five (5) days after Tenant's receipt of such notice from Landlord. Tenant shall indemnify and defend Landlord against and hold Landlord harmless from all claims, demands, actions, judgments, liabilities, costs, expenses, losses, damages, penalties, fines and obligations of any nature (including reasonable attorneys' fees and disbursements incurred in the investigation, defense or settlement of claims) that Landlord may incur as a result of, or in connection with, claims arising from the presence, use, storage, transportation, treatment, disposal, release or other handling, on or about or beneath the Premises, of any Hazardous Material introduced or permitted on or about or beneath the Premises by any act or omission of Tenant or its agents, officers, employees, contractors, invitees or licensees. The liability of Tenant under this Section 4.3 shall survive the termination of this Lease and Tenant's relinquishment of possession of the Premises with respect to acts or omissions that occur before the later to occur of such termination and Tenant's relinquishment of possession. Notwithstanding the foregoing, Tenant shall have no liability under this Section 4.3 for any Hazardous Material that was present on or under the Premises or the Property as of the Commencement Date that was not caused by Tenant or its agents, officers, employees, contractors, invitees or licensees. 4.4 Compliance With Law. Tenant shall, at Tenant's sole cost and expense, promptly comply with all laws, ordinances, rules, regulations, orders and other requirements of any government or public authority now in force or which may hereafter be in force, with all requirements of any board of fire underwriters or other similar body now or hereafter constituted, and with all directions and certificates of occupancy issued pursuant to any law by any governmental agency or officer, insofar as any thereof relate to or are required by the condition, use or occupancy of the Premises or the operation, use or maintenance of any personal property, fixtures, machinery, equipment or improvements in the Premises, but Tenant shall not be required to make structural changes unless structural changes are related to or required by Tenant's acts or use of the Premises or by improvements made by or for Tenant. Notwithstanding the foregoing, Tenant shall not be required to make any structural changes that are necessary to remedy or cure any non-compliance of the Premises with any applicable laws in effect as of the Commencement Date. 4.5 Rules and Regulations. Tenant shall faithfully observe and fully comply with all rules and regulations (the "Rules and Regulations") from time to time made in writing by Landlord for the safety, care, use and cleanliness of the Property or the common areas of the Property and the preservation of good order therein. If there is any conflict, this Lease shall prevail over the Rules and Regulations. 4.6 Entry by Landlord. Landlord shall have the right to enter the Premises at any time to (a) inspect the Premises, (b) exhibit the Premises to prospective purchasers, lenders or tenants, (c) determine whether Tenant is performing all of Tenant's obligations, (d) supply any service to be provided by Landlord, (e) post notices of nonresponsibility, and (f) make any repairs to the Premises, or make any repairs to any adjoining space or utility services, or make any repairs, alterations or improvements to any other portion of the Property, provided all such work shall be done as promptly as reasonably practicable and so as to cause as little interference to Tenant as reasonably practicable. Tenant waives all claims for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or any other loss occasioned by such entry. Landlord shall have the right to use any and all means which Landlord may deem proper to open all doors in, on or about the Premises in an emergency to obtain entry to the Premises. Any entry to the Premises obtained by Landlord by any of such means shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from the Premises or any portion thereof. ARTICLE 5 Utilities and Services 5.1 Tenant's Responsibilities. Tenant shall pay, directly to the appropriate supplier before delinquency, for all water, gas, heat, light, power, telephone, sewer, refuse disposal and other utilities and services supplied to the Premises, together with all taxes, assessments, surcharges and similar expenses relating to such utilities and services. Tenant shall furnish the Premises with all telephone service, window washing, security service, janitor, scavenger and disposal services, and other services required by Tenant for the use of the Premises permitted by this Lease. Tenant shall furnish all electric light bulbs and tubes and restroom supplies used in the

8 Premises. Landlord shall not be in default under this Lease or be liable for any damage or loss directly or indirectly resulting from, nor shall the rent be abated or a constructive or other eviction be deemed to have occurred by reason of, any interruption of or failure to supply or delay in supplying any such utilities and services or any limitation, curtailment, rationing or restriction on use of water, electricity, gas or any resource or form of energy or other service serving the Premises or the Property, whether such results from mandatory restrictions or voluntary compliance with guidelines. ARTICLE 6 Maintenance and Repairs 6.1 Obligations of Landlord. Landlord shall maintain and repair only the foundations, the exterior walls (which shall not include windows, glass or plate glass, doors, special fronts, entries, or the interior surfaces of exterior walls, all of which shall be the responsibility of Tenant, provided that Landlord, and not Tenant, shall be responsible for repairing any broken glass and plate glass caused by any settling of the foundation of the Building), the roof and other structural components of the Premises and the common areas of the Property and keep them in good condition, reasonable wear and tear excepted. Tenant shall give Landlord written notice of the need for any maintenance or repair for which Landlord is responsible, after which Landlord shall have a reasonable opportunity to perform the maintenance or make the repair, and Landlord shall not be liable for any failure to do so unless such failure continues for an unreasonable time after Tenant gives such written notice to Landlord. Tenant waives any right to perform maintenance or make repairs for which Landlord is responsible at Landlord's expense. Landlord's liability with respect to any maintenance or repair for which Landlord is responsible shall be limited to the cost of the maintenance or repair. Any damage to any part of the Property for which Landlord is responsible that is caused by Tenant or any agent, officer, employee, contractor, licensee or invitee of Tenant shall be repaired by Landlord at Tenant's expense and Tenant shall pay to Landlord, upon billing by Landlord, as additional rent, the cost of such repairs incurred by Landlord. 6.2 Obligations of Tenant. Tenant shall, at all times during the term of this Lease and at Tenant's sole cost and expense, maintain and repair the Premises and every part thereof (except only the parts for which Landlord is expressly made responsible under this Lease) and all equipment, fixtures and improvements therein (including windows, glass, plate glass, doors, special fronts, entries, the interior surfaces of exterior walls, interior walls, floors, heating and air conditioning systems, dock boards, truck doors, dock bumpers, plumbing fixtures and equipment, electrical components and mechanical systems) and keep all of the foregoing clean and in good order and operating condition, ordinary and normal wear and tear excepted. Tenant shall not damage the Premises or disturb the integrity and support provided by any wall. Tenant shall, at Tenant's expense, promptly repair any damage to the Premises caused by Tenant or any agent, officer, employee, contractor, licensee or invitee of Tenant. Tenant shall take good care of the Premises and keep the Premises free from dirt, rubbish, waste and debris at all times. Tenant shall not overload the floors in the Premises or exceed the load-bearing capacity of the floors in the Premises. Tenant shall, at Tenant's expense, enter into a regularly scheduled preventative maintenance and service contract with a maintenance contractor approved in writing by Landlord for servicing all hot water, heating and air conditioning systems and equipment in the Premises. The maintenance and service contract shall include all services suggested by the equipment manufacturer and shall become effective (and Tenant shall deliver a copy to Landlord) within thirty (30) days after the Commencement Date. Tenant and Tenant's maintenance contractor shall at all times conduct maintenance on the HVAC equipment at the Premises in accordance with all Federal, state or local laws. In the event that a leak occurs in any portion of the HVAC equipment at the Premises, Tenant shall cause Tenant's maintenance contractor to repair promptly such leak in accordance with such Federal, state or local laws and shall, in any event, cause such leaks to be repaired within the deadline imposed by such Federal, state or local laws. Tenant hereby agrees to indemnify, defend and hold Landlord harmless against any and all damages, liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by Landlord as a result of Tenant's failure to cause maintenance to be conducted on the HVAC equipment at the Premises in accordance with all Federal, state or local laws or as a result of Tenant's failure to cause the repair of any leak in any portion of the HVAC equipment at the Premises in accordance with Federal, state or local laws. In the event of a replacement of a part or portion of the HVAC equipment which is warranted by the manufacturer and/or guaranteed by the installer, Tenant shall provide the Landlord with a duplicate original of the warranty and/or guarantee. Tenant shall, at the end of the term of this Lease, surrender to Landlord the Premises and all alterations, additions, fixtures and improvements therein or thereto in the same condition as when received, ordinary wear and tear excepted.

9 ARTICLE 7 Alteration of the Premises 7.1 No Alterations by Tenant. Tenant shall not make any alterations, additions or improvements in or to the Premises or any part thereof, or attach any fixtures or equipment thereto, without Landlord's prior written consent. Notwithstanding the preceding sentence, Tenant may make such alterations, additions or improvements without Landlord's consent only if the total cost of such alterations, additions or improvements is five thousand dollars ($5,000) or less and such alterations, additions or improvements will not affect in any way the structural, exterior or roof elements of the Property or the mechanical, electrical, plumbing or life safety systems of the Property, but Tenant shall give prior written notice of any such alterations, additions or improvements to Landlord. All alterations, additions and improvements (except improvements made by Landlord pursuant to Exhibit B, if any) in or to the Premises to which Landlord consents shall be made by Tenant at Tenant's sole cost and expense as follows: (a) Tenant shall submit to Landlord, for Landlord's written approval, complete plans and specifications for all work to be done by Tenant, provided that no plans and specifications shall be required for any work in which (i) the total cost of the proposed alteration, addition or improvement is five thousand dollars ($5,000) or less and (ii) such alteration, addition or improvement will not affect in any way the structural, exterior or roof elements of the Property or the mechanical, electrical, plumbing or life safety systems of the Property. Such plans and specifications shall be prepared by responsible licensed architect(s) and engineer(s), shall comply with all applicable codes, laws, ordinances, rules and regulations, shall not adversely affect any systems, components or elements of the Property, shall be in a form sufficient to secure the approval of all government authorities with jurisdiction over the Property, and shall be otherwise satisfactory to Landlord in Landlord's reasonable discretion. (b) Tenant shall obtain all required permits for the work. Tenant shall engage responsible licensed contractor(s) to perform all work. Tenant shall perform all work in accordance with the plans and specifications approved by Landlord, in a good and workmanlike manner, in full compliance with all applicable laws, codes, ordinances, rules and regulations, and free and clear of any mechanics', materialmen's or any other construction related liens. Tenant shall pay for all work (including the cost of all utilities, permits, fees, taxes, and property and liability insurance premiums in connection therewith) required to make the alterations, additions and improvements. Tenant shall pay to Landlord all direct costs and shall reimburse Landlord for all expenses incurred by Landlord in connection with the review, approval and supervision of any alterations, additions or improvements made by Tenant. Under no circumstances shall Landlord be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of design of any work, construction of any work, or delay in completion of any work. (c) Tenant shall give written notice to Landlord of the date on which construction of any work will be commenced at least five (5) days prior to such date. Tenant shall keep the Premises and the Property free from mechanics', materialmen's and all other liens arising out of any work performed, labor supplied, materials furnished or other obligations incurred by Tenant. Tenant shall promptly and fully pay and discharge all claims on which any such lien could be based. Tenant shall have the right to contest the amount or validity of any such lien, provided Tenant gives prior written notice of such contest to Landlord, prosecutes such contest by appropriate proceedings in good faith and with diligence, and, upon request by Landlord, furnishes such bond as may be required by law or such security as Landlord may require to protect the Premises and the Property from such lien. Landlord shall have the right to post and keep posted on the Premises any notices that may be provided by law or which Landlord may deem to be proper for the protection of Landlord, the Premises and the Property from such liens, and to take any other action Landlord deems necessary to remove or discharge liens or encumbrances at the expense of Tenant. 7.2 Landlord's Property. All alterations, additions, fixtures and improvements, including improvements made pursuant to Exhibit B (if any), whether temporary or permanent in character, made in or to the Premises by Landlord or Tenant, shall become part of the Property and Landlord's property. Upon termination of this Lease, Landlord shall have the right, at Landlord's option, by giving written notice to Tenant at any time before or within thirty (30) days after such termination, to retain all such alterations, additions, fixtures and improvements in the Premises, without compensation to Tenant, or to remove all such alterations, additions, fixtures and improvements from the Premises, repair all damage caused by any such removal, and restore the Premises to the condition in which the Premises existed before such alterations, additions, fixtures and improvements were made, and in the latter case Tenant shall pay to Landlord, upon billing by Landlord, the cost of such removal, repair and

10 restoration (including a reasonable charge for Landlord's overhead and profit), provided, however, that Tenant shall have no obligation to pay Landlord for the cost of removing the original Tenant Improvements that are installed by Landlord pursuant to the Approved Plans (as hereafter defined in Exhibit B). All movable furniture, equipment, trade fixtures, computers, office machines and other personal property shall remain the property of Tenant. Upon termination of this Lease, Tenant shall, at Tenant's expense, remove all such movable furniture, equipment, trade fixtures, computers, office machines and other personal property from the Property and repair all damage caused by any such removal. Termination of this Lease shall not affect the obligations of Tenant pursuant to this section 7.2 to be performed after such termination. ARTICLE 8 Indemnification and Insurance 8.1 Damage or Injury. Landlord shall not be liable to Tenant, and Tenant hereby waives all claims against Landlord, for any damage to or loss or theft of any property or for any bodily or personal injury, illness or death of any person in, on or about the Premises or the Property arising at any time and from any cause whatsoever, except to the extent caused by the gross negligence or willful misconduct of Landlord. Tenant shall indemnify and defend Landlord against and hold Landlord harmless from all claims, demands, liabilities, damages, losses, costs and expenses, including reasonable attorneys' fees and disbursements, arising from or related to any use or occupancy of the Premises, or any condition of the Premises, or any default in the performance of Tenant's obligations under this Lease, or any damage to any property (including property of employees and invitees of Tenant) or any bodily or personal injury, illness or death of any person (including employees and invitees of Tenant) occurring in, on or about the Premises or any part thereof arising at any time and from any cause whatsoever (except to the extent caused by the gross negligence or willful misconduct of Landlord) or occurring in, on or about any part of the Property other than the Premises when such damage, bodily or personal injury, illness or death is caused by any act or omission of Tenant or its agents, officers, employees, contractors, invitees or licensees. This section 8.1 shall survive the termination of this Lease with respect to any damage, bodily or personal injury, illness or death occurring prior to such termination. 8.2 Insurance Coverages and Amounts. Tenant shall, at all times during the term of this Lease and at Tenant's sole cost and expense, obtain and keep in force the insurance coverages and amounts set forth in this section 8.2. Tenant shall maintain commercial general liability insurance, with limits not less than one million dollars ($1,000,000) per occurrence and two million dollars ($2,000,000) general aggregate, which insures against claims for bodily injury, personal injury, advertising injury and property damage based upon, involving or arising out of the use, occupancy or maintenance of the Premises and the Property. Such insurance shall include blanket contractual liability, broad form property damage liability, fire legal liability, premises, products and completed operations, and medical payments, with minimum limits of $10,000 each accident. The policy shall contain an exception to any pollution exclusion which insures damage or injury arising out of heat, smoke or fumes from a hostile fire. Such insurance shall be written on an occurrence basis and contain a standard separation of insureds provision with cross liability. Tenant shall maintain business auto liability insurance with limits not less than one million dollars ($1,000,000) each accident covering owned, hired and non-owned vehicles used by Tenant. If Tenant has no owned autos, Tenant shall at a minimum provide hired and non-owned auto liability coverage. Tenant shall maintain umbrella excess liability insurance on a following form basis in excess of the required commercial general liability, business auto and employers liability insurance with limits of not less than five million dollars ($5,000,000) per occurrence and aggregate. Tenant shall maintain (i) workers' compensation insurance in statutory limits for all of its employees in the state in which the Property is located and (ii) employers liability insurance which affords not less than one million dollars ($1,000,000) for each coverage and policy limit. Tenant shall maintain "all risk" property insurance for all personal property of Tenant, improvements, fixtures and equipment constructed or installed by Tenant in the Premises in an amount not less than the full replacement cost. Such property insurance, shall include business income and extra expense coverage with sufficient limits for Tenant to sustain its business operation at this location for a period of twelve (12) months. Tenant shall maintain boiler and machinery insurance against loss or damage from an accident from Tenant installed or above building standard equipment installed for Tenant's use in the Premises for full replacement cost and plate glass insurance coverage against breakage of plate glass in the Premises from causes other than insured perils. Tenant may self insure for plate glass. Any deductibles selected by Tenant shall be the sole responsibility of Tenant.

11 8.3 Insurance Requirements. All insurance and all renewals thereof shall be issued by companies with a rating of at least "A-" "VIII" or better in the current edition of Best's Insurance Reports and be approved to do business in the state in which the Property is located. Each policy shall expressly provide that the policy shall not be canceled or materially reduced below the limits required without thirty (30) days' prior written notice to Landlord and shall remain in effect notwithstanding any such cancellation or alteration until such notice shall have been given to Landlord and such period of thirty (30) days shall have expired. All liability insurance (except employers liability) shall name Landlord and any other parties designated by Landlord (including without limitation the State of California Public Employees Retirement System, CalEast Industrial Investors, LLC, LaSalle Investment Management, Inc., Trammell Crow Company, or any other investment manager, asset manager or property manager) as an additional insured, shall be primary and noncontributory to any insurance which may be carried by Landlord, shall afford coverage for all claims based on any act, omission, event or condition that occurred or arose (or the onset of which occurred or arose) during the policy period, and shall expressly provide that Landlord, although named as an insured, shall nevertheless be entitled to recover under the policy for any loss, injury or damage to Landlord. All property insurance shall name Landlord as loss payee as respects Landlord's interest in any improvements and betterments. Tenant shall deliver certificates of insurance acceptable to Landlord at least ten (10) days before the Commencement Date and at least ten (10) days before expiration of each policy. Additional Insured Endorsement CG 20 11 11 85 or its equivalent is required to be provided as soon as it is available. If Tenant fails to insure or fails to furnish any such insurance certificate or endorsement, Landlord shall have the right, but shall not be required to, from time to time to effect such insurance for the benefit of Tenant or Landlord or both of them, and Tenant shall pay to Landlord on written demand, as additional rent, all premiums paid by Landlord. Landlord may at any time amend the requirements herein due to (i) information not previously known to the Landlord and which poses a material risk (ii) changed circumstances which, in the reasonable judgment of the Landlord renders such coverage materially inadequate or (iii) as required by the Landlord's lender. 8.4 Subrogation. Tenant waives on behalf of all insurers under all policies of property insurance now or hereafter carried by Tenant insuring or covering the Premises, or any portion or any contents thereof, or any operations therein, all rights of subrogation which any such insurer might otherwise, if at all, have to any claims of Tenant against Landlord. Landlord waives on behalf of all insurers under all policies of property insurance now or hereafter carried by Landlord insuring or covering the Property, or any portion or any contents thereof, or any operations therein, all rights of subrogation which any such insurer might otherwise, if at all, have to any claims of Landlord against Tenant. Landlord and Tenant shall procure from each of their insurers under all policies of property insurance now or hereafter carried by Tenant insuring or covering the Premises, or any portion or any contents thereof, or any operations therein, a waiver of all rights of subrogation which the insurer might otherwise, if at all, have to any claims of either party against the other as required by this section 8.4. 8.5 Landlord Insurance Requirements. Landlord shall, at all times during the term of this Lease, secure and maintain: (a) All risk property insurance coverage on the Property. Landlord shall not be obligated to insure any furniture, equipment, trade fixtures, machinery, goods, or supplies which Tenant may keep or maintain in the Demised Premises or any alteration, addition or improvement which Tenant may make upon the Demised Premises. In addition, Landlord shall secure and maintain rental income insurance and any other insurance coverage required to be maintained by any mortgage of the property. If the annual cost to Landlord for such property or rental income insurance exceeds the standard rates because of the nature of Tenant's operations, Tenant shall, upon the receipt of appropriate invoices, reimburse Landlord for such increased cost. Commercial general liability insurance with limits not less than $5,000,000 per occurrence and aggregate. Such insurance shall be in addition to, and not in lieu of, insurance required to be maintained by Tenant. Tenant shall not be named as an additional insured on any policy of liability insurance maintained by Landlord. ARTICLE 9 Assignment or Sublease 9.1 Prohibition. Tenant shall not, directly or indirectly, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, assign this Lease or any interest herein or sublease the Premises or any part thereof, or permit the use or occupancy of the Premises by any person or entity other than Tenant.

12 Tenant shall not, directly or indirectly, without the prior written consent of Landlord, pledge, mortgage or hypothecate this Lease or any interest herein. This Lease shall not, nor shall any interest herein, be assignable as to the interest of Tenant involuntarily or by operation of law without the prior written consent of Landlord. For purposes of this Lease, any of the following transfers on a cumulative basis shall constitute an assignment of this Lease that requires the prior written consent of Landlord: if Tenant is a corporation, the transfer of more than forty-nine percent (49%) of the stock of the corporation; if Tenant is a partnership, the transfer of more than forty-nine percent (49%) of the capital or profits interest in the partnership; if Tenant is a limited liability company, the transfer of more than forty-nine percent (49%) of the membership interests in the limited liability company or a change in the manager of the limited liability company, if any; and if Tenant is a trust, the transfer of more than forty-nine percent (49%) of the beneficial interest under the trust. Any of the foregoing acts without such prior written consent of Landlord shall be void and shall, at the option of Landlord, constitute a default that entitles Landlord to terminate this Lease. Tenant agrees that the instrument by which any assignment or sublease to which Landlord consents is accomplished shall expressly provide that the assignee or subtenant will perform all of the covenants to be performed by Tenant under this Lease (in the case of a sublease, only insofar as such covenants relate to the portion of the Premises subject to such sublease) as and when performance is due after the effective date of the assignment or sublease and that Landlord will have the right to enforce such covenants directly against such assignee or subtenant. Any purported assignment or sublease without an instrument containing the foregoing provisions shall be void. Tenant shall in all cases remain liable for the performance by any assignee or subtenant of all such covenants. 9.2 Landlord's Consent or Termination. If Tenant wishes to assign this Lease or sublease all or any part of the Premises, Tenant shall give written notice to Landlord identifying the intended assignee or subtenant by name and address and specifying all of the terms of the intended assignment or sublease. Tenant shall give Landlord such additional information concerning the intended assignee or subtenant (including complete financial statements and a business history) or the intended assignment or sublease (including true copies thereof) as Landlord requests. For a period of thirty (30) days after such written notice is given by Tenant, Landlord shall have the right, by giving written notice to Tenant, (a) to consent in writing to the intended assignment or sublease, unless Landlord determines not to consent, or (b) in the case of an assignment of this Lease or a sublease of substantially the entire Premises for substantially the balance of the term of this Lease, to terminate this Lease, which termination shall be effective as of the date on which the intended assignment or sublease would have been effective if Landlord had not exercised such termination right. 9.3 Completion. If Landlord consents in writing, Tenant may complete the intended assignment or sublease subject to the following covenants: (a) the assignment or sublease shall be on the same terms as set forth in the written notice given by Tenant to Landlord, (b) no assignment or sublease shall be valid and no assignee or subtenant shall take possession of the Premises or any part thereof until an executed duplicate original of such assignment or sublease, in compliance with section 9.1 hereof, has been delivered to Landlord, (c) no assignee or subtenant shall have a right further to assign or sublease, and (d) all "excess rent" (as hereinafter defined) derived from such assignment or sublease shall be paid to Landlord. Such excess rent shall be deemed to be, and shall be paid by Tenant to Landlord as, additional rent. Tenant shall pay such excess rent to Landlord immediately as and when such excess rent becomes due and payable to Tenant. As used in this section 9.3, "excess rent" shall mean the amount by which the total money and other economic consideration to be paid by the assignee or subtenant as a result of an assignment or sublease, whether denominated rent or otherwise, exceeds, in the aggregate, the total amount of rent which Tenant is obligated to pay to Landlord under this Lease (prorated to reflect the rent allocable to the portion of the Premises subject to such assignment or sublease), less only the reasonable costs paid by Tenant for additional improvements installed in the portion of the Premises subject to such assignment or sublease by Tenant at Tenant's sole cost and expense for the specific assignee or subtenant in question and reasonable leasing commissions paid by Tenant in connection with such assignment or sublease, without deduction for carrying costs due to vacancy or otherwise. Such costs of additional improvements and leasing commissions shall be amortized without interest over the term of such assignment or sublease. 9.4 Tenant Not Released. No assignment or sublease whatsoever shall release Tenant from Tenant's obligations and liabilities under this Lease or alter the primary liability of Tenant to pay all rent and to perform all obligations to be paid and performed by Tenant. No assignment or sublease shall amend or modify this Lease in any respect, and every assignment and sublease shall be subject and subordinate to this Lease. The acceptance of rent by Landlord from any other person or entity shall not be deemed to be a waiver by Landlord of any provision of this Lease. Consent to one assignment or sublease shall not be deemed consent to any subsequent assignment or

13 sublease. Concurrently with any request for Landlord's consent, Tenant shall pay to Landlord a service fee of Five Hundred Dollars ($500.00), which shall be used by Landlord to defray the costs incurred by Landlord in reviewing and processing such request. In the event that the actual costs incurred by Landlord in reviewing Tenant's request exceeds Five Hundred Dollars ($500.00), then Tenant shall reimburse Landlord for the amount of such excess within ten (10) days of written demand therefor. If the actual costs incurred by Landlord in reviewing Tenant's request is less than Five Hundred Dollars ($500.00), then Landlord shall refund the difference to Tenant. If any assignee, subtenant or successor of Tenant defaults in the performance of any obligation to be performed by Tenant under this Lease, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee, subtenant or successor. Landlord may consent to subsequent assignments or subleases or amendments or modifications to this Lease with assignees, subtenants or successors of Tenant, without notifying Tenant or any successor of Tenant and without obtaining any consent thereto from Tenant or any successor of Tenant, and such action shall not release Tenant from liability under this Lease. ARTICLE 10 Events of Default and Remedies 10.1 Default by Tenant. The occurrence of any one or more of the following events ("Event of Default") shall constitute a breach of this Lease by Tenant: (a) Tenant fails to pay any Base Rent, or any additional monthly rent under section 3.1 hereof, or any additional rent or other amount of money or charge payable by Tenant hereunder as and when such rent becomes due and payable and such failure continues for more than five (5) business days after Landlord gives written notice thereof to Tenant; provided, however, that after the second such failure in a calendar year, only the passage of time, but no further written notice, shall be required to establish an Event of Default in the same calendar year; or (b) Tenant fails to perform or breaches any other agreement or covenant of this Lease to be performed or observed by Tenant as and when performance or observance is due and such failure or breach continues for more than ten (10) days after Landlord gives written notice thereof to Tenant; provided, however, that if, by the nature of such agreement or covenant, such failure or breach cannot reasonably be cured within such period of ten (10) days, an Event of Default shall not exist as long as Tenant commences with due diligence and dispatch the curing of such failure or breach within such period of ten (10) days and, having so commenced, thereafter prosecutes with diligence and dispatch and completes the curing of such failure or breach; or (c) Tenant (i) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency or other debtors' relief law of any jurisdiction, (ii) makes an assignment for the benefit of its creditors, or (iii) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers of Tenant or of any substantial part of Tenant's property; or (d) Without consent by Tenant, a court or government authority enters an order, and such order is not vacated within thirty (30) days, (i) appointing a custodian, receiver, trustee or other officer with similar powers with respect to Tenant or with respect to any substantial part of Tenant's property, or (ii) constituting an order for relief or approving a petition for relief or reorganization or arrangement or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency or other debtors' relief law of any jurisdiction, or (iii) ordering the dissolution, winding-up or liquidation of Tenant; or (e) This Lease or any estate of Tenant hereunder is levied upon under any attachment or execution and such attachment or execution is not vacated within thirty (30) days; or (f) Tenant (i) abandons the Premises without providing Landlord with thirty (30) days advance written notice of its intention to vacate the Premises and (ii) after vacating the Premises fails to perform or observe any covenant, term or condition contained in this Lease, including without limitation the obligation to pay all rent due hereunder, the duty to maintain the Premises and the covenant to obtain and maintain the insurance coverages required under this Lease.

