SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-KSB

(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
  Act of 1934

    For the fiscal year ended December 31, 2000

[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
    of 1934

    Commission file number: 333-46643


Industrial Rubber Products, Inc.
(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction of incorporation or organization)

41-1550505
(I.R.S. Employer Identification No.)

3804 East 13th Street, Hibbing, MN 55746
(Address of principal executive offices including zip code)

(218) 263-8831
(Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes x   No _

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. x

The Company's revenues for its fiscal year ended December 31, 2000: $18,492,547.

Aggregate  Market  Value of Stock  held by  NonAffiliates  of the  Company as of
February 15, 2001:  $2,375,578 based on a closing average bid and asked price on
that date of $.9065 per share.

The number of shares of the Company's  Common Stock  outstanding  as of February
15, 2001 is 4,187,205.

Transitional Small Business Disclosure Form: Yes _ No x

Documents Incorporated by Reference

Portions of the Proxy Statement for the 2001 Annual Meeting of Shareholders  are
incorporated by references in Part III.




PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain   matters   discussed   in  this   Annual   Report  on  Form  10KSB  are
"forwardlooking  statements"  intended  to  qualify  for the safe  harbors  from
liability  established by the Private Securities  Litigation Reform Act of 1995.
These forwardlooking  statements can generally be identified as such because the
context of the  statement  will  include  words such as the Company  "believes",
"anticipates", "expects", or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also forwardlooking
statements.  Such  forwardlooking  statements  are subject to certain  risks and
uncertainties  which are  described in close  proximity to such  statements  and
which could cause actual results to differ  materially from those anticipated as
of the date of this report. Shareholders,  potential investors and other readers
are urged to consider these factors in evaluating the forwardlooking  statements
and are cautioned not to place undue reliance on such forwardlooking statements.
The  forwardlooking  statements  included herein are only made as of the date of
this report and the Company  undertakes no  obligation  to publicly  update such
forwardlooking statements to reflect subsequent events or circumstances.



Item 1: Business

(a) General development of business

Industrial  Rubber  Products,  Inc. (the "Company" or  "Industrial  Rubber") was
founded in 1986 to acquire and operate a rubber  lining  facility  then owned by
Irathane Systems Incorporated, a wholly owned subsidiary of Illinois Tool Works,
Inc.

The Company was  incorporated  as a Minnesota  corporation  on March 5, 1986, as
Industrial Rubber  Applicators,  Inc., and on January 30, 1998, changed its name
to Industrial Rubber Products,  Inc. The Company's corporate offices are located
at 3804 E. 13th Avenue,  Hibbing,  MN 55746,  and its telephone  number is (218)
263-8831.

The Company began operations in April of 1986. The Company's business originally
consisted of applying and then  vulcanizing  rubber (for  corrosion and abrasion
resistance  purposes) to wearable  parts that were used  primarily in the mining
industry.

In 1996 the Company entered into a major contract for approximately $10,000,000,
to provide rubber lining services for a pipelining  project near Salt Lake City,
Utah.  To  effectively  provide these  services the Company  leased and opened a
manufacturing  facility  in  Clearfield  Utah in 1996.  During 1997 and 1998 the
Company  used the  facility to provide  products and services to copper and gold
producing customers in the Western United States and Canada.

On January 20, 1999, the Company acquired Sonwil Products,  Inc. dba TJ Products
in West Jordan,  Utah.  TJ Products  provides  products and services  similar to
Industrial  Rubber in the  Inter-mountain  West region of the United States.  In
addition, it produces cast urethane and rubber molded products for the military,
aerospace,  paper,  utility and mineral processing  industries.  TJ Products had
sales volume of slightly less than $3 million in 1999 and 2000.

On January  31,  1999,  the lease on the  Clearfield  facility  expired  and the
Company consolidated those operations at the facilities of the newly acquired TJ
Products.

On March 31, 1999,  the Company  acquired the assets of Irathane  Systems  Inc.,
("Irathane")  which  was a wholly  owned  subsidiary  of  Illinois  Tool  Works.
Irathane had three manufacturing  plants located in Colorado Springs,  Colorado;
Hibbing, Minnesota; and Sudbury, Ontario, Canada. These plants produce primarily
cast  urethane  products  for the  mineral  processing,  aggregate  and  utility
industries. The Colorado Springs plant also produced the prepolymer liquids used
to produce the cast products in all three Irathane  plants and sells the liquids
to  licensees in Chile and India.  Irathane  Systems has had  historical  annual
sales of approximately $10 million.

During the first quarter of 2000 the Company sold the Colorado  Springs facility
and  relocated  all of the  manufacturing  equipment to the Hibbing  plant.  The
proceeds  from the sale of  approximately  $1.6  million were used to reduce the
bank term loan.

In October of 1999, the Company became the  distributor for Nordberg Sales Corp.
("Nordberg")  to the taconite  industry in Minnesota and  Michigan.  The Company
distributes  new  equipment  (crushers),  wear  materials  and  spare  parts for
Nordberg.  The Company also distributes new equipment  (magnetic  separators and
filter systems) for Scanmec (a wholly owned division of Nordberg).  The previous
distributor for these products in this area had annual sales of approximately $2
million.

Initially,  the Company was taxed as a C corporation  under the Internal Revenue
Code.  Effective  January  1,  1989,  the  Company  elected  to be taxed as an S
corporation.  The Company  continued to be taxed as an S corporation until March
31, 1998, when the Company elected C corporation status.




(b) Narrative description of Industrial Rubber's business

PRINCIPAL PRODUCTS, SERVICES AND MARKETS

Industrial  Rubber and its subsidiaries  design,  produce and supply  protective
materials,   abrasion  resistant   products  and  equipment,   erosion/corrosion
protective  linings and proprietary  rubber products to the mineral  processing,
power, wood processing and other heavy industries.



PRODUCT LINES

Industrial  Rubber has five product lines. Its urethane cast parts line consists
of urethane molded products for the mineral processing and aggregate industries.
Its steel cast parts line consists of new  machinery,  wear  materials and spare
parts that the Company  distributes for Nordberg and Scanmec.  Its pipe and pipe
lining  products  line  consists of rubber lined pipe and pipe parts  fabricated
primarily for the mineral  processing  industry.  Its proprietary  products line
consists of  engineered  replacement  parts  primarily  for  mineral  processing
facilities.  Its standard rubber products line consists of products sold,  along
with  related  services,  to the  Company's  customers  in the various  industry
segments served by the Company.

URETHANE CAST PARTS.  Industrial Rubber Products produces urethane cast parts at
its Irathane facilities and at TJ Products.  These parts include screens for the
mineral  processing  and  aggregate  industries,  pump linings and parts for the
utility and mineral processing  industries,  rollers for the paper industry, tie
pads for the railroad  industry and many other parts for the mineral  processing
industry  including  cyclones,  classifier  shoes,  discharge  cones and launder
liners.  Irathane also produces the liquid  prepolymer  used to produce the cast
parts and  distributes  the liquid  prepolymer  through  licensees  in Chile and
India.  The Company  also  applies  urethane  coating to pipe and other parts to
prevent wear.

STEEL CAST PARTS.  Industrial  Rubber  Products  was selected by Nordberg as its
distributor  to the  taconite  industry in  Minnesota  and Michigan for Nordberg
products. Nordberg products include new equipment (primarily crushers), and wear
materials and spare parts for existing equipment. Nordberg is one of the largest
suppliers of crushing  equipment in the taconite industry and currently has over
100 crushers  installed in the taconite  plants of Minnesota and  Michigan.  The
Scanmec  products  include  new  equipment  used  in  magnetic   separation  and
filtration of taconite slurry.

PIPE AND PIPE LINING  PRODUCTS.  Industrial  Rubber produces and supplies rubber
and  steel  slurry  pipe  and  components  for  tailings  pipeline  systems.   A
proprietary  formulated rubber compound (IRP X8220) is used which protects these
pipelines from abrasion and corrosion.

In 1996,  the Company  designed and developed  new processes and equipment  that
decreased the cost and improved the overall  product  quality of overland slurry
pipelines. Mechanical couplings,  historically used in connecting lined pipe for
long distance  overland  slurry  systems,  are typically  high cost items to the
customer. This is particularly true in high pressure,  large diameter pipelines.
The  Company  believes  that prior to 1996,  industry  standards  and  equipment
limitations  only  allowed  for  the  production  of  40'  long  pipe  sections.
Industrial  Rubber has  designed its own  production  equipment,  and  presently
supplies to its customers  60'lined pipe sections,  eliminating one third of the
required mechanical  couplings,  and resulting in cost savings to the customers.
The Company believes that the development of 60' lined pipe has set the standard
for the industry.

PROPRIETARY  AND  ENGINEERED  PRODUCTS.   Industrial  Rubber's  proprietary  and
engineered  product line includes air bags, lifter bars, shell liners,  pressure
seals,  fuel  ignitors,  auto  suspension  parts,  screens and mill  parts,  all
manufactured with either rubber or urethane raw materials.

STANDARD RUBBER PRODUCTS.  Historically,  the Company's standard rubber products
are  vulcanized  rubber to  steel.  Examples  of such  products  are  manifolds,
screens, pulleys, and rolls. The acquisition of TJ Products and Irathane Systems
greatly expanded this line of products to include molded rubber products for the
military and  aerospace  industries;  as well as parts for the paper and mineral
processing   industries.   All   products   are  made  to  customer   engineered
specifications.  The Company's Quality Assurance Program seeks to insure product
conformity while limiting defects and reducing associated value added costs. The
Company's  Irathane/Elliott  division in Sudbury,  Ontario,  Canada, is ISO 9000
certified.



MARKETS

The markets for the  Company's  products are the hard rock  mineral  processing,
coal  mining  and  power  generation,   aggregate,   railroad,  paper  and  pulp
production, and other similar heavy industries.

The North American mining industry,  including  aggregate related materials (the
fastest growing segment of mining) is served by the Company's products. The hard
rock  that  hosts  important  minerals  (iron,  copper,  gold,  molybdenum),  is
generally blasted from the earth and then crushed,  and ground  (processed),  to
allow the extraction  (beneficiation) of these minerals. The equipment needed to
process and beneficiate this rock is subject to constant abrasion, corrosion and
erosion.  Industrial Rubber has developed,  designed, tested and produced rubber
and urethane  products  that protect the mineral  processing  and  beneficiation
equipment,  extending  their  serviceable  life, and saving its customers  money
through decreased  replacement costs and reduced downtime.  The Company's rubber
and urethane  products also provide  further  benefits to its customers  through
noise abatement and dust and dirt reductions.

Although  Industrial  Rubber's  products  protect  the  mineral  processing  and
beneficiation  equipment, the products do become worn and must be replaced. Many
of the Company's  products are used to replace its own and other  manufacturers'
protective products that have become worn.

Industrial  Rubber's  first market was the  Minnesota  taconite  industry  where
taconite  rock  with a  typical  iron ore  content  of 25% to 30% is  excavated,
crushed,  ground  and  separated  to make  and  average  of 46  million  tons of
high-grade taconite (iron ore) pellets annually.

In  1991,  Industrial  Rubber  began  to sell  its  products  to  other  mineral
processing  markets to diversify its business and minimize the effects of demand
cycles. Recently, through acquisition,  the Company has further diversified into
the aggregate, paper, utility, and railroad industries.

Although North America is a large market for the Company's  products,  the world
mining  industry  is  significantly   larger,   with  Chile  alone  operating  a
significant number of grinding mills with resulting mine production of 3,000,000
metric  tons.  The  international  market  offers  potential  market  growth for
Industrial  Rubber,  with most of the actual contracts coming through  licensees
and from North American engineering firms or their subcontractors.



MARKETING AND DISTRIBUTION OF PRODUCTS

The Company markets its products through a direct sales force, independent sales
representatives, distributors, licensees, and OEM alliances.

The  Company's  present  sales  force  consists  of a sales and  marketing  vice
president,  ten direct sales people,  two inside sales people,  approximately 40
independent sales representatives and distributors, two licensee representatives
(India and Chile), four OEM alliances, and sales and marketing clerks.

Industrial  Rubber seeks to grow through  increased  penetration  of all current
markets with its present  products,  the  development and sales of new products,
sales to new  markets  outside  the United  States and sales of present  and new
products to new markets.

The Company  estimates  that the Minnesota and Michigan  taconite  industry will
produce  about 20% less than recent years in 2001.  Although the majority of the
anticipated  reduction  will be at  mines  that  are not the  Company's  largest
customers,  it seeks to continue a strategy of  diversification  and continue to
reduce its dependence on the taconite industry.

Industrial  Rubber's  marketing  strategy  is to  maximize  penetration  of  new
markets, including the auto industry, the aggregate industry, and coal and power
generating  facilities,  with its  present  products.  The  Company is acting to
expand its product lines and new products will be cross-sold to existing and new
customers.

The marketing plan includes prospective customer identification,  customer needs
analysis and increased and strategic placement of the sales force, to facilitate
geographic market and product expansion. The Company intends to develop business
partnerships with existing customers. The marketing plan is being implemented in
the U.S.,  Canadian,  Mexican,  Asian and Chilean markets and, when appropriate,
will be  implemented  elsewhere.  At the  present  time,  Chile,  Peru,  Brazil,
Argentina,  Mexico, and Australia are major mineral processing countries, as are
certain Southeast Asian countries.