14 10.2 Landlord's Remedies. Upon the occurrence of an Event of Default, Landlord shall have the option to do and perform any one or more of the following: (a) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord. If Tenant shall fail to do so, Landlord may, without further notice and without prejudice to any other remedy Landlord may have, lawfully enter upon the Premises without the requirement of resorting to the dispossessory procedures set forth in O.C.G.A. ss.ss. 44-7-50 et seq. and expel or remove Tenant and Tenant's effects without being liable for any claim for trespass or damages therefor. Upon any such termination, Tenant shall remain liable to Landlord for damages, due and payable monthly on the day Base Rent would have been payable hereunder, in an amount equal to the Base Rent and any other amounts which would have been owing by Tenant for the balance of the Term, had this Lease not been terminated, less the net proceeds, if any, of any reletting of the Premises by Landlord, after deducting all of Landlord's costs and expenses (including, without limitation, advertising expenses, professional fees and the preparation of the Premises for reletting) incurred in connection with or in any way related to the termination of this Lease, eviction of Tenant and such reletting; and/or (b) Declare the entire amount of Base Rent calculated on the current rate being paid by Tenant, and other sums (including additional rent) which in Landlord's reasonable determination would become due and payable during the remainder of the Term (including, but not limited to, increases in Base Rent), discounted to present value by using a reasonable discount rate selected by Landlord, to be due and payable immediately. Upon such acceleration of such amounts Tenant agrees to pay the same at once, together with all Base Rent and other amounts theretofore due, less the market rental value of the Premises for the remainder of the Term, as determined by Landlord (taking into consideration the probable costs of marketing and reletting the Premises (including improvements required to be made to ready the Premises for reletting), then-current rental rates, probable rental rates for the remainder of the Term, probable concession packages, the probability of reletting the Premises and the probable amount of time which will elapse before the Premise are relet), at Landlord's address as provided herein; provided however, that such payment shall not constitute a penalty or forfeiture but shall constitute liquidated damages for Tenant's failure to comply with the terms and provisions of this Lease (Landlord and Tenant agreeing that Landlord's actual damages in such an event are impossible to ascertain and that the amount set forth above is a reasonable estimate thereof). The acceptance of such payment by Landlord shall not constitute a waiver or rights or remedies to Landlord for any failure of Tenant thereafter occurring to comply with any term, provision, condition or covenant of this Lease; and/or (c) Lawfully enter the Premises as the agent of Tenant without the requirement of resorting to the dispossessory procedures set forth in O.C.G.A. ss.ss. 44-7-50 et seq. and without being liable for any claim for trespass or damages therefor, and, in connection therewith, rekey the Premises, remove Tenant's effects therefrom and store the same at Tenant's expense, without being liable for any damage thereto, and relet the Premises as the agent of Tenant, without advertisement, by private negotiations, for any term Landlord deems proper, and receive the rent therefor. Tenant shall pay Landlord on demand any deficiency that may arise by reason of such reletting, but Tenant shall not be entitled to any surplus so arising. Tenant shall reimburse Landlord for all reasonable costs and expenses (including, without limitation, advertising expenses and reasonable professional fees) incurred in connection with or in any way related to the eviction of Tenant and reletting the Premises. Landlord, in addition to but not in lieu of or in limitation of any other right or remedy provided to Landlord under the terms of this Lease or otherwise (but only to the extent such sum is not reimbursed to Landlord in conjunction with any other payment made by Tenant to Landlord), shall have the right to be immediately repaid by Tenant the amount of all sums expended by Landlord and not repaid by Tenant in connection with preparing or improving the Premises to Tenant's specifications and any and all costs and expenses incurred in renovating or altering the Premises to make it suitable for reletting; and/or (d) As agent of Tenant, do whatever Tenant is obligated to do under this Lease, including, but not limited to, lawfully entering the Premises, without being liable to prosecution or any claims for damages, in order to accomplish this purpose. Tenant agrees to reimburse Landlord immediately upon demand for any expenses which Landlord may incur in thus effecting compliance with this Lease on behalf of Tenant. Landlord shall not be liable for any damages resulting to Tenant from such action, unless caused by the negligence or willful misconduct of Landlord or otherwise. 10.3 Continuation. If an Event of default occurs, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord shall have the right to enforce all its rights

15 and remedies under this Lease, including the right to recover all rent as it becomes due under this Lease. Acts of maintenance or preservation or efforts to relet the Premises or the appointment of a receiver upon initiative of Landlord to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession unless written notice of termination is given by Landlord to Tenant. 10.4 Remedies Cumulative. Upon the occurrence of an Event of Default, Landlord shall have the right to exercise and enforce all rights and remedies granted or permitted by law. The remedies provided for in this Lease are cumulative and in addition to all other remedies available to Landlord at law or in equity by statute or otherwise. Exercise by Landlord of any remedy shall not be deemed to be an acceptance of surrender of the Premises by Tenant, either by agreement or by operation of law. Surrender of the Premises can be effected only by the written agreement of Landlord and Tenant. 10.5 Tenant's Primary Duty. All agreements and covenants to be performed or observed by Tenant under this Lease shall be at Tenant's sole cost and expense and without any abatement of rent. If Tenant fails to pay any sum of money to be paid by Tenant or to perform any other act to be performed by Tenant under this Lease, Landlord shall have the right, but shall not be obligated, and without waiving or releasing Tenant from any obligations of Tenant, to make any such payment or to perform any such other act on behalf of Tenant in accordance with this Lease. All sums so paid by Landlord and all costs incurred or paid by Landlord shall be deemed additional rent hereunder and Tenant shall pay the same to Landlord on written demand, together with interest on all such sums and costs from the date of expenditure by Landlord to the date of repayment by Tenant at the rate of ten percent (10%) per annum. 10.6 Abandoned Property. If Tenant abandons the Premises, or is dispossessed by process of law or otherwise, any movable furniture, equipment, trade fixtures or personal property belonging to Tenant and left in the Premises shall be deemed to be abandoned, at the option of Landlord, and Landlord shall have the right to sell or otherwise dispose of such personal property in any commercially reasonable manner. 10.7 Landlord Default. If Landlord defaults under this Lease, Tenant shall give written notice to Landlord specifying such default with particularity, and Landlord shall have thirty (30) days after receipt of such notice within which to cure such default, or if default cannot reasonably be cured within such thirty (30) day period, such longer period of time as may be required to cure such default provided that Landlord commences efforts to cure such default within such thirty (30) day period and thereafter continues to diligently prosecute such cure to completion. In the event of any default by Landlord, Tenant's exclusive remedy shall be an action for damages. Notwithstanding any other provision of this Lease, Landlord shall not have any personal liability under this Lease. In the event of any default by Landlord under this Lease, Tenant agrees to look solely to the equity or interest then owned by Landlord in the Property, and in no event shall any deficiency judgment or personal money judgment of any kind be sought or obtained against Landlord. 10.8 Landlord's Lien. [Intentionally Deleted.] ARTICLE 11 Damage or Destruction 11.1 Restoration. If the Property or the Premises, or any part thereof, is damaged by fire or other casualty before the Commencement Date or during the term of this Lease, and this Lease is not terminated pursuant to section 11.2 hereof, Landlord shall repair such damage and restore the Property and the Premises to substantially the same condition in which the Property and the Premises existed before the occurrence of such fire or other casualty and this Lease shall, subject to this section 11.1, remain in full force and effect. If such fire or other casualty damages the Premises or common areas of the Property necessary for Tenant's use and occupancy of the Premises and if such damage is not the result of the negligence or willful misconduct of Tenant or Tenant's agents, officers, employees, contractors, licensees or invitees, then, during the period the Premises is rendered unusable by such damage, Tenant shall be entitled to a reduction in Base Rent in the proportion that the area of the Premises rendered unusable by such damage bears to the total area of the Premises. Landlord shall not be obligated to repair any damage to, or to make any replacement of, any movable furniture, equipment, trade fixtures or personal property in the Premises. Tenant shall, at Tenant's sole cost and expense, repair and replace all such movable furniture, equipment, trade fixtures and personal property.

16 11.2 Termination of Lease. If the Property or the Premises, or any part thereof, is damaged by fire or other casualty before the Commencement Date or during the term of this Lease and (a) such fire or other casualty occurs during the last twelve (12) months of the term of this Lease and the repair and restoration work to be performed by Landlord in accordance with section 11.1 hereof cannot, as reasonably estimated by Landlord, be completed within two (2) months after the occurrence of such fire or other casualty, or (b) the insurance proceeds received by Landlord in respect of such damage are not adequate to pay the entire cost, as reasonably estimated by Landlord, of the repair and restoration work to be performed by Landlord in accordance with section 11.1 hereof (including inadequacy resulting from the requirement of the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises that the insurance proceeds be applied to such indebtedness), or (c) the repair and restoration work to be performed by Landlord in accordance with section 11.1 hereof cannot, as reasonably estimated by Landlord, be completed within four (4) months after the occurrence of such fire or other casualty, then, in any such event, Landlord shall have the right, by giving written notice to Tenant within sixty (60) days after the occurrence of such fire or other casualty, to terminate this Lease as of the date of such notice. If Landlord does not exercise the right to terminate this Lease in accordance with this section 11.2, Landlord shall repair such damage and restore the Property and the Premises in accordance with section 11.1 hereof and this Lease shall, subject to section 11.1 hereof, remain in full force and effect. A total destruction of the Property shall automatically terminate this Lease effective as of the date of such total destruction. ARTICLE 12 Eminent Domain 12.1 Condemnation. Landlord shall have the right to terminate this Lease if any part of the Premises or any substantial part of the Property (whether or not it includes the Premises) is taken by exercise of the power of eminent domain before the Commencement Date or during the term of this Lease. Tenant shall have the right to terminate this Lease if a substantial portion of the Premises is taken by exercise of the power of eminent domain before the Commencement Date or during the term of this Lease and the remaining portion of the Premises is not reasonably suitable for Tenant's purposes. In each such case, Landlord or Tenant shall exercise such termination right by giving written notice to the other within thirty (30) days after the date of such taking. If either Landlord or Tenant exercises such right to terminate this Lease in accordance with this section 12.1, this Lease shall terminate as of the date of such taking. If neither Landlord nor Tenant exercises such right to terminate this Lease in accordance with this section 12.1, this Lease shall terminate as to the portion of the Premises so taken as of the date of such taking and shall remain in full force and effect as to the portion of the Premises not so taken, and the Base Rent and Tenant's Percentage Share shall be reduced as of the date of such taking in the proportion that the area of the Premises so taken bears to the total area of the Premises. If all of the Premises is taken by exercise of the power of eminent domain before the Commencement Date or during the term of this Lease, this Lease shall terminate as of the date of such taking. 12.2 Award. If all or any part of the Premises is taken by exercise of the power of eminent domain, all awards, compensation, damages, income, rent and interest payable in connection with such taking shall, except as expressly set forth in this section 12.2, be paid to and become the property of Landlord, and Tenant hereby assigns to Landlord all of the foregoing. Without limiting the generality of the foregoing, Tenant shall have no claim against Landlord or the entity exercising the power of eminent domain for the value of the leasehold estate created by this Lease or any unexpired term of this Lease. Tenant shall have the right to claim and receive directly from the entity exercising the power of eminent domain only the share of any award determined to be owing to Tenant for the taking of improvements installed in the portion of the Premises so taken by Tenant at Tenant's sole cost and expense based on the unamortized cost actually paid by Tenant for such improvements, for the taking of Tenant's movable furniture, equipment, trade fixtures and personal property, for loss of goodwill, for interference with or interruption of Tenant's business, or for removal and relocation expenses. 12.3 Temporary Use. Notwithstanding sections 12.1 and 12.2 hereof to the contrary, if the use of all or any part of the Premises is taken by exercise of the power of eminent domain during the term of this Lease on a temporary basis for a period less than the term of this Lease remaining after such taking, this Lease shall continue in full force and effect, Tenant shall continue to pay all of the rent and to perform all of the covenants of Tenant in accordance with this Lease, to the extent reasonably practicable under the circumstances, and the condemnation proceeds in respect of such temporary taking shall be paid to Tenant.

17 12.4 Definition of Taking. As used herein, a "taking" means the acquisition of all or part of the Property for a public use by exercise of the power of eminent domain or voluntary conveyance in lieu thereof and the taking shall be considered to occur as of the earlier of the date on which possession of the Property (or part so taken) by the entity exercising the power of eminent domain is authorized as stated in an order for possession or the date on which title to the Property (or part so taken) vests in the entity exercising the power of eminent domain. ARTICLE 13 Subordination and Sale 13.1 Subordination. This Lease shall be subject and subordinate at all times to the lien of all mortgages and deeds of trust securing any amount or amounts whatsoever which may now exist or hereafter be placed on or against the Property or on or against Landlord's interest or estate therein, all without the necessity of having further instruments executed by Tenant to effect such subordination. Notwithstanding the foregoing, in the event of a foreclosure of any such mortgage or deed of trust or of any other action or proceeding for the enforcement thereof, or of any sale thereunder, this Lease shall not be terminated or extinguished, nor shall the rights and possession of Tenant hereunder be disturbed, if no Event of Default then exists under this Lease, and Tenant shall attorn to the person who acquires Landlord's interest hereunder through any such mortgage or deed of trust. Tenant agrees to execute, acknowledge and deliver upon demand such further instruments evidencing such subordination of this Lease to the lien of all such mortgages and deeds of trust as may reasonably be required by Landlord. 13.2 Sale of the Property. If the original Landlord hereunder, or any successor owner of the Property, sells or conveys the Property, all liabilities and obligations on the part of the original Landlord, or such successor owner, under this Lease accruing after such sale or conveyance shall terminate and the original Landlord, or such successor owner, shall automatically be released therefrom, and thereupon all such liabilities and obligations shall be binding upon the new owner. Tenant agrees to attorn to such new owner. 13.3 Estoppel Certificate. At any time and from time to time, Tenant shall, within ten (10) days after written request by Landlord, execute, acknowledge and deliver to Landlord a certificate certifying: (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified, and stating the date and nature of each modification); (b) the Commencement Date and the Expiration Date determined in accordance with Article 2 hereof and the date, if any, to which all rent and other sums payable hereunder have been paid; (c) that no notice has been received by Tenant of any default by Tenant hereunder which has not been cured, except as to defaults specified in such certificate; (d) that Landlord is not in default under this Lease, except as to defaults specified in such certificate; and (e) such other matters as may be reasonably requested by Landlord or any actual or prospective purchaser or mortgage lender. Any such certificate may be relied upon by Landlord and any actual or prospective purchaser or mortgage lender of the Property or any part thereof. At any time and from time to time, Tenant shall, within ten (10) days after written request by Landlord, deliver to Landlord copies of all current financial statements (including a balance sheet, an income statement, and an accumulated retained earnings statement), annual reports, and such other financial and operating information and data of Tenant prepared by Tenant in the course of Tenant's business as Landlord shall reasonably require. Unless available to the public, Landlord shall disclose such financial statements, annual reports and other information or data only to actual or prospective purchasers or mortgage lenders of the Property or any part thereof, and otherwise keep them confidential unless other disclosure is required by law. ARTICLE 14 Notices 14.1 Method. All requests, approvals, consents, notices and other communications given by Landlord or Tenant under this Lease shall be properly given only if made in writing and either deposited in the United States mail, postage prepaid, certified with return receipt requested, or delivered by hand (which may be through a messenger or recognized delivery, courier or air express service) and addressed as follows: To Landlord at the address of Landlord specified in the Basic Lease Information, or at such other place as Landlord may from time to time designate in a written notice to Tenant; to Tenant at the address of Tenant specified in the Basic Lease Information, or at such other place as Tenant may from time to time designate in a written notice to Landlord; and to Guarantor at the address of Guarantor specified in the Basic Lease Information, or at such other place as Guarantor may from time to time designate in a written notice to Landlord. Such requests, approvals, consents,

18 notices and other communications shall be effective on the date of receipt (evidenced by the certified mail receipt) if mailed or on the date of hand delivery if hand delivered. If any such request, approval, consent, notice or other communication is not received or cannot be delivered due to a change in the address of the receiving party of which notice was not previously given to the sending party or due to a refusal to accept by the receiving party, such request, approval, consent, notice or other communication shall be effective on the date delivery is attempted. Any request, approval, consent, notice or other communication under this Lease may be given on behalf of a party by the attorney for such party. ARTICLE 15 Miscellaneous 15.1 General. The words "Landlord" and "Tenant" as used herein shall include the plural as well as the singular. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." If there is more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. Time is of the essence of this Lease and each and all of its provisions. This Lease shall benefit and bind Landlord and Tenant and the permitted personal representatives, heirs, successors and assigns of Landlord and Tenant. If any provision of this Lease is determined to be illegal or unenforceable, such determination shall not affect any other provision of this Lease and all such other provisions shall remain in full force and effect. Tenant shall not record this Lease or any memorandum or short form of it. This Lease shall be governed by and construed in accordance with the laws of the state in which the Property is located. 15.2 No Waiver. The waiver by Landlord or Tenant of any breach of any covenant in this Lease shall not be deemed to be a waiver of any subsequent breach of the same or any other covenant in this Lease, nor shall any custom or practice which may grow up between Landlord and Tenant in the administration of this Lease be construed to waive or to lessen the right of Landlord or Tenant to insist upon the performance by Landlord or Tenant in strict accordance with this Lease. The subsequent acceptance of rent hereunder by Landlord or the payment of rent by Tenant shall not waive any preceding breach by Tenant of any covenant in this Lease, nor cure any Event of Default, nor waive any forfeiture of this Lease or unlawful detainer action, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's or Tenant's knowledge of such preceding breach at the time of acceptance or payment of such rent. 15.3 Attorneys' Fees. If there is any legal action or proceeding between Landlord and Tenant to enforce this Lease or to protect or establish any right or remedy under this Lease, the unsuccessful party to such action or proceeding shall pay to the prevailing party all costs and expenses, including reasonable attorneys' fees and disbursements, incurred by such prevailing party in such action or proceeding and in any appeal in connection therewith. If such prevailing party recovers a judgment in any such action, proceeding or appeal, such costs, expenses and attorneys' fees and disbursements shall be included in and as a part of such judgment. 15.4 Exhibits. Exhibit A (Plan(s) Outlining the Premises and the Property), Exhibit B (Description of Landlord's Work), Exhibit C (Form of Memorandum Confirming Term), Exhibit D (Permitted Use of Hazardous Materials), and any other attachments specified in the Basic Lease Information, are attached to and made a part of this Lease. 15.5 Broker(s). Tenant warrants and represents to Landlord that Tenant has negotiated this Lease directly with the real estate broker(s) specified in the Basic Lease Information and has not authorized or employed, or acted by implication to authorize or to employ, any other real estate broker to act for Tenant in connection with this Lease. 15.6 Waivers of Jury Trial and Certain Damages. Landlord and Tenant each hereby expressly, irrevocably, fully and forever releases, waives and relinquishes any and all right to trial by jury and any and all right to receive punitive, exemplary and consequential damages from the other (or any past, present or future board member, trustee, director, officer, employee, agent, representative, or advisor of the other) in any claim, demand, action, suit, proceeding or cause of action in which Landlord and Tenant are parties, which in any way (directly or indirectly) arises out of, results from or relates to any of the following, in each case whether now existing or hereafter arising and whether based on contract or tort or any other legal basis: This Lease; any past, present or future act, omission, conduct or activity with respect to this Lease; any transaction, event or occurrence

19 contemplated by this Lease; the performance of any obligation or the exercise of any right under this Lease; or the enforcement of this Lease. Landlord and Tenant reserve the right to recover actual or compensatory damages, with interest, attorneys' fees, costs and expenses as provided in this Lease, for any breach of this Lease. 15.7 Entire Agreement. There are no oral agreements between Landlord and Tenant affecting this Lease, and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, offers, agreements and understandings, oral or written, if any, between Landlord and Tenant or displayed by Landlord to Tenant with respect to the subject matter of this Lease, the Premises or the Property. There are no commitments, representations or assurances between Landlord and Tenant or between any real estate broker and Tenant other than those expressly set forth in this Lease and all reliance with respect to any commitments, representations or assurances is solely upon commitments, representations and assurances expressly set forth in this Lease. This Lease may not be amended or modified in any respect whatsoever except by an agreement in writing signed by Landlord and Tenant. 15.8 No Estate. Tenant has only a usufruct under this Lease, not subject to levy or sale. No estate shall pass out of Landlord by this Lease. 15.9 No Recordation of Lease. Without the prior written consent of Landlord, neither this Lease nor any memorandum hereof shall be recorded or placed on public record. [BALANCE OF THIS PAGE IS INTENTIONALLY BLANK]

20 IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under seal as of the date specified in the Basic Lease Information. TENANT: LANDLORD: LB FOSTER COMPANY, a Pennsylvania SUWANEE CREEK BUSINESS CENTER LLC, a corporation Delaware limited liability company By: /s/Stan L. Hasselbusch By: CalEast Industrial Investors, LLC, Name: Stan L. Hasselbusch a California limited liability company, Title: CEO & President its Member By: LaSalle Investment Management, Inc., [CORPORATE SEAL] a Maryland corporation, its Manager By:/s/Laurence Christopher Harris Laurence Christopher Harris, Vice President (CORPORATE SEAL) By: TC Suwanee Creek, Inc., a Delaware corporation, its Member By:/s/Patty Name: Title: (CORPORATE SEAL)

This site plan or floor plan is used solely for the purpose of identifying the approximate location and size of the Premises. Building sizes, site dimensions, access, common and parking areas, and existing tenants and locations are subject to change at Landlord's discretion. EXHIBIT A Plan(s) Outlining the Premises and the Property

EXHIBIT B Description of Landlord's Work Plans and Specifications prepared by Kennedy and Associates dated January 6, 2004 (the "Approved Plans").

EXHIBIT C MEMORANDUM CONFIRMING TERM THIS MEMORANDUM, made as of __________________, ________, by and between SUWANEE CREEK BUSINESS CENTER LLC, a Delaware limited liability company ("Landlord"), and LB FOSTER COMPANY, a Pennsylvania corporation ("Tenant"), W I T N E S S E T H: Recital of Facts: Landlord and Tenant entered into the Industrial Lease (the "Lease") dated ____________, _______. Words defined in the Lease have the same meanings in this Memorandum. NOW, THEREFORE, in consideration of the covenants in the Lease, Landlord and Tenant agree as follows: 1. Landlord and Tenant hereby confirm that: (a) The Commencement Date under the Lease is ____________________, _________; (b) The Expiration Date under the Lease is ____________________, _________; and (c) The date on which Landlord substantially completed the improvements pursuant to Exhibit B to the Lease (if any), Landlord delivered possession of the Premises to Tenant as required by the Lease, and Tenant's obligation to pay rent begins under the Lease is ____________________, _________. 2. Tenant hereby confirms that: (a) All commitments, representations and assurances made to induce Tenant to enter into the Lease have been fully satisfied; (b) All improvements to the Property and in the Premises to be constructed or installed by Landlord have been completed and furnished in accordance with the Lease to the satisfaction of Tenant; and (c) Tenant has accepted and is in full and complete possession of the Premises. 3. This Memorandum shall be binding upon and inure to the benefit of Landlord and Tenant and their permitted successors and assigns under the Lease. The Lease is in full force and effect. [BALANCE OF THIS PAGE IS INTENTIONALLY BLANK]

IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum as of the date first hereinabove written. TENANT: LANDLORD: LB FOSTER COMPANY, a Pennsylvania SUWANEE CREEK BUSINESS CENTER LLC, a corporation Delaware limited liability company By: By: CalEast Industrial Investors, LLC, Name: a California limited liability Title: company, its Member By: LaSalle Investment Management, Inc., [CORPORATE SEAL] a Maryland corporation, its Manager By:____________________________ Laurence Christopher Harris, Vice President (CORPORATE SEAL) By: TC Suwanee Creek, Inc., a Delaware corporation, its Member By:__________________________________ Name: Title: (CORPORATE SEAL)

EXHIBIT D PERMITTED USE OF HAZARDOUS MATERIALS Name of Hazardous Material Maximum Amount Per Year -------------------------- ----------------------- Lubricants 1,125 lbs. Forklift fuel & welding gas 400 lbs. Galvanized hardware 20,000 lbs. Rubber 40,000 lbs. Cleaners, paint, ink, adhesives 800 lbs. Railroad hardware including de minimus amounts N/A of alloy metals and cured adhesives Office furniture, files and office supplies N/A

ADDENDUM TO INDUSTRIAL LEASE 1. Rent Abatement. Provided that Tenant is not in default in its obligations under this Lease, Landlord shall abate in its entirety the Monthly Base Rent and Tenant's contributions for CAM Expenses, Property Taxes and Insurance Costs for the second (2nd), third (3rd), fourth (4th), fifth (5th), sixth (6th), seventh (7th) and eighth (8th) months of this Lease. 2. Improvements. Subject to the terms and conditions of this Lease, including without limitation Section 2.2 of this Lease, Landlord shall, at Landlord's expense, construct or install improvements in the Premises (the "Tenant Improvements") in accordance with the Approved Plans. Notwithstanding anything to the contrary, the parties hereby acknowledge and agree as follows: a. Landlord shall complete the Tenant Improvements with its standard building finishes as described in the Approved Plans and such above-standard building finishes as shall have been expressly requested by Tenant and described in the notes to the Approved Plans (collectively, the "Upgrade Finishes"). The parties agree that any notes in the Approved Plans calling for above-standard building finishes that were not expressly requested by Tenant shall be disregarded. b. Except for the Upgrade Finishes, the Approved Plans will not provide for, and Landlord shall have no responsibility for, the furnishing or installation of (i) Tenant's telecommunications, computer, security, fire alarm and fire extinguishing systems (the "Tenant Systems") and (ii) any fixtures, equipment, furniture, cabinetry, mill work or other items specific to Tenant's operation and proposed use of the Premises (the "Tenant FF&E"). c. Tenant, and not Landlord, shall be responsible for any additional cost of the Tenant Improvements arising from a Tenant Delay (as hereinafter defined) or any change to the Approved Plans (a "Change Order"), whether such Change Order is voluntarily requested or is the result of a change to the Approved Plans required by any governmental entity having jurisdiction over the Premises, provided, however that Landlord shall be responsible for any additional cost of the Tenant Improvements that results from a change to the Approved Plans required by any governmental entity for reasons other than Tenant's use of the Premises. d. Any sums owed to Landlord under this paragraph 2 shall be deemed "Additional Rent" under the Lease. e. The furnishing and installation of the Tenant Systems and Tenant FF&E shall be performed by Tenant at Tenant's sole cost and expense in accordance with the terms of this Lease, including Article 7 (relating to Alterations) and Section 4.4. Each of the following events shall constitute a "Tenant Delay": (a) delays resulting from any Direction by Tenant that Landlord suspend work or otherwise hold up construction of any portion of the Tenant Improvements because of a possible change to be initiated by Tenant or for any other reason Directed by Tenant; (b) delays due to the failure of Tenant to pay when due any amount payable pursuant to this Lease; or (c) delays which result directly or indirectly from requested changes in the Approved Plans Directed by Tenant. As used herein, the terms "Direction" and "Directed" shall mean a written communication from Steven L. Hart to Landlord. 3. Warranty of Tenant. Tenant represents and warrants that as of the date of the Lease it is a corporation organized, validly existing and in good standing under the laws of Pennsylvania, and that it is in good standing and qualified to do business in the State of Georgia. Tenant covenants that throughout the term of this Lease it will at all times remain in good standing under the laws of Pennsylvania and that it will remain in good standing and qualified to do business in the State of Georgia.