Industrial  Rubber  utilizes  general and product  specific  brochures and sales
literature.  Video is used as an additional marketing resource.  Advertising and
articles in industry trade magazines,  journals, newsletters and papers has been
increased.  Trade show  attendance and  participation  has increased to become a
larger part of the marketing effort. The Company has identified other protective
material  products,  including  steel and iron  products  that are not presently
produced  by  Industrial  Rubber,  but are used by its  customers.  Through  its
distribution  agreement  with  Nordberg,  the Company seeks to be able to supply
cast  iron  and  steel  products  to  its  customers  and is  seeking  strategic
relationships with the manufacturers of related products.

In October of 1999, the Company signed a distributorship agreement with Nordberg
to supply Nordberg and Scanmec products to the taconite  operations in Minnesota
and  Michigan.  In March of 2000,  the Company and  Nordberg  signed a five-year
supply  alliance  with the six mining  operations in Minnesota and Michigan that
are  managed  by  Cliffs.  Under the terms of the  alliance,  the  Company  will
distribute  for  Nordberg,  90% of the Cliffs  operational  needs of the covered
items,  or from $3 to $5 million  annually for the five remaining  properties in
total.  One of the  properties,  LTV, filed  bankruptcy and closed at the end of
December 2000.

The goal is to allow the  Company  to supply its  customers  with a full line of
protective  products  eliminating the disadvantage to the customers of acquiring
components from multiple suppliers. Customers should further benefit by having a
single source for the design and testing of protective product improvements.

In  connection  with the sale of its  products,  the Company  from time to time,
provides  its  customers  with  written   limited   warranties,   including  the
establishment of performance  related standards.  The Company's products subject
to such  performance  related  standards  are under  continuing  review  and the
failure to meet performance  related standards can result in credits back to the
customers.  As of year end, no significant  warranty claims or other performance
related claims have had to be accrued.



COMPETITIVE CONDITIONS

The protective material products business that serves the mineral processing and
other heavy industries is competitive.  These protective  material  products are
made of steel, iron, rubber, urethane,  ceramics,  plastics and hybrids of these
materials. The Company's competitors fabricate,  cast, mold, shape, machine, and
form the  material  into  finished  products.  Both  large and  small  companies
throughout  the world  compete  on price and by adding  value to their  products
through fit and function, using physical design, chemical or physical make up or
proprietary data (patents). The competition falls into two categories.

The first  category is the  regional  manufacturer/supplier  that  services  the
mineral  processing  and  power  generation  properties  that  are  close to its
production  facility.   Standard  rubber  liners,  urethane  castors  and  metal
fabricators  typically fall within this category.  They use personalized service
and quick delivery as an advantage to their regional customers.

The second  category is national  manufacturers  of products  that are used by a
large number of mineral processing and power generating plants.  Rubber molders,
cast  iron and  metal  makers,  ceramic  manufacturers  and  original  equipment
manufacturers  typically fall into this category.  They use proprietary  design,
large  distribution  networks  and high  volume to reduce  manufacturing  costs.
Sophisticated quality programs,  managed inventories and just-in-time deliveries
are  advantages  to their  customers and their size provides them with access to
greater financial and other resources.

The Company  believes that it can  successfully  compete with  companies in both
categories,  through  focused  service to customers  located near its Minnesota,
Ontario, and Utah facilities and through its ability to provide quality products
in increasingly large quantities to customers located in geographically  distant
areas.



RAW MATERIALS AND SUPPLIES

The Company obtains rubber used to manufacture its rubber products from numerous
rubber suppliers using Industrial  Rubber Products  proprietary  compounds.  The
Company produces its own prepolymer liquids for cast urethane production through
a supply of raw materials from large nationally  recognized  chemical companies.
The Company  obtains  numerous  metal  fabrications  from metal  fabricators  in
Minnesota,  Colorado,  other states and Canada. The Company  anticipates that it
will continue to obtain these materials from these suppliers,  but other sources
are available for all such materials.



DEPENDENCE ON MAJOR CUSTOMERS

While the Company is not dependent on any single customer, a substantial portion
of  Industrial  Rubber's  revenues  in 1997 and 1998  were  from  large  project
contracts for rubber lined tailings pipe. The companies purchasing such products
and services from the Company  pursuant to large  contracts  vary and the recent
drops in commodity prices have caused many  modernization and new projects to be
put on hold.  The  Company  has no orders  for  large  contracts  at this  time,
although the Company is continuing to seek such contracts.



PROPRIETARY RIGHTS AND LABOR CONTRACTS

The Company holds numerous  patents and  trademarks.  Industrial  Rubber holds a
patent for a Discharge  Millhead,  which will  terminate  on April 7, 2013.  The
Irathane  division  holds various  patents for  elastomeric  railroad pads and a
railroad tie repair  system.  The Company is developing  additional  potentially
patentable products including rubber compounds, grinding mill parts, screens and
cyclone products,  pipe coupling products and parts for the automobile industry.
The Company also has several proprietary rubber and urethane compounds.

Since many of the Company's  developments are extensions of existing  knowledge,
and given the cost of obtaining  patent  protection,  no assurance  can be given
that  patents  for either the  products or  processes  being  developed  will be
issued,  that the scope of any patent  protection  will exclude  competitors  or
provide competitive advantages to the Company, that any of the Company's patents
will be held valid if  subsequently  challenged  or that  others  will not claim
rights in or ownership to the patents and other  proprietary  rights held by the
Company.  Further,  there can be no assurance  competitors have not developed or
will not develop  similar  products,  duplicate  the  Company's  products or, if
patents are issued to the  Company,  design  around such  patents.  In addition,
whether or not  patents are issued,  others may hold or receive  patents,  which
contain claims having a scope that covers products developed by the Company.

Industrial  Rubber's  proprietary  rubber formula is not  patentable.  While the
Company  obtains  confidentiality  agreements  from  its  suppliers  and its key
employees,   competitors  could  independently  develop  the  formula.  Further,
litigation to protect either patents or trade secrets, to enforce patents issued
to the Company,  to protect trade secrets or know-how owned by the Company,  and
to defend the Company against claimed infringement may be necessary.

The Minnesota  production  employees at the Industrial Rubber Products plant are
covered by a collective  bargaining  agreement  with the United Steel Workers of
America,  Local  #6860-1,  which  terminates  on April 15, 2004.  The  Minnesota
production  employees  at  the  Irathane  plant  are  covered  by  a  collective
bargaining  agreement with Midwestern  Industrial  Council,  which terminates on
June 30, 2002. The Sudbury,  Ontario production  employees at the Irathane plant
are  covered  by  a  collective  bargaining  agreement  with  the  International
Brotherhood of Painters and Allied Trades,  Local 1904,  which terminates on May
31, 2001. There is no union affiliation at the TJ Products facility.



RESEARCH AND DEVELOPMENT

The  Company  has not  incurred  significant  research  and  development  costs,
although it has incurred  certain of such costs on a job-by-job  basis which are
expensed as incurred.

The Company has a research facility in Colorado  Springs,  which was established
following  the sale of the Colorado  facility.  This  facility,  which  performs
research and  development  functions for all  Industrial  Rubber  divisions,  is
staffed by a lead  scientist  (chemist) who has over twenty years  experience in
the elastomeric research industry.



GOVERNMENTAL REGULATION

While  Industrial  Rubber's  products are not subject to, and do not require any
governmental  approvals before sale, the Company is subject to a wide variety of
governmental  regulations.  As a  manufacturing  company,  Industrial  Rubber is
subject to safety  regulations  established  by the United States  Department of
Labor and the Minnesota  Department of Labor and Industry under the Occupational
Safety and Health Act  ("OSHA").  Because  its  products  are sold to the mining
industry,  workplace  safety at the Company is also subject to regulation by the
Mine Safety and Health Administration.  The Company's operations are continually
being monitored and inspected.  During February 1998, the Company  received OSHA
reports addressing a number of deficiencies found by inspectors in the Company's
production  facilities,   and  assessing  fines  against  the  Company  totaling
approximately $6,000. In 1998 all deficiencies were addressed, none of which had
a material effect on the Company's  operations.  The Company  participates  with
OSHA in a program to limit or correct deficiencies before fines are assessed.



ENVIRONMENTAL REGULATION

The Company uses hazardous solvents in its production  processes and disposes of
waste products such as used solvents.  These and other activities of the Company
are subject to various federal,  state and local laws and regulations  governing
the generation,  handling,  storage,  transportation,  treatment and disposal of
hazardous  wastes.  Under  such laws,  an owner or lessee of real  estate may be
liable  for,  among other  things,  (i) the costs of removal or  remediation  of
certain  hazardous or toxic  substances  located on, in or emanating  from, such
property,  as well as related  costs of  investigation  and property  damage and
substantial  penalties  for  violations  of such  laws,  and (ii)  environmental
contamination at facilities  where its waste is or has been disposed.  Such laws
often impose such liability  without regard to whether the owner or lessee knows
of, or was responsible for, the presence of such hazardous or toxic substances.

While the Company's  operations,  to its best knowledge,  are in full compliance
with  all  existing  laws  and   regulations,   environmental   legislation  and
regulations  have changed rapidly in recent years and the Company cannot predict
what,  if any,  impact  future  changes  in  such  legislation  may  have on the
Company's business. Further, environmental legislation has been enacted, and may
in the future be enacted,  that  creates  liability  for past  actions that were
lawful  at the  time  taken.  As in the case  with  manufacturing  companies  in
general,  if damage to persons or the environment has been caused,  or is in the
future  caused,  by the  Company's  use of  hazardous  solvents or by  hazardous
substances located at the Company's facilities, the Company may be fined or held
liable for the cost of remediating such damage.

Imposition of such fines or the incurrence of such liability may have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  Further,  changes in  environmental  regulations  in the future may
require the Company to make significant  capital  expenditures to change methods
of disposal of hazardous solvents or otherwise alter aspects of its operations.



EMPLOYEES

As of February 15, 2001,  Industrial Rubber had 127 employees,  all of whom were
fulltime;  84 were  production  workers (54 union);  the other 43 were in sales,
engineering,   accounting,   administrative   and   clerical,   and   production
supervision.

The Company  believes  that its  relations  with its  employees  are  excellent,
demonstrated   by  a  low  turnover   rate.   The  Company   believes  that  the
representation  of employees by unions acts to remove a potential barrier to the
sale of certain of the  Company's  products  to the  taconite  mining  plants by
responding to union contract language that limits outsourcing of work.



Item 2: Properties

The Company currently has four manufacturing facilities.  Two of these are owned
and two are  leased.  Two  are in  Hibbing,  Minnesota  (Industrial  Rubber  and
Irathane);  and one  each is in West  Jordan,  Utah  and  Sudbury,  Ontario.  On
December 31, 1999, the Company closed a  manufacturing  facility in Casa Grande,
Arizona  that it was  leasing,  and on March  31,  2000,  the  Company  sold the
Colorado Springs plant and moved the equipment to the Hibbing plant.

The Hibbing,  Minnesota  (Industrial  Rubber)  facility is a 30,000  square foot
manufacturing  facility and office facility that the Company owns,  subject to a
mortgage with a balance of $282,334.09 as of December 31, 2000. This facility is
used to produce  proprietary  rubber and rubber lined  products that are used in
the  taconite  industry  and also shipped  throughout  North  America for use in
copper, gold, molybdenum and other mineral processing operations.  This facility
also houses the Company's corporate headquarters.

The Hibbing, Minnesota (Irathane) facility is a 42,000 square foot manufacturing
and office  facility that the Company  leases.  This facility is used to produce
urethane cast products used in the taconite industry in Minnesota, other mineral
processing  operations  throughout  the world,  and  screens  for the  aggregate
industry.  All manufacturing  equipment previously located in the Colorado plant
was moved to the Hibbing  facility during the first and second quarters of 2000.
This facility also houses sales and technical support staffs.

The West Jordan,  Utah facility is a 25,000 square foot  manufacturing  facility
that is leased from the  previous  owner of TJ Products.  The facility  produces
urethane cast products, rubber molded products and rubber lined products for the
mineral  processing,  military and aerospace,  paper and power industries in the
Inter-mountain  West. The Company has options to purchase all or portions of the
land and buildings during the term of the lease.  The production  equipment from
the Arizona facility was moved to and was stored at this facility early in 2000.

The Sudbury,  Ontario  facility is a 15,000 square foot  manufacturing  facility
used to produce urethane cast products and rubber lined products for the mineral
processing industry in Canada. The Company owns the facility.

The Company also owns a 16,000  square foot  facility in Hibbing,  MN,  that is
currently being used as a storage facility.

The Company  believes that all facilities are in  satisfactory  condition  given
their age and use, and expects only normal maintenance in the near future.



Item 3: Legal Proceedings

The Company has not been involved in any legal proceedings since the date of the
initial  public  offering  and there are no known  pending or  threatened  legal
proceedings at this time.



Item 4: Submission of Matters to a Vote of Security Holders

No matters have been submitted to a vote of the security  holders of the Company
since  the date of its  previous  annual  meeting,  May 23,  2000,  through  the
solicitation of proxies or otherwise.





Part II



Item 5: Market for Registrant's Common Equity and Related Stockholder Matters

The Company's Common Stock trades on the Nasdaq SmallCap Market under the symbol
INRB.  The  following  table sets forth the high and low bid  quotation  for the
quarters shown.  The prices quoted  represent prices between trades in the stock
without adjustments for markups, markdowns or commissions and do not necessarily
reflect actual  transactions.  The Company's  initial  public  offering date was
April 24, 1998.


<TABLE>
2000
<CAPTION>
Quarter                 High               Low

<S>                    <C>                <C>
1st                    3 15/16            17/32

2nd                     2 1/2              1/2

3rd                       2               9/16

4th                       2               3/32


<CAPTION>
1999

Quarter                 High               Low
<S>                    <C>                <C>
1st                     2 1/8             11/16

2nd                     2 1/8             1 1/8

3rd                    1 15/16            15/16

4th                     1 3/8              1/4

</TABLE>

The approximate number of shareholders of record and beneficial  shareholders of
the Company's  $.001 par value common stock as of December 31, 1999 and December
31, 2000, was 1,000.

The  Company  has not paid any  dividends  on its Common  Stock,  and intends to
follow a policy of retaining all of its earnings to finance its business and any
future acquisitions.  The terms of the Company's covenants with its bank further
limits its ability to pay dividends.



Item 6: Management's Discussion and Analysis of  Financial Condition and Results
        of Operations

This commentary should be read in conjunction with the Financial  Statements and
Notes, presented immediately following the signature page of this 10-KSB Report,
for a full  understanding of Industrial  Rubber's financial position and results
of operations.



FISCAL 2000 COMPARED WITH 1999

Net sales in the year ended December 31, 2000, of $18,492,547  increased  42.4%,
or  $5,507,246  when compared  with 1999 sales of  $12,985,301.  The increase is
attributable to the full year effect of the 1999 acquisition of Irathane Systems
on March 31st, which accounted for  approximately  $2.5 million of the increase.
The Nordberg  distributorship,  which started in October of 1999,  accounted for
about  $2.7  million of the  increase.  Sales  levels of the other  subsidiaries
reflected no major changes.

The Company's order backlog on December 31, 2000, was approximately $2,200,000.

Cost of sales as a percentage of net sales was 77.2% in 2000 compared with 81.4%
in 1999.  The decrease was the result of  reductions  in variable  manufacturing
expenses at nearly all subsidiaries and included Nordberg  distributorship  cost
of sales of 87.8%, which did not impact the 1999 results. The 2000 cost of sales
as a percentage of net sales was 75.9% without Nordberg.

Selling,  general and administrative  expenses decreased from $3,984,698 in 1999
to  $3,610,906  in 2000.  The decrease is the result of  restructuring  and cost
consolidation  efforts,  primarily  at TJ Products  and  Irathane  Systems,  and
reduced legal and audit expenses,  which related to the 1999  acquisitions.  The
2000 expenses of $3,610,906 included  approximately $367,000 of expenses related
specifically  to the closure and move of the Colorado  Irathane  facility.  As a
percentage of sales, selling, general and administrative expenses decreased from
30.7% in 1999 to 19.5% in 2000, 17.6% excluding the Colorado expenses.

In 1999 the  Company  recorded  a $505,991  provision  for  restructuring  costs
associated with the closing of the Arizona and the Colorado facilities.

Net non-operating  expenses for 2000 of $475,747 compared with $429,988 in 1999.
Included in the 2000  expenses  were  $730,517 of interest  expense,  all except
$71,743  of which was on bank  debt.  The  $71,743  represents  interest  on the
capital lease of the Hibbing Irathane facility.  During 2000, the Company signed
a seven year  extension to the original  three year lease.  This  extension  was
signed after the Company  moved the Colorado  equipment to the Hibbing  facility
and  invested  nearly  $400,000  in  leasehold  improvements.  Interest  expense
increased in 2000  compared with 1999  primarily  because the bank debt began on
March 31,  1999.  Partially  offsetting  the  increased  interest  expense was a
$248,207 gain from the sale of assets. Most of this, $202,000, resulted from the
sale of the Colorado real estate.

The Company  recorded an income tax provision of $52,731 in 2000.  This compares
with an $889,000 tax credit in 1999. Additional  information is provided in Note
10,  Income Tax Matters,  of the Financial  Statements,  presented in Item 13 of
this 10-KSB Report.

The 2000 net income of $84,465, or $.02 per basic and diluted share,  represents
a  significant  improvement  from the 1999 net loss of  $1,618,635,  or $.39 per
basic and diluted share.  This change was due to the increased sales and reduced
expenses previously discussed.



FISCAL 1999 COMPARED WITH 1998

Net sales in the year ended December 31, 1999, of $12,985,301  increased  30.1%,
or  $3,004,033,  when  compared with 1998 sales of  $9,981,268.  The increase is
attributable  to the  acquisition  of TJ Products,  on January 20, 1999, and the
acquisition  of  Irathane  Systems  on  March  31,  1999.  Together,  these  two
acquisitions  accounted for sales of $9,404,836 in 1999.  These  increases  were
partially offset by a decrease in major pipelining  projects,  which the Company
had none of in 1999.

The Company's order backlog on December 31, 1999, was approximately $2,976,000.

Cost of sales as a percentage of net sales was 81.4% in 1999 compared with 78.0%
in 1998. The increase was the result of the change from new acquisitions.

Selling,  general and administrative  expenses increased from $2,342,553 in 1998
to $3,984,698  in 1999.  The increase is the result of the  associated  selling,
general and administrative  expenses of the 1999 acquisition companies,  and the
legal and audit costs required to complete the acquisitions.

The Company  experienced a $505,991 pre-tax  provision for  restructuring  costs
associated with the closing of the Arizona facility (approximately $408,000) and
the closing and transfer of the Colorado facility to Hibbing,  Minnesota.  These
closures  and  consolidations  are expected to result in cost  savings,  with no
impact on sales.

Net non-operating expense for 1999 was $429,988, compared with net non-operating
income of $107,466 in 1998.  Interest income in 1999 was $41,736,  compared with
$245,713 in 1998,  which  reflected the investment of IPO proceeds from April of
1998 to early  1999.  Interest  expense  increased  from  $138,247  in 1998,  to
$461,475 in 1999.  The increase was the result of the $7 million bank  borrowing
on March 31, 1999, to finance the Irathane acquisition.

As discussed  elsewhere in this Form  10-KSB,  the Company was an S  Corporation
until March  31,1998,  and as such,  was  generally not  responsible  for income
taxes.  Instead,  the then sole  stockholder was taxed on the Company's  taxable
income.  If the Company had paid income taxes as a C Corporation,  its estimated
income  taxes  during  1998 would have been a credit of  $80,000.  In 1999,  the
Company had an income tax credit of $889,000. Additional information is provided
in Note 10, Income Tax Matters, of the Financial  Statements,  presented in Item
13 of this 10-KSB Report.

The 1999 net loss of $1,618,635, or $.39 per basic and diluted share, represents
a decrease from the 1998  pro-forma net loss of $168,454,  or $.04 per basic and
diluted share of the prior year.  This change was due to the increased  expenses
and other provisions previously discussed.



LIQUIDITY AND CAPITAL RESOURCES

The Company's  cash flows used by operating  activities  were $518,460 for 2000,
which  compares with $166,989  provided by operating  activities in 1999.  There
were several significant  differences between the two periods.  During 1999, the
Company had a net loss  $1,618,635 and a deferred tax credit of $980,000.  These
uses of cash were offset by non-cash  adjustments  of  $1,248,564  and favorable
working capital changes of $1,517,060. In 2000, the Company had a net profit and
tax provision which provided $124,465.  Non-cash  adjustments provided $687,026,
while unfavorable working capital changes used $1,329,951.

Cash flows provided by investing  activities were  $1,201,245 in 2000,  compared
with $8,564,648 used for investing  activities in 1999. The major source of cash
in 2000 was  $1,764,186  from the sale of assets  (primarily  the Colorado  real
estate),  while  $529,361  was used for the  purchase of assets  (primarily  the
leasehold  improvements to the Hibbing Irathane facility).  In 1999,  $9,716,015
was used for business acquisitions,  and was partially offset by $1,642,784 from
the sale of marketable securities.

The Company's  cash flows used for financing  activities  were $875,422 in 2000,
compared with $6,233,752  provided by financing  activities in 1999. During 2000
the Company repaid bank loans of $815,004,  while in 1999, the Company  borrowed
$6,500,000.

In total,  the Company had a decrease in cash of  $175,494,  resulting in a cash
balance of $388,351 as of December 31, 2000.  This  compares  with a decrease of
$2,152,121 in 1999.

The Company has recently  signed a fifth amendment to the US Bank revolving line
of credit and term loan,  which now  extends  until  June 30,  2001.  A $125,000
repayment was made on the term loan at the time of the  extension.  In addition,
the Company has agreed to repay an  additional  $200,000 on the term loan during
the  second  quarter  of  2001.  The  Company   continues  to  pursue  financing
alternatives  other than US Bank, which informed the Company in November of 2000
of their  desire  to exit the  relationship.  The  major  issue  encountered  in
obtaining new financing has been the currently available collateral rates on the
Company's  manufacturing  equipment.  On  December  19,  2000,  the  Iron  Range
Resources and Rehabilitation  Board approved a $1.0 million loan,  contingent on
the  completion of a new financing  package.  The Company is confident that with
this loan and the successful completion of other financing initiatives currently
being pursued, a new financing package will be completed during 2001.

The Company also  believes that it can fund proposed  capital  expenditures  and
operational  requirements from operations,  currently available cash and renewed
lines of credit.  Proposed capital expenditures for the year ending December 31,
2001,  are  estimated at $250,000 and compare with $529,361 in 2000 and $434,714
in 1999.

The Company intends to grow its business through internal product expansion, new
market development and through strategic alliances.



Item 7. Financial Statements

The Company's  financial  statements  are filed as a part of this report on Form
10-KSB immediately following the signature page.



     Item 8. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure

The  Company  has not,  during the past two years and  through  the date of this
report,  had a change in its independent  certified public  accountants or had a
disagreement  with such  accountants  on any  matter of  accounting  principles,
practices or financial statement disclosure.





Part III



     Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
Compliance with Section 16 (a) of the Exchange Act

The response to this item  incorporates by reference the  information  under the
caption  "Election of Directors" of Industrial  Rubber's Proxy Statement for the
annual meeting of the stockholders held in 2001.



Item 10. Executive Compensation

The response to this item  incorporates by reference the  information  under the
caption "Executive  Compensation" of Industrial Rubber's Proxy Statement for the
annual meeting of the stockholders held in 2001.



Item 11. Security Ownership of Certain Beneficial Owners and Management

The response to this item  incorporates by reference the  information  under the
caption "voting Securities and Principal  Holders" of Industrial  Rubber's Proxy
Statement for the annual meeting of the stockholders held in 2001.



Item 12. Certain Relationships and Related Transactions

The response to this item  incorporates by reference the  information  under the
caption "Certain  Transactions"  of Industrial  Rubber's Proxy Statement for the
annual meeting of the stockholders held in 2001.



Item 13. Exhibits and Reports on Form 8-K.

Exhibits  designated  by the symbol * are filed with this Annual  Report on Form
10-KSB.  All exhibits not so designated are incorporated by reference to a prior
filing as indicated.

(a) Required Exhibits

     Industrial Rubber Products,  Inc.  undertakes to furnish to any shareholder
so  requesting  a copy of any of the  following  exhibits  upon  payment  to the
Company of the  reasonable  costs incurred by the Company in furnishing any such
exhibit.

Exhibits Number

3(a)(1) Restated  Articles of  Incorporation  of Company dated as of January 30,
        1998 (Filed as Exhibit 3.1 to Form SB-2 dated  February 20,  1998,  File
        No. 333-46643.

3(a)(2) Restated Bylaws of Company as of January 30, 1998  (Filed as Exhibit 3.1
        to Form SB-2 dated February 20, 1998 File No. 333-46643).

10(1)   Employment Agreement between the Company and Daniel O. Burkes dated
        January 30, 2000. (Filed as Exhibit 10(1) to Form 10-KSB dated April 3,
        2000, File No. 000-24039).

10(2)   Management Contract between the Company and Nelson Roofing, Inc., dated
        January 30, 1999 (Filed as Exhibit 10.2 to Form SB-2 dated February 20,
        1998 File No. 333-46643)which contract has been extended to December 31,
        2000.

10(3)*  Labor Agreement  between the Company and United  Steelworkers of America
        dated June 26, 2000.

10(4)   Labor Agreement between Irathane Systems and Midwestern Industrial
        Council dated June 30, 1999. (Filed as Exhibit 10(4) to Form 10-KSB
        dated April 3, 2000, File No. 000-24039).

10(5)   Labor Agreement between Industrial Rubber Products-Canada Inc. and
        International Brotherhood of Painters and Allied Trades Local 1904 dated
        April 1, 1999. (Filed as Exhibit 10(5) to Form 10-KSB dated April 3,
        2000, File No. 000-24039).

10(6)   Stock Option Plan, Including Specimen Stock Option Agreement as of
        January 30, 1999 (Filed as Exhibit 10.5 to Form SB-2 dated February 20,
        1998 File No. 333-46643).

10(7)   Stock Bonus Plan adopted on October 12, 1999. (Filed as Exhibit 10(7) to
        Form 10-KSB dated April 3, 2000, File No. 000-24039).