4. Tenant's Contribution for Tenant Improvements. Upon signing this Lease, Tenant shall pay Landlord the sum of Six Thousand Dollars ($6,000.00) for construction and other costs to be incurred by Landlord in connection with the Tenant Improvements.

                            Stock Purchase Agreement


This Stock Purchase Agreement  ("Agreement") is made as of June 3, 1999, by L.B.
Foster Company, a Pennsylvania  corporation  ("Buyer") and Alaska Trust Company,
acting  solely in its  capacity as trustee of the CXT Employee  Stock  Ownership
Trust, N.A. Bianco, D. Firth, J.M.  McLaughlin,  the J.M. McLaughlin  Individual
Retirement Account, D.L. Millard, R.O. Skrypchuk,  the R.O. Skrypchuk Individual
Retirement  Account,  R.D.  Steiger,  J.G. White and the J.G.  White  Individual
Retirement Account (collectively the "Sellers").

RECITALS

Sellers  desire to sell,  and Buyer  desires to purchase,  all of the issued and
outstanding  shares  (the  "Shares")  of capital  stock of CXT  Incorporated,  a
Delaware corporation (the "Company"), for the consideration and on the terms set
forth in this Agreement.

AGREEMENT

The parties, intending to be legally bound, agree as follows:

1. DEFINITIONS

For purposes of this Agreement,  the following terms have the meanings specified
or referred to in this Section 1:

"Adjustment Amount"--as defined in Section 2.5.

"Applicable  Contract"--any  Contract  (a) under  which the  Company  has or may
acquire any rights, (b) under which the Company has or may become subject to any
obligation or liability,  or (c) by which the Company or any of the assets owned
or used by it is or may become bound;  in each case  excluding  Contracts  fully
performed by all parties thereto prior to the date of this Agreement.

"Balance Sheet"--as defined in Section 3.4.

"Best Efforts"--the efforts that a prudent Person desirous of achieving a result
would use in similar  circumstances  to ensure  that such  result is achieved as
expeditiously  as possible;  provided,  however,  that an obligation to use Best
Efforts  under  this  Agreement  does not  require  the  Person  subject to that
obligation to take actions that would result in a materially  adverse  change in
the benefits to such Person of this Agreement and the Contemplated Transactions.

"Breach"--a "Breach" of a representation,  warranty,  covenant,  obligation,  or
other provision of this Agreement or any instrument  delivered  pursuant to this
Agreement  will be  deemed  to have  occurred  if  there  is or has been (a) any
Material  inaccuracy  in or breach  of, or any  Material  failure  to perform or
comply with,  such  representation,  warranty,  covenant,  obligation,  or other
provision,  or (b) any claim (by any Person) or other occurrence or circumstance
that is or was  materially  inconsistent  with  such  representation,  warranty,
covenant,  obligation,  or other provision, and the term "Breach" means any such
inaccuracy, breach, failure, claim, occurrence, or circumstance.

"Buyer"--as defined in the first paragraph of this Agreement.

 "Closing"--as defined in Section 2.3.

"Closing Date"--the date and time as of which the Closing actually takes place.

"Company"--as defined in the Recitals of this Agreement.

"Consent"--any approval, consent,  ratification,  waiver, or other authorization
(including any Governmental Authorization).

"Contemplated  Transactions"--all  of  the  transactions  contemplated  by  this
Agreement, including:

(a) the sale of the Shares by Sellers to Buyer;

(b) the execution,  delivery,  and performance of the Sellers' Releases, and the
Escrow Agreement;

(c) the  performance  by Buyer and  Sellers of their  respective  covenants  and
obligations under this Agreement; and

(d) Buyer's acquisition and ownership of the Shares and exercise of control over
the Company.

"Contract"--any  agreement,  contract,   obligation,   promise,  or  undertaking
(whether  written  or oral and  whether  express  or  implied)  that is  legally
binding.

"CXT  ESOP"--the CXT Employee Stock  Ownership  Plan,  adopted by the Company on
October  19,  1990,  as amended by  Amendments  No. 1 through  11  thereto,  and
reflected in the Restated CXT Employee  Stock  Ownership  Plan dated January 20,
1999.

"CXT ESOT"--the  trust  established and maintained  pursuant to the CXT ESOP and
the CXT Employee Stock Ownership Trust Agreement dated October 19, 1990.

"Damages"--as defined in Section 10.2.

"Disclosure  Letter"--the  disclosure letter to be delivered by Sellers to Buyer
pursuant to the provisions of this Agreement.

"Encumbrance"--any  charge,  claim,  community  property  interest,   condition,
equitable  interest,  lien, option,  pledge,  security interest,  right of first
refusal,  or restriction of any kind,  including any restriction on use, voting,
transfer,  receipt of income,  or exercise of any other  attribute of ownership;
excluding,  however,  Legal Requirements of general applicability to issuance or
transfer of corporate securities..

"Environment"--soil,   land  surface  or  subsurface   strata,   surface  waters
(including navigable waters, ocean waters,  streams, ponds, drainage basins, and
wetlands),  groundwaters,  drinking water supply, stream sediments,  ambient air
(including  indoor  air),  plant and animal  life,  and any other  environmental
medium or natural resource.

"Environmental,  Health, and Safety  Liabilities"--any  cost, damages,  expense,
liability,   obligation,   or  other   responsibility   arising  from  or  under
Environmental  Law or  Occupational  Safety and Health Law and  consisting of or
relating to:

(a) any  environmental,  health,  or safety  matters  or  conditions  (including
on-site  or  off-site   contamination,   occupational  safety  and  health,  and
regulation of chemical substances or products);

(b) fines, penalties,  judgments,  awards, settlements,  legal or administrative
proceedings,  damages,  losses,  claims,  demands and  response,  investigative,
remedial,  or inspection costs and expenses arising under  Environmental  Law or
Occupational Safety and Health Law;

(c) financial  responsibility under Environmental Law or Occupational Safety and
Health Law for cleanup costs or corrective action,  including any investigation,
cleanup,  removal,   containment,  or  other  remediation  or  response  actions
("Cleanup") required by applicable  Environmental Law or Occupational Safety and
Health Law  (whether or not such  Cleanup has been  required or requested by any
Governmental Body or any other Person) and for any natural resource damages; or

(d) any  other  compliance,  corrective,  investigative,  or  remedial  measures
required under Environmental Law or Occupational Safety and Health Law.

The terms  "removal,"  "remedial," and "response  action,"  include the types of
activities covered by the United States  Comprehensive  Environmental  Response,
Compensation,  and  Liability  Act,  42  U.S.C.  ss.  9601 et seq.,  as  amended
("CERCLA").






"Environmental Law"--any Legal Requirement that requires or relates to:

(a) advising  appropriate  authorities,  employees,  and the public of intended,
potential or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits,  or other  prohibitions and of the commencements
of  activities,  such as resource  extraction or  construction,  that could have
significant impact on the Environment;

(b)  preventing  or reducing to  acceptable  levels the release of pollutants or
hazardous substances or materials into the Environment;

(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;

(d) assuring that products are designed, formulated,  packaged, and used so that
they do not present  unreasonable  risks to human health or the Environment when
used or disposed of;

(e) protecting resources, species, or ecological amenities;

(f) reducing to acceptable  levels the risks inherent in the  transportation  of
hazardous substances, pollutants, oil, or other potentially harmful substances;

(g) cleaning up pollutants  that have been  released,  preventing  the threat of
release, or paying the costs of such clean up or prevention; or

(h) making  responsible  parties pay  private  parties,  or groups of them,  for
damages done to their health or the  Environment,  or permitting  self-appointed
representatives  of the public  interest to recover for injuries  done to public
assets.

"ERISA"--the Employee Retirement Income Security Act of 1974, as amended, or any
successor  law, and  regulations  and rules  issued  pursuant to that Act or any
successor law.

"Escrow Agreement"--as defined in Section 2.4.

"ESOT  Trustee"--Alaska  Trust  Company,  which is the duly appointed and acting
trustee of the CXT ESOT or, if  applicable,  its successor as trustee of the CXT
ESOT.

"Facilities"--any  real property,  leaseholds,  or other interests  currently or
formerly owned or operated by the Company and any buildings, plants, structures,
or equipment (including motor vehicles,  tank cars, and rolling stock) currently
or formerly owned or operated by the Company.

"GAAP"--generally  accepted United States  accounting  principles,  applied on a
basis  consistent  with the  basis on which  the  Balance  Sheet  and the  other
financial statements referred to in Section 3.4(b) were prepared.

"Governmental Authorization"--any approval, consent, license, permit, waiver, or
other authorization  issued,  granted,  given, or otherwise made available by or
under  the  authority  of  any  Governmental  Body  or  pursuant  to  any  Legal
Requirement.

"Governmental Body"--any:

(a) nation, state, county, city, town, village,  district, or other jurisdiction
of any nature;

(b) federal, state, local, municipal, foreign, or other government;

(c) governmental or  quasi-governmental  authority of any nature  (including any
governmental agency,  branch,  department,  official, or entity and any court or
other tribunal);

(d) multi-national organization or body; or

(e) body exercising,  or entitled to exercise,  any  administrative,  executive,
judicial,  legislative,  police, regulatory, or taxing authority or power of any
nature.

"Hazardous  Activity"--the  distribution,   generation,   handling,   importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer,  transportation,  treatment, or use (including any withdrawal or other
use of  groundwater)  of Hazardous  Materials in, on, under,  about, or from the
Facilities  or any  part  thereof  into  the  Environment,  and any  other  act,
business,  operation,  or thing that increases the danger, or risk of danger, or
poses  an  unreasonable  risk of  harm  to  persons  or  property  on or off the
Facilities,  or that may  materially  affect the value of the  Facilities or the
Company.

"Hazardous  Materials"--any  waste or other  substance that is listed,  defined,
designated,  or  classified  as,  or  otherwise  determined  to  be,  hazardous,
radioactive,  or toxic or a pollutant or a contaminant  under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including  petroleum  and  all  derivatives  thereof  or  synthetic  substitutes
therefor and asbestos or asbestos-containing materials.

"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
or any successor law, and  regulations  and rules issued pursuant to that Act or
any successor law.

"Intellectual Property Assets" --as defined in Section 3.22.

"Interim Balance Sheet"--as defined in Section 3.4.

"IRC"--the  Internal Revenue Code of 1986, as amended, or any successor law, and
regulations  issued by the IRS  pursuant  to the  Internal  Revenue  Code or any
successor law.

"IRS"--the United States Internal Revenue Service or any successor agency,  and,
to the extent relevant, the United States Department of the Treasury.

"Knowledge"--an  individual  will be deemed to have  "Knowledge" of a particular
fact or other matter if:

(a) such individual is actually aware of such fact or other matter; or

(b) as to any Person other than the ESOT Trustee,  a prudent individual could be
expected to discover or  otherwise  become aware of such fact or other matter in
the course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter;  it being  understood  among the parties
that the ESOT  Trustee has made inquiry of officers of the Company as to matters
relating to the  Company  but has not  conducted  an  independent  investigation
thereof.

A Person  (other than an  individual)  will be deemed to have  "Knowledge"  of a
particular fact or other matter if any individual who is serving,  or who has at
any time served, as a director,  officer, partner,  executor, or trustee of such
Person (or in any similar  capacity) has, or at any time had,  Knowledge of such
fact or other matter.

"Legal   Requirement"--any   federal,   state,   local,   municipal,    foreign,
international,  multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

"Materiality"  or "Material"  shall mean of significance to a reasonable  person
and,  if  convertible  into a  dollar  amount,  shall  mean an  amount  which is
reasonably expected to be in excess of $25,000.

"Occupational  Safety and Health Law"--any Legal Requirement designed to provide
safe and healthful  working  conditions  and to reduce  occupational  safety and
health  hazards,  and any  governmental  program  designed  to provide  safe and
healthful working conditions.

"Order"--any award, decision, injunction,  judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court,  administrative agency,
or other Governmental Body or by any arbitrator.





"Ordinary  Course of  Business"--an  action  taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:

(a) such  action is  consistent  with the past  practices  of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;

(b) such action is not  required to be  authorized  by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority);
and

(c) such action is similar in nature and magnitude to actions customarily taken,
without any  authorization  by the board of directors (or by any Person or group
of Persons exercising similar  authority),  in the ordinary course of the normal
day-to-day  operations of other Persons that are in the same line of business as
such Person.

"Organizational Documents"--(a) the articles or certificate of incorporation and
the bylaws of a corporation;  (b) the partnership agreement and any statement of
partnership of a general partnership;  (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.

"Person"--any  individual,  corporation (including any non-profit  corporation),
general  or limited  partnership,  limited  liability  company,  joint  venture,
estate,  trust,  association,  organization,  labor  union,  or other  entity or
Governmental Body.  Without limiting the generality of the foregoing,  said term
shall include the CXT ESOT and each of the Shareholder IRAs.

"Plan"--as defined in Section 3.13.

"Proceeding"--any   action,   arbitration,    audit,   hearing,   investigation,
litigation, or suit (whether civil, criminal, administrative,  investigative, or
informal)  commenced,  brought,  conducted,  or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.

"Related Person"--with respect to a particular individual:

(a) each other member of such individual's Family;

(b) any Person that is directly or indirectly  controlled by such  individual or
one or more members of such individual's Family;

(c) any Person in which such individual or members of such  individual's  Family
hold (individually or in the aggregate) a Material Interest; and

(d) any Person with respect to which such  individual  or one or more members of
such individual's Family serves as a director,  officer,  partner,  executor, or
trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

(a) any Person that directly or indirectly  controls,  is directly or indirectly
controlled  by, or is directly or  indirectly  under  common  control  with such
specified Person;

(b) any Person that holds a Material Interest in such specified Person;

(c) each  Person  that  serves as a director,  officer,  partner,  executor,  or
trustee of such specified Person (or in a similar capacity);

(d) any Person in which such specified Person holds a Material Interest;

(e) any Person with respect to which such  specified  Person serves as a general
partner or a trustee (or in a similar capacity); and

(f) any Related Person of any individual described in clause (b) or (c).

For purposes of this definition,  (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is  related  to the  individual  or the  individual's  spouse  within the second
degree, and (iv) any other natural person who resides with such individual,  and
(b)  "Material  Interest"  means  direct or indirect  beneficial  ownership  (as
defined  in Rule  13d-3  under the  Securities  Exchange  Act of 1934) of voting
securities or other voting interests representing at least 5% of the outstanding
voting  power  of a Person  or  equity  securities  or  other  equity  interests
representing  at  least  5% of  the  outstanding  equity  securities  or  equity
interests in a Person.

"Release"--any spilling, leaking, emitting, discharging,  depositing,  escaping,
leaching, dumping, or other releasing into the Environment,  whether intentional
or unintentional.

"Representative"--with  respect to a particular Person,  any director,  officer,
employee,  agent, consultant,  advisor, trustee, or other representative of such
Person, including legal counsel, accountants, and financial advisors.

"Securities  Act"--the  Securities  Act  of  1933  or  any  successor  law,  and
regulations and rules issued pursuant to that Act or any successor law.

"Sellers"--as defined in the first paragraph of this Agreement.

"Sellers' Releases"--as defined in Section 2.4.

"Shareholder  IRAs"--the  Individual  Retirement Accounts holding Shares for the
benefit of J.M. McLaughlin, R.O. Skrypchuk and J.G. White.

"Shares"--as defined in the Recitals of this Agreement.

"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other
Person  of which  securities  or other  interests  having  the  power to elect a
majority of that  corporation's  or other Person's board of directors or similar
governing  body,  or  otherwise  having  the power to direct  the  business  and
policies of that  corporation  or other Person  (other than  securities or other
interests  having such power only upon the happening of a  contingency  that has
not  occurred)  are held by the Owner or one or more of its  Subsidiaries;  when
used without reference to a particular  Person,  "Subsidiary" means a Subsidiary
of the Company.

"Tax"--any tax imposed by a Governmental Body.

"Tax Return"--any return (including any information return), report,  statement,
schedule, notice, form, or other document or information filed with or submitted
to, or  required  to be filed with or  submitted  to, any  Governmental  Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration,  implementation,  or enforcement of or
compliance with any Legal Requirement relating to any Tax.

"Threat of  Release"--a  substantial  likelihood  of a Release  that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.

"Threatened"--a  claim,  Proceeding,  dispute,  action,  or other matter will be
deemed to have  been  "Threatened"  if any  demand  or  statement  has been made
(orally or in writing) or any notice has been given  (orally or in writing),  or
if any other event has  occurred or any other  circumstances  exist,  that would
lead a  prudent  Person to  conclude  that  such a claim,  Proceeding,  dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.

2. SALE AND TRANSFER OF SHARES; CLOSING

2.1 SHARES

Subject to the terms and conditions of this Agreement,  at the Closing,  Sellers
will sell and transfer the Shares to Buyer,  and Buyer will  purchase the Shares
from Sellers.

2.2 PURCHASE PRICE

The purchase  price (the  "Purchase  Price") for the Shares will be  $17,875,000
minus the Adjustment Amount, if any.

2.3 CLOSING

The purchase and sale (the  "Closing")  provided for in this Agreement will take
place at the offices of Company's  counsel at Spokane,  Washington at 10:00 a.m.
(local  time) on the  later of (i)  June 30,  1999 or (ii) the date  that is ten
business days following the  termination of the applicable  waiting period under
the HSR Act,  or on such  other  date or at such  other  time  and  place as the
parties may agree. Subject to the provisions of Section 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and at
the  place  determined  pursuant  to this  Section  2.3 will not  result  in the
termination  of this  Agreement and will not relieve any party of any obligation
under this Agreement.

2.4 CLOSING OBLIGATIONS

At the Closing:

(a) Sellers will deliver to Buyer:

(i) certificates  representing the Shares, duly endorsed (or accompanied by duly
executed stock powers),  with signatures guaranteed by a commercial bank or by a
member firm of the New York Stock Exchange, for transfer to Buyer;

(ii) releases in the form of Exhibits  2.4(a)(ii)-1 and 2.4(a)(ii)-2 executed by
Sellers (collectively, "Sellers' Releases");

(iii)  a  certificate,  executed  on  behalf  of the  Sellers  by the  Company's
President and Chief Executive Officer and the Company's chief accounting officer
(which they shall have discussed with  PricewaterhouseCoopers,  LLP with respect
to compliance  with GAAP,  consistently  applied),  and approved by Buyer (which
approval shall not be  unreasonably  withheld or delayed),  setting forth,  with
reasonably   detailed   supporting   calculations,   the   Company's   estimated
consolidated net worth and the Adjustment Amount as of the Closing Date.

(iv) a certificate  executed by Sellers  representing and warranting (subject to
the  limitation of liability and remedies set forth in Section 10) to Buyer that
each of Sellers'  representations  and warranties in this Agreement was accurate
in all  respects as of the date of this  Agreement  and is accurate  (except for
changes provided for herein in all respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements to the Disclosure Letter
that were  delivered by Sellers to Buyer prior to the Closing Date in accordance
with Section 5.5); and

(b) Buyer will deliver to Sellers:

(i)  $16,000,000  less the  amount by which  $5,600,000  exceeds  the  Company's
estimated Adjustment Amount, as calculated in the certificate delivered pursuant
to Section 2.4(a)(iii),  payable to each of Sellers in the proportions set forth
in Exhibit  2.4(b)(i)  by wire  transfer  to accounts  specified  by each of the
Sellers.  (ii) the sum of $1,000,000 to the escrow agent  referred to in Section
2.4(c) by wire transfer to an account specified by said escrow agent;

(iii) the sum of $875,000 to Lukins & Annis,  P.S. to be held in trust  pursuant
to the agreement set forth in Exhibit 2.4(b)(iii) for distribution in accordance
with the procedures set forth in Section 2.6.

(iv) a  certificate  executed by Buyer to the effect  that,  except as otherwise
stated in such certificate,  each of Buyer's  representations  and warranties in
this Agreement was accurate in all respects as of the date of this Agreement and
is  accurate in all  respects  as of the Closing  Date as if made on the Closing
Date; and

(c) Buyer and Sellers will enter into an escrow agreement at Closing in the form
of Exhibit 2.4(c) (the "Escrow Agreement") with First Union National Bank.

(d)  Title  to the  Shares  held  in the  Shareholder  IRAs  is in the  name  of
custodians,  which hold title  thereto for the benefit of the Persons  executing
this Agreement for such  Shareholder  IRAs.  Each of said Persons agrees to take
all actions as may be necessary to cause their custodian to execute stock powers
to convey to Buyer at Closing the Shares held in such Person's Shareholder IRA.

(e)  Company  will  have  purchased  a six (6) year  extended  reporting  period
("tail")  endorsement  for  the  existing  officers'  and  directors'  liability
insurance  maintained by the Company,  the expense of which shall be included in
calculation of the Adjustment Amount.

2.5 ADJUSTMENT AMOUNT

The  Adjustment  Amount , if any,  shall be equal  to the  amount  by which  the
consolidated net worth of the Company  immediately  prior to the Closing is less
than $5,600,000,  as determined in accordance with GAAP and, in any event,  with
all amounts  contemplated  under Sections 2.6 and 11.1 having been fully accrued
and set forth in the certificate executed pursuant to Section 2.4(a)(iii) or, if
Closing Financial  Statements are prepared pursuant to Section 2.6, as set forth
in the Closing  Financial  Statements,  as adjusted for any final  determination
thereof by the Accountants pursuant to Section 2.6(a), if applicable.  The Buyer
and the Company have  reached an  agreement  for  settlement  of certain  issues
relating to the  following  Contracts:  (i) a Contract for sale,  unloading  and
handling of concrete ties for the St. Louis Bi-States  Project;  (ii) a Contract
for sale,  unloading  and  handling  of  concrete  ties for the POLA West  Basin
Project;  and (iii) a Contract  for sale of  concrete  ties for the Tren  Urbano
Project,  which is set forth in a separate letter  agreement (the "Side Letter")
between  Buyer and Company of even date.  The terms and  provisions  of the Side
Letter  shall be fully  reflected  in the Closing  Financial  Statements  and in
computation of the Adjustment Amount, if any.






2.6 ADJUSTMENT PROCEDURE

(a)   Buyer   will    prepare    and   may,    at   Buyer's    expense,    cause
PricewaterhouseCoopers,  LLP, the Company's  certified  public  accountants,  to
audit consolidated  financial statements ("Closing Financial Statements") of the
Company as of the  Closing  Date and for the period from the date of the Balance
Sheet  through  the  Closing  Date,  including a  computation  of the  Company's
consolidated  net worth and a calculation of the Adjustment  Amount,  if any, as
defined in Section 2.5, all in accordance  with GAAP as of the Closing Date. The
Closing Financial  Statements shall include reasonable and adequate reserves for
all  unliquidated,  disputed or otherwise  non-quantifiable  liabilities  of the
Company.  Buyer will deliver the Closing  Financial  Statements to Seller within
sixty days after the Closing  Date.  Each of the Sellers shall have the right to
object  to  the  Closing  Financial  Statements  and if  the  Closing  Financial
Statements  are prepared by  PricewaterhouseCoopers,  LLP, Buyer shall also have
the right to object  thereto.  Notice of any such objection must be given by the
objecting  party to all other parties  hereto in writing within thirty (30) days
following delivery of the Closing Financial  Statements to the Sellers. Any such
notice must  contain a statement  of the basis for the  objection to the Closing
Financial  Statements.  If  no  such  notice  is  timely  given,  the  Company's
consolidated  net worth and the  Adjustment  Amount,  if any,  reflected  in the
Closing  Financial  Statements  shall be  conclusive  and  binding on all of the
parties.  If any such notice of  objection is timely  given,  then the issues in
dispute will be submitted to Arthur  Anderson & Co. or, if Arthur Anderson & Co.
is  not  available,   Deloitte  &  Touche,  certified  public  accountants  (the
"Accountants"),   for   resolution.   Such   resolution   shall  be  by  written
determination  of the  Accountants,  delivered to the parties within ninety (90)
days  following  submission  of the  dispute  to the  Accountants.  If issues in
dispute are submitted to the  Accountants  for  resolution,  (i) each party will
furnish to the  Accountants  such workpapers and other documents and information
relating to the disputed issues as the Accountants may request and are available
to that party (or its independent public accountants),  and will be afforded the
opportunity  to  present  to  the  Accountants  any  material  relating  to  the
determination  and to discuss the determination  with the Accountants;  (ii) the
determination  by the  Accountants,  as set forth in a notice  delivered  to all
parties by the Accountants,  will be binding and conclusive on the parties;  and
(iii)  Sellers,  collectively,  and Buyer  will each bear 50% of the fees of the
Accountants  for such  determination.  Sellers'  share of the fees shall be paid
first from the funds  deposited into the trust  established  pursuant to Section
2.4(b)(iii) and, if the amounts in said trust after deduction and payment of the
portion,  if  any,  thereof  ultimately  determined  to  belong  to  Buyer,  are
insufficient, Sellers' share of such fees shall be paid from the funds deposited
into Escrow pursuant to Section 2.4(b)(ii).

(b)  On  the  tenth  business  day  following  the  final  determination  of the
Adjustment  Amount,  if the Purchase  Price is greater than the aggregate of the
payments made pursuant to Sections  2.4(b)(i)  and  2.4(b)(ii),  Lukins & Annis,
P.S. shall release from its trust account,  established pursuant to 2.4(b)(iii),
the difference to Sellers and shall release any remaining  balance to Buyer, all
pursuant to the trust agreement in the form of Exhibit 2.4(b)(iii) If all of the
$875,000 held in said trust account becomes  payable to Sellers  pursuant to the
foregoing provisions,  all earnings thereon shall be released to Sellers, and if
only a portion of the  $875,000  becomes  payable to  Sellers,  a portion of the
earnings on the $875,000  deposited into such trust account shall be released to
Sellers,  which portion shall be  calculated  by  multiplying  the earnings by a
fraction,  the numerator of which shall be the  difference  between the Purchase
Price  and the  amount  paid at  Closing  pursuant  to  Sections  2.4(b)(i)  and
2.4(b)(ii) and the denominator of which shall be $875,000.  In the latter event,
the  remaining  balance of such  earnings  shall be  released  to Buyer.  If the
Purchase  Price is less than the  aggregate  amount paid at Closing  pursuant to
Sections  2.4(b)(i) and  2.4(b)(ii),  Lukins & Annis P.S. shall release from its
trust account to Buyer the $875,000  deposited into such trust account  pursuant
to Section  2.4(b)(iii)  together with all earnings  therein.  To the extent the
Purchase Price is less than the sum of the amounts paid or deposited pursuant to
Sections  2.4(b)(i),  2.4(b)(ii) and 2.4(b)(iii) and the difference is more than
the $875,000 deposited pursuant to Section  2.4(b)(iii),  Buyer may recover said
difference from the funds  deposited into Escrow pursuant to Section  2.4(b)(ii)
and Sellers  shall be obliged to take all actions  necessary or  appropriate  to
cause such funds to be released to Buyer. If the Purchase Price is more than the
sum of the amounts paid or deposited pursuant to Sections 2.4(b)(i),  2.4(b)(ii)
and 2.4(b)(iii), the difference shall be paid by Buyer to Sellers, together with
interest at 9% per annum  compounded  daily  beginning  on the Closing  Date and
ending  on the  date  of  payment.  Any  payments  to  Sellers  must  be made in
immediately  available  funds and be made in the manner and will be allocated in
the proportions set forth in Section 2.4(b)(i).

2.7  ESOT TRUSTEE

The ESOT Trustee shall be independent of all other parties to this Agreement and
will rely in making its decision whether to Close the Contemplated  Transactions
pursuant to this  Agreement on behalf of the CXT ESOT, on the written  report of
an  appraiser  who is  qualified  to value the  Shares and is  unrelated  to the
Company or any of the parties to this  Agreement.  The appraisal shall be issued
and delivered on the Closing Date.

3. REPRESENTATIONS AND WARRANTIES OF SELLERS

All  Sellers,  severally  and  jointly  represent  and  warrant  (subject to the
limitation  of  liability  and  remedies  set forth in  Section  10) to Buyer as
follows:

3.1 ORGANIZATION AND GOOD STANDING

(a) Part 3.1 of the Disclosure  Letter contains a complete and accurate list for
the Company of its name, its jurisdiction of incorporation,  other jurisdictions
in which it is authorized to do business, and its capitalization  (including the
identity of each stockholder and the number of shares held by each). The Company
is a corporation duly organized,  validly  existing,  and in good standing under
the laws of its  jurisdiction  of  incorporation,  with full corporate power and
authority  to conduct its business as it is now being  conducted,  to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations  under  Applicable  Contracts.  The Company is duly  qualified to do
business as a foreign corporation and is in good standing under the laws of each
state  or  other  jurisdiction  in  which  either  the  ownership  or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.

(b) Sellers have  delivered to Buyer copies of the  Organizational  Documents of
the Company, as currently in effect.

3.2 AUTHORITY; NO CONFLICT

(a) This  Agreement  constitutes  the legal,  valid,  and binding  obligation of
Sellers,  enforceable  against  Sellers in accordance  with its terms.  Upon the
execution  and  delivery  by Sellers of the Escrow  Agreement  and the  Sellers'
Releases (collectively,  the "Sellers' Closing Documents"), the Sellers' Closing
Documents will constitute the legal,  valid, and binding obligations of Sellers,
enforceable  against Sellers in accordance with their respective terms.  Sellers
have the absolute and  unrestricted  right,  power,  authority,  and capacity to
execute and deliver this  Agreement  and the Sellers'  Closing  Documents and to
perform  their  obligations  under  this  Agreement  and  the  Sellers'  Closing
Documents;

(b)  Except  as set  forth in Part 3.2 of the  Disclosure  Letter,  neither  the
execution and delivery of this Agreement nor the  consummation or performance of
any of the  Contemplated  Transactions  will,  directly or  indirectly  (with or
without notice or lapse of time):

(i) contravene,  conflict with, or result in a violation of (A) any provision of
the  Organizational  Documents of the Company,  or (B) any resolution adopted by
the board of directors or the stockholders of the Company;

(ii)  contravene,  conflict  with,  or  result  in a  violation  of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions  or to exercise  any remedy or obtain any relief  under,  any Legal
Requirement  or any  Order to which the  Company  or any  Seller,  or any of the
assets owned or used by the Company, may be subject;

(iii) contravene, conflict with, or result in a violation of any of the terms or
requirements  of, or give any Governmental  Body the right to revoke,  withdraw,
suspend,  cancel,  terminate, or modify, any Governmental  Authorization that is
held by the Company or that otherwise  relates to the business of, or any of the
assets owned or used by, the Company;

(iv) cause  Buyer or the Company to become  subject to, or to become  liable for
the payment of, any Tax;

(v) cause any of the assets owned by the Company to be reassessed or revalued by
any taxing authority or other Governmental Body; (vi) contravene, conflict with,
or result in a violation or breach of any  provision  of, or give any Person the
right to declare a default or exercise any remedy under,  or to  accelerate  the
maturity or performance of, or to cancel,  terminate,  or modify, any Applicable
Contract; or

(vii)  result in the  imposition  or  creation of any  Encumbrance  upon or with
respect to any of the assets owned or used by the Company.

Except as set forth in Part 3.2 of the Disclosure  Letter,  neither  Sellers nor
the  Company is or will be  required to give any notice to or obtain any Consent
from any Person in connection  with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.

3.3 CAPITALIZATION

The authorized  equity  securities of the Company consist of 2,666,667 shares of
Class A common stock,  par value $.01 per share, of which  1,086,633  shares are
issued and outstanding and 6,666,667  shares of Class B common stock,  par value
$.01 per share of which  4,000,000  shares  are issued  and  outstanding,  which
together constitute the Shares.  Sellers are and will be on the Closing Date the
record  (except for the  Shareholder  IRAs held in the name of a custodian)  and
beneficial owners and holders of the Shares,  free and clear of all Encumbrances
and each of the Sellers owns the Shares set forth  opposite  each such  Seller's
name in  Exhibit  3.3  hereto.  No legend or other  reference  to any  purported
Encumbrance  appears upon any certificate  representing equity securities of the
Company,  except a legend  reflecting  transfer  restrictions  under the current
Organizational  Documents of the Company, which restrictions shall be deleted or
modified  on or before the  Closing  Date  pursuant  to the  amendments  to said
Organizational  Documents  provided for herein.  All of the  outstanding  equity
securities of the Company have been duly  authorized  and validly issued and are
fully paid and  nonassessable.  There are no Contracts relating to the issuance,
sale, or transfer of any equity  securities  or other  securities of the Company
except: (i) the Organizational Documents; and (ii) an Incentive Bonus Plan dated
October 19, 1990  pursuant to which no Shares  shall be issued after the date of
this Agreement.  Between the date of this Agreement and the Date of Closing,  no
Shares  shall be  issued or  transferred,  other  than to  Buyer,  by any of the
Sellers or the  Company  and as of the  Closing  Date no party  other than Buyer
shall own or have the  right to  acquire  any  Shares.  None of the  outstanding
equity  securities or other securities of the Company was issued in violation of
the Securities Act or any other Legal Requirement. The Company neither owns, nor
has any Contract to acquire,  any equity  securities or other  securities of any
Person  (other than the  Company) or any direct or indirect  equity or ownership
interest in any other business.

3.4 FINANCIAL STATEMENTS

 Sellers  have  delivered  to Buyer and  included in Part 3.4 of the  Disclosure
Letter:  (a)  consolidated  balance  sheets of the Company as of September 30 in
each of the years 1996 through 1998 and the related  consolidated  statements of
income,  changes in consolidated net worth, and cash flow for each of the fiscal
years then ended,  together with the report  thereon of  PricewaterhouseCoopers,
L.L.P.  (successor  to  Coopers & Lybrand,  LLP,  independent  certified  public
accountants),  (b) a  consolidated  balance sheet of the Company as of September
30, 1998  (including the notes thereto,  the "Balance  Sheet"),  and the related
consolidated  statements of income,  changes in consolidated net worth, and cash
flow for the  fiscal  year then  ended,  together  with the  report  thereon  of
PricewaterhouseCoopers, L.L.P. (successor to Coopers & Lybrand, LLP, independent
certified public accountants),  and (c) an unaudited  consolidated balance sheet
of the  Company  as of April 30,  1999 (the  "Interim  Balance  Sheet")  and the
related unaudited consolidated statements of income, changes in consolidated net
worth, and cash flow for the seven months then ended, including in each case the
supporting statements in form and consistent with that previously provided. Such
financial  statements and notes fairly  present the financial  condition and the
results of operations,  changes in consolidated  net worth, and cash flow of the
Company as at the  respective  dates of and for the periods  referred to in such
financial  statements,  all in  accordance  with GAAP,  subject,  in the case of
interim  financial  statements,  to normal recurring  year-end  adjustments (the
effect of which  will  not,  individually  or in the  aggregate,  be  materially
adverse)  and the  absence  of notes  (that,  if  presented,  would  not  differ
materially from those included in the Balance Sheet);  the financial  statements
referred  to in this  Section 3.4 reflect  the  consistent  application  of such
accounting  principles  throughout the periods involved,  except as disclosed in
the notes to such financial  statements.  No financial  statements of any Person
other than the Company are  required by GAAP to be included in the  consolidated
financial statements of the Company.

3.5 BOOKS AND RECORDS

The books of account, minute books, stock record books, and other records of the
Company,  all of which  have been made  available  to Buyer,  are  complete  and
correct and have been  maintained in accordance  with sound business  practices,
including the maintenance of an adequate system of internal controls. The minute
books of the Company contain  accurate and complete records of all meetings held
of, and corporate  action taken by, the  stockholders,  the Boards of Directors,
and committees of the Boards of Directors of the Company,  and no meeting of any
such  stockholders,  Board of  Directors,  or committee  has been held for which
minutes have not been prepared and are not  contained in such minute  books.  At
the  Closing,  all of those books and records will be in the  possession  of the
Company.

3.6 TITLE TO PROPERTIES; ENCUMBRANCES

Part 3.6 of the Disclosure  Letter  contains a complete and accurate list of all
real  property,  leaseholds,  or other  interests  therein owned by the Company.
Sellers have delivered or made available to Buyer copies of the leases and other
instruments (as recorded, if applicable) by which the Company acquired such real
property and interests,  and copies of all title insurance  policies,  opinions,
abstracts,  and surveys in the possession of Sellers or the Company and relating
to such property or interests.  The Company owns (with good and marketable title
in the case of real property  leaseholds,  subject only to the matters permitted
by the  following  sentence)  all  the  properties  and  assets  (whether  real,
personal,  or mixed and whether tangible or intangible) that it purports to own,
including all of the  properties  and assets  reflected in the Balance Sheet and
the Interim  Balance  Sheet  (except for assets  held under  capitalized  leases
disclosed or not required to be disclosed in Part 3.6 of the  Disclosure  Letter
and personal  property  sold since the date of the Balance Sheet and the Interim
Balance Sheet, as the case may be, in the Ordinary Course of Business),  and all
of the  properties  and assets  purchased or  otherwise  acquired by the Company
since the date of the Balance Sheet (except for personal  property  acquired and
sold since the date of the Balance Sheet in the Ordinary  Course of Business and
consistent  with  past  practice),  which  subsequently  purchased  or  acquired
properties  and assets  (other than  inventory,  supplies,  equipment  items not
properly  treated as capital  assets and short-term  investments)  are listed in
Part 3.6 of the Disclosure Letter. All Material  properties and assets reflected
in the  Balance  Sheet and the Interim  Balance  Sheet are free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way,  building  use  restrictions,   exceptions,  variances,   reservations,  or
limitations  of any  nature  except,  with  respect to all such  properties  and
assets,  (a) mortgages or security  interests  shown on the Balance Sheet or the
Interim Balance Sheet as securing  specified  liabilities or  obligations,  with
respect  to which no default  (or event  that,  with  notice or lapse of time or
both, would constitute a default)  exists,  (b) mortgages or security  interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such  mortgages and security  interests being limited
to the  property or assets so  acquired),  with  respect to which no default (or
event that,  with notice or lapse of time or both,  would  constitute a default)
exists,  (c) liens for current  taxes not yet due,  and (d) with respect to real
property,  (i) easements and minor imperfections of title, if any, none of which
is substantial in amount,  materially detracts from the value or impairs the use
of the property subject thereto,  or impairs the operations of the Company,  and
(ii) zoning laws and other land use restrictions  that do not impair the present
or anticipated use of the property subject thereto.  All buildings,  plants, and
structures  owned by the Company lie wholly  within the  boundaries  of the real
property  owned by the  Company and do not  encroach  upon the  property  of, or
otherwise conflict with the property rights of, any other Person.

3.7 CONDITION AND SUFFICIENCY OF ASSETS

The buildings, plants, structures, and equipment of the Company are structurally
sound, are in good operating condition and repair, and are adequate for the uses
to which they are being put, and none of such buildings,  plants, structures, or
equipment is in need of  maintenance  or repairs  except for  ordinary,  routine
maintenance  and repairs that are not Material in nature or cost.  The building,
plants,  structures,  and  equipment  of the  Company  are  sufficient  for  the
continued conduct of the Company's businesses after the Closing in substantially
the same manner as conducted prior to the Closing.


3.8 ACCOUNTS RECEIVABLE

 All accounts  receivable of the Company that are reflected on the Balance Sheet
or the Interim  Balance Sheet or on the accounting  records of the Company as of
the Closing Date  (collectively,  the "Accounts  Receivable")  represent or will
represent  valid  obligations  arising  from  sales  actually  made or  services
actually performed in the Ordinary Course of Business.  Unless paid prior to the
Closing  Date,  the  Accounts  Receivable  are or will be as of the Closing Date
current and  collectible  net of the  respective  reserves  shown on the Balance
Sheet or the Interim  Balance Sheet or on the accounting  records of the Company
as of the Closing Date (which  reserves are adequate and  calculated  consistent
with past practice and, in the case of the reserve as of the Closing Date,  will
not represent a greater percentage of the Accounts  Receivable as of the Closing
Date than the reserve  reflected in the Interim Balance Sheet represented of the
Accounts Receivable  reflected therein and will not represent a Material adverse
change  in the  composition  of such  Accounts  Receivable  in terms of  aging).
Subject to such  reserves,  each of the Accounts  Receivable  either has been or
will be collected in full,  without any set-off,  within one hundred eighty days
after the day on which it first becomes due and payable, except for any Accounts
Receivable  payable  in  installments  over a longer  term  pursuant  to written
Contract which, subject to such reserves,  will be paid in full without set-off,
in accordance with such written contracts.  There is no contest, claim, or right
of set-off,  other than  returns in the Ordinary  Course of Business,  under any
Contract  with any obligor of an Accounts  Receivable  relating to the amount or
validity of such Accounts Receivable. Part 3.8 of the Disclosure Letter contains
a complete and accurate  list of all Accounts  Receivable  as of the date of the
Interim  Balance  Sheet,  which  list  sets  forth  the  aging of such  Accounts
Receivable.

3.9 INVENTORY

All  inventory of the Company,  whether or not reflected in the Balance Sheet or
the Interim Balance Sheet, consists of a quality and quantity usable and salable
in the  Ordinary  Course of  Business,  except for  obsolete  items and items of
below-standard  quality,  all of which have been  written off or written down to
net realizable value in the Balance Sheet or the Interim Balance Sheet or on the
accounting  records of the Company as of the Closing  Date,  as the case may be.
All  inventories not written off have been priced at the lower of cost or market
on a first in-first out basis. The quantities of each item of inventory (whether
raw materials,  work-in-process,  or finished goods) are not excessive,  but are
reasonable in the present circumstances of the Company.

3.10 NO UNDISCLOSED LIABILITIES

Except as set forth in Part 3.10 of the  Disclosure  Letter,  the Company has no
liabilities or  obligations of any nature  (whether known or unknown and whether
absolute,   accrued,   contingent,  or  otherwise)  except  for  liabilities  or
obligations  reflected or reserved  against in the Balance  Sheet or the Interim
Balance  Sheet and current  liabilities  for  inventory  purchases,  payroll and
similar  recurrent  items incurred in the Ordinary  Course of Business since the
respective dates thereof.

3.11 TAXES
(a) The  Company  has  filed or  caused  to be filed  (on a timely  basis  since
September  30, 1995) all Tax Returns that are or were required to be filed by or
with respect to it,  pursuant to  applicable  Legal  Requirements.  Sellers have
delivered or made  available to Buyer copies of, and Part 3.11 of the Disclosure
Letter  contains a complete  and  accurate  list of, all such Tax Returns  filed
since  September  30,  1995.  The Company has paid,  or made  provision  for the
payment  of, all Taxes that have or may have  become due  pursuant  to those Tax
Returns or otherwise,  or pursuant to any assessment  received by Sellers or the
Company, except such Taxes, if any, as are listed in Part 3.11 of the Disclosure
Letter and are being  contested in good faith and as to which adequate  reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.

(b) The  United  States  federal  and state  income Tax  Returns of the  Company
subject  to such  Taxes  have  been  audited  by the IRS or  relevant  state tax
authorities  or are  closed by the  applicable  statute of  limitations  for all
taxable years through  September 30, 1994.  Part 3.11 of the  Disclosure  Letter
contains a complete  and  accurate  list of all audits of all such Tax  Returns,
including a reasonably  detailed  description  of the nature and outcome of each
audit.  All  deficiencies  proposed  as a result of such  audits have been paid,
reserved  against,  settled,  or, as  described  in Part 3.11 of the  Disclosure
Letter, are being contested in good faith by appropriate proceedings.  Part 3.11
of the Disclosure  Letter describes all adjustments to the United States federal
income Tax Returns filed by the Company or any group of  corporations  including
the Company for all taxable years since  September  30, 1994,  and the resulting
deficiencies  proposed  by the IRS.  Except  as  described  in Part  3.11 of the
Disclosure  Letter,  neither  any  Seller  nor the  Company  has  given  or been
requested to give waivers or  extensions  (or is or would be subject to a waiver
or extension  given by any other Person) of any statute of limitations  relating
to the payment of Taxes of the Company or for which the Company may be liable.

(c) The charges,  accruals, and reserves with respect to Taxes on the respective
books of the Company are adequate  (determined in accordance  with GAAP) and are
at least equal to the Company's  liability  for Taxes.  There exists no proposed
tax  assessment  against the Company except as disclosed in the Balance Sheet or
in Part 3.11 of the Disclosure  Letter. No consent to the application of Section
341(f)(2) of the IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.

(d) All Tax  Returns  filed by (or that  include  on a  consolidated  basis) the
Company are true, correct, and complete.  There is no tax sharing agreement that
will require any payment by the Company  after the date of this  Agreement.  The
Company is not, or within the  five-year  period  preceding the Closing Date has
not been, an "S" corporation.

3.12 NO MATERIAL ADVERSE CHANGE

Since the date of the Balance  Sheet,  there has not been any  Material  adverse
change in the business, operations,  properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may result
in such a Material adverse change.

3.13 EMPLOYEE BENEFITS

(a) As used in this  Section  3.13,  the  following  terms have the meanings set
forth below.

"Company  Other  Benefit  Obligation"  means an Other Benefit  Obligation  owed,
adopted, or followed by the Company or an ERISA Affiliate of the Company.

"Company Plan" means all Plans of which the Company or an ERISA Affiliate of the
Company is or was a Plan Sponsor,  or to which the Company or an ERISA Affiliate
of the Company otherwise contributes or has contributed, or in which the Company
or an ERISA Affiliate of the Company otherwise participates or has participated.
All  references  to Plans are to  Company  Plans  unless  the  context  requires
otherwise.

"Company  VEBA" means a VEBA whose members  include  employees of the Company or
any ERISA Affiliate of the Company.

"ERISA  Affiliate"  means,  with respect to the Company,  any other person that,
together with the Company,  would be treated as a single  employer under IRC ss.
414.

"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).

"Other Benefit  Obligations" means all obligations,  arrangements,  or customary
practices,  whether or not legally enforceable,  to provide benefits, other than
salary, as compensation for services  rendered,  to present or former directors,
employees, or agents, other than obligations,  arrangements,  and practices that
are Plans. Other Benefit Obligations  include consulting  agreements under which
the  compensation  paid does not depend  upon the  amount of  service  rendered,
sabbatical policies,  severance payment policies, and fringe benefits within the
meaning of IRC ss. 132.

"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.

"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).

"Plan" has the meaning given in ERISA ss. 3(3).

"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).

"Qualified  Plan" means any Plan that meets or purports to meet the requirements
of IRC ss. 401(a).

"Title IV Plans" means all Pension  Plans that are subject to Title IV of ERISA,
29 U.S.C.ss. 1301 et seq., other than Multi-Employer Plans.

"VEBA"  means a  voluntary  employees'  beneficiary  association  under  IRC ss.
501(c)(9).

"Welfare Plan" has the meaning given in ERISA ss. 3(1).

(b) (i) Part 3.13(i) of the Disclosure  Letter  contains a complete and accurate
list of all Company Plans, Company Other Benefit Obligations, and Company VEBAs,
and  identifies as such all Company Plans that are (A) defined  benefit  Pension
Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.

(ii) Part  3.13(ii) of the  Disclosure  Letter  contains a complete and accurate
list of (A) all ERISA Affiliates of the Company,  and (B) all Plans of which any
such ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA Affiliate
participates  or  has  participated,  or  to  which  any  such  ERISA  Affiliate
contributes or has contributed.

(iii)  Part   3.13(iii)  of  the   Disclosure   Letter  sets  forth,   for  each
Multi-Employer  Plan,  as of its last  valuation  date,  the amount of potential
withdrawal  liability of the Company and the Company's  other ERISA  Affiliates,
calculated  according  to  information  made  available  pursuant  to ERISA  ss.
4221(e).

(iv) Part  3.13(iv) of the  Disclosure  Letter sets forth a  calculation  of the
liability of the Company for post-retirement  benefits other than pensions, made
in  accordance  with  Financial   Accounting  Statement  106  of  the  Financial
Accounting  Standards  Board,  regardless  of whether the Company is required by
this Statement to disclose such information.

(v) Part 3.13(v) of the  Disclosure  Letter sets forth the financial cost of all
obligations owed under any Company Plan or Company Other Benefit Obligation that
is not subject to the disclosure and reporting requirements of ERISA.

(c) Sellers have delivered to Buyer prior to the date of this Agreement:

(i) all documents  that set forth the terms of each Company Plan,  Company Other
Benefit Obligation,  or Company VEBA and of any related trust, including (A) all
plan  descriptions  and summary  plan  descriptions  of Company  Plans for which
Sellers or the  Company  are  required to prepare,  file,  and  distribute  plan
descriptions  and  summary  plan   descriptions,   and  (B)  all  summaries  and
descriptions  furnished to  participants  and  beneficiaries  regarding  Company
Plans,  Company  Other Benefit  Obligations,  and Company VEBAs for which a plan
description or summary plan description is not required;

(ii) all personnel, payroll, and employment manuals and policies;

(iii) all collective  bargaining agreements pursuant to which contributions have
been made or obligations  incurred (including both pension and welfare benefits)
by the Company  and the ERISA  Affiliates  of the  Company,  and all  collective
bargaining  agreements  pursuant  to  which  contributions  are  being  made  or
obligations are owed by such entities;

(iv) a  written  description  of any  Company  Plan  or  Company  Other  Benefit
Obligation that is not otherwise in writing;

(v) all registration statements filed with respect to any Company Plan;

(vi) all  insurance  policies  purchased  by or to  provide  benefits  under any
Company Plan;

(vii) all  contracts  with third  party  administrators,  actuaries,  investment
managers,  consultants,  and other  independent  contractors  that relate to any
Company Plan, Company Other Benefit Obligation, or Company VEBA;

(viii) all reports  submitted  within the four years  preceding the date of this
Agreement  by  third  party  administrators,   actuaries,  investment  managers,
consultants,  or other independent contractors with respect to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;

(ix) all  notifications to employees of their rights under ERISA ss. 601 et seq.
and IRC ss. 4980B;

(x) the Form 5500 filed in each of the most recent three plan years with respect
to each  Company  Plan,  including  all  schedules  thereto and the  opinions of
independent accountants;

(xi) all notices  that were given by the Company or any ERISA  Affiliate  of the
Company  or any  Company  Plan to the  IRS,  the  PBGC,  or any  participant  or
beneficiary,  pursuant to statute,  within the four years  preceding the date of
this Agreement, including notices that are expressly mentioned elsewhere in this
Section 3.13;

(xii) all notices that were given by the IRS,  the PBGC,  or the  Department  of
Labor to the Company,  any ERISA  Affiliate of the Company,  or any Company Plan
within the four years preceding the date of this Agreement;

(xiii) with respect to Qualified Plans and VEBAs, the most recent  determination
letter for each Plan of the Company that is a Qualified Plan; and

(xiv) with  respect  to Title IV Plans,  the Form  PBGC-1  filed for each of the
three most recent plan years.

(xv) all  notifications  and  certifications  to employees  of their  periods of
creditable coverage and other rights under IRC ss.9801, et seq.