10(8)   Credit Agreement between Company and U.S. Bank National Association
        dated March 31, 1999 (Filed as Exhibit 10.11 to Form 8-K dated April 12,
        1999 File No. 000-24039).

10(9)   First Amendment to Credit Agreement between Company and US Bank National
        Association dated September 30, 1999. (Filed as Exhibit 10(9) to Form
        10-KSB dated April 3, 2000, File No. 000-24039).

10(10)* Second Amendment to Credit  Agreement  between Company and US Bank dated
        March 31, 2000.

10(11)* Third  Amendment to Credit  Agreement  between Company and US Bank dated
        June 9, 2000.

10(12)* Fourth Amendment to Credit  Agreement  between Company and US Bank dated
        December 31, 2000.

10(13)  Lease Agreement between DGW Enterprises, L.C. and Industrial Rubber
        Products - Utah, Inc. dated January 20, 1999 (Filed as Exhibit 10(7) to
        Form 10-KSB dated March 29, 1999, File No. 000-24039).

10(14)  First Amendment to Lease Agreement between DGW Enterprises, L.C. and
        Company dated October 5, 1999. (Filed as Exhibit 10(11) to Form 10-KSB
        dated April 3, 2000, File No. 000-24039).

10(15)  Lease Agreement between Daniel O. Burkes and Irathane Systems, Inc.
        dated January 1, 2000. (Filed as Exhibit 10(12) to Form 10-KSB dated
        April 3, 2000, File No. 000-24039).

10(16)* Lease Agreement between Daniel O. Burkes and Irathane Systems, Inc.
        dated June 30, 2000.

10(17)  Purchase Agreement between Industrial Rubber Products - Utah, Inc. and
        Company and Sonwil Products, Inc., dba T.J. Products and Dean G. Wilson
        dated January 20, 1999 (Filed as Exhibit 2.1 to Form 8-K dated February
        4, 1999, File No. 000-24039).

10(18)  Purchase Agreement between Illinois Tool Works Inc. and Industrial
        Rubber Products, Inc. dated March 25, 1999 (Filed as Exhibit 10.8 to
        Form 10-KSB dated March 29, 1999, File No. 000-24039).

10(19)  Secrecy and Supply Agreement between Illinois Tool Works, Inc. and
        Company dated March 31, 1999 (Filed as Exhibit 10.9 to Form 8-K dated
        April 12, 1999 File No. 000-24039).

10(20)  Non-Competition Agreement between Illinois Tool Works, Inc. and Company
        dated March 31, 1999 (Filed as Exhibit 10.10 to Form 8-K dated April 12,
        1999, File No. 000-24039).



21. List of Subsidiaries

Industrial Rubber Products-Utah, Inc., a Utah corporation which does business as
"TJ Products".

Irathane Systems Inc., a Minnesota Corporation.

Industrial Rubber Products-Canada, Inc., an Ontario Canada corporation which
does business as "Irathane/Elliott Systems".

Industrial Rubber Products, Arizona, Inc., an Arizona Corporation.

Industrial Rubber Applicators, Inc., a Minnesota Corporation.

Industrial Rubber Products-Montana, Inc., a Montana Corporation.
Currently inactive.

27. Financial Data Schedule
<TABLE>
<S>                             <C>
PERIOD-TYPE                   Year
FISCAL-YEAR-END                          DEC-31-2000
PERIOD-START                             JAN-01-2000
PERIOD-END                               DEC-31-2000
CASH                                         388,351
SECURITIES                                         0
RECEIVABLES                                3,045,729
ALLOWANCES                                   402,000
INVENTORY                                  1,725,134
CURRENT-ASSETS                             5,131,841
PP&E                                       8,907,168
DEPRECIATION                               2,592,220
TOTAL-ASSETS                              13,602,592
CURRENT-LIABILITIES                        7,624,897
BONDS                                        842,854
PREFERRED-MANDATORY                                0
PREFERRED                                          0
COMMON                                         4,187
OTHER-SE                                   5,130,654
TOTAL-LIABILITY-AND-EQUITY                13,602,592
SALES                                     18,492,547
TOTAL-REVENUES                            18,492,547
CGS                                       14,268,698
TOTAL-COSTS                               17,879,604
OTHER-EXPENSES                                     0
LOSS-PROVISION                                20,000
INTEREST-EXPENSE                             730,517
INCOME-PRETAX                                137,196
INCOME-TAX                                    52,731
INCOME-CONTINUING                             84,465
DISCONTINUED                                       0
EXTRAORDINARY                                      0
CHANGES                                            0
NET-INCOME                                    84,465
EPS-BASIC                                        .02
EPS-DILUTED                                      .02
 </TABLE>

<PAGE>
(b)  Reports on Form 8K
     None




SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities  Exchange
Act of 1934,  this  registrant has caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



Industrial Rubber Products, Inc.

Dated: March 12, 2001         /s/ John M. Kokotovich
                              Chief Financial Officer

Pursuant  to the  requirement  of the  Securities  Exchange  Act of  1934,  this
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


SIGNATURE                          TITLE                          DATE
                                   President
/s/ Daniel O. Burkes               Chief Executive Officer
Daniel O. Burkes                   and Director                   March 12, 2001

                                   Vice President
/s/ Christopher M. Liesmaki        Chief Operating Officer
Christopher M. Liesmaki            and Director                   March 12, 2001

/s/ Paul A. Friesen
Paul A. Friesen                    Director                       March 12, 2001


/s/ James D. Mackay
James D. Mackay                    Director                       March 12, 2001

/s/ John R. Ryan, Jr.
John R. Ryan, Jr.                  Director                       March 12, 2001






Industrial Rubber Products, Inc. and Subsidiaries

CONSOLIDATED FINANCIAL REPORT
December 31, 2000



INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Industrial Rubber Products, Inc.
Hibbing, Minnesota



We have  audited the  accompanying  consolidated  balance  sheets of  Industrial
Rubber Products, Inc. and Subsidiaries as of December 31, 1999 and 2000, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Industrial Rubber
Products,  Inc.  and  Subsidiaries  as of December  31,  1999 and 2000,  and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.



McGLADREY & PULLEN, LLP



Duluth, Minnesota
February 16, 2001, except for the last paragraph of Note 5, as to which the date
is March 7, 2001.






<TABLE>
<CAPTION>
               Industrial Rubber Products, Inc. and Subsidiaries

                          CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 2000

<S>                                                      <C>                 <C>

ASSETS (Note 6)                                              1999                2000

Current Assets
     Cash and cash equivalents                           $   563,845        $    388,351
     Trade receivables, less allowance for doubtful
      accounts 1999 $382,000; 2000 $402,000                2,159,582           2,643,729
     Inventories (Note 4)                                  1,628,459           1,725,134
     Prepaid expenses                                        115,531              85,627
   Deferred taxes (Note 9)                                   337,000             289,000

                               TOTAL CURRENT ASSETS        4,804,417           5,131,841

Other Assets

     Cash value of life insurance                            180,524             214,104
     Goodwill, at cost, less accumulated
      amortization 1999 $68,431;
      2000 $140,561 (Note 2)                               1,013,520             941,390
     Prepaid pension costs (Note 10)                          11,206              13,309

                                                           1,205,250           1,168,803

Deferred Taxes (Note 9)                                      979,000             987,000

Property and Equipment (Note 6)
     Land                                                    533,847             509,186
     Buildings and leashold improvements                   2,057,287           1,610,551
     Automotive Equipment                                    621,296             529,560
     Machinery and equipment                               6,147,583           6,257,871

                                                           9,360,013          8,907,168

 Less accumulated depreciation                             1,884,460          2,592,220

                                                           7,475,553          6,314,948

                                                        $14,464,220        $13,602,592
</TABLE>

See Notes to Consolidated Financial Statements.



<TABLE>
<CAPTION>
Industrial Rubber Products, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 2000


LIABILITIES AND STOCKHOLDERS' EQUITY                           1999                 2000

Current Liabilities
<S>                                                       <C>                <C>
Bank note payable (Note 5)                                $ 6,500,000        $ 5,684,996
     Current maturities of long-term debt (Note 6)             24,804             62,734
     Accounts payable                                       1,344,478          1,115,985
     Accrued expenses                                       1,212,576            760,182
     Income taxes payable                                      91,000              1,000

Total current liabilities                                   9,172,858          7,624,897


Long-Term Debt, less current maturities (Note 6)              291,202            842,854

Commitments and Contingencies (Notes 5, 12 and 13)

Stockholders' Equity (Note 7)

     Common stock, $.001 par value; authorized
        25,000,000 shares; issued 1999 -
4,144,000 shares; 2000 - 4,187,205 shares                       4,144              4,187
     Additional paid-in capital                             5,605,832          5,638,862
     Retained earnings (deficit)                             (617,602)          (533,137)
     Accumulated other comprehensive income                     7,786             24,929

         Total equity                                       5,000,160          5,134,841

         Total liabilities and equity                    $14,464,220        $ 13,602,592

</TABLE>


<TABLE>
<CAPTION>

Industrial Rubber Products, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 2000

                                                              1999             2000
<S>                                                      <C>                <C>

Net Sales (Notes 3)                                      $12,985,301        $18,492,547
Cost of Sales                                             10,572,259         14,268,698
        Gross profit                                       2,413,042          4,223,849


Operating Expenses                                         3,984,698          3,610,906
Provision for Restructuring of Operations (Note 12)          505,991                  0
        Operating loss                                    (2,077,647)           612,943

Nonoperating Income (Expense)
     Interest and other income                                41,736              6,563
     Interest expense                                       (461,475)          (730,517)
  Gain (loss) on sale of equipment                           (10,249)           248,207
                                                            (429,988)          (475,747)

        Income (loss) before income taxes                 (2,507,635)            137,196


Federal and State Income Taxes (Credits) (Note 9)            (889,000)            52,731
         Net income (loss)                               $ (1,618,635)      $     84,465

Net income (loss) per share
     Basic                                               $      (0.39)      $       0.02
     Diluted                                             $      (0.39)      $       0.02

Weighted average shares outstanding
     Basic                                                  4,167,351          4,181,539
     Diluted                                                4,167,351          4,478,790

</TABLE>
See Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>

Industrial Rubber Products, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years Ended December 31, 1999 and 2000

                                                           Accumulated
                                Additional                  Retained        Other            Total          Total
                             Common Stock Paid-inEarnings Comprehensive Stockholders'    Comprehensive
                             SharesAmountCapital (Deficit)    Loss         Equity        Income (Loss)
<S>                        <C>        <C>       <C>          <C>            <C>        <C>

Balance,

December 31, 1998          4,187,500  $4,188    $5,605,832   $1,079,872     $   -      $   6,689,892

  Purchase of 43,500
  Shares of stock           (43,500)    (44)        -          (78,839)         -           (78,883)

  Foreign currency
  translation adjustment,
  net of tax of $4,000         -          -         -             -            7,786          7,786       $   7,786

Net loss                       -          -         -         (1,618,635)       -          (1,618,635)    (1,618,635)

Total comprehensive
loss                                                                                                    $ (1,610,849)

Balance,

December 31, 1999          4,144,000$  4,144   $ 5,605,832    $ (617,602)  $   7,786     $   5,000,160

  Issuance of common
stock                         43,205      43        33,030        -             -             33,073

Foreign currency
translation adjustment             -       -             -        -           17,143          17,143       $ 17,143

Net Income                         -       -             -       84,465         -             84,465         84,465

Total comprehensive loss                                                                                  $ 101,608

Balance,
December 31, 2000          4,187,205  $ 4,187   $ 5,638,862   $ (533,137)    $ 24,929      $ 5,134,841
</TABLE>
See Notes to Consolidated Financial Statements.


<TABLE>
<CAPTION>

Industrial Rubber Products, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 1999 and 2000

                                                                    1999           2000
<S>                                                         <C>                    <C>

Cash Flows from Operating Activities
    Net income (loss)                                       $ (1,618,635)          $ 84,465
    Adjustments to reconcile net income (loss)
    to net cash provided by (used in) operating activities:
    Depreciation                                                 800,744             823,987
    Amortization                                                   98,431             72,130
    Provision for bad debts                                        98,653             39,116

(Gain) loss on disposal of property and equipment                 250,736          (248,207)

Deferred taxes                                                  (980,000)             40,000
    Changes in working capital components, net
    of effects of business combinations:
    (Increase) decrease in trade receivables                      207,399          (523,263)
    Decrease in income tax refund receivable                      254,200                  -
    (Increase) decrease in inventories                            179,901           (96,675)
    (Increase) in prepaid expenses                               (39,515)             27,801
    Increase (decrease) in accounts payable
    and accrued expenses                                          824,075          (647,814)
    Increase (decrease) in income taxes payable                    91,000           (90,000)

     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES          166,989          (518,460)


Cash Flows from Investing Activities
    Purchase of property and equipment                          (434,714)          (529,361)
    Proceeds from sale of equipment                                18,655          1,764,186
    Disbursements for business combinations                   (9,716,015)                  -

Proceeds from maturity of marketable debt securities            1,642,784                  -
    Disbursements for other assets                               (30,000)                  -
    Increase in cash value of life insurance                     (45,358)           (33,580)

     NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITES       (8,564,648)        (1,201,245)

Cash Flows from Financing Activities
    Net proceeds (repayment) on short-term borrowings           6,500,000          (815,004)
    Principal payments on long-term borrowings                  (187,365)           (60,418)
    Disbursement for common stock reacquired                     (78,883)                  -

     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES        6,233,752          (875,422)

Effect of foreign currency exchange rate changes on
cash and cash equivalents                                          11,786             17,143

NET (DECREASE) IN CASH AND CASH EQUIVALENTS                   (2,152,121)          (175,494)

Cash and cash equivalents:
Beginning                                                       2,715,966            563,845
    Ending                                                      $ 563,845         $ 388,351

Supplemental Disclosures of Cash Flow Information
    Cash payments for interest                                  $ 413,111          $ 727,077
    Cash payments for income taxes (net of refunds)           $ (254,100)         $   99,903

Supplemental Schedule of Noncash Investing
and Financing Activities

    Capital lease obligation incurred for use of property                          $ 650,000
    Accrued bonus paid with common stock                                            $ 33,073

Acquistion of businesses, cash purchase price                 $ 9,716,015
Accounts receivable                                           $ 1,501,550
Inventory                                                       1,399,629
Other current assets                                               29,226
Property and equipment                                          6,387,391
Cost in excess of net assets of businesses acquired             1,081,951

    Current liabilities assumed                                 (683,732)

                                                              $ 9,716,015
</TABLE>

See Notes to Consolidated Financial Statements.