(d) Except as set forth in Part 3.13(d) of the Disclosure Letter:

(i) The Company has  performed  all of their  respective  obligations  under all
Company Plans, Company Other Benefit Obligations,  and Company VEBAs,  including
but not limited to timely  contributions of employee payroll  withholdings which
are or become  "plan  assets"  within the meaning of 29 CFR  ss.2510.3-102.  The
Company has made appropriate  entries in their financial  records and statements
for all  obligations and liabilities  under such Plans,  VEBAs,  and Obligations
that have accrued but are not due.

(ii) No statement,  either  written or oral, has been made by the Company to any
Person  with  regard  to any Plan or Other  Benefit  Obligation  that was not in
accordance  with the Plan or Other  Benefit  Obligation  and that  could have an
adverse economic consequence to the Company or to Buyer.

(iii) The Company,  with respect to all Company  Plans,  Company Other  Benefits
Obligations, and Company VEBAs, is, and each Company Plan, Company Other Benefit
Obligation,  and Company VEBA is, in full  compliance  with ERISA,  the IRC, and
other applicable Laws including the provisions of such Laws expressly  mentioned
in this Section 3.13, and with any applicable  collective  bargaining  agreement
and in particular as follows:

(A) No transaction  prohibited by ERISA ss. 406 and no "prohibited  transaction"
under IRC ss. 4975(c), and no breaches of fiduciary duty under ERISA ss.404 have
occurred  with  respect  to any  Company  Plan  for  which an  exemption  is not
available under ERISA or the IRC.

(B) Neither any Seller nor the  Company nor ERISA  Affiliate  of the Company has
any  liability  to the IRS with  respect to any Plan,  including  any  liability
imposed by Chapter 43 of the IRC.

(C) Neither any Seller nor the  Company nor ERISA  Affiliate  of the Company has
any  liability to the PBGC with respect to any Plan or has any  liability  under
ERISA ss. 502 or ss. 4071.

(D) All  filings  required by ERISA and the IRC as to each Plan have been timely
filed, and all notices and disclosures to participants  required by either ERISA
or the IRC have been timely provided.

(E) All  contributions  and payments made or accrued with respect to all Company
Plans, Company Other Benefit Obligations, and Company VEBAs are deductible under
IRC ss. 162 or ss. 404. No amount,  or any asset of any Company  Plan or Company
VEBA, is subject to tax as unrelated business taxable income.

(iv) Each Company Plan can be terminated within thirty days,  without payment of
any additional contribution or amount and without the vesting or acceleration of
any  benefits  promised  by such Plan,  except for  vesting or  acceleration  of
benefits  under the CXT ESOP to the  extent  which may be  required  by law as a
result of termination thereof as provided for in this Agreement.

(v) Since January 20, 1999,  there has been no establishment or amendment of any
Company Plan, Company VEBA, or Company Other Benefit Obligation.

(vi) No event  has  occurred  or  circumstance  exists  that  could  result in a
Material  increase in premium  costs of Company  Plans and Company Other Benefit
Obligations  that are insured,  or a Material  increase in benefit costs of such
Plans and Obligations  that are  self-insured  or, with respect to the Qualified
Plans, could give rise to a partial  termination  (except for termination of the
CXT  ESOP  as  provided  for  in  this  Agreement)  within  the  meaning  of IRC
ss.411(d)(3).

(vii) Other than claims for benefits submitted by participants or beneficiaries,
no claim against, or legal proceeding (including any audit, examination, inquiry
or  investigation by any governmental  agency or  organization)  involving,  any
Company Plan, Company Other Benefit  Obligation,  or Company VEBA is pending or,
to Sellers' Knowledge, is Threatened.

(viii) No Company Plan is a stock bonus,  pension, or profit-sharing plan within
the meaning of IRC ss. 401(a), except the CXT ESOP.

(ix) Each Qualified Plan of the Company is qualified in form and operation under
IRC ss. 401(a);  each trust for each such Plan is exempt from federal income tax
under IRC ss.  501(a).  Each Company VEBA is exempt from federal  income tax. No
event has  occurred  or  circumstance  exists  that  will or could  give rise to
disqualification  or  loss of  tax-exempt  status  of any  such  Plan  or  trust
associated with a Plan.  Neither Seller,  the Company nor any ERISA Affiliate of
the Company has taken or is taking  voluntary  corrective  action (in accordance
with  procedures  of the Internal  Revenue  Service) with respect to any Company
Plan.

(x) The  Company  and each ERISA  Affiliate  of the  Company has met the minimum
funding standard, and has made all contributions  required,  under ERISA ss. 302
and IRC ss. 402.

(xi) No Company Plan is subject to Title IV of ERISA.

(xii) The Company  has paid all  amounts  due to the PBGC  pursuant to ERISA ss.
4007.

(xiii)  Neither the Company  nor any ERISA  Affiliate  of the Company has ceased
operations at any facility or has  withdrawn  from any Title IV Plan in a manner
that  would  subject  to any entity or  Sellers  to  liability  under  ERISA ss.
4062(e), ss. 4063, or ss. 4064.

(xiv)  Neither the Company  nor any ERISA  Affiliate  of the Company has filed a
notice of intent to terminate  any Plan or has adopted any  amendment to treat a
Plan as terminated. The PBGC has not instituted proceedings to treat any Company
Plan as  terminated.  No event has  occurred  or  circumstance  exists  that may
constitute  grounds  under  ERISA  ss.  4042  for  the  termination  of,  or the
appointment of a trustee to administer, any Company Plan.

(xv) No amendment has been made,  or is  reasonably  expected to be made, to any
Plan that has required or could  require the  provision of security  under ERISA
ss. 307 or IRC ss. 401(a)(29).

(xvi) No  accumulated  funding  deficiency,  whether or not waived,  exists with
respect to any Company Plan; no event has occurred or  circumstance  exists that
may  result  in an  accumulated  funding  deficiency  as of the  last day of the
current plan year of any such Plan.

(xvii) The actuarial  report for each Pension Plan of the Company and each ERISA
Affiliate of the Company fairly presents the financial condition and the results
of operations of each such Plan in accordance with GAAP.

(xviii) Since the last  valuation  date for each Pension Plan of the Company and
each ERISA  Affiliate  of the  Company,  no event has  occurred or  circumstance
exists that would  increase  the amount of  benefits  under any such Plan (other
than the  Contemplated  Transactions  and the  impact  thereof  on the  benefits
payable  under the CXT ESOP) or that would  cause the excess of Plan assets over
benefit liabilities (as defined in ERISA ss. 4001) to decrease, or the amount by
which benefit liabilities exceed assets to increase.

(xiv) No  reportable  event (as  defined  in ERISA ss.  4043 and in  regulations
issued thereunder) has occurred.

(xx) Neither Seller nor the Company has Knowledge of any facts or  circumstances
that may give rise to any liability of any Seller, the Company,  or Buyer to the
PBGC under Title IV of ERISA.

(xxi)  Neither  the  Company  nor any ERISA  Affiliate  of the  Company has ever
established,  maintained, or contributed to or otherwise participated in, or had
an  obligation  to maintain,  contribute  to, or otherwise  participate  in, any
Multi-Employer Plan.

(xxii) Neither the Company nor any ERISA  Affiliate of the Company has withdrawn
from any  Multi-Employer  Plan with  respect to which  there is any  outstanding
liability  as  of  the  date  of  this  Agreement.  No  event  has  occurred  or
circumstance  exists that presents a risk of the  occurrence  of any  withdrawal
from, or the participation,  termination,  reorganization, or insolvency of, any
Multi-Employer  Plan that could result in any liability of either the Company or
Buyer to a Multi-Employer Plan.

(xxiii)  Neither the Company nor any ERISA Affiliate of the Company has received
notice  from  any  Multi-Employer  Plan  that  it  is  in  reorganization  or is
insolvent,  that increased contributions may be required to avoid a reduction in
plan benefits or the  imposition of any excise tax, or that such Plan intends to
terminate or has terminated.

(xxiv) No Multi-Employer Plan to which the Company or any ERISA Affiliate of the
Company contributes or has contributed is a party to any pending merger or asset
or liability transfer or is subject to any proceeding brought by the PBGC.

(xxv)  Except to the extent  required  under  ERISA ss. 601 et seq.  and IRC ss.
4980B,  the Company does not provide health or welfare  benefits for any retired
or former employee and is not obligated to provide health or welfare benefits to
any active employee following such employee's retirement or other termination of
service.

(xxvi) The  Company has the right to modify and  terminate  benefits to retirees
(other than pensions) with respect to both retired and active employees  without
incurring liability for benefits after they have been so terminated.

(xxvii) Sellers and all Company have complied with the provisions of ERISAss.601
et seq. and IRCss.4980B and with the provisions of IRCss.9801, et seq.

(xxviii)  No payment  that is owed or may become due to any  director,  officer,
employee,  or agent of the  Company  will be  non-deductible  to the  Company or
subject to tax under IRC ss. 280G or ss. 4999;  nor will the Company be required
to "gross up" or otherwise  compensate any such person because of the imposition
of any excise tax on a payment to such person.

(xxix) The consummation of the Contemplated  Transactions will not result in the
payment, vesting, or acceleration of any benefit under any Company Plan, Company
Other Benefit Obligation or Company VEBA, except the CXT ESOP.

(xxx) With respect to any Plan that:  (1) is intended to be an  "employee  stock
ownership plan",  within the meaning of IRC ss.4975(e)(7);  and (2) holds Shares
of the Company:

(A) All Shares held therein are and at all times have been "qualifying  employer
securities",  within the meaning of ERISA  ss.407(d)(5),  and every  transaction
which would  otherwise give rise to a "prohibited  transaction"  under ERISA ss.
406 and IRC ss.4975 qualifies for an exemption;

(B) There are no unpaid or outstanding  securities  acquisition  loans, debts or
other  obligations  (including  notes  issued  in  redemption  of  Plan  benefit
distributions)  held by the Plan or under  which the Plan has  agreed to pay the
Company, an ERISA Affiliate of the Company or any third party;

(C) Neither the Sellers, the Company nor any ERISA Affiliate of the Company have
guaranteed  or  otherwise  secured the  repayment  of any loans,  debts or other
obligations  held by the Plan or under  which the Plan has agreed to pay,  other
than debts of the CXT ESOT which have previously been paid in full;

(D) On an annual or more frequent basis,  the Plan has satisfied the requirement
for  obtaining  an  independent  appraisal  of the  Shares,  as  provided in IRC
ss.401(a)(28);

(E) All votes,  consents,  approvals and other legal requirements  necessary and
appropriate  to consummate  the sale  contemplated  by this  Agreement have been
obtained  by Sellers  (or others as  appropriate)  and are  legally  binding and
enforceable,  except for approval of the Contemplated  Transactions and approval
of amendment of the Organizational Documents of the Company by its shareholders;
and

(F) No trustee of the Plan has,  within the most recent 24 months,  tendered his
or her  resignation or been removed by the Company in accordance  with the Plan,
except for resignation of the former members of the Board of Trustees of the CXT
ESOT and appointment of Alaska Trust Company as successor trustee.

3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS

(a) Except as set forth in Part 3.14 of the Disclosure Letter:

(i) the Company is, and at all times since  October 1, 1995,  has been,  in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or  operation  of its  business  or the  ownership  or use of any of its
assets;

(ii) no event has occurred or  circumstance  exists that (with or without notice
or lapse of time) (A) may constitute or result in a violation by the Company of,
or a failure on the part of the Company to comply with,  any Legal  Requirement,
or (B) may give rise to any  obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature;
and

(iii) the  Company  has not  received,  at any time since  October 1, 1995,  any
notice or other  communication  (whether oral or written) from any  Governmental
Body or any  other  Person  regarding  (A) any  actual,  alleged,  possible,  or
potential violation of, or failure to comply with, any Legal Requirement, or (B)
any  actual,  alleged,  possible,  or  potential  obligation  on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.

(b) Part 3.14 of the Disclosure  Letter contains a complete and accurate list of
each  Governmental  Authorization  that is held by the Company or that otherwise
relates  to the  business  of,  or to any of the  assets  owned or used by,  the
Company. Each Governmental Authorization listed or required to be listed in Part
3.14 of the Disclosure  Letter is valid and in full force and effect.  Except as
set forth in Part 3.14 of the Disclosure Letter:

(i) the Company is, and at all times since  October 1, 1995,  has been,  in full
compliance  with  all  of  the  terms  and  requirements  of  each  Governmental
Authorization  identified  or  required  to be  identified  in Part  3.14 of the
Disclosure Letter;

(ii) no event has  occurred  or  circumstance  exists  that may (with or without
notice or lapse of time) (A)  constitute  or result  directly or indirectly in a
violation  of or a  failure  to  comply  with  any  term or  requirement  of any
Governmental  Authorization  listed or required to be listed in Part 3.14 of the
Disclosure  Letter,  or (B) result  directly or  indirectly  in the  revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental  Authorization  listed or required to be listed in Part 3.14 of
the Disclosure Letter;

(iii) the  Company  has not  received,  at any time since  October 1, 1995,  any
notice or other  communication  (whether oral or written) from any  Governmental
Body or any  other  Person  regarding  (A) any  actual,  alleged,  possible,  or
potential  violation of or failure to comply with any term or requirement of any
Governmental Authorization,  or (B) any actual, proposed, possible, or potential
revocation,   withdrawal,   suspension,   cancellation,   termination   of,   or
modification to any Governmental Authorization; and

(iv) all  applications  required  to have  been  filed  for the  renewal  of the
Governmental  Authorizations listed or required to be listed in Part 3.14 of the
Disclosure  Letter have been duly filed on a timely  basis with the  appropriate
Governmental  Bodies,  and all  other  filings  required  to have been made with
respect  to such  Governmental  Authorizations  have  been duly made on a timely
basis with the appropriate Governmental Bodies.

The  Governmental  Authorizations  listed in Part 3.14 of the Disclosure  Letter
collectively  constitute  all of the  Governmental  Authorizations  necessary to
permit the Company to  lawfully  conduct and  operate  their  businesses  in the
manner they  currently  conduct and operate  such  businesses  and to permit the
Company to own and use their  assets in the manner in which they  currently  own
and use such assets.

3.15 LEGAL PROCEEDINGS; ORDERS

(a)  Except  as set  forth in Part 3.15 of the  Disclosure  Letter,  there is no
pending Proceeding:

(i) that has been commenced by or against the Company or that otherwise  relates
to or may affect  the  business  of, or any of the assets  owned or used by, the
Company; or

(ii)  that  challenges,  or that may have the  effect of  preventing,  delaying,
making  illegal,  or  otherwise   interfering  with,  any  of  the  Contemplated
Transactions.

To the  Knowledge of Sellers and the Company,  (1) no such  Proceeding  has been
Threatened,  and (2) no event has occurred or circumstance  exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. Sellers
have  delivered  to Buyer  copies of all  pleadings,  correspondence,  and other
documents  relating  to each  Proceeding  listed in Part 3.15 of the  Disclosure
Letter.  The Proceedings  listed in Part 3.15 of the Disclosure  Letter will not
have a Material adverse effect on the business,  operations,  assets, condition,
or prospects of the Company.

(b) Except as set forth in Part 3.15 of the Disclosure Letter:

(i) there is no Order to which any of the Company, or any of the assets owned or
used by the Company, is subject;

(ii) neither  Seller is subject to any Order that relates to the business of, or
any of the assets owned or used by, the Company; and

(iii) to the Knowledge of Sellers and the Company, no officer,  director, agent,
or employee of the Company is subject to any Order that  prohibits such officer,
director,  agent,  or employee  from  engaging  in or  continuing  any  conduct,
activity,  or  practice  relating  to the  business of either the Company or the
Buyer.

(c) Except as set forth in Part 3.15 of the Disclosure Letter:

(i) the Company is, and at all times since  October 1, 1995,  has been,  in full
compliance with all of the terms and  requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;

(ii) no event has occurred or circumstance  exists that may constitute or result
in (with or without notice or lapse of time) a violation of or failure to comply
with any term or  requirement  of any Order to which the Company,  or any of the
assets owned or used by the Company, is subject; and

(iii) the  Company  has not  received,  at any time since  October 1, 1995,  any
notice or other  communication  (whether oral or written) from any  Governmental
Body or any other Person regarding any actual,  alleged,  possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which the Company,  or any of the assets owned or used by the Company, is or has
been subject.

3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS

Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the
Balance Sheet  (September  30, 1998),  the Company has conducted its  businesses
only in the Ordinary Course of Business and there has not been any:

(a) change in the Company's  authorized or issued  capital  stock;  grant of any
stock  option or right to  purchase  shares  of  capital  stock of the  Company;
issuance of any  security  convertible  into such  capital  stock;  grant of any
registration rights; purchase,  redemption,  retirement, or other acquisition by
the Company of any shares of any such capital  stock;  or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock;

(b) amendment to the Organizational Documents of the Company;

(c)  payment or  increase  by the  Company of any  bonuses,  salaries,  or other
compensation to any stockholder,  director,  officer, or (except in the Ordinary
Course of Business and authorized  prior to December 31, 1998) employee or entry
into any employment,  severance, or similar Contract with any director, officer,
or employee;

(d) adoption of, or increase in the  payments to or benefits  under,  any profit
sharing, bonus, deferred compensation,  savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of the Company;

(e) damage to or  destruction  or loss of any asset or property of the  Company,
whether or not covered by  insurance,  materially  and  adversely  affecting the
properties, assets, business, financial condition, or prospects of the Company;

(f) entry into,  termination  of, or receipt of notice of termination of (i) any
license, distributorship,  dealer, sales representative,  joint venture, credit,
or similar  agreement,  or (ii) any  Contract or  transaction  involving a total
remaining commitment by or to the Company of at least $25,000;

(g) sale (other than sales of  inventory in the  Ordinary  Course of  Business),
lease, or other disposition of any asset or property of the Company or mortgage,
pledge,  or imposition of any lien or other encumbrance on any Material asset or
property of the Company,  including the sale, lease, or other disposition of any
of the Intellectual Property Assets;

(h)  cancellation  or waiver of any claims or rights with a value to the Company
in excess of $10,000;

(i) Material change in the accounting methods used by the Company; or

(j)  agreement,  whether  oral  or  written,  by  the  Company  to do any of the
foregoing.

3.17 CONTRACTS; NO DEFAULTS

(a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate list,
and Sellers have delivered to Buyer true and complete copies, of:

(i) each Applicable  Contract that involves  performance of services or delivery
of goods or materials by the Company of an amount or value in excess of $25,000;

(ii) each Applicable Contract that involves  performance of services or delivery
of goods or materials to the Company of an amount or value in excess of $25,000;

(iii) each Applicable  Contract that was not entered into in the Ordinary Course
of Business and that involves  expenditures or receipts of the Company in excess
of $25,000;

(iv) each  lease,  rental  or  occupancy  agreement,  license,  installment  and
conditional  sale  agreement,   and  other  Applicable  Contract  affecting  the
ownership of,  leasing of, title to, use of, or any leasehold or other  interest
in,  any  real  or  personal  property  (except  personal  property  leases  and
installment  and  conditional  sales  agreements  having  a  value  per  item or
aggregate payments of less than $25,000 and with terms of less than one year);

(v) each  licensing  agreement  or other  Applicable  Contract  with  respect to
patents,  trademarks,  copyrights,  or other  intellectual  property,  including
agreements  with  current  or  former  employees,  consultants,  or  contractors
regarding the  appropriation  or the  non-disclosure  of any of the Intellectual
Property Assets;

(vi) each collective  bargaining  agreement and other Applicable  Contract to or
with any labor union or other employee representative of a group of employees;

(vii) each joint venture,  partnership,  and other Applicable  Contract (however
named)  involving a sharing of profits,  losses,  costs,  or  liabilities by the
Company with any other Person;

(viii) each Applicable Contract containing  covenants that in any way purport to
restrict the business activity of the Company or any Affiliate of the Company or
limit the  freedom of the Company or any  Affiliate  of the Company to engage in
any line of business or to compete with any Person;

(ix) each Applicable  Contract  providing for payments to or by any Person based
on sales, purchases, or profits, other than direct payments for goods;

(x) each power of attorney that is currently effective and outstanding;

(xi) each Applicable  Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express  undertaking by the Company to
be responsible for consequential damages;

(xii) each Applicable Contract for capital expenditures in excess of $25,000;

(xiii) each written warranty,  guaranty,  and or other similar  undertaking with
respect to  contractual  performance  extended by the Company  other than in the
Ordinary Course of Business; and

(xiv) each amendment,  supplement, and modification (whether oral or written) in
respect of any of the foregoing.

Part 3.17(a) of the Disclosure  Letter sets forth  reasonably  complete  details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining  commitment of the Company under the Contracts,  and the Company's
office where details relating to the Contracts are located.

(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:

(i) No Seller  (and no Related  Person of any  Seller)  has or may  acquire  any
rights  under,  and no Seller has or may become  subject  to any  obligation  or
liability  under,  any  Contract  that relates to the business of, or any of the
assets owned or used by, the Company; and

(ii) No officer,  director,  agent, employee,  consultant,  or contractor of the
Company is bound by any  Contract  that  purports  to limit the  ability of such
officer,  director, agent, employee,  consultant, or contractor to (A) engage in
or continue any conduct,  activity,  or practice relating to the business of the
Company,  or (B) assign to the Company or to any other  Person any rights to any
invention, improvement, or discovery.

(c) Except as set forth in Part 3.17(c) of the Disclosure Letter,  each Contract
identified or required to be identified in Part 3.17(a) of the Disclosure Letter
is in full force and effect and is valid and  enforceable in accordance with its
terms.

(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:

(i) The Company is, and at all times since  September 30, 1998 has been, in full
compliance  with all applicable  terms and  requirements  of each Contract under
which the Company has or had any obligation or liability or by which the Company
or any of the assets owned or used by the Company is or was bound;

(ii) each other Person that has or had any  obligation  or  liability  under any
Contract  under  which the  Company  has or had any  rights is, and at all times
since September 30, 1998 has been, in full compliance with all applicable  terms
and requirements of such Contract;

(iii) no event has occurred or circumstance  exists that (with or without notice
or lapse of time) may  contravene,  conflict  with,  or result in a violation or
breach of, or give the Company or other Person the right to declare a default or
exercise any remedy under,  or to accelerate the maturity or performance  of, or
to cancel, terminate, or modify, any Applicable Contract; and

(iv) The Company has not given to or received from any other Person, at any time
since  October  1,  1995,  any notice or other  communication  (whether  oral or
written)  regarding any actual,  alleged,  possible,  or potential  violation or
breach of, or default  under,  any Contract  which could give rise to Damages in
excess of $25,000.

(e) There are no  renegotiations  of,  attempts to  renegotiate,  or outstanding
rights to renegotiate any Material  amounts paid or payable to the Company under
current or  completed  Contracts  with any  Person  and no such  Person has made
written demand for such renegotiation.

(f) The Contracts  relating to the sale,  design,  manufacture,  or provision of
products or services by the Company has been entered into in the Ordinary Course
of Business and have been entered into without the  commission  of any act alone
or in concert with any other Person,  or any  consideration  having been paid or
promised, that is or would be in violation of any Legal Requirement.

3.18 INSURANCE

(a) Sellers have delivered to Buyer:

(i) true and  complete  copies of all policies of insurance to which the Company
is a party or under which the Company, or any director of the Company, is or has
been  covered at any time  within  the three  years  preceding  the date of this
Agreement;

(ii) true and  complete  copies of all  pending  applications  for  policies  of
insurance; and

(iii) any statement by the auditor of the Company's  financial  statements  with
regard to the adequacy of such entity's coverage or of the reserves for claims.

(b) Part 3.18(b) of the Disclosure Letter describes:

(i) any  self-insurance  arrangement  (by policy) by or  affecting  the Company,
including any reserves established thereunder;

(ii) any  contract or  arrangement,  other than a policy of  insurance,  for the
transfer or sharing of any risk by the Company; and

(iii) all  obligations of the Company to third parties with respect to insurance
(including such obligations under leases and service  agreements) and identifies
the policy under which such coverage is provided.

(c) Part 3.18(c) of the Disclosure  Letter sets forth,  by year, for the current
policy year and each of the three preceding policy years:

(i) a summary of the loss experience under each policy;

(ii) a statement  describing each claim under an insurance  policy for an amount
claimed or with a total incurred value in excess of $5,000 which sets forth:

(A) the name of the claimant;

(B) a description  of the policy by insurer,  type of  insurance,  and period of
coverage; and

(C) the amount paid, the amount  reserved and a brief  description of the claim;
and

(iii) a  statement  describing  the loss  experience  for all  claims  that were
self-insured, including the number and aggregate cost of such claims.

(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:

(i) All policies to which the Company is a party or that provide coverage to any
Seller, the Company, or any director or officer of the Company:

(A) are valid, outstanding, and enforceable;

(B) are issued by an insurer that is financially sound and reputable;

(C) taken together,  provide adequate  insurance coverage for the assets and the
operations of the Company for risks to which the Company is normally obtained by
other persons exposed to similar risks;

(D) are sufficient for compliance with all Legal  Requirements  and Contracts to
which the Company is a party or by which any of them is bound;

(E) will  continue in full force and effect  following the  consummation  of the
Contemplated Transactions; and

(F)  do  not  provide  for  any  retrospective   premium   adjustment  or  other
experienced-based liability on the part of the Company.

(ii) Neither  Seller nor the Company has received (A) any refusal of coverage or
any notice that a defense will be afforded with  reservation  of rights,  or (B)
any notice of cancellation or any other  indication that any insurance policy is
no longer in full  force or effect or will not be  renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.

(iii) The Company has paid all premiums due, and have otherwise performed all of
their respective obligations,  under each policy to which the Company is a party
or that provides coverage to the Company or director thereof.

(iv) The  Company  has given  notice to the  insurer of all  claims  that may be
insured thereby.


3.19 ENVIRONMENTAL MATTERS

Except as set forth in part 3.19 of the  Disclosure  Letter to the  Knowledge of
Sellers and Company (it being understood and agreed that the foregoing Knowledge
qualification  does not  lessen  the  absolute  indemnification  obligations  of
Sellers under Section 10.3):

(a) The Company is, and at all times has been, in full compliance  with, and has
not been and is not in  violation of or liable  under,  any  Environmental  Law.
Neither any Seller nor the Company has any basis to expect,  nor has any of them
or any other Person for whose conduct they are or may be held to be  responsible
received,  any actual or Threatened order,  notice, or other  communication from
(i) any Governmental  Body or private citizen acting in the public interest,  or
(ii) the current or prior owner or operator of any Facilities,  of any actual or
potential  violation or failure to comply with any Environmental  Law, or of any
actual  or  Threatened   obligation  to  undertake  or  bear  the  cost  of  any
Environmental,  Health,  and  Safety  Liabilities  with  respect  to  any of the
Facilities or any other properties or assets (whether real, personal,  or mixed)
in which  Sellers or the Company  has had an  interest,  or with  respect to any
property  or  Facility  at or  to  which  Hazardous  Materials  were  generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company,  or any  other  Person  for  whose  conduct  they  are  or may be  held
responsible,  or from which Hazardous Materials have been transported,  treated,
stored, handled, transferred, disposed, recycled, or received.