Industrial Rubber Products, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Nature of Business and Significant Accounting Policies

Nature of business: The Company's operations consist of applying and vulcanizing
rubber and applying urethane (for corrosion and abrasion resistant  purposes) to
pipes,  pumps and other wear material  surfaces.  The Company also produces cast
urethane parts and rubber molded parts. The Company's products are primarily for
the mineral  processing  industry,  but are also used in the  aggregate,  paper,
utility and military and aerospace industries. The Company extends credit to its
customers,  all  on an  unsecured  basis,  on  terms  that  it  establishes  for
individual customers.

A summary of the Company's significant accounting policies follows:

Basis of  consolidation:  The  consolidated  financial  statements  include  the
accounts  of the  Company  and  its  wholly  owned  subsidiaries.  All  material
intercompany accounts and transactions are eliminated in consolidation.

Cash and cash  equivalents:  For purposes of reporting  cash flows,  the Company
considers all highly liquid debt instruments  purchased with a maturity of three
months or less to be cash equivalents.  Cash equivalents consist of money market
funds.

The Company maintains its cash in accounts,  which, at times, may exceed insured
limits. The Company has not experienced any losses in such accounts.

Inventories:  Inventories  are  stated at  the lower  of cost or market. Cost is
determined by the first-in, first-out method.

Property and equipment:  Property and equipment is stated at cost.  Depreciation
is  computed  using  the  straight-line   method  for  buildings  and  leasehold
improvements and a combination of the accelerated and straight-line  methods for
equipment over the following estimated useful lives. The depreciation expense on
assets  acquired under capital leases is included with  depreciation  expense on
owned assets.


                                                                       Years

Buildings including building under capital lease                       10 - 39

Leasehold improvements                                             Term of lease

Automotive equipment                                                    3 - 5

Machinery and equipment                                                 5 - 10


Buildings  acquired  under  capital lease during 2000 had a cost of $650,000 and
accumulated depreciation of $65,000 at December 31, 2000.

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate that the carrying amount may not be recoverable.  If the
fair value is less than the carrying  amount of the asset,  a loss is recognized
for the difference.

Goodwill:  Goodwill is the excess of the  purchase  price over the fair value of
identifiable  net assets  acquired in business  combinations  accounted for as a
purchase.  Goodwill is  amortized  on a  straight-line  basis over the  expected
periods  benefited of 15 years.  The carrying  amount of goodwill is reviewed if
facts  and  circumstances  suggest  that  it may be  impaired.  If  this  review
indicates  that goodwill  will not be  recoverable,  as determined  based on the
estimated  undiscounted  cash flows of the entity  acquired  over the  remaining
amortization  period,  the  carrying  amount of the  goodwill  is reduced by the
estimated shortfall of cash flows.

Income  taxes:  Deferred  taxes are  provided on an asset and  liability  method
whereby deferred tax assets are recognized for deductible temporary  differences
and operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences between the reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation  allowance  when,  in the
opinion of  management,  it is more likely than not that some  portion or all of
the  deferred  tax  assets  will  not  be  realized.  Deferred  tax  assets  and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

Employee  health  benefits  self-insurance:  The  Company  is  self-insured  for
employee health benefits.  The Company has purchased  reinsurance to limit claim
exposure.  The estimated expense from uninsured claims,  including  incurred but
not reported claims, is accrued as losses occur.

Advertising  costs:  The Company  follows  the policy of  charging  the costs of
advertising  to expense as incurred.  For the years ended  December 31, 1999 and
2000, advertising expense totaled $98,152 and $81,630, respectively.

Shipping fees and costs: The Company  classifies amounts billed to customers for
shipping fees as revenue. Shipping costs are included in cost of sales.

Revenue  recognition:  The Company  recognizes revenue upon shipment of product.
Returns  and  allowances  are  recorded  in the  period  the  need  for  such is
identified.

Foreign currency translation:  For the Company's Canadian operation, the results
of operations and cash flows are translated at average exchange rates during the
year, and assets and liabilities are translated at end of year rates, except for
property and  equipment,  which is translated at historical  rates.  Translation
adjustments  are  included  as  a  separate   component  of  accumulated   other
comprehensive income in stockholders' equity.

Disclosures  about fair value of financial  instruments:  The carrying amount of
current  assets and  liabilities  approximates  fair value  because of the short
maturity  of  those   instruments.   The  carrying   amount  of  long-term  debt
approximates  fair value since the fair value of the long-term debt is estimated
based on  interest  rates for the same or similar  debt  offered to the  Company
having the same or similar remaining maturities and collateral requirements.

Recent  pronouncements:  In  December  1999,  the  staff  of  the Securities and
Exchange   Commission   issued  Staff  Accounting   Bulletin  No.  101,  Revenue
Recognition in Financial Statements.  SAB No. 101 summarizes some of the staff's
interpretations of the application of generally accepted  accounting  principles
to  revenue   recognition.   Management  believes  that  the  Company's  revenue
recognition policies are in compliance with SAB No. 101.

Use of estimates in the preparation of financial statements:  The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Earnings  per share:  The Company has granted  options to  employees to purchase
shares of common  stock at varying  amounts  per share and  issued  underwriters
warrants to purchase shares of common stock. Those options and warrants were not
included in the computation of diluted earnings per share for 1999 because their
effect was antidilutive.



NOTE 2. Business Combination

During 1999, the Company entered into two business combinations.  On January 20,
1999,  the  Company  acquired  for  cash  certain  assets  and  assumed  certain
liabilities  of Sonwil  Products,  Inc.  (d/b/a TJ  Products,  Inc.),  a company
engaged in the  business  of  producing  rubber  linings,  rubber  moldings  and
urethane moldings for the mineral  processing,  electric power,  paper, and U.S.
military and aerospace  industries to customers  located  primarily in the Rocky
Mountain area of the United States.  The total  acquisition cost was $2,330,000.
The excess of the total  acquisition  cost over the fair value of the net assets
acquired  of  $860,000  is being  amortized  over 15 years by the  straight-line
method.

On March 31,  1999,  the Company  acquired  certain  assets for cash and assumed
certain  liabilities of ITW Irathane Systems (a Division of Illinois Tool Works,
Inc.) which produces liquid urethanes, urethane moldings and rubber and urethane
linings  for  the  mineral  processing,  aggregate,  transportation,  and  power
industries to customers  located near its  manufacturing  facilities in Hibbing,
Minnesota,  Colorado Springs,  Colorado, and Sudbury, Ontario, Canada. The total
acquisition cost was $8,094,000.  The excess of the total  acquisition cost over
the fair value of the net assets acquired of $222,000 is being amortized over 15
years by the straight-line method.

The acquisitions have been accounted for as a purchase and results of operations
of since the dates of  acquisition  are included in the  consolidated  financial
statements.



NOTE 3. Revenue by Products and Services

The Company's revenue is attributed to a single  reportable  segment and results
from the sale of  products  or  services  which  consist  of  liquid  urethanes,
urethane  moldings and rubber and urethane  linings for the mineral  processing,
aggregate, transportation, and power industries.
The following  table presents net sales from external  customers for each of the
Company's  groups of products and services for the years ended December 31, 1999
and 2000:


<TABLE>
<CAPTION>
                                                                1999                2000
<S>                                                     <C>                  <C>

Urethane cast parts                                     $ 5,047,809          $ 7,621,923
Pipe and pipe lining products                                                                    3,342,395         1,621,948
Coatings                                                    363,429            1,192,133
Spray                                                       385,222              342,636
Proprietary engineered products                             891,671              649,551
Standard rubber products                                  2,097,454            3,390,326
Steel cast parts                                            315,741            2,055,496
New equipment                                                     -            1,077,100
Other                                                       541,580              541,434

                                                       $ 12,985,301         $ 18,492,547
</TABLE>

The  Company's  revenue  (based on location of the customer) for the years ended
December 31, 1999 and 2000 is as follows:
<TABLE>
<CAPTION>
                                                                1999                2000
<S>                                                      <C>                 <C>
United States                                            $11,816,264         $15,735,225
Canada                                                       311,895           1,668,989
Other countries                                              857,142           1,088,333

                                                         $12,985,301         $18,492,547
</TABLE>


Net sales for the years ended  December 31, 1999 and 2000 include sales to major
customers, each of which accounted for 10 percent of more of net sales:
<TABLE>
<CAPTION>
                                                               Amount of Net Sales
                                                            Year Ended December 31,
<S>                                                        <C>               <C>
Customer                                                     1999                2000

Customer A                                                    *              $ 2,070,953
Customer B                                                 1,395,948               *

</TABLE>

*The net sales to these customers was under 10 percent of net sales.

The Company's  long-lived assets as of December 31, 1999 and 2000 are located as
follows:
<TABLE>
<CAPTION>

                                                                1999                2000
<S>                                                      <C>                 <C>
United States                                            $ 6,864,372         $ 5,688,125
Canada                                                       611,181             626,823

                                                         $ 7,475,553         $ 6,314,948
</TABLE>

NOTE 4. Inventories

Inventories consist of the following as of December 31, 1999 and 2000:

<TABLE>
<CAPTION>

                                                                 1999               2000
<S>                                                       <C>                <C>
Raw materials                                             $ 1,208,378        $ 1,417,107
Work in process                                                40,591             17,090
Finished goods                                                654,388            457,781
                                                            1,903,357          1,891,978

Raw materials purchased on behalf of customers                 42,180             25,606
                                                            1,945,537          1,917,584
Less allowance for obsolescence                               317,078            192,450
                                                          $ 1,628,459        $ 1,725,134

</TABLE>

The Company  incurs costs on behalf of its  customers for the purchase of pipes,
pumps and  launders  and is  reimbursed  for these costs by the  customers.  The
Company  does not receive a commission  or  recognize  gross profit upon sale of
these  components;  therefore,  net sales and cost of sales in the statements of
operations do not include amounts for sales and purchases of components.

NOTE 5. Notes Payable and Liquidity

During 2000, the Company entered into a $2,000,000  revolving line of credit for
working  capital  financing and a $4,848,107 term loan with a bank which are due
on March 31, 2001.  Advances under the line of credit are subject to a borrowing
base of eligible trade receivables and inventories, as defined in the agreement.
Advances under the line of credit and the term loan are  collateralized by trade
receivables,  inventories,  equipment, general intangibles, assignment of a life
insurance  policy,  and are personally  guaranteed by the majority  stockholder.
Interest  on the  revolving  line of credit is  payable  monthly  at the  bank's
reference rate, plus 1 percent (10.5 percent at December 31, 2000).  Interest on
the term loan is payable monthly at the bank's  reference rate, plus 1.5 percent
(11  percent  at  December  31,  2000).  At  December  31,  2000,  $836,889  was
outstanding on the revolving  line of credit and  $4,848,107 was  outstanding on
the term loan.

Among other things, the agreement requires the Company to:

   a. Maintain a tangible net worth of at least $4,000,000.

   b. Maintain a current ratio of at least 1.5 to 1. (Excluding bank term loan)

   c. Maintain a leverage ratio of less than 2.0 to 1.

   d. Maintain all of its deposits with the bank.

   e. Refrain  from declaring or paying dividends or redeeming any of its common
      stock.

   f. Refrain from incurring additional interest-bearing indebtedness.

As of December 31, 2000,  the Company was in default of certain of the covenants
under the line of credit and term loan.  Under the terms of the  agreement,  the
Bank has the right to  declare  all  amounts  immediately  due and  payable  and
terminate  the  agreement.  The Company has  received a waiver from the Bank for
loan covenant violations through December 31, 2000, however,  remains in default
subsequent  to December 31, 2000.  The Company and the lender are in the process
of  negotiations.  On March 7, 2001, the Company  obtained a 90-day extension on
the line of credit and term loan through June 30,  2001.  Although  they are not
committed to do so, the Bank may extend the maturities of the line of credit and
term notes for  additional  periods.  It is the Company's  plan to work with the
lender to obtain  the  needed  extensions,  and to seek  alternative  sources of
financing.