(b) There are no  pending  or, to the  Knowledge  of  Sellers  and the  Company,
Threatened claims, Encumbrances,  or other restrictions of any nature, resulting
from any  Environmental,  Health,  and Safety  Liabilities  or arising  under or
pursuant to any  Environmental  Law,  with  respect to or  affecting  any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which Sellers or the Company has or had an interest.

(c) Neither  any Seller nor the Company has any basis to expect,  nor has any of
them or any other Person for whose conduct they are or may be held  responsible,
received, any citation,  directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Activity,  Hazardous Materials, or
any  alleged,  actual,  or  potential  violation  or failure to comply  with any
Environmental  Law,  or of any  alleged,  actual,  or  potential  obligation  to
undertake or bear the cost of any Environmental,  Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real,  personal,  or mixed) in which Sellers or the Company had an interest,  or
with respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company,  or any  other  Person  for  whose  conduct  they  are  or may be  held
responsible,  have been  transported,  treated,  stored,  handled,  transferred,
disposed, recycled, or received.

(d) Neither any Seller nor the Company,  nor any other Person for whose  conduct
they are or may be held responsible,  has any Environmental,  Health, and Safety
Liabilities  with  respect  to the  Facilities  or  with  respect  to any  other
properties and assets (whether real, personal, or mixed) in which Sellers or the
Company  (or  any  predecessor),  has  or had an  interest,  or at any  property
geologically  or  hydrologically  adjoining  the  Facilities  or any such  other
property or assets.

(e) There are no Hazardous  Materials  present on or in the  Environment  at the
Facilities  or  at  any  geologically  or  hydrologically   adjoining  property,
including any Hazardous  Materials  contained in barrels,  above or  underground
storage tanks, landfills,  land deposits,  dumps, equipment (whether moveable or
fixed) or other  containers,  either  temporary or  permanent,  and deposited or
located  in land,  water,  sumps,  or any other part of the  Facilities  or such
adjoining  property,  or  incorporated  into any  structure  therein or thereon.
Neither any Seller, the Company,  any other Person for whose conduct they are or
may be held responsible, nor any other Person, has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the Facilities or any
other properties or assets (whether real,  personal,  or mixed) in which Sellers
or the  Company  has or had an  interest  [except  in full  compliance  with all
applicable Environmental Laws.

(f) There has been no Release or, to the  Knowledge  of Sellers and the Company,
Threat of Release,  of any Hazardous  Materials at or from the  Facilities or at
any other locations where any Hazardous Materials were generated,  manufactured,
refined,  transferred,  produced,  imported,  used, or processed  from or by the
Facilities,  or  from or by any  other  properties  and  assets  (whether  real,
personal,  or mixed) in which Sellers or the Company has or had an interest,  or
to the Knowledge of Sellers and the Company any  geologically or  hydrologically
adjoining property, whether by Sellers, the Company, or any other Person.

(g) Sellers have delivered to Buyer true and complete  copies and results of any
reports,  studies,  analyses,  tests,  or  monitoring  possessed or initiated by
Sellers or the Company pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the  Facilities,  or  concerning  compliance  by  Sellers,  the
Company,  or any  other  Person  for  whose  conduct  they  are  or may be  held
responsible, with Environmental Laws.

3.20 EMPLOYEES

(a) Part 3.20 of the Disclosure  Letter contains a complete and accurate list of
the  following  information  for  each  employee  or  director  of the  Company,
including  each employee on leave of absence or layoff status:  employer;  name;
job title;  current  compensation paid or payable and any change in compensation
since September 30, 1998; vacation accrued; and service credited for purposes of
vesting and eligibility to participate  under the Company  pension,  retirement,
profit-sharing,   thrift-savings,  deferred  compensation,  stock  bonus,  stock
option,  cash bonus,  employee stock ownership  (including  investment credit or
payroll  stock  ownership),  severance  pay,  insurance,  medical,  welfare,  or
vacation plan,  other Employee  Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.

(b) No employee or director of the Company is a party to, or is otherwise  bound
by, any agreement or arrangement, including any confidentiality, noncompetition,
or proprietary rights agreement, between such employee or director and any other
Person  ("Proprietary  Rights  Agreement") that in any way adversely  affects or
will affect (i) the  performance of his duties as an employee or director of the
Company,  or (ii) the ability of the Company to conduct its business,  including
any  Proprietary  Rights  Agreement  with  Sellers  or the  Company  by any such
employee or director. To Sellers' Knowledge, no director,  officer, or other key
employee,  other than John G. White of the  Company  intends  to  terminate  his
employment with the Company due to Closing of the  Contemplated  Transactions or
for any  reason  within 12 months of the  Closing,  with the  exception  of R.D.
Steiger (who is considering resignation to pursue a business opportunity).

(c) Part 3.20 of the  Disclosure  Letter also  contains a complete  and accurate
list of the following  information for each retired  employee or director of the
Company,  or their  dependents,  receiving  benefits  or  scheduled  to  receive
benefits in the future: name, pension benefit, pension option election,  retiree
medical insurance coverage, retiree life insurance coverage, and other benefits,
with the  exception  of benefits  payable  pursuant to the CXT ESOP (as to which
full and complete information has previously been provided to Buyer).

3.21 LABOR RELATIONS; COMPLIANCE

Except as set forth in Part 3.21 of the Disclosure Letter:

Since October 1, 1995,  the Company has not been or is a party to any collective
bargaining or other labor Contract.  Since October 1, 1995,  there has not been,
there is not presently pending or existing,  and to Sellers'  Knowledge there is
not Threatened, (a) any strike, slowdown,  picketing, work stoppage, or employee
grievance process,  (b) any Proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement  pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment  Opportunity
Commission,  or any comparable  Governmental Body,  organizational  activity, or
other labor or employment dispute against or affecting any of the Company or its
premises,  or (c) any application for  certification of a collective  bargaining
agent.  To  Sellers'  and the  Company's  Knowledge,  no event has  occurred  or
circumstance  exists that could provide the basis for any work stoppage or other
labor dispute.  There is no lockout of any employees by the Company, and no such
action is contemplated by the Company.  The Company has complied in all respects
with  all  Legal   Requirements   relating  to  employment,   equal   employment
opportunity, nondiscrimination,  immigration, wages, hours, benefits, collective
bargaining,  the  payment of social  security  and similar  taxes,  occupational
safety and health, and plant closing.  The Company is not liable for the payment
of any compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.

3.22 INTELLECTUAL PROPERTY

(a)  Intellectual  Property  Assets--The  term  "Intellectual  Property  Assets"
includes:

(i) the name CXT  Incorporated,  all fictional  business  names,  trading names,
registered  and  unregistered   trademarks,   service  marks,  and  applications
(collectively, "Marks");

(ii) all patents,  patent applications,  and inventions and discoveries that may
be patentable (collectively, "Patents");

(iii)  all   copyrights  in  both   published   works  and   unpublished   works
(collectively, "Copyrights"); and

(iv) all know-how,  trade secrets,  confidential  information,  customer  lists,
software, technical information,  data, process technology, plans, drawings, and
blue prints  (collectively,  "Trade Secrets");  owned,  used, or licensed by the
Company as licensee or licensor.

(b)  Agreements--Part  3.22(b) of the Disclosure  Letter contains a complete and
accurate list and summary description,  including any royalties paid or received
by the Company, of all Contracts relating to the Intellectual Property Assets to
which the  Company is a party or by which the  Company is bound,  except for any
license  implied by the sale of a product and  perpetual,  paid-up  licenses for
commonly  available  software  programs  with a value of less than $5,000  under
which the Company is the  licensee.  There are no  outstanding  and, to Sellers'
Knowledge,  no  Threatened  disputes or  disagreements  with respect to any such
agreement.

(c) Know-How Necessary for the Business

(i) The  Intellectual  Property Assets are all those necessary for the operation
of the  Company's  businesses  both  as  they  are  currently  conducted  and as
reflected  in the  business  plan  given to  Buyer.  Except as set forth in Part
3.22(c)(i)  of the  Disclosure  Letter,  the  Company is the owner of all right,
title, and interest in and to each of the Intellectual Property Assets, free and
clear of all liens, security interests,  charges,  encumbrances,  equities,  and
other adverse claims,  and has the right to use without payment to a third party
all of the Intellectual Property Assets.

(ii)  Except as set forth in Part  3.22(c)(ii)  of the  Disclosure  Letter,  all
former and current employees of the Company have executed written Contracts with
one or more of the  Company  that  assigns  to the  Company  all  rights  to any
inventions,  improvements,  discoveries, or information relating to the business
of the Company.  No employee of the Company has entered  into any Contract  that
restricts  or limits in any way the scope or type of work in which the  employee
may be engaged or  requires  the  employee  to  transfer,  assign,  or  disclose
information concerning his work to anyone other than the Company.

(d) Patents

(i) Part 3.22(d) of the Disclosure  Letter contains a complete and accurate list
and summary  description of all Patents.  Except as set forth in Part 3.22(d)(i)
of the  Disclosure  Letter,  the Company is the owner of all right,  title,  and
interest in and to each of the  Patents,  free and clear of all liens,  security
interests, charges, encumbrances, entities, and other adverse claims.

(ii) All of the issued  Patents are  currently in  compliance  with formal legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use), are valid and enforceable, and are not subject to any
maintenance  fees or taxes or actions  falling due within  ninety days after the
Closing Date.

(iii)  No  Patent  has been or is now  involved  in any  interference,  reissue,
reexamination,  or opposition  proceeding.  To Sellers'  Knowledge,  there is no
potentially interfering patent or patent application of any third party.

(iv) No Patent is infringed or, to Sellers'  Knowledge,  has been  challenged or
threatened  in any way.  None of the  products  manufactured  and sold,  nor any
process or know-how used, by the Company infringes or is alleged to infringe any
patent or other proprietary right of any other Person.

(v) All products made, used, or sold under the Patents have been marked with the
proper patent notice.

(e) Trademarks

(i) Part 3.22(e) of Disclosure  Letter contains a complete and accurate list and
summary  description of all Marks. Except as set forth in Part 3.22(e)(i) of the
Disclosure Letter, the Company is the owner of all right, title, and interest in
and to each of the  Marks,  free and  clear of all  liens,  security  interests,
charges, encumbrances, equities, and other adverse claims.

(ii) All Marks  that have been  registered  with the  United  States  Patent and
Trademark Office are currently in compliance with all formal legal  requirements
(including  the  timely  post-registration  filing  of  affidavits  of  use  and
incontestability and renewal applications),  are valid and enforceable,  and are
not  subject  to any  maintenance  fees or taxes or actions  falling  due within
ninety days after the Closing Date.

(iii) No Mark has been or is now involved in any  opposition,  invalidation,  or
cancellation and, to Sellers'  Knowledge,  no such action is Threatened with the
respect to any of the Marks.

(iv) To Sellers'  Knowledge,  there is no potentially  interfering  trademark or
trademark application of any third party.

(v) No Mark is  infringed  or, to Sellers'  Knowledge,  has been  challenged  or
threatened  in any way.  None of the Marks used by the Company  infringes  or is
alleged to infringe  any trade  name,  trademark,  or service  mark of any third
party.

(vi) All  products  and  materials  containing  a Mark bear the  proper  federal
registration notice where permitted by law.

(f) Copyrights

(i) Part 3.22(f) of the Disclosure  Letter contains a complete and accurate list
and summary  description  of all  Copyrights  of Material  value to the Company.
Except as set forth in Part 3.22(f)(i) of the Disclosure  Letter, the Company is
the owner of all right,  title,  and interest in and to each of the  Copyrights,
free  and  clear  of  all  liens,  security  interests,  charges,  encumbrances,
equities, and other adverse claims. (ii) All the Copyrights have been registered
and are currently in compliance  with formal legal  requirements,  are valid and
enforceable,  and are not  subject to any  maintenance  fees or taxes or actions
falling due within ninety days after the date of Closing.

(iii) No Copyright is infringed or, to Sellers'  Knowledge,  has been challenged
or threatened in any way.  None of the subject  matter of any of the  Copyrights
infringes  or is alleged to infringe  any  copyright  of any third party or is a
derivative work based on the work of a third party.

(iv) All works  encompassed by the  Copyrights  have been marked with the proper
copyright notice.

(g) Trade Secrets

(i) With respect to each Trade Secret, the documentation  relating to such Trade
Secret is current,  accurate,  and  sufficient in detail and content to identify
and  explain  it and to allow its full and proper use  without  reliance  on the
knowledge or memory of any individual.

(ii) Sellers and the Company have taken all  reasonable  precautions  to protect
the secrecy, confidentiality, and value of their Trade Secrets.

(iii) The Company has good title and an absolute (but not necessarily exclusive)
right to use the Trade  Secrets.  The Trade  Secrets  are not part of the public
knowledge  or  literature,  and,  to  Sellers'  Knowledge,  have not been  used,
divulged,  or appropriated  either for the benefit of any Person (other than the
Company) or to the  detriment of the Company.  No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.




3.23 CERTAIN PAYMENTS

Since October 1, 1995, neither the Company nor any director,  officer, agent, or
employee of the Company, or to Sellers'  Knowledge,  any other Person associated
with or acting for or on behalf of the Company,  has directly or indirectly  (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person,  private or public,  regardless of form, whether
in money,  property,  or services (i) to obtain favorable  treatment in securing
business,  (ii) to pay for favorable  treatment for business  secured,  (iii) to
obtain special concessions or for special  concessions already obtained,  for or
in respect of the Company or any Affiliate of the Company,  or (iv) in violation
of any Legal  Requirement,  (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company.

3.24 DISCLOSURE

(a) No  representation or warranty of Sellers in this Agreement and no statement
in the  Disclosure  Letter omits to state a Material fact  necessary to make the
statements  herein or therein,  in light of the circumstances in which they were
made, not misleading.

(b) No notice given pursuant to Section 5.5 will contain any untrue statement or
omit to state a Material  fact  necessary to make the  statements  therein or in
this  Agreement,  in light of the  circumstances  in which they were  made,  not
misleading.

(c) There is no fact known to any Seller that has  specific  application  to any
Seller or the Company (other than general  economic or industry  conditions) and
that  materially  adversely  affects or, as far as either Seller can  reasonably
foresee,  materially  threatens,  the  assets,  business,  prospects,  financial
condition,  or results of  operations of the Company that has not been set forth
in this Agreement or the Disclosure Letter.

3.25 RELATIONSHIPS WITH RELATED PERSONS

No Seller or any  Related  Person of Sellers  or of the  Company  has,  or since
October 1, 1995, has had, any interest in any property (whether real,  personal,
or mixed and  whether  tangible or  intangible),  used in or  pertaining  to the
Company's  businesses.  No Seller or any  Related  Person of  Sellers  or of the
Company is, or since  October 1, 1995,  has owned (of record or as a  beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had  business  dealings  or a Material  financial  interest  in any
transaction  with the Company,  or (ii) engaged in competition  with the Company
with  respect  to any  line  of the  products  or  services  of the  Company  (a
"Competing Business") in any market presently served by the Company,  except for
less than one percent of the outstanding capital stock of any Competing Business
that is publicly  traded on any recognized  exchange or in the  over-the-counter
market.  Except as set forth in Part 3.25 of the Disclosure Letter, no Seller or
any Related Person of Sellers or of the Company is a party to any Contract with,
or has any claim or right against, the Company.

3.26 BROKERS OR FINDERS

Except as set forth in Part 3.26 of the Disclosure Letter:

Sellers and their agents have incurred no obligation or liability, contingent or
otherwise,  for  brokerage  or  finders'  fees or agents'  commissions  or other
similar payment in connection with this Agreement.

3.27 NO SUBSIDIARIES

The Company has no Subsidiaries.

4. REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers as follows:

4.1 ORGANIZATION AND GOOD STANDING

Buyer is a corporation duly organized,  validly  existing,  and in good standing
under the laws of the Commonwealth of Pennsylvania.

4.2 AUTHORITY; NO CONFLICT

(a) This  Agreement  constitutes  the legal,  valid,  and binding  obligation of
Buyer,  enforceable  against  Buyer  in  accordance  with  its  terms.  Upon the
execution and delivery by Buyer of the Escrow  Agreement,  (the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective  terms.  Buyer has the absolute and  unrestricted  right,  power, and
authority  to  execute  and  deliver  this  Agreement  and the  Buyer's  Closing
Documents and to perform its  obligations  under this  Agreement and the Buyer's
Closing Documents.

(b) Except as set forth in Schedule  4.2,  neither the execution and delivery of
this  Agreement  by Buyer  nor the  consummation  or  performance  of any of the
Contemplated  Transactions  by Buyer will give any Person the right to  prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:

(i) any provision of Buyer's Organizational Documents;

(ii) any  resolution  adopted by the board of directors or the  stockholders  of
Buyer;

(iii) any Legal Requirement or Order to which Buyer may be subject; or

(iv) any Contract to which Buyer is a party or by which Buyer may be bound.

Except as set forth in  Schedule  4.2,  Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the  consummation or performance of any of the Contemplated
Transactions.

4.3 INVESTMENT INTENT

Buyer is  acquiring  the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.

4.4 CERTAIN PROCEEDINGS

There is no pending  Proceeding  that has been commenced  against Buyer and that
challenges,  or may have the effect of preventing,  delaying, making illegal, or
otherwise  interfering  with, any of the Contemplated  Transactions.  To Buyer's
Knowledge, no such Proceeding has been Threatened.

4.5 BROKERS OR FINDERS

Buyer and its  officers and agents have  incurred no  obligation  or  liability,
contingent or otherwise,  for brokerage or finders' fees or agents'  commissions
or other similar  payment in connection  with this  Agreement and will indemnify
and hold Sellers  harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.

4.6  FINANCING

Buyer has obtained a written loan commitment for the financing required by Buyer
to fund payment of the Purchase Price.

5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE

Sellers agree  (subject to the limitation of liability and remedies set forth in
Section 10) as follows:

5.1 ACCESS AND INVESTIGATION

Between the date of this Agreement and the Closing Date,  Sellers will, and will
cause  the  Company  and  its  Representatives  to,  (a)  afford  Buyer  and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full and free access to the Company's personnel,  properties
(including  subsurface  testing),   contracts,  books  and  records,  and  other
documents and data,  (b) furnish  Buyer and Buyer's  Advisors with copies of all
such  contracts,  books and records,  and other  existing  documents and data as
Buyer may reasonably request, (c) furnish Buyer,

commencing for the month of May, 1999 and each month thereafter through Closing,
an  unaudited  consolidated  balance  sheet of the Company as of the last day of
each month and the related unaudited consolidated  statements of income, changes
in  consolidated  net worth and cash flow for the period from September 30, 1998
through the end of such month, including in each case, the supporting statements
in form  consistent  with that  previously  provided  and (d) furnish  Buyer and
Buyer's Advisors with such additional financial,  operating,  and other data and
information as Buyer may reasonably request.

5.2 OPERATION OF THE BUSINESSES OF THE COMPANY

Between the date of this Agreement and the Closing Date,  Sellers will, and will
cause the Company to:

(a) conduct the business of the Company only in the Ordinary Course of Business;

(b) preserve  intact the current  business  organization  of the  Company,  keep
available  the services of the current  officers,  employees,  and agents of the
Company,  and maintain the  relations and good will with  suppliers,  customers,
landlords,   creditors,   employees,   agents,   and  others   having   business
relationships with the Company;

(c) confer with Buyer concerning operational matters of a Material nature;

(d)  otherwise  report  periodically  to  Buyer  concerning  the  status  of the
business, operations, and finances of the Company; and

(e) retain the  trustees  who serve with  respect to any Plans or Company  Other
Benefit Obligations.

5.3 NEGATIVE COVENANT

Except as otherwise expressly  permitted by this Agreement,  between the date of
this  Agreement  and the  Closing  Date,  Sellers  will not,  and will cause the
Company not to, without the prior consent of Buyer, take any affirmative action,
or fail to take any reasonable  action within their or its control,  as a result
of which any of the changes or events listed in Section 3.16 may occur.

5.4 REQUIRED APPROVALS

 As promptly as practicable after the date of this Agreement,  Sellers will, and
will cause the Company to, make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions (including all
filings under the HSR Act).  Between the date of this  Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect  to all  filings  that  Buyer  elects  to make or is  required  by Legal
Requirements to make in connection with the Contemplated  Transactions,  and (b)
cooperate  with Buyer in  obtaining  all  consents  identified  in Schedule  4.2
(including  taking all actions  requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act).

5.5 NOTIFICATION

Between  the date of this  Agreement  and the  Closing  Date,  each  Seller will
promptly  notify Buyer in writing if such Seller or the Company becomes aware of
any fact or  condition  that causes or  constitutes  a Breach of any of Sellers'
representations  and  warranties  as of the date of this  Agreement,  or if such
Seller or the Company  becomes  aware of the  occurrence  after the date of this
Agreement of any fact or condition that would (except as expressly  contemplated
by this Agreement)  cause or constitute a Breach of any such  representation  or
warranty  had  such  representation  or  warranty  been  made as of the  time of
occurrence  or  discovery  of such fact or  condition.  Should  any such fact or
condition  require any change in the Disclosure  Letter if the Disclosure Letter
were  dated  the  date  of the  occurrence  or  discovery  of any  such  fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will promptly
notify Buyer of the  occurrence of any Breach of any covenant of Sellers in this
Section 5 or of the  occurrence of any event that may make the  satisfaction  of
the conditions in Section 7 impossible or unlikely.

5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS

Except  as  expressly  provided  in  this  Agreement,  Sellers  will  cause  all
indebtedness,  if any,  owed to the  Company by any of  Sellers  or any  Related
Person of any of Sellers to be paid in full prior to Closing.

5.7 NO NEGOTIATION

Until such time, if any, as this Agreement is terminated  pursuant to Section 9,
Sellers will not,  and will cause the Company and each of their  Representatives
not to, directly or indirectly solicit,  initiate, or encourage any inquiries or
proposals from,  discuss or negotiate with,  provide any non-public  information
to, or consider the merits of any  unsolicited  inquiries or proposals from, any
Person (other than Buyer) relating to any transaction  involving the sale of the
business  or assets  (other  than in the  Ordinary  Course of  Business)  of the
Company,   or  any  of  the  capital  stock  of  the  Company,  or  any  merger,
consolidation,  business  combination,  or  similar  transaction  involving  the
Company.

5.8 BEST EFFORTS

Between the date of this Agreement and the Closing Date,  Sellers will use their
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.


6. COVENANTS OF BUYER PRIOR TO CLOSING DATE

6.1 APPROVALS OF GOVERNMENTAL BODIES

As promptly as  practicable  after the date of this  Agreement,  Buyer will, and
will cause each of its Related  Persons  to, make all filings  required by Legal
Requirements  to be made by them to  consummate  the  Contemplated  Transactions
(including  all filings under the HSR Act).  Between the date of this  Agreement
and the  Closing  Date,  Buyer  will,  and will  cause each  Related  Person to,
cooperate  with Sellers with respect to all filings that Sellers are required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Sellers in obtaining all consents  identified in Part 3.2 of
the  Disclosure  Letter;  provided that this Agreement will not require Buyer to
dispose of or make any change in any  portion  of its  business  or to incur any
other burden to obtain a Governmental Authorization.

6.2 BEST EFFORTS

Except as set forth in the  proviso to Section  6.1 and except  with  respect to
Sections  7.4, 7.6 and 7.7,  between the date of this  Agreement and the Closing
Date,  Buyer will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied.

7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE

Buyer's obligation to purchase the Shares and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction,  at or prior
to the Closing, of each of the following  conditions (any of which may be waived
by Buyer, in whole or in part):

7.1 ACCURACY OF REPRESENTATIONS

Each of Sellers'  representations  and  warranties  in  Sections  must have been
accurate as of the date of this Agreement,  and must be accurate in all Material
respects  as of the  Closing  Date as if made on the  Closing  Date  (except for
changes  provided for herein,  without  giving  effect to any  supplement to the
Disclosure Letter.

7.2 SELLERS' PERFORMANCE

(a) All of the covenants and obligations that Sellers are required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively),   and  each  of  these  covenants  and  obligations   (considered
individually),  must have been duly  performed and complied with in all Material
respects.

(b) Each  document  required to be  delivered  pursuant to Section 2.4 must have
been delivered, the certificate required and delivered under Section 2.4(a)(iii)
must show the Company's  consolidated  net worth as of the Closing Date to be at
least  $4,750,000  and each of the other  covenants and  obligations in Sections
5.3, 5.4 and 5.8 must have been performed and complied with in all respects.

7.3 CONSENTS

Each of the Consents  identified in Part 3.2 of the Disclosure  Letter, and each
Consent  identified in Schedule 4.2, must have been obtained and must be in full
force and effect.

7.4  EMPLOYMENT AND BENEFITS MATTERS; NON COMPETITION, DIRECTOR RESIGNATIONS

(a)  An   employment,   confidentiality   and/or  non   competition   agreement,
satisfactory  to Buyer,  must have been executed by each of John G. White,  Russ
Skrypchuk,  Derek Firth, James McLaughlin,  D. L. Millard, N. A. Bianco and R.D.
Steiger.

(b) On or prior to the Closing Date,  Company must have approved and executed an
amendment  to  terminate  every Plan which holds  Shares of or provides  for the
issuance of shares in the Company,  to be effective prior to the Closing,  which
amendments shall be as set forth in the form attached hereto as Exhibit 7.4.

(c) Company must have obtained from all the individuals or entities who serve as
trustees  under  those  Plans  which hold  Shares of the Company (or such lesser
number of  individuals  as is  satisfactory  to Buyer) a written  commitment  to
continue  to serve in their  capacity as trustee of such Plans until the earlier
of:  removal by the  Company;  a date two years  after the Closing  Date;  their
termination  of  employment  with the Company or its  successor;  or the date on
which  the  assets  of  the  Plan  are  finally  distributed  by  reason  of its
termination.

(d) Each  individual who serves as a member of the Company's  Board of Directors
must have tendered his or her unconditional resignation from the Board effective
as of the Closing.