NOTE 6. Long-Term Debt

A summary of long-term debt as of December 31, 1999 and 2000 is as follows:
<TABLE>
<CAPTION>

                                                                    1999           2000
<S>                                                            <C>             <C>

Capital lease obligation to Company president for use of
   building, payable in monthly installments of $9,090 to
   December 31, 2009, discounted at a rate of 11.3%            $       -       $ 613,843

Note payable bank, due in monthly installments of $1,576
   including interest at 8.5% to April 2003, at
   time the remaining balance is due.                            150,889         144,784

Note payable bank, in participation with the Iron Resources
   Rehabilitation    Board, due in installments of $1,144
   including interest at 3.5% to April 2003, at which
   time the remaining balance is due.                            146,214         137,550

Other notes payable due through November 2002.                    18,903           9,411

                                                                 316,006         905,588

Less current maturities                                           24,804          62,734

                                                               $ 291,202       $ 842,854
</TABLE>

The 8.5 percent and 3.5 percent notes payable to the bank are  collateralized by
real estate and  guaranteed  by the majority  stockholder.  Among other  things,
these notes require the Company to:

a. Maintain a current ratio of at least 1.2 to 1.

b. Maintain a ratio of total liabilities to tangible net worth of less than 3 to
   1.

c. Maintain a ratio of traditional cash flow  to current maturities of long-term
   debt of at least 1.5 to 1.

d. Refrain  from declaring or paying dividends in excess of 50% of after tax net
   income.

e. Limit capital expenditures to $500,000.

f. Obtain bank approval for the issuance of additional debt.

g. Refrain from  consolidating, combining or  merging with any other corporation
   or purchase or acquire the assets of another business.

The  Company  was in  violation  of  certain  covenants  of the above bank notes
payable and line of credit  agreement as of December 31,  2000;  however,  these
violations have been waived by the Bank.

Aggregate  maturities  required on long-term debt as of December 31, 2000 are as
follows:


Years ending December 31,

2001                                                                $    62,734
2002                                                                     67,859
2003                                                                    301,633
2004                                                                     58,425
2005                                                                     65,398
Thereafter                                                              349,539
                                                                    $   905,588

Gross lease  payments  under the building  lease are $109,080  each year through
December 31, 2009. Total lease payments remaining at December 31, 2000 amount to
$981,720, including imputed interest of $367,877.


NOTE 7. Stockholders' Equity

In connection with the initial public offering in April 1998, the Company issued
warrants to the  underwriters to purchase 126,000 shares of the Company's common
stock.  The warrants are exercisable at a price equal of $6.00 per share through
April 2003.



NOTE 8. Stock Option and Bonus Plans

At December 31, 2000, the Company has a stock-based  compensation  plan which is
described below. As permitted under generally  accepted  accounting  principles,
grants under the plan are accounted for following APB Opinion No. 25 and related
interpretations.  Accordingly,  no  compensation  cost has been  recognized  for
grants under the stock option plan.  Had  compensation  costs for the  Company's
stock options been determined based on the fair value method  prescribed in FASB
Statement No. 123, net earnings  (loss) and earnings (loss) per share would have
been reduced to the pro forma amounts shown below:


<TABLE>
<CAPTION>

                                                                 1999              2000
<S>                                                      <C>                 <C>
Net earnings (loss):

   As reported                                            $(1,618,635)       $   84,465
   Pro forma                                               (1,641,956)           71,956

Basic earnings (loss) per share:

   As reported                                            $     (0.39)       $     0.02
   Pro forma                                                    (0.39)             0.02

Diluted earnings (loss) per share:

   As reported                                            $     (0.39)       $     0.02
   Pro forma                                                    (0.39)             0.02

</TABLE>


Options  were not  included in the  computation  of diluted  earnings  per share
because the exercise price of those options exceeded the average market price of
the common shares during the year.  The pro forma effects of applying  Statement
No.  123  are  not  necessarily  representative  of the  effects  on  pro  forma
disclosures of future years.

The fair value of stock  options used to compute pro forma net loss and loss per
share  disclosures  is  the  estimated  fair  value  at  grant  date  using  the
Black-Scholes option-pricing model with the following assumptions:


<TABLE>
<CAPTION>

Weighted-average assumptions                                      1999             2000
<S>                                                             <C>              <C>

Dividend rate                                                        -                -
Price volatility                                                55.50%           68.25%
Risk-free interest rate                                          5.60%            5.32%
Expected lives of options                                            4                4
</TABLE>


Stock  option  plan:  On January 30,  1998,  the Company  adopted the 1998 Stock
Option  Plan which  provided  for the  granting of stock  options to  employees,
directors and officers of the Company.  The number of shares issued  pursuant to
the options granted shall not exceed 400,000 shares.  Options are exercisable at
$1.125,  $1.875 and $2.00 per share, which approximates fair market value at the
date of  grant  and  expire  five  years  after  date  of  grant.  Options  vest
immediately.  During 2000, the Company  canceled all the $4.50 stock options and
reissued new options at $2.00 per share.

A summary of the stock option plan is as follows:

<TABLE>
<CAPTION>


                                             1999                           2000
                                       Weighted-Average               Weighted-Average
                             Shares     Exercise Price     Shares      Exercise Price
<S>                          <C>          <C>               <C>            <C>

Under option,
beginning of year            169,200      $    4.50         170,950        $ 4.44
     Granted                  33,750          1.875         174,300          1.96
     Exercised                     -              -               -             -
     Forfeited              (32,000)           4.50        (167,600)         4.49

Under option,
end of year                  170,950                       177,650

Options exercisable,
end of year                   44,050                       177,650

Weighted-average fair
value per option of
options granted during
the year                        $.46                          $.51
</TABLE>

A further summary of options outstanding as of December 31, 2000 is as follows:
<TABLE>

                                            Options Outstanding and Exercisable
<CAPTION>
                                                         Weighted-
                                                          Average         Weighted-
Number                                                   Remaining         Average
                                 Outstanding            Contractual       Exercise
Exercise Price                 and Exercisable         Life (Years)         Price
<S>                               <C>                      <C>           <C>

$1.125                              7,500                  4.08          $   1.125
$1.875                              3,750                  3.80              1.875
$2.00                             166,400                  4.08              2.000
                                  177,650                                $   1.960
</TABLE>

Stock  bonus plan:  During  1999,  the Company  adopted a stock bonus plan which
provided for the granting of stock to  employees,  directors and officers of the
Company. The number of shares which may be issued pursuant to the plan shall not
exceed  50,000  shares.   The  Company  granted  43,205  shares  and  recognized
compensation expense of $41,944 for the year ended December 31, 1999.

NOTE 9. Income Tax Matters

The components of the income tax provision for the years ended December 31, 1999
and 2000 are as follows:
<TABLE>
<CAPTION>

Year Ended December 31,
                                                               1999               2000
<S>                                                       <C>               <C>
Current:
   Federal                                                $        -        $          -
   State                                                       1,000               1,000
   Foreign                                                     90,000             11,731
                                                               91,000             12,731
Deferred:
   Federal                                                   (839,000)           34,000
   State                                                     (141,000)            6,000
                                                             (980,000)           40,000

                                                          $ (889,000)       $ (52,731)
</TABLE>

The income tax  provision  differs from the amount of income tax  determined  by
applying the US federal income tax rate to pretax income due to the following:

<TABLE>
<CAPTION>
Year Ended December 31,                                         1999               2000
<S>                                                       <C>               <C>

Computed "expected" tax expense                           $ (878,000)       $    48,000
Increase (decrease) in income taxes
resulting from:
   State income taxes, net of federal
     tax benefit                                             (92,000)             5,000
   Benefit of income taxed at lower rates                     25,000              1,000
   Nondeductible expenses and other                           56,000             (1,269)
                                                          $ (889,000)       $    52,731
</TABLE>

Net deferred tax assets  consist of the following  components as of December 31,
1999 and 2000:

<TABLE>
<CAPTION>
                                                                1999             2000
<S>                                                       <C>              <C>
Property and equipment                                    $   (74,000)     $   (497,000)
Additional costs capitalized to inventory
for income tax purposes                                       28,000             25,000
Accrued expenses not currently deductible
for tax purposes                                             156,000             39,000
Allowance for doubtful accounts                              153,000            153,000
Net operating loss carryforwards                             963,000          1,449,000
Allowance for obsolete inventory                              90,000             72,000
Foreign tax credit carryforward                                    -             35,000

         Total deferred tax assets                         1,390,000          1,773,000
         Net deferred tax assets                         $1,316,000         $ 1,276,000
</TABLE>

The deferred tax amounts have been classified on the accompanying balance sheets
as follows:


<TABLE>
<CAPTION>
                                                              1999                 2000
<S>                                                      <C>                 <C>
Current deferred tax assets                              $   337,000         $  289.000
Noncurrent deferred tax assets                               979,000            987,000
Net deferred tax assets                                  $ 1,316,000         $1,276,000
</TABLE>

The Company has determined that is is more likely than not that the deferred tax
assets  will be  realized  and a  valuation  allowance  for such  assets  is not
required.

At December 31, 2000, the Company has federal net operating  loss  carryforwards
of approximately $3,802,000 and state operating loss carryforwards for Minnesota
and Utah of  approximately  $1,952,000  and  $895,000,  respectively,  which are
available to reduce future taxable income.  The net operating loss carryforwards
expire in 2013 through 2020 as follows:

<TABLE>
<CAPTION>
Expiration Date                                             Federal              State
<S>                                                      <C>                 <C>
December 31, 2013                                        $         -         $  579,658
December 31, 2014                                                  -          1,445,930
December 31, 2015                                                  -            821,313
December 31, 2018                                            590,639                  -
December 31, 2019                                          2,093,412                  -
December 31, 2020                                          1,118,227                  -

                                                         $3,802,278          $2,846,901
</TABLE>

NOTE 10. Retirement Plan

The  Company  has  a  Salary  Savings  Plan  and  Trust  (401(k))  which  covers
substantially all employees of the Company.  The plan provides for contributions
in such  amounts  as the Board of  Directors  may  annually  determine.  Company
contributions for 1999 and 2000 were $29,000 and $33,649, respectively.

In connection with the acquisition of ITW Irathane Systems,  the Company assumed
a defined  benefit  pension plan for ITW Irathane  Systems  union  employees and
retirees.  Information relative to the Company's defined benefit pension plan is
presented below:
<TABLE>
<CAPTION>

                                                        1999                     2000
<S>                                                 <C>                      <C>
Changes in benefit obligations:
  Obligations at beginning of year                  $ 234,750                $ 155,252
  Service cost                                         13,602                   11,354
  Interest cost                                        13,012                   12,247
   Participant contributions                                -                        -
   Benefits                                           (72,060)                    (900)
  Actuarial gains                                     (34,052)                   8,540

Obligations at end of year                          $ 155,252              $   186,493

Changes in plan assets:
  Fair value of assets at beginning of year         $ 204,455              $   150,897
  Actual return on assets                              (7,647)                   3,162
  Company contributions                                26,149                   18,790
  Participant contributions                                 -                        -
  Benefits paid                                       (72,060)                    (900)

Fair value of assets at end of year                 $ 150,897              $   171,949

Funded status at end of year:
  Plan assets in excess of (less than) obligations  $  (4,355)                  11,206
  Unrecognized gains                                  (34,378)                (44,608)
  Unrecognized prior service cost                           -                        -
  Unrecognized transition obligation                   49,939                   46,711

Prepaid pension costs                               $  11,206              $    13,309

Costs recognized during the year:
  Service cost                                      $  13,602              $    11,354
  Interest cost                                        13,012                   12,247
  Amortization of prior losses (gains)                      -                        -
  Amortization of prior service cost                        -                        -
  Amortization of transition obligation                 3,228                    3,228

     Total costs recognized in expense              $  18,431              $    16,687

Assumptions used in computing ending obligations:
   Discount rate                                          7.5%                    7.5%

Expected return on plan assets                              6%                      6%
</TABLE>

NOTE 11. Related Party Transactions

The Company had a payable of $25,000 to Nelson Roofing,  Inc. as of December 31,
1999, a company owned by the majority  stockholder  of the Company.  The Company
has a  receivable  of $86,140  and  $35,427 as of  December  31,  1999 and 2000,
respectively,  from Nelson  Roofing,  Inc.  Under the terms of an agreement with
Nelson  Roofing,  Inc.,  the  Company  provides  management  and  administrative
services based upon actual employee cost plus overhead and receives a management
fee for such services.

Management fees received  from  Nelson  Roofing, Inc. amounted  to approximately
$134,000  in  1999 and $117,000  in 2000. The Company  paid $7,611  in  1999 and
$174,784 in 2000 to Nelson Roofing, Inc. for construction services.

The  Company  rented a house  in Utah  owned by the  majority  stockholder  on a
month-to-month  basis. Total rent paid to the majority  stockholder  amounted to
$33,840 in 1999 and $22,560 in 2000.

The  Company  rents  warehouse  space  from a  company  owned  by  the  majority
stockholder  on a  month-to-month  basis which  amounted to $5,500 and $6,000 in
1999 and 2000, respectively.

Effective  January  1,  2000,  the  Company  rents a portion  of an  office  and
production facility from the majority  stockholder under the terms of a ten-year
capital lease expiring on December 31, 2009. The lease provides that the Company
pay all property  taxes,  insurance,  and  maintenance  plus a monthly rental of
$9,090 and has a purchase option at any time of $650,000 to December 31, 2002 at
which time the  purchase  price  changes by an inflation  adjustment.  Rent also
changes by the inflation adjustment on January 1, 2003.