7.5 ADDITIONAL DOCUMENTS

Each of the following documents must have been delivered to Buyer:

(a) an opinion of Lukins & Annis,  P.S.,  dated the Closing Date, in the form of
Exhibit  7.5(a)-1 and an opinion of McDermott,  Will & Emery,  dated the Closing
Date, in the form of Exhibit 7.5(a)-2;

(b)  estoppel  certificates  executed  on behalf of the Union  Pacific  Railroad
Company  dated as of a date not more than 30 days prior to the Closing  Date, in
the form of Exhibit 7.5(b); and

(c) such other documents as Buyer may reasonably  request for the purpose of (i)
enabling its counsel to provide the opinion referred to in Section 8.4(a),  (ii)
evidencing the accuracy of any of Sellers' representations and warranties, (iii)
evidencing  the  performance  by either  Seller of, or the  compliance by either
Seller  with,  any covenant or  obligation  required to be performed or complied
with by such Seller,  (iv) evidencing the satisfaction of any condition referred
to in  this  Section  7,  or (v)  otherwise  facilitating  the  consummation  or
performance of any of the Contemplated Transactions.


7.6  CORPORATE DOCUMENTS

The  Company's  Certificate  of  Incorporation  and Bylaws and the CXT ESOP each
shall have been  amended in the manner set forth in  Exhibits  7.6.1,  7.6.2 and
7.4, respectively.

7.7  NO PROCEEDINGS

Since  the  date of this  Agreement,  there  must  not have  been  commenced  or
Threatened  against  Buyer,  or against any Person  affiliated  with Buyer,  any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions,  or (b) that may have the
effect of preventing,  delaying,  making illegal, or otherwise  interfering with
any of the Contemplated Transactions.

7.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS

There  must not have  been  made or  Threatened  by any  Person  other  than the
Sellers, the custodians of the Shareholders IRAs and the Participants in the CXT
ESOP (as to a  beneficial  interest) to the extent set forth in Exhibit 3.3, any
claim  asserting that such Person (a) is the holder or the beneficial  owner of,
or has the right to acquire or to obtain beneficial  ownership of, any stock of,
or any other voting,  equity, or ownership  interest in, any of the Company,  or
(b) is  entitled  to all or any portion of the  Purchase  Price  payable for the
Shares.

7.9 NO PROHIBITION

Neither  the  consummation  nor  the  performance  of any  of  the  Contemplated
Transactions  will,  directly or indirectly  (with or without notice or lapse of
time),  materially  contravene,  or  conflict  with,  or  result  in a  Material
violation of, or cause Buyer or any Person  affiliated  with Buyer to suffer any
Material adverse  consequence  under,  (a) any applicable  Legal  Requirement or
Order,  or  (b)  any  Legal  Requirement  or  Order  that  has  been  published,
introduced, or otherwise proposed by or before any Governmental Body.

7.10 DISCLOSURE LETTER

Buyer shall have  received  the  Disclosure  Letter and shall have  approved the
content thereof, as hereinafter provided.

7.11 HSR ACT

All waiting periods under the HRS Act shall have expired.

7.12 AUDITORS' COMMITMENT

Buyer  shall have  obtained a written  commitment,  reasonably  satisfactory  to
Buyer, of PricewaterhouseCoopers,  LLP to provide at Buyer's request the Closing
Financial Statements contemplated under Section 2.6.

8. CONDITIONS PRECEDENT TO SELLERS'  OBLIGATION TO CLOSE

Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the  satisfaction,  at or prior
to the Closing, of each of the following  conditions (any of which may be waived
by Sellers, in whole or in part):

8.1 ACCURACY OF REPRESENTATIONS

All of Buyer's  representations  and  warranties in this  Agreement  (considered
collectively),  and each of these  representations  and  warranties  (considered
individually),  must have been accurate in all Material  respects as of the date
of this  Agreement  and must be  accurate  in all  Material  respects  as of the
Closing Date as if made on the Closing Date. 8.2 BUYER'S PERFORMANCE

(a) All of the covenants and obligations that Buyer is required to perform or to
comply with  pursuant to this  Agreement at or prior to the Closing  (considered
collectively),   and  each  of  these  covenants  and  obligations   (considered
individually),  must have  been  performed  and  complied  with in all  Material
respects.

(b) Buyer must have delivered each of the documents  required to be delivered by
Buyer  pursuant to Section 2.4 and must have made the cash payments  required to
be made by Buyer pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).

8.3 CONSENTS

Each of the Consents  identified in Part 3.2 of the  Disclosure  Letter and each
Consent  identified  in Schedule 4.2 must have been obtained and must be in full
force and effect.

8.4 ADDITIONAL DOCUMENTS

Buyer must have caused the following documents to be delivered to Sellers:

(a) an opinion of David L. Voltz, dated the Closing Date, in the form of Exhibit
8.4(a); and

(b) such other  documents as Sellers may  reasonably  request for the purpose of
(i)  enabling  their  counsel to provide the opinion  referred to in Section 7.5
(a), (ii)  evidencing the accuracy of any  representation  or warranty of Buyer,
(iii)  evidencing the  performance by Buyer of, or the compliance by Buyer with,
any covenant or  obligation  required to be performed or complied with by Buyer,
(ii) evidencing the satisfaction of any condition referred to in this Section 8,
or (v)  otherwise  facilitating  the  consummation  of  any of the  Contemplated
Transactions.

8.5 NO INJUNCTION

There must not be in effect any Legal  Requirement  or any  injunction  or other
Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b) has
been adopted or issued,  or has otherwise  become  effective,  since the date of
this Agreement.

8.6      STOCKHOLDER ACTION

The  stockholders of the Company shall have adopted  resolutions:  (i) approving
the Contemplated  Transactions;  and (ii) amending the Company's  Certificate of
Incorporation and Bylaws in the manner set forth in Exhibits 7.7.1 and 7.7.2; it
being  understood  among the parties that approval of such  amendments will be a
"Super-Majority  Issue",  as  defined  in the  Organizational  Documents  of the
Company.

8.7      FAIRNESS OPINION

The ESOT Trustee shall have  received a written  opinion from  Houlihan,  Lokey,
Howard & Zukin,  Inc., or such other  financial  advisor as the ESOT Trustee may
select, in form and substance satisfactory to the ESOT Trustee,  stating in part
that: (i) the  consideration to be received by the CXT ESOT and its Participants
for the  Contemplated  Transactions  is  "adequate  consideration",  within  the
meaning of ERISA ss.3(18);  and (ii) the  Contemplated  Transactions are fair to
the CXT ESOT and its Participants from a financial point of view.

8.8      NO PROCEEDINGS

Since  the  date of this  Agreement,  there  must  not have  been  commenced  or
Threatened  against Sellers,  the Company or against any Person  affiliated with
Sellers or the Company,  any  Proceeding  (a)  involving  any  challenge  to, or
seeking  damages  or other  relief in  connection  with any of the  Contemplated
Transactions,  or (b) that may have the effect of preventing,  delaying,  making
illegal or otherwise interfering with any of the Contemplated Transactions.

8.9      NO PROHIBITION

Neither  the  consummation  nor  the  performance  of any  of  the  Contemplated
Transactions  will,  directly or indirectly  (with or without notice or lapse of
time),  materially  contravene,  or  conflict  with,  or  result  in a  Material
violation  of, or cause  Sellers,  the  Company  or any Person  affiliated  with
Sellers or the Company to suffer any Material adverse consequence under, (a) any
applicable  Legal  Requirement or Order,  or (b) any Legal  Requirement or Order
that has been  published,  introduced,  or  otherwise  proposed by or before any
Governmental Body.

8.10  HRS ACT

All waiting periods under the HRS Act shall have expired.

8.11     CERTIFICATES

The certificates  required to be delivered pursuant to Section  2.4(a)(iii) must
show the Company's  consolidated net worth as of the Closing Date to be at least
$4,750.000.

9. TERMINATION

9.1 TERMINATION EVENTS

This Agreement may, by notice given prior to or at the Closing, be terminated:

(a) by either  Buyer or Sellers if a Material  Breach of any  provision  of this
Agreement  has been  committed  by the other  party and such Breach has not been
waived;

(b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied as
of the  Closing  Date or if  satisfaction  of  such a  condition  is or  becomes
impossible  (other  than  through  the  failure  of  Buyer  to  comply  with its
obligations  under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Section
8 has not  been  satisfied  of the  Closing  Date or if  satisfaction  of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their  obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;

(c) by mutual consent of Buyer and Sellers; or

(d) by either  Buyer or Sellers if the  Closing  has not  occurred  (other  than
through the failure of any party seeking to terminate  this  Agreement to comply
fully with its obligations  under this Agreement) on or before July 31, 1999, or
such later date as the parties may agree upon.

9.2 EFFECT OF TERMINATION

Each party's right of termination  under Section 9.1 is in addition to any other
rights it may have under this  Agreement  or  otherwise,  and the  exercise of a
right of termination  will not be an election of remedies.  If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate,  except that the obligations in Sections 11.1 and
11.3 will survive; provided,  however, that if this Agreement is terminated by a
party  because of the Breach of the  Agreement by the other party or because one
or more of the  conditions to the  terminating  party's  obligations  under this
Agreement is not  satisfied as a result of the other  party's  failure to comply
with its  obligations  under this Agreement,  the  terminating  party's right to
pursue all legal remedies will survive such termination  unimpaired  (subject to
the limitation of liability and remedies set forth in Section 10).

10. INDEMNIFICATION; REMEDIES

10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE

All representations,  warranties,  covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(iii), and any other certificate or document
delivered  pursuant to this  Agreement  will survive the  Closing.  The right to
indemnification,   payment   of   Damages   or  other   remedy   based  on  such
representations,  warranties, covenants, and obligations will not be affected by
any  investigation  conducted with respect to, or any Knowledge  acquired (or in
the case of all Sellers except the ESOT Trustee,  capable of being  acquired) at
any time,  whether  before or after the execution and delivery of this Agreement
or the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation,  warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance  with any covenant or  obligation,  will not affect
the right to indemnification,  payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.

10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS

Subject to the  limitation  of liability and remedies set forth in Section 10.5,
Sellers,  jointly and  severally,  will indemnify and hold harmless  Buyer,  the
Company,  and  their  respective  Representatives,   stockholders,   controlling
persons, and affiliates (collectively,  the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim, damage
(including  incidental and consequential  damages),  expense (including costs of
investigation  and defense and  reasonable  attorneys'  fees) or  diminution  of
value, whether or not involving a third-party claim  (collectively,  "Damages"),
arising, directly or indirectly, from or in connection with:

(a) any  Breach  of any  representation  or  warranty  made by  Sellers  in this
Agreement  (without  giving effect to any supplement to the Disclosure  Letter),
the Disclosure  Letter,  the supplements to the Disclosure  Letter, or any other
certificate or document delivered by Sellers pursuant to this Agreement;

(b) any  Breach  of any  representation  or  warranty  made by  Sellers  in this
Agreement  as if such  representation  or  warranty  were  made on and as of the
Closing Date without giving effect to any  supplement to the Disclosure  Letter,
other than any such Breach that is disclosed in a supplement  to the  Disclosure
Letter and is expressly  identified  in the  certificate  delivered  pursuant to
Section  2.4(a)(iv) as having caused the condition  specified in Section 7.1 not
to be satisfied;

(c) any Breach by  Sellers  of any  covenant  or  obligation  of Sellers in this
Agreement;

(d) subject to any applicable reserves shown on the Closing Financial Statements
or,  if  applicable  and  in  lieu  thereof,  the  final  determination  of  the
Accountants  under  Section  2.6  hereof,  any claim by any Person  based on any
alleged defect in any product shipped,  manufactured or sold by, or any services
provided by or through, the Company prior to the Closing Date;

(e) any claim by any Person for  brokerage or finder's  fees or  commissions  or
similar payments based upon any agreement or understanding  alleged to have been
made by any such Person with either  Seller or the Company (or any Person acting
on their behalf) in connection with any of the Contemplated Transactions, except
for any such fees or commissions  paid or payable by the Company as set forth in
Part 3.26 of the Disclosure  Letter.  If any portion of such fees or commissions
is payable by the Company  after the Closing Date,  the amount  thereof shall be
reflected as a liability on the certificate to be delivered  pursuant to Section
2.4(a)(iii) and on the Closing  Financial  Statements and the liability for such
fees or commissions shall be included in the determination under Section 2.6.;

 (f)  any  claim  by  any  current  or  former  shareholder  of the  Company  or
participant  in the CXT ESOP  against  the  Company  based on any alleged act or
omission of any current or former  officer or director of the Company or current
or former  trustee of the CXT ESOT alleged to have occurred prior to the Closing
Date; or

(g) any claim by any  current or former  officer or  director  of the Company or
current or former  trustee of the CXT ESOT for  indemnification  pursuant to the
Organizational  Documents  of the Company or the written  agreement  between the
Company and the ESOT Trustee.

Except as provided in Section 10.5,  the remedies  provided in this Section 10.2
will not be  exclusive of or limit any other  remedies  that may be available to
Buyer or the other Indemnified Persons.

10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS--ENVIRONMENTAL MATTERS


In addition to the  provisions of Section 10.2, but subject to the limitation of
liability  and  remedies  set  forth  in  Section  10.5,  Sellers,  jointly  and
severally,  will indemnify and hold harmless Buyer,  the Company,  and the other
Indemnified  Persons  for,  and will pay to Buyer,  the  Company,  and the other
Indemnified  Persons  the amount of, any  Damages  (including  costs of cleanup,
containment,  or other remediation) arising, directly or indirectly,  from or in
connection with:

(a) any Environmental, Health, and Safety Liabilities arising out of or relating
to: (i) (A) the  ownership,  operation,  or condition at any time on or prior to
the Closing Date of the Facilities or any other  properties and assets  (whether
real, personal, or mixed and whether tangible or intangible) in which Sellers or
the Company has or had an  interest,  or (B) any  Hazardous  Materials  or other
contaminants  that were present on the  Facilities or such other  properties and
assets at any time on or prior to the Closing  Date;  or (ii) (A) any  Hazardous
Materials or other contaminants, wherever located, that were, or were allegedly,
generated,  transported,  stored,  treated,  Released,  or otherwise  handled by
Sellers or the Company or by any other Person for whose  conduct they are or may
be held  responsible  at any time on or prior to the  Closing  Date,  or (B) any
Hazardous  Activities that were, or were allegedly,  conducted by Sellers or the
Company  or by any  other  Person  for  whose  conduct  they  are or may be held
responsible; or

(b) any bodily injury (including illness,  disability, and death, and regardless
of when any such bodily injury occurred,  was incurred,  or manifested  itself),
personal  injury,  property  damage  (including  trespass,   nuisance,  wrongful
eviction, and deprivation of the use of real property), or other damage of or to
any Person,  including any employee or former employee of Sellers or the Company
or any other Person for whose  conduct they are or may be held  responsible,  in
any way arising from or allegedly arising from any Hazardous  Activity conducted
or allegedly  conducted  with respect to the  Facilities or the operation of the
Company  prior to the Closing  Date,  or from  Hazardous  Material  that was (i)
present or  suspected  to be present on or before the Closing  Date on or at the
Facilities (or present or suspected to be present on any other property, if such
Hazardous Material emanated or allegedly emanated from any of the Facilities and
was present or suspected to be present on any of the  Facilities  on or prior to
the  Closing  Date) or (ii)  Released  or  allegedly  Released by Sellers or the
Company  or any  other  Person  for  whose  conduct  they  are  or  may be  held
responsible, at any time on or prior to the Closing Date.

Buyer will be entitled  to control any  Cleanup,  any related  Proceeding,  and,
except as provided in the following sentence,  any other Proceeding with respect
to which  indemnity  may be  sought  under  this  Section  10.3.  The  procedure
described in Section  10.9 will apply to any claim  solely for monetary  damages
relating to a matter covered by this Section 10.3.

If  Buyer  should  recover  Damages  from a  third  party  with  respect  to any
Environmental,  Health  and  Safety  Liabilities  and the sum of the  Damages so
recovered  from the third party and Damages  recovered by Buyer from Sellers for
such Environmental,  Health and Safety Liabilities exceeds Buyer's total Damages
with respect to such Environmental,  Health and Safety  Liabilities,  the excess
(up to the amount previously paid by Sellers with respect to such Environmental,
Health and Safety  Liabilities)  shall be refunded to Sellers in the proportions
specified in Exhibit 2.4(b)(i).




10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER

Subject to Section 10.6,  Buyer will  indemnify and hold harmless  Sellers,  and
will pay to Sellers the amount of any Damages  arising,  directly or indirectly,
from or in connection with (a) any Breach of any representation or warranty made
by Buyer in this Agreement or in any certificate  delivered by Buyer pursuant to
this  Agreement,  (b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions  or similar  payments  based  upon any  agreement  or  understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in  connection  with any of the  Contemplated  Transactions  and (d) any
liability  of  the  Company  specifically  disclosed  on the  Closing  Financial
Statements or, if applicable and in lieu thereof, the final determination of the
Accountants  under  Section 2.6 hereof  (which  liabilities  shall be taken into
account in determination of the Adjustment Amount, if any).

10.5 LIMITATIONS ON AMOUNT--SELLERS

(a) Subject to Sections 10.5(c) and 10.5(d) each of the Persons (a "Seller") who
collectively  comprise the Sellers shall be severally but not jointly liable for
all of Buyer's  Damages  caused by: (i) any fraud of such  Seller;  and (ii) any
defect in title of such  Seller  to the  Shares to be  conveyed  by such  Seller
pursuant hereto, including any Encumbrance thereon.

(b) If the  Closing  does not occur  due to breach by a Seller of any  covenant,
representation  or warranty  contained  herein,  the Company  shall be liable to
Buyer for up to a maximum of $1,000,000 of Buyer's Damages caused thereby.

(c) Except as provided in Sections 10.5(a) and 10.5(b), in the event of a breach
of a Seller of any covenant, representation or warranty of such Seller contained
herein,  the sole and exclusive  remedy of Buyer and Buyer's sole recourse under
the  indemnification  provisions of this Section 10 shall be recovery of Buyer's
Damages from the funds  deposited to escrow  pursuant to Section  2.4(b)(ii) and
interest thereon,  up to a maximum amount equal to the total amount then held in
escrow.  Notwithstanding  Section  10.5(a)  and  subject to  Sellers'  rights of
contribution  pursuant  to Section  10.11  below,  Sellers  shall be jointly and
severally  liable  with  respect to all sums  deposited  into Escrow for matters
indemnifiable under Sections 10.2 and 10.3.

(d) Whenever this Agreement provides for joint and several liability of Sellers,
such joint liability shall be limited to the total amount from time to time held
in escrow pursuant to the Escrow  Agreement and the sole and exclusive remedy of
Buyer and Buyer's sole  recourse with respect to such joint  liability  shall be
recovery  in respect  thereof  from the funds  deposited  to  escrow.  Except as
provided in Section  10.5(a),  whenever  this  Agreement  provides for joint and
several liability or for several  liability of a Seller,  such several liability
shall  also be  limited  to the  total  amount  from time to time held in escrow
pursuant to the Escrow  Agreement and the sole and exclusive remedy of Buyer and
Buyer's sole recourse with respect to such several  liability  shall be recovery
in respect thereof from the funds deposited to escrow.  The several liability of
each Seller under Section  10.5(a) shall not be limited by the amount  deposited
to escrow.

10.6 LIMITATIONS ON AMOUNT--BUYER

Other  than  with  respect  to  fraud,   Buyer  will  have  no  liability   (for
indemnification  or otherwise) in excess of, in the aggregate,  $1,000,000  with
respect to the matters described in clause (a) or (b) of Section 10.4.

10.7 ESCROW; RIGHT OF SET-OFF

Buyer may give notice of a Claim and  exercise a right of set-off  with  respect
thereto  in  the  manner  provided  in  the  Escrow  Agreement.  Subject  to the
limitation  of liability  and remedies  set forth in Section  10.5,  neither the
exercise  of nor the  failure  to  exercise  such  right of set-off or to give a
notice of a Claim  under the Escrow  Agreement  will  constitute  an election of
remedies or limit Buyer in any manner in the  enforcement  of any other remedies
that may be available to it.

10.8 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS

(a) Promptly after receipt by an indemnified  party under Section 10.2, 10.4, or
(to the extent  provided in the last  sentence of Section  10.3) Section 10.3 of
notice of the commencement of any Proceeding  against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the  indemnifying  party  demonstrates  that the  defense of such action is
prejudiced by the indemnifying party's failure to give such notice.

(b) If any  Proceeding  referred  to in Section  10.8(a)  is brought  against an
indemnified  party  and  it  gives  notice  to  the  indemnifying  party  of the
commencement of such Proceeding,  the indemnifying  party will, unless the claim
involves  Taxes, be entitled to participate,  at the  indemnifying  party's sole
expense,  in such Proceeding in a reasonable  manner.  Buyer shall have the sole
right and power to settle or compromise any Proceeding  with respect to which it
is an  indemnified  party  and  Sellers  shall be bound  by such  compromise  or
settlement and shall be obliged to indemnify  Buyer,  subject to the limitations
of Section  10.5,  except to the extent that Sellers can  demonstrate  through a
clear preponderance of evidence,  that the claims which were alleged and settled
and/or  compromised  were  not  with  the  scope  of  Seller's   indemnification
obligations.

(c) Sellers and Buyer hereby consent to the  non-exclusive  jurisdiction  of any
court in which a  Proceeding  is  brought  against  any  Indemnified  Person for
purposes of any claim that an  Indemnified  Person may have under this Agreement
with respect to such Proceeding or the matters alleged  therein,  and agree that
process  may be served on all of them with  respect to such a claim  anywhere in
the world.

10.10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS

A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.

10.11    CONTRIBUTION

In the event a Seller (the  "Culpable  Seller")  causes  other  Sellers to incur
Damages  due to  Culpable  Seller's  failure  to convey to Buyer  good  title to
Culpable Seller's Shares,  free of all Encumbrances,  such Culpable Seller shall
be obliged to indemnify  and hold  harmless  the other  Sellers from all Damages
arising,  directly or indirectly,  from or in connection with Culpable  Seller's
failure to deliver to Buyer good title,  free of Encumbrances,  to such Culpable
Seller's Shares.

11. GENERAL PROVISIONS

11.1 EXPENSES

Except as otherwise  expressly  provided in this  Agreement,  each party to this
Agreement  will bear its  respective  expenses  incurred in connection  with the
preparation,  execution,  and performance of this Agreement and the Contemplated
Transactions,  including  all  fees and  expenses  of  agents,  representatives,
counsel,  and  accountants.  The Company  will pay all  amounts  payable to V.M.
Equity  Partners,  Inc. in connection  with this Agreement and the  Contemplated
Transactions and all sums owed or estimated to be ultimately owed by the Company
(net of any sums payable from the CXT ESOT) in connection with the orderly final
administration  of  the  CXT  ESOP,  liquidation  of  the  CXT  ESOP  and  final
distribution  thereof  to the  part or  parts  in the CXT  ESOP,  including  all
appraisers'  fees and  costs,  and all fees and other  sums due to Alaska  Trust
Company with respect thereto as set forth in its engagement letter dated January
15, 1998,  the  Indemnification  Agreement  between the Company and Alaska Trust
Company  dated  January  24,  1999 and any  "tail"  insurance  purchased  by the
Company,  all of which  shall be deemed  payable  at  Closing  for  purposes  of
calculating the Adjustment Amount.  Buyer will pay one-half and the Company will
each pay one-half of the HSR Act filing fee. In the event of termination of this
Agreement,  the obligation of each party to pay its own expenses will be subject
to any rights of such party  arising from a breach of this  Agreement by another
party. All expenses  incurred with respect to the  Contemplated  Transactions by
the  Sellers  other  than any Tax which may be  imposed  on a Seller as a result
thereof shall be paid by the Company. If any such expenses remain payable by the
Company on the Closing  Date,  including  any sum due to V.M.  Equity  Partners,
Inc., the amount thereof shall be reflected as a liability on the certificate to
be  delivered  pursuant  to  Section   2.4(a)(iii)  and  the  Closing  Financial
Statements, and taken into account in determination of the Adjustment Amount, if
any.

11.2 PUBLIC ANNOUNCEMENTS

Any public  announcement or similar  publicity with respect to this Agreement or
the  Contemplated  Transactions  will be issued,  if at all, at such time and in
such  manner as Buyer  determines.  Unless  consented  to by Buyer in advance or
required by Legal  Requirements,  prior to the Closing Sellers shall,  and shall
cause the Company to, keep this Agreement strictly confidential and may not make
any disclosure of this  Agreement to any Person.  Sellers and Buyer will consult
with  each  other  concerning  the  means  by  which  the  Company's  employees,
customers,  and suppliers  and others  having  dealings with the Company will be
informed of the Contemplated  Transactions,  and Buyer will have the right to be
present for any such communication.

11.3 CONFIDENTIALITY

Between the date of this Agreement and the Closing Date,  Buyer and Sellers will
maintain  in  confidence,  and will cause the  directors,  officers,  employees,
agents,  and  advisors of Buyer and the Company to  maintain in  confidence  any
written,  oral, or other  information  obtained in confidence from such party or
the Company in connection with this Agreement or the Contemplated  Transactions,
unless  (a) such  information  is  already  known to such party or to others not
bound  by a  duty  of  confidentiality  or  such  information  becomes  publicly
available  through no fault of such party,  (b) the use of such  information  is
necessary  or  appropriate  in making any  filing or  obtaining  any  consent or
approval required for the consummation of the Contemplated Transactions,  or (c)
the  furnishing  or use of such  information  is  necessary  or  appropriate  in
connection with legal proceedings.

If the Contemplated Transactions are not consummated,  each party will return or
destroy as much of such written  information  as the other party may  reasonably
request.  Whether or not the Closing takes place,  Sellers waive,  and will upon
Buyer's request cause the Company to waive, any cause of action, right, or claim
arising out of the access of Buyer or its  representatives  to any trade secrets
or other  confidential  information  of the Company  except for the  intentional
competitive misuse by Buyer of such trade secrets or confidential information.

11.4 NOTICES

All notices,  consents,  waivers,  and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written  confirmation  of receipt),  (b) sent by telecopier  (with
written  confirmation of receipt),  provided that a copy is mailed by registered
mail, return receipt requested,  or (c) when received by the addressee,  if sent
by a nationally  recognized overnight delivery service (receipt  requested),  in
each case to the  appropriate  addresses and telecopier  numbers set forth below
(or to such other  addresses and telecopier  numbers as a party may designate by
notice to the other parties):


Sellers:                                        Buyer:
CXT ESOT                                        L. B. Foster Company
Address:                                        Address:
c/o Alaska Trust Company                        415 Holiday Drive
Resolution Plaza, Suite 601                     Pittsburgh, PA 15220-2282
1029 W. Third Ave.
Anchorage, AK 99501                             Facsimile No.: (412) 928-7891
Facsimile No: (907) 258-1649
N.A. Bianco
Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757

Facsimile No.  (509) 921-7877

D. Firth
Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757
Facsimile No. (509) 921-7877
J. M. McLaughlin and
J.M. McLaughlin IRA

Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757
Facsimile No. (509) 921-7877

D. L. Millard

Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757

Facsimile No. (509) 921-7877





R. O. Skrypchuk and
R.O. Skrypchuk IRA

Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757

Facsimile No. (509) 921-7877

R. D. Steiger

Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757

Facsimile No. (509) 921-7877

J..G. White and
J.G. White IRA

Address:
15602 E. Marietta Ave., Bldg. S17
Spokane, WA 99214-0757

Facsimile No. (509) 921-7877

11.5 JURISDICTION; SERVICE OF PROCESS

Any action or  proceeding  seeking to enforce any  provision of, or based on any
right arising out of, this  Agreement may be brought  against any of the parties
in the courts of the Commonwealth of Pennsylvania,  County of Allegheny,  or, if
it has or can acquire jurisdiction,  in the United States District Court for the
Western  District  of  Pennsylvania,  and each of the  parties  consents  to the
jurisdiction  of such courts (and of the  appropriate  appellate  courts) in any
such  action or  proceeding  and waives  any  objection  to venue laid  therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.

11.6 FURTHER ASSURANCES

The  parties  agree (a) to furnish  upon  request  to each  other  such  further
information,  (b) to execute and deliver to each other such other documents, and
(c) to do such  other acts and  things,  all as the other  party may  reasonably
request  for the purpose of carrying  out the intent of this  Agreement  and the
documents referred to in this Agreement.


11.7 WAIVER

The rights and remedies of the parties to this  Agreement are cumulative and not
alternative.  Neither the failure nor any delay by any party in  exercising  any
right,  power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege,  and
no single or partial  exercise  of any such  right,  power,  or  privilege  will
preclude any other or further exercise of such right, power, or privilege or the
exercise  of any  other  right,  power,  or  privilege.  To the  maximum  extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents  referred to in this  Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing  signed by the other  party;  (b) no waiver that may be given by a party
will be applicable  except in the specific  instance for which it is given;  and
(c) no notice  to or  demand  on one party  will be deemed to be a waiver of any
obligation  of such  party or of the right of the party  giving  such  notice or
demand to take  further  action  without  notice or demand as  provided  in this
Agreement or the documents referred to in this Agreement.

11.8 ENTIRE AGREEMENT AND MODIFICATION

This Agreement  supersedes all prior agreements between the parties with respect
to its subject matter  (including the Letter of Intent between Buyer and Sellers
dated  on or about  April 6,  1999 and  constitutes  (along  with the  documents
referred to in this  Agreement) a complete and exclusive  statement of the terms
of the agreement  between the parties with respect to its subject  matter.  This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.

11.9 DISCLOSURE LETTER

(a) The  disclosures  in the  Disclosure  Letter,  and  those in any  Supplement
thereto,  must relate only to the  representations and warranties in the Section
of  the  Agreement  to  which  they  expressly  relate  and  not  to  any  other
representation or warranty in this Agreement.

(b) In the event of any inconsistency between the statements in the body of this
Agreement and those in the Disclosure Letter (other than an exception  expressly
set  forth as such in the  Disclosure  Letter  with  respect  to a  specifically
identified  representation  or  warranty),  the  statements  in the body of this
Agreement will control.

(c) The Sellers shall deliver the  Disclosure  Letter to Buyer no later than the
fifteenth day following the date this  Agreement is executed by the parties.  If
Buyer, in Buyer's sole and absolute discretion, disapproves, for any reason, all
or any portion of the  provisions of the Disclosure  Letter,  Buyer shall notify
Sellers in writing  thereof within ten days following  receipt of the Disclosure
Letter. Any such notice shall set forth with particularity the matters contained
in the Disclosure  Letter which are  disapproved by Buyer and the basis for such
disapproval.  If Buyer gives Sellers timely notice of disapproval of any portion
of the Disclosure  Letter and the parties are unable to agree as to modification
thereof  to make the  Disclosure  Letter  acceptable  to Buyer  within  ten days
following the date Sellers  receive  notification of Buyer's  disapproval,  this
Agreement shall terminate and be of no further force or effect.  Approval of the
Disclosure  Letter  or  failure  to  object  to the  content  thereof  shall not
constitute  a waiver by Buyer of  Buyer's  rights  in  respect  of any  Material
inaccuracy in the content thereof.

11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS

No party may assign any of its rights  under this  Agreement  without  the prior
consent of the other parties.  Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects  upon, and inure to the benefit of the
successors and permitted  assigns of the parties.  Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right,  remedy,  or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions  and conditions are for the sole and exclusive  benefit of
the parties to this Agreement and their successors and assigns.

11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full  force  and  effect.  Any  provision  of this  Agreement  held  invalid  or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

11.12 SECTION HEADINGS, CONSTRUCTION

The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation.  All references to "Section"
or "Sections" refer to the corresponding  Section or Sections of this Agreement.
All words  used in this  Agreement  will be  construed  to be of such  gender or
number as the circumstances  require.  Unless otherwise expressly provided,  the
word "including" does not limit the preceding words or terms.

11.13 TIME OF ESSENCE

With  regard to all  dates and time  periods  set forth or  referred  to in this
Agreement, time is of the essence.

11.14 GOVERNING LAW

This Agreement will be governed by the laws of the  Commonwealth of Pennsylvania
without regard to conflicts of laws principles.


11.15 COUNTERPARTS

This Agreement may be executed in one or more  counterparts,  each of which will
be deemed to be an original copy of this Agreement and all of which,  when taken
together, will be deemed to constitute one and the same agreement.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.

BUYER:                                       SELLERS:

L.B. FOSTER COMPANY                          CXT EMPLOYEE STOCK
                                             OWNERSHIP TRUST

By: /s/Lee B. Foster                         By Alaska Trust Company, Trustee
Title: President and CEO
                                             By:/s/Douglas J. Blattmachr
                                             Douglas J. Blattmachr, President


Attest:/s/David L. Voltz
       Secretary
                                  /s/ N.A.Bianco
                                  --------------------------
                                  N. A. Bianco

                                  /s/ D. Firth
                                  --------------------------
                                   D. Firth

                                  /s/J. M. McLaughlin
                                  --------------------------
                                  J. M. McLaughlin

                                  J. M. McLaughlin, IRA

                                  By:/s/J. M. McLaughlin
                                  ---------------------------
                                     J. M. McLaughlin

                                  /s/D. L. Millard
                                  --------------------------
                                  D. L. Millard

                                  /s/R. O. Skrypchuk
                                  --------------------------
                                  R. O. Skrypchuk




The  undersigned  do hereby affix their  signatures  to the above and  foregoing
Stock  Purchase  Agreement,  dated June 3, 1999,  consisting of sixty-four  (64)
pages, and Exhibits, of which this is the last.


                                                 R. O. Skrypchuk, IRA

                                                 By:/s/R. O. Skrypchuk
                                                 --------------------------
                                                    R. O. Skrypchuk

                                                 /s/R. D. Steiger
                                                 --------------------------
                                                 R. D. Steiger

                                                 /s/J. G. White
                                                 --------------------------
                                                  J. G. White

                                                 J. G. White, IRA

                                                 By:/s/ J. G. White
                                                 --------------------------
                                                    J. G. White



CXT  Incorporated  agrees  to be  legally  bound to the  extent  as set forth in
Section 10.5

                                                 CXT INCORPORATED


Attest:/s/R.O. Skrypchuk                         By: /s/J.G. White
- ---------------------------------                ----------------------------
       R.O. Skrypchuk, Secretary                 J.G. WHITE, President

L. B. Foster Company Leased Vehicle / Car Allowance Policy SP-P-10 Revised 06/09/04 Supersedes 10/16/2002 1. GENERAL POLICY It is the policy of the L.B. Foster Company to provide a leased vehicle or vehicle allowance to employees holding one of the following positions: o Chairman and President; o Corporate Officer; o District Sales Manager, General Manager, or Product Manager with a job level of 12 or above; o Other Managers with a job level of 15 or above; o Outside Sales Person or Sales Manager with a job level between 6 and 11 or; o An eligible employee who drives 12,000 business miles annually. 2. PURPOSE The purposes of this Policy are to reduce Company expenses by avoiding personal automobile mileage reimbursement for present business use and to provide a competitive benefit to attract and retain qualified personnel for eligible management and sales positions; to establish procedures for complying with appropriate safety regulations and to minimize L. B. Foster's risk exposure. 3. ELIGIBILITY ............................................................................................................................... Monthly Class: Group: Policy: Deduction for Leased Vehicle: ............................................................................................................................... A Chairman, President and CEO Leased Car or $800 monthly Car Allowance. $100 ............................................................................................................................... B Corporate Officers Leased Car or $700 monthly Car Allowance. $85 ............................................................................................................................... Sales Managers General Manager, or Leased Car or $500 monthly Car Allowance. $75 Product Manager with a job grade C of 12 and above and other managers with a job grade of 15 and above. ............................................................................................................................... Outside Sales personnel and Sales Managers with a job grade between D 6 and 11; other eligible Leased Car $60 participants who drive in excess of 12,000 business miles annually. ............................................................................................................................... See Addendum for Current Vehicle Selection ...............................................................................................................................

4. ELIGIBLE DRIVER Except in emergencies, driving of a Company vehicle shall be limited to employee and the employee's spouse over the age of twenty-five (25). 5. RESPONSIBILITY A. Plan Participants 1. An eligible employee within class A, B, or C may choose between a Company leased vehicle or a monthly car allowance. An employee within class D shall receive a Company vehicle. a. Car Allowance guidelines 1) Eligible employees cannot opt out of the Company leased vehicle option until the current car lease has expired or the vehicle has reached 60,000 miles. The Company may require the employee to continue driving the vehicle if the book value exceeds the Fair Market Value of the vehicle until such time that the disposal of the car will not result in a financial loss to the Company. 2) The monthly car allowance amount is set by employee class on an annual basis and is paid as additional income in the employee's regular paycheck. The car allowance is considered additional income by the IRS and is taxed accordingly. An employee receiving a car allowance is responsible for the payment of any and all associated federal, state, and local taxes. 3) An employee receiving a car allowance is required to have available, as required by business needs, a late model four (4) door vehicle. The vehicle is to be clean externally and internally and is presentable for Company business at all times. 2. When a new Company Leased vehicle is ordered, the employee may purchase options, beyond Company established base options, avail- able on his or her vehicle model. Payment is due before delivery of the vehicle. The leasing company will provide information regarding payment and applicable sales and or state tax. 3. It shall be the responsibility of each employee receiving a Company leased vehicle to monitor and report odometer readings as of each November 1st and on the date his/her vehicle is replaced to validate personal mileage. These odometer readings are to be turned into the Payroll Department during the first week of November on the Company Automobile Odometer Form. (Attachment SP-P-10.1)

4. If a form is not received, mileage estimates from fuel and maintenance records will be used, and will be reported as 100% personal miles and reported as such on the employee's W-2. It shall be the responsibility of each employee to maintain records documenting all business and personal mileage usage in accordance with record keeping requirements which may, from time to time, be required by the Internal Revenue Service, and to note this on the Company Automobile Odometer Form. (Attachment SP-P-10.1) 5. The driver is responsible for operating the vehicle in a safe manner. The use of seat belts is mandatory for the driver and all passengers. Operating a motor vehicle while under the influence of alcohol or illegal drugs is prohibited. 6. It is the employee's responsibility to notify their Manager of any change in the employee's physical status or if the employee is taking any medications labeled with a warning that the medication could impair his/her driving. 7. If any driver of a Company leased vehicle or an employee receiving a car allowance, is issued a citation for DUI (driving under the influence), their Company vehicle/car allowance privileges will be suspended until the outcome of the charge is determined in a court of law. If convicted for DUI, that driver will have their Company leased vehicle/car allowance privileges revoked for a minimum one (1) year period. Pre-trial suspension will be counted towards the one (1) year. a. In addition, other disciplinary actions may be levied up to and including termination. b. Decisions on reinstatement of Company car privileges after a suspension will be based on consultations with the Risk Manager and in compliance with Foster's current automobile insurance carrier's requirements. 8. If any employee is issued a second DUI citation, the privilege of a company-leased vehicle will be removed permanently. 9. Leased vehicle participants are required to adhere to the maintenance schedule under the leased vehicle maintenance program. 10. While assigned to an employee, Company vehicles must be carefully maintained and kept clean in a manner properly representing the Company. When returned from employee use, vehicles should be clean and free of alteration or damage beyond normal wear and tear.

11. All employees receiving a car allowance must show proof of insurance annually by submitting a proof of insurance to Human Resources. This must be done in January of each year. 12. All participants in this program shall be required to execute SP-P-10.2 (Acknowledgment of Driver Requirements) and SP-P-10.1 (Company Automobile Odometer form) on an annual basis. Failure to adhere to these policies can result in loss of Company car privileges, and/or disciplinary actions up to and including termination. B. Accounting and Payroll Departments It shall be the responsibility of the Accounting and Payroll Departments to maintain and verify the records of all Leased Vehicle Plan participants with regard to payroll deductions, individual taxability calculations and W-2 reporting. C. Human Resources Department 1. It shall be the responsibility of the Human Resources Department to monitor the fleet of Company leased automobiles in service, to provide lease values, to ensure that the appropriate forms are provided to each driver, and acquire and dispose of all Company leased automobiles. 2. The Vice President, Human Resources shall be responsible for the interpretation and application of the provisions of the Leased Vehicle Plan. 3. The Human Resources Department shall obtain a copy of a newly hired employee's driver's license prior to authorizing the use of a company vehicle. 4. The Human Resources Department shall be responsible for obtaining an application and completing a Motor Vehicle Record (MVR) check on all new hires that may be required to drive as part of their assigned duties and no less than annually thereafter. Any employee with excessive violations or accidents may lose their leased vehicle privileges based on the requirements of the fleet insurance carrier. 5. The Human Resources Department and the Finance Department will be responsible for investigating all accidents. D. Division Management and the Vice President of Human Resources will be responsible for approving any car assignments or allowance and may, at his or her discretion, reject assignment of a Company vehicle or authorizing the receipt of a car allowance.

6. PRACTICE A. Pursuant to the Tax Reform Act of 1984, the value of the personal use of an employer provided automobile must be included in the employee's income and subjected to withholding tax. B. The annual lease value of an automobile shall be based the manufacture's invoice price plus 4%. C. The percentage of personal usage of the annual lease value shall represent an additional non-cash item which shall be included as employee taxable income. D. The annual lease value shall include all maintenance and insurance but will not include the annual fuel cost for the leased vehicle. E. Fuel shall be valued at the current calendar year IRS established rate, per personal mile driven for employees driving company leased vehicles. F. The driver of a company-leased vehicle is to use the fuel and maintenance card to charge fuel, maintenance, and repair expenses. Those expenses that cannot be charged through the fuel and maintenance program shall be reimbursed through the Weekly Expense Report. For body damage and repairs refer to 10(c). G. 90 days prior to turning in a Company leased vehicle, all maintenance expenses must be approved by Human Resources. H. Employees who receive a car allowance will be reimbursed via the Company expense report at the per mile rate established by the IRS annually. I. Monthly deductions for Company leased vehicles shall be classified on the employee pay stub as federal withholding tax. J. The annualized dollar value of the Company automobile personal use benefit will appear as additional earnings on the employee pay stub and W-2. 7. TRANSFER The transfer of any Company provided automobile between employees must be authorized by the Human Resources Department and Division Officer(s). 8. REPLACEMENT A. Company leased vehicles may be eligible for replacement not earlier than the assigned length of the lease expires or 60,000 miles, whichever occurs first. Replacement Vehicle orders will not be approved and entered by the Human Resources Department until the vehicle has reached 60,000 miles. The employee's Manager may require the eligible employee to continue driving the vehicle if the book value exceeds the Fair Market Value of the vehicle until such time that the disposal of the car will not result in a financial loss to the Company.

B. All vehicle lease terms will be established based on the average number of annual miles traveled for each individual position. Annual Miles Term ----------------------------------------------- 0-13,000 60 Mos 13,001-17,000 50 Mos 17,001-20,000 45 Mos 20,001-23,000 40 Mos 23,001 and Up 36 Mos C. Drivers may purchase their assigned vehicle at lease end for the current wholesale fair market value (established by the Human Resources Department) plus all taxes, title, licensing, delivery and any other related costs. The value of the vehicle will then be adjusted for any driver-paid options. D. Vehicles not purchased by the assigned driver will be offered to all Company employees through the use of Lotus Notes and posted on employee bulletin boards at each L.B. Foster location, with maximum one (1) vehicle purchase per employee per year. The asking price will be established by the Human Resources Department and the car will be sold to the highest bidder via sealed bid auction. The Human Resources department will dispose of vehicles not sold through the internal employee auction process. E. Any employee who purchases a vehicle under this standard practice is responsible for all financing, pick up of vehicle, sales tax, and must sign an "As Is" bill of sale that will be placed in their personnel file. Payment in full to the leasing Company is required prior to release of the vehicle's title. The final sales transaction is solely between the leasing company and the purchaser of the vehicle and L.B. Foster has no involvement in the title transfer. 9. TERMINATION OF EMPLOYMENT The immediate supervisor of a terminated employee shall be responsible for ensuring that the terminated employee deposits the leased vehicle and keys at the Company facility prior to or on the day of termination. The employee is to complete form SP-P-10.1 and return it to the Payroll Department or they will be charged 100% personal mileage usage for that year. 10. ACCIDENT/LOSS RESPONSIBILITY/INSURANCE A. Personal property -The Corporate Vehicle Insurance Plan does not cover personal articles. Employees must secure their own insurance. B. Company property - Samples, literature, equipment, and supplies which are in the direct possession of an employee shall be the responsibility of the employee if lost, stolen, or damaged. C. Accident and loss reports - All accidents regardless of fault or amount of damage and property losses must be reported immediately to the employee's manager and the Insurance Department by personal contact and by use of the Preliminary Property Loss Report. Refer to SP-F-I.5 for the automobile accident claim procedures and SP-F-I.6 for reporting property loss.

11. TRAFFIC VIOLATIONS A. Employees will be solely responsible for any fines and fees associated with traffic or parking violations or any other motor vehicle infraction. Failure to reimburse the Company (for any delinquent fine or fee) within 60 days of notification of the amount due will result in deduction from the employee's paycheck. B. Employees must notify the Human Resources department regarding any status changes in their driving license due to traffic violations. Failure of such notification may result in discipline up to and including termination. This policy is subject to changes by the Company at any time with or without notice. /s/Robert J. Howard 06/10/04 /s/S L Hasselbusch 06/06/04 - --------------------- ----------- --------------------- -------------- Robert J. Howard Date Stan Hasselbusch Date VP - Human Resources President & CEO

ADDENDUM Vehicle selections and options may be changed from time to time with the approval of the Chief Executive Officer. 2004 Model Year Vehicle Options - --------------------------------- --------------------------------------- Class: Vehicle Option - --------------------------------- --------------------------------------- - --------------------------------- --------------------------------------- A Choice of Car - --------------------------------- --------------------------------------- - --------------------------------- --------------------------------------- B Buick LeSabre Custom Pontiac Bonneville SE - --------------------------------- --------------------------------------- - --------------------------------- --------------------------------------- C Chevrolet Impala Pontiac Grand Prix - --------------------------------- --------------------------------------- - --------------------------------- --------------------------------------- D Chevrolet Malibu - --------------------------------- --------------------------------------- - --------------------------------- --------------------------------------- Pickup Truck Chevrolet Silverado - --------------------------------- --------------------------------------- Company Ordered Cars are generally equipped with the following options: o V6 Engines o Automatic Transmissions o Air conditioning o Cruise Control o Power Driver Seats o AM/FM Radio with single CD player o Power Windows and Door Locks o Floor Mats o Tilt Wheel o Power side mirror(s) o Remote keyless entry

SP-P-10.1 Leased Vehicle Odometer Form ***Form must be received by November 10th or 100% personal use will be used. *** Employee: Cost Center ------------------------------- ------------------ Employee #: Driver's License #: ------------------------------- ------------------ Your assigned vehicle is used for: [] Business and personal use [] 100% Personal use Your license plate #: State in which licensed: --------------- ------------------ - -------------------------------------------------------------------------------- PART A: Current Leased Vehicle Information (To be completed by all employees assigned a leased vehicle) Car #: Year, make, and model: ------------------------- --------------------------- License plate #: ------------------------------------ Odometer Reading Change Business Personal -------------- ----------------- --------------- --------------- November 1, N/A N/A N/A ------------ -------------- ----------------- --------------- --------------- Or the date vehicle was put into service. October 31, ------------ -------------- ----------------- --------------- --------------- - -------------------------------------------------------------------------------- PART B: Replaced Leased Vehicle Information (To be completed by all employees who were assigned more than one leased vehicle between November 1st and October 31st) Car #: Year, make, and model: ------------------------- --------------------------- License plate #: ------------------------------------ Odometer Reading Change Business Personal -------------- ----------------- --------------- --------------- November 1, N/A N/A N/A ------------ -------------- ----------------- --------------- --------------- Date vehicle retired ------------ -------------- ----------------- --------------- --------------- - -------------------------------------------------------------------------------- I certify to the best of my knowledge that this form represents a true and accurate reading of my L. B. Foster leased vehicle as of ---------------------------------- I also understand that I may be subject to tax penalties if I cannot substantiate the business use of this automobile and I further authorize the Company to obtain a State Motor Vehicle Driver History Report on me including any medical information contained therein. Signature _____________________________ Date ____________________

SP-P-10.2 Acknowledgment Please check off the appropriate box indicating your choice and sign at the bottom. Company Leased Vehicle [ ] - -------------------------------------------------------------------------------- I, , acknowledge that I have read and will comply with all requirements contained within the Company's leased vehicle policy. - -------------------------------------------------------------------------------- Print Name Monthly Car Allowance [ ] Class A, B, and C only - -------------------------------------------------------------------------------- I, , acknowledge that I have valid proof of insurance and I have attached a copy of the insurance to this acknowledgement. - -------------------------------------------------------------------------------- Print Name - -------------------------------------------------------------------------------- Driver's signature Date

                                                                    Exhibit 31.1

                     Certification under Section 302 of the
                           Sarbanes-Oxley Act of 2002

I, Stan L.  Hasselbusch,  President and Chief Executive  Officer of L. B. Foster
Company, certify that:

        1.        I have reviewed this Quarterly Report on Form 10-Q of L. B.
                  Foster Company;

        2.        Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which statements were made, not
                  misleading with respect to the period covered by this
                  quarterly report;

        3.        Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

        4.        The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d - 15(e)) for the registrant and we have:

                  (a) Designed such disclosure controls and procedures, or
                  caused such disclosure controls and procedures to be designed
                  under our supervision, to ensure that material information
                  relating to the registrant, including its consolidated
                  subsidiaries, is made known to us by others within those
                  entities, particularly during the period in which this
                  quarterly report is being prepared;

                  (b) Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this quarterly report
                  our conclusions about the effectiveness of the disclosure
                  controls and procedures, as of the end of the period covered
                  by this report based upon such evaluation; and

                  (c) Disclosed in this quarterly report any change in the
                  registrant's internal control over financial reporting that
                  occurred during the registrant's most recent fiscal quarter
                  (the registrant's fourth fiscal quarter in the case of an
                  annual report) that has materially affected, or is reasonably
                  likely to materially affect, the registrant's internal control
                  over financial reporting; and

        5.        The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent function):

                  (a) All significant deficiencies and material weaknesses in
                  the design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

                  (b) Any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal control over financial reporting.

August 12, 2004                     /s/ Stan L. Hasselbusch
                                   -----------------------------------
                                   Name: Stan L. Hasselbusch
                                   Title: President and Chief Executive Officer

                                                                    Exhibit 31.2

                     Certification under Section 302 of the
                           Sarbanes-Oxley Act of 2002

I, David J. Russo, Senior Vice President,  Chief Financial Officer and Treasurer
of L. B. Foster Company, certify that:

        1.        I have reviewed this Quarterly Report on Form 10-Q of L. B.
                  Foster Company;

        2.        Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which statements were made, not
                  misleading with respect to the period covered by this
                  quarterly report;

        3.        Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

        4.        The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d - 15(e)) for the registrant and we have:

                  (a) Designed such disclosure controls and procedures, or
                  caused such disclosure controls and procedures to be designed
                  under our supervision, to ensure that material information
                  relating to the registrant, including its consolidated
                  subsidiaries, is made known to us by others within those
                  entities, particularly during the period in which this
                  quarterly report is being prepared;

                  (b) Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this quarterly report
                  our conclusions about the effectiveness of the disclosure
                  controls and procedures, as of the end of the period covered
                  by this report based upon such evaluation; and

                  (c) Disclosed in this quarterly report any change in the
                  registrant's internal control over financial reporting that
                  occurred during the registrant's most recent fiscal quarter
                  (the registrant's fourth fiscal quarter in the case of an
                  annual report) that has materially affected, or is reasonably
                  likely to materially affect, the registrant's internal control
                  over financial reporting; and

        5.        The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent function):

                  (a) All significant deficiencies and material weaknesses in
                  the design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

                  (b) Any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal control over financial reporting.

August 12, 2004                           /s/David J. Russo
                                          --------------------------------
                                          Name: David J. Russo
                                          Title: Senior Vice President,
                                          Chief Financial Officer and Treasurer

                                                                   Exhibit 32.0

          CERTIFICATE PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
                        OF 2002 (18 U.S.C. SECTION 1350)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,  (subsections (a) and
(b) of Section 1350,  Chapter 63 of Title 18,  United States Code),  each of the
undersigned  officers of L. B. Foster Company does hereby certify to the best of
their knowledge and belief that:

        (1)                The quarterly report on Form 10-Q for the quarter
                           ended June 30, 2004, which this statement
                           accompanies, fully complies with the requirements of
                           Section 13(a) or 15(d) of the Securities Exchange Act
                           of 1934; and

        (2)                The information contained in this quarterly report on
                           Form 10-Q for the quarter ended June 30, 2004, fairly
                           presents, in all material respects, the financial
                           condition and results of operations of L. B. Foster
                           Company.






Date:    August 12, 2004                By:/s/ Stan L. Hasselbusch
         ------------------------       ---------------------------------------
                                        Stan L. Hasselbusch
                                        President and
                                        Chief Executive Officer


Date:    August 12, 2004                By:/s/ David J. Russo
         ------------------------       ---------------------------------------
                                        David J. Russo
                                        Senior Vice President,
                                        Chief Financial Officer and
                                        Treasurer