On January 30, 2000 the Company  entered  into a two-year  employment  agreement
with its president, who is also the majority stockholder, in which the president
will  receive a base salary of $175,000 in  addition to  quarterly  bonuses,  as
defined in the agreement,  and annual bonuses based upon the  performance of the
Company, as determined by the Board of Directors. The agreement contains certain
noncompetition provisions.

The Company  accrued  unpaid salary to the majority  stockholder of $138,873 and
$21,000 as of December 31, 1999 and 2000, respectively.


NOTE 12. Business Restructuring and Other Charges
During the  fourth  quarter of 1999,  the  Company  approved a plan to close the
Colorado Springs,  Colorado production facility and terminate  substantially all
employees  (nine).  Substantially  all of the operations have been  consolidated
with the Hibbing, Minnesota facilities. The closure was completed in April 2000.
At December  31, 1999,  the Company  accrued  $98,000 for  employee  termination
benefits. During 2000, the Company sold the real estate for $1,700,000 resulting
in a gain of approximately $200,000.

Also in the fourth  quarter of 1999,  the  Company  approved a plan to close the
Arizona production  facility as a result of market conditions.  The facility was
opened during 1999 to supply sprayed polyurethane and vulcanized rubber products
to the Arizona  mining  industries.  The  facility is under a  three-year  lease
agreement and the present value of the remaining lease payments of approximately
$95,000  was  expensed as of December  31,  1999.  In  addition,  equipment  and
leasehold  improvements  with  a  book  value  of  approximately  $263,000  were
considered  impaired  as  they  are  not  expected  to be  used  in the  future.
Accordingly,  the Company wrote off the remaining book value of the assets.  The
Company accrued $50,000 for other charges to close the facility during 1999. The
provision for restructuring of operations is summarized as follows:

                                                                        1999
Accrued employee termination benefits                                $   98,000
Accrued long-term lease and other charges                               145,053
Asset impairment                                                        262,938
                                                                     $  505,991


NOTE 13. Lease Commitments and Total Rental Expense

The Company  leases two office and  production  facilities  under  noncancelable
operating  lease  agreements  which  expire in  January  2003 and March 2005 and
require various  minimum annual rentals.  The leases also require the payment of
the property taxes, normal maintenance and insurance on the properties. See Note
12 regarding Arizona lease.

The Company also leases automobiles and other equipment on annual leases.

Total  rent  expense,  including  rent  paid to  related  parties,  amounted  to
approximately $340,000 in 1999 and $254,000 in 2000.

The total minimum rental commitment at December 31, 2000 is due as follows:


Years Ending December 31,                                               Amount
2001                                                                  $ 229,888
2002                                                                    194,694
2003                                                                     40,477
2004                                                                     28,572
2005                                                                      7,212
                                                                      $ 500,843
<PAGE>
                                  EXHIBIT 10(3)

                          INDUSTRIAL RUBBER APPLICATORS
                              3804 EAST 13TH AVENUE
                                HIBBING, MN 55746

                                    AGREEMENT

     This  agreement  is made and  entered  into this day 16th of  April,  2000,
between  Industrial  Rubber  Applicators  (IRA),  Hibbing,  Minnesota  or  their
successors,  hereinafter  called the  "Company" and the United  Steelworkers  of
America, hereinafter called the "Union".

     In consideration  of the settlement of the differences  between the parties
hereto as to wages,  hours and working  conditions and the mutual  covenants and
agreement contained herein.

                                    ARTICLE I
                        Purpose and Intent of the Parties

     The  purpose  of the  Company  and the Union in  entering  into this  labor
agreement is to set forth their  agreement on rates of pay,  hours of work,  and
other conditions of employment,  and further to the fullest extent possible, the
safety and  welfare of the  employees,  economy of  operations,  elimination  of
waste,  quantity and quality of output,  cleanliness of plant, and protection of
parties.

     The Company and the Union will  encourage  the highest  possible  degree of
friendly, cooperative relationship between their representatives at all levels.

                                   ARTICLE II
                         Recognition and Bargaining Unit

     The Company  agrees and does hereby  recognize  the Union as the  exclusive
bargaining  agency for its'  employees as classified  herein for the purposes of
collective  bargaining  with the  Company as to rates of pay,  hours of work and
conditions of  employment,  to be observed  between the parties  hereto,  and to
provide procedure to prompt,  equitable  adjustment of alleged  grievances,  and
their shall be no  interruptions  or impeding of work, work stoppages,  strikes,
lockouts  or  other  interference's  with  production  during  the  life  of the
Agreement,  so long as both  parties  are  complying  with its  terms.  The term
"employee' as used in this agreement  shall mean the production and  maintenance
employees  excluding  supervisors,  office  employees,  drive salesmen,  and any
employee  defined by the National Labor Relations Act,  including all janitorial
and summer students.

                                   ARTICLE III
                     Maintenance of Membership and Checkoff

     Each  employee   covered  by  this  Agreement  shall  become  and  maintain
membership  in the  union to the  extent  of  paying  periodic  membership  dues
uniformly required of all union member and new employees, upon completion of the
probationary period, shall be included.

     The  Company  will  deduct  dues from  employee  wages and the dues will be
submitted to the International Secretary-Treasurer each month.

     The sole authorized representative of the Union, for purposes of certifying
the amount of any change in monthly  dues or  initiation  fees to be deducted by
the Company, shall be the International Secretary-Treasurer.

                                   ARTICLE IV
                             Management Prerogatives

     The operation of the business and all procedures and methods of production,
including  the  assignment  of work to the  employees,  shall  be the  exclusive
function of the  Company.  The Company,  in the  exercise of its' rights,  shall
observe the provisions of the Agreement.

                                    ARTICLE V
                            Adjustment of Grievances

A.       Procedure

     Any employee  and/or a Union Grievance  Committee  Person who believes that
he/she has a  justifiable  request or  complaint,  shall  discuss the request or
complaint with supervision.  If the complaint is not dispose of, he/she may then
proceed as follows:

     Step 1.  Within 30 days,  a  grievance  will be  presented  in  writing  to
supervision  on a form provided by the Grievance  Committee.  Supervision  shall
answer the  grievance  on the form within  three (3) working days and return the
Union copies to the Grievance Committee.

     Step 2. In the event no satisfactory settlement of the grievance is arrived
at in Step 1, and it appears as though the  grievance  cannot be settled in Step
1, it shall be  appealed  within  seven (7) working  days to Step 2.  Management
shall then arrange to hold a meeting  within  three (3) working  days  following
receipt of the Grievance  Committee's  request for a Step 2 meeting.  A district
representative of the Union shall be present at all Step 2 meetings. The Company
shall state on the grievance  form the Company's  position,  not later than five
(5) working days following the date of the Step 2 meeting.

     If a  grievance  cannot be settled by Step 2, then at the request of either
party, made within ten (10) working dates from the receipt of the decision under
Step 2, a third neutral and  disinterested  party,  satisfactory  to both sides,
shall be selected by the parties. In the event that the Union and Company cannot
agree  upon an umpire  within  the ten (10)  working  dates  after the  District
Representative  and the  executives of the Company have  disagreed,  the parties
shall  request the State  conciliator  of the State of  Minnesota  to appoint an
"umpire".

     An umpire to whom any grievance  shall be submitted in accordance  with the
provisions of this section,  shall only have the  jurisdiction  and authority to
interpret,  apply, or determine  compliance with the provisions  relating to the
wages,  hours of work,  and other  conditions of employment as set forth in this
Agreement insofar as shall be necessary to the determination of such grievances,
but he shall not have the  jurisdiction or authority to add to, detract from, or
to alter in any way the provisions of this  Agreement.  Said umpire so appointed
shall  decide the dispute and the  decision  shall be final and binding upon the
Union, the Company, and any employees affected.  The Company and the Union shall
pay the expenses and fees of the umpire equally.  Unless  otherwise agreed upon,
the matter shall be heard by such neutral  umpire as soon as possible  after his
appointment  and shall be determined  by him as soon as possible  after close of
the hearing.

B.       Grievance Committee

     The Grievance  Committee shall consist of not more than three (3) employees
from the plant to be selected by the Union.

                                   ARTICLE VI
                            Discharge and Suspension

     Management  agrees  that a member of the Union shall not be  discharged  or
suspended without just cause, or without the right to appeal, with the exception
of probationary employees.  Prior to a discharge or suspension,  management will
have a discussion  with the Grievance  Committee  Chairman or his designee in an
effort to resolve the matter. The employee will have the option of being present
at this meeting.  Following a discharge or  suspension,  the employee may, if he
believes that he has been unjustly  discharged or suspended,  allege a grievance
in accordance with the procedure of Article V, "Adjustment of Grievances". Final
decision  on all  discharge  or  suspension  cases shall be made within the time
limits  specified  I Article V.  should it be  determined  by the company or the
umpire in  accordance  with Article V, that the employee has been  discharged or
suspended   unjustly,   the  company  shall   reinstate  the  employee  and  pay
compensation  for the time lost at the  employee's  regular  rate of pay,  in an
amount agreed upon in each case or as set by the umpire.

                                   ARTICLE VII
                                    Seniority

     Seniority is defined as the  principle  that in the event of laying off men
during  slack  time or when a  reduction  of  force  is to be  effected,  unless
impractical,  the last man hires shall be the first laid off, and in calling men
back to work, the last man laid off shall be the first man returned to work.

A.       Seniority State of Employees

     Seniority  shall be recognized,  in the event of  promotions,  decreases of
forces,  and rehiring  after  lay-off,  in  proportion  to length of  continuous
service  providing the employee is qualified to perform the job.  During layoff,
employees will continue to accumulate hours toward seniority.

B.       Probationary Employees.

     New  employees  and those hired after a break in continuity of service will
be regarded as probationary employees for ninety (90) aggregate working days.

     Probationary  employees  may be  laid  off  or  discharged  as  exclusively
determined by management.

     Probationary  employees  continued in the service of the Company subsequent
to the  probationary  period shall receive full  continuous  service credit from
their date of work.

C.       Seniority Lists

     On or before thirty (30) days following the signing of this Agreement,  the
Company shall furnish to the Union and post a seniority list. Such list shall be
brought  up to date at least once  every six  months in the event  changes  have
taken  place.  In the event of  disagreement  in  individual  cases,  authorized
representatives  of the Union may  inspect  the  necessary  records for the case
involved.

D.       Promotions and Job Vacancies

     Should  differences  arise  between  the Company and Union as to whether an
applicant to a job is qualified to perform the job, the employee  shall be given
a trial on the job,  not to exceed  thirty  (30) days.  The Company may elect to
shorten the 30-day period if it determines that the employee cannot qualify with
the trial  period.  The  disqualified  applicant  shall be returned to his prior
classification.  Employees  affected may then use the  grievance  procedure  for
final determination.

     On promotion of an employee to a  non-bargaining  position,  his  seniority
shall be  frozen  as of the date of the  promotion,  pursuant  to the  seniority
provisions of this Agreement.

E.       Layoffs and Call Backs

     1. An employee  who is not  interested  in learning or working on the field
crew or lining tanks at the plant could be laid off if other work for which they
are qualified to perform is unavailable.

     2. In the matter of call back to work, the employee with the most seniority
shall be the first person called back if they are qualified to perform the work.

F.       Notices in the Event of Layoff

     1. In the  event of  layoffs,  in so far as  practical,  the  Company  will
provide a one (1) week notice.  The Company will hold monthly  meetings with the
bargaining  unit to discuss the production  schedule.  Employees  shall keep the
Company advised of any change of address or telephone  number.  The Company will
phone notice to all employees,  outlining the nature of the job open. If this is
impossible, written notice shall be given by registered or certified mail to the
employee's last known mailing address.  Those employees  notified by mail of the
availability  of work will have the obligation of determining for themselves the
nature  of job  openings.  The  Company  will  furnish  the Union a copy of such
notice.

     3. A  recalled  employee  has three (3) days to notify  the  Company of his
intent to report back to work within five (5)  calendar  days.  If such laid off
employee does not report with said five (5) calendar  days after being  recalled
as above stated,  he shall be deemed to have  terminated  his  employment and to
have lost all  seniority  rights,  except that the right of  employees to accept
this offer of recall  shall be extended  for those  employees  who are unable to
return to work immediately  because of sickness or injury or other circumstances
for which the employee could not reasonably report with the 5-day period.

G.       Time Off for Union Activity

     The Company agrees to grant  necessary time off without  discrimination  to
any employee designated by the Local Union to serve in any capacity in behalf of
or at the  request of the Local  Union,  but in each case  notification  must be
given to the Company in sufficient time to secure a replacement.

H.       Termination of Seniority and Employment

     An employee's seniority and employment with the Company will terminate,  in
accordance  with  Article VI, upon the  occurrence  of any one of the  following
events:

     1. Quit or Resignation

     2. Discharge for just cause;

     3.  Failure  to  report to work at  expiration  of an  authorized  leave of
absence;

     4. Absence from work on three (3)  consecutive  scheduled work days without
notifying the Company except for good and sufficient cause;

     5. Absence due to industrial accident or illness while actively employed by
the  Company  where the  employee  fails to return to work  within  thirty  (30)
calendar days after final payment of statutory  benefits or after the end of the
period used in calculating the lump sum settlement;

     6.  Owning or  operating  a business  in  competition  with the  Company or
working for a competitor while actively on the payroll;

     7. Fighting or any other acts of violence, or acts of vandalism. Threats of
physical violence towards any employee.

                                  ARTICLE VIII
                                Safety and Health

A.       An  employee  or group of  employees  who  believe  that they are being
         required to work under  conditions which are unsafe or unhealthy beyond
         the normal hazards  inherent to the operation in questions  shall bring
         this matter to the  companies  attention.  The Company will then notify
         the union  safety  representative  and  jointly  will  investigate  and
         correct, if needed, the unsafe or unhealthy condition or hazard.

B.       In the  event  an  employee  is  injured  while  on  duty,  he shall be
         furnished by the Company with transportation to the doctor or hospital,
         as the case may be; also  transportation  from the  doctor's  office or
         hospital to home and/or return to plant.

C.       Each month a safety  inspection  will be made of the IRA facility.  One
         member  designated by the union and one member of management  will tour
         these facilities and make  recommendations to correct safety and health
         conditions. The Company will post these recommendations.

D.       When curing parts in the main shop, the Company will eliminate water in
         working areas and will limit the steam exhaust.

                                   ARTICLE IX
                              401k Retirement Plan

     The Company  agrees to contribute  $.30 per hour in the pension fund, to be
added in a lump sum on an annual  basis at year's end.  The  employees  may also
contribute to their 401k's,  but must pay the  maintenance fee at the end of the
year.

                                    ARTICLE X
                                    Vacations

A.       Definition of Vacation

     A one-week's  full  vacation  shall  consist of forth (40) hours in a seven
consecutive day period. A two weeks vacation shall consist of eighty (80) hours,
a three  weeks  vacation  shall  consist  of one  hundred  twenty  (120)  hours.
Employees  shall be allowed to split a week of vacation into one or more days at
a time.

B.       Eligibility and Length of Vacation

     1. One (1) week vacation  after  completion of first year.

     2. Two (2) weeks vacation after completion of second year.

     3. Three (3) weeks vacation after completion of fifth year.

     4. Four (4) weeks vacation after completion of 12 years.

     5. If paid holiday  falls during an  employee's  vacation,  he will be paid
holiday pay, at straight time, in addition to his vacation pay.

     6. You must work  eight (8)  months in the  previous  year to  qualify  for
vacation.

     7. First vacation may be taken on or after the anniversary date. Succeeding
vacations  can be  taken  annually,  following  your  anniversary  date.

     8. All  employees  who have  qualified  for  vacation  shall be paid  their
vacation  if they are  laid-off or  discharged.  In case an  employee  dies, his
vacation allowance shall be paid to his heirs,  assigns,  or administrators.

     9. Vacation shall be paid in advance to the employee on the last day worked
before going on vacation. Minimum of one week.

                                   ARTICLE XI
                                  Funeral Leave

     When  death  occurs  to  an  employee's  legal  spouse,   mother,   father,
mother-in-law,  father-in-law, son, daughter, step-children, brother, or sister,
an  employee  will be excused  and paid for up to a maximum  of three  scheduled
shifts  (or for such fewer  shifts as the  employee  may be  absent)  which fall
within a three consecutive  calendar-day period; provided that one such calendar
day shall include the day of the funeral and it is established that the employee
attended the funeral. When death occurs to an employee's grandparents,  aunt, or
uncle,  an employee  will be excused and paid for one day. An employee  will not
receive  funeral pay when it duplicates pay received for time not worked for any
other  reasons.  Employee  must show proof of  attendance,  if  requested by the
Company.

                                   ARTICLE XI
                                  Paid Holidays

                                   Good Friday
                                   Memorial Day
                                   Fourth of July
                                   Labor Day
                                   Thanksgiving Day
                                   Day after Thanksgiving
                                   Christmas Eve Day
                                   Christmas Day
                                   New Year's Day

     Holiday pay shall be paid for at the regular  classified  rate of eight (8)
hours when not worked. If holidays are worked, they shall be paid for at two (2)
times the regular rate of pay. If a holiday falls on Saturday,  holiday pay will
be paid for the previous Friday. If a holiday falls on Sunday,  holiday pay will
be paid for on Monday. A paid holiday shall be counted as eight (8) hours worked
when figuring overtime for the regular work week.

                                  ARTICLE XIII
                                 Hours of Work

     A. The  normal  work week for all  regular  employees  shall be forty  (40)
hours.

     B. All hourly employees shall be paid every two (2) weeks on Thursday.

     C. Any  employee  assigned  to work out of town  shall  be  reimbursed  for
lodging and meals at $50.00 per day. The  employee  will make  arrangements  for
lodging.  On January 1st of 2001, 2002, and 2003, this per diem will increase by
$2.00 per year, for each of the listed years.

     D. Shop: Time and one-half over 40 hours.

     E. Field: Time and one-half after eight hours.

     F. Two  fifteen-minute  rest  period  shall be  provided  for each  regular
eight-hour  shift.  This means one rest period after each  consecutive two hours
worked.  These rest period  shall be  considered  as time worked when  computing
wages. Meal periods shall be twenty minutes. Meal breaks shall not be considered
as time worked in computing pay.

     G.  Employees  scheduled to work on Sunday's shall be paid at two (2) times
their regular rate of pay.

     H. The rate of pay for any hours that extend  beyond the normal  hours of a
shift is that rate in effect at the beginning of the shift.

                                   ARTICLE XIV
                                      Wages
<TABLE>
<CAPTION>
                           04-16-00         04-16-01          04-16-02          04-16-03
<S>                        <C>               <C>              <C>               <C>
Class 1                    $  8.50            $  8.50         $  8.85           $  9.25
Class 2                    $  9.35            $  9.35         $  9.70            $10.10
Class 3                     $10.00             $10.00         $10.35             $10.75
Class 4                     $11.20             $11.55         $11.90             $12.30
Class 5                     $12.35             $12.70         $13.05             $13.45
Class 6                     $14.35             $14.70         $15.05             $15.45
Class 7                     $15.35             $15.70         $16.05             $16.45
Lead man                    $16.35             $16.70         $17.05             $17.45
Shop Leader                 $17.35             $17.60         $18.05             $18.45

Class 1           Start
Class 2           120 days
Class 3           1 year
Class 4           2 years
Class 5           3 years
Class 6           4 years
Class 7           5 years
</TABLE>

     All raises are  effective  the first day of the pay  period  following  the
scheduled pay raise increase date on the previous page.

Field rates:

         Rubber Lining and Sand Blasting
                  All field rates will be 25% of base pay additional
         Urethane Lining
                  Field Rate - 25% of Base Pay
                  Shop Rate - Additional $1.00 per hour, added to base pay

Differentials:

         Afternoon Shift      $.40
         Midnight Shift       $.55
         Boiler Operator      $.80

                                   ARTICLE XV
                                Military Service

     A.  Each  employee,  who  during  the term of this  Agreement,  enters  the
Military Service of the United States, is honorable  discharged from such serve,
and within ninety (90) days after he is  discharged  form such service or within
one (1)  year  after  discharge  from  hospitalization  from  service  connected
disability,  applied to the Company for re-  employment,  shall be reinstated in
accordance with his status under Article VII "Seniority" of this agreement, to a
position  of like  status  and pay to that  which he left  when he  entered  the
Military  Service,  without having his seniority  record broken by reason of his
absence.

     B.  Vacation - Each employee  entering the Military  Service shall have his
final pay checks computed to include whatever  vacation pay he shall have earned
through the final day of work less  whatever  vacation  allowance  he shall have
received prior thereto.

     C. Upon being  re-employed in accordance  with Paragraph A of this Section,
an employee  shall begin accruing  vacation  benefits based on time worked after
his return and shall receive such vacation allowance.

                                   ARTICLE XVI
                               Health and Welfare

     The Company hereby agrees to furnish the following coverage to employees:

A.       Health Insurance

         Comprehensive Major Medical
         A.       Deductible per calendar year      CHECK DEDUCTIBLES
                  1.       $200.00 per person
                  2.       $600.00 per family
         B.       Out-of-Pocket Maximum (including deductible)
                  1.       $600.00 per person
                  2.       $1,200.00 per family
         C.       Lifetime Maximum
                  1.       $1,000,000.00
         D.       Dependent Member Age Limits
                  1.       19 years
                  2.       25 years (Full Time Student)
         E.       Prescription Drug Co-Pay
                  1.       $9.00 (Formulary Drugs Only)


B.       Life Insurance
         A.       Basic Life
                  1.       $50,000.00
         B.       Accidental Death & Dismemberment
                  1.       $30,000.00
         C.       Dependent Life
                  1.       Spouse - $5,000.00
                  2.       Children - $5,000.00


C.       Sick and Accident Benefits

     The plan will provide for weekly benefits payable starting on the first (1)
day of  hospitalization  and after the seventh (7) day of sickness,  as follows,
effective  June 1, 1996 at $200 per week.  For  injuries  occurring  5/1/2000 or
later, the benefit is changed to $300 per week.

     Benefits  will be paid equal to four (4) times the amount of vacation  each
employee is eligible to receive for that year for a maximum of 12 weeks.

D.       Dental Plan

         Benefits:         Preventive Services       80%
                           Basic Services            50% after deductible
                           Major Services            50% after deductible
                           Orthodontia               50%

         Deductible:
                  Individual:               $50.00
                  Family Aggregate:         $150.00
                  Annual Maximum:           $1,000.00

         Dependent         19 / 23 years of age

         Orthodontia:
                  Dependent -       50% to age 19
                  Lifetime Max - $1,500.00

***Deductible is not applicable for preventive services.

                                  ARTICLE XVII

     A. If the Employer requests employees to take a physical  examination,  the
Employer shall pay the cost of said physical examination.

     B. The Union shall have space on a bulletin board for Union business.

     C. For the safety and protection of employees, certain safety devices shall
be furnished  by the  Company,  and normally  recognized  safety  equipment  and
closing shall be furnished by the employee.  Any employee who fails to have such
safety devices or to use normally recognized safety equipment and clothing shall
be issued a warning  notice.  The Company will authorize the following  expenses
toward safety glasses: Exam alone - $38.00 Single vision glasses + exam = $58.00
Bi-focal  glasses + exam - $76.00  Safety  glasses must be OSHA  approved.  This
covers one pay of glasses per year.

     D. Probationary employees are not eligible for fringe benefits provided for
in Articles IX, X, XI, XXII, and XVI.

     E. Use of or being under the  influence of drugs or alcohol on company time
or property is subject to the companies drug and alcohol program.

     F. Field work will be posted in advance, so long as practical.

     G. Lead Man is considered a promotion, so if a Class 5 employee is the Lead
Man for a shift, he will be paid at the Lead Man rate.

     H. If there is a posting  for a  special  project  needing a lead man,  the
duration of the job (length of time) will be stated,  and if a lead  position is
accepted, you will be required to complete the job as lead man.

     I. If a lead position is eliminated, the employer must notify the union, in
writing, of why it is being eliminated and who will be assuming the duties.

     J. For the safety and  protection of employees,  the Company will authorize
the  reimbursement  of $50.00 per year for safety toed boots.  A receipt must be
turned in before you will be reimbursed.

                                  ARTICLE XVIII
                                   Termination

     Except as  otherwise  provided  herein,  the terms and  conditions  of this
Agreement shall take effect on April15, 2000 and shall continue in effect to and
including midnight of April 15, 2004. Either party may, sixty (60) days prior to
April 5,  2004, give notice to the other party of the desire of the party giving
such  notice to  negotiate  with  respect to the terms and  conditions  of a new
agreement.

     Any notice to be given under this agreement  shall be given by Certified or
Registered  Mail and the mailing of such  notice  shall be  considered  personal
services upon the party to whom it is mailed, and if by the company, it shall be
addressed to the United  Steelworkers  of America,  District 11, 2829 University
Avenue  SE,  Suite 100  Minneapolis,  Minnesota,  55414,  and if by union to the
company, it shall be addressed,  Industrial Rubber Applicators,  Inc., 3804 Each
13th Avenue,  P.O. Box 782, Hibbing, MN 55746. Either party may, by like written
notice,  change the address to which the certified or registered notice shall be
sent.

     Signed this 26 day of June, 2000

INDUSTRIAL RUBBER APPLICATORS, INC.              UNITED STEELWORKERS OF AMERICA

By:      /s/                                     By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/

                                                 By:      /s/


                SIDE AGREEMENT TO UNION-MANAGEMENT CONTRACT 2000

     In  exchange  for  paying a monthly  pension  payment  instead  of a yearly
contribution  to the 401k as negotiated in the labor contract dated  04-15-2000,
the union agrees that a labor management  committee will agree on an enforceable
policy  with a goal to stop  tardiness  and  absenteeism.  This  policy  will be
implemented no later than September 1, 2000.

                                                              /s/

                                                              /s/

                                                              /s/

                                                              /s/


         /s/                                6/26/00
Daniel O. Burkes
President & CEO

<PAGE>
                                 EXHIBIT 10(10)

                                SECOND AMENDMENT
                               TO CREDIT AGREEMENT

         This Second Amendment to Credit Agreement dated as of March 31, 2000 is
by and between  INDUSTRIAL RUBBER PRODUCTS,  INC., a Minnesota  corporation (the
"Borrower") and U.S. BANK NATIONAL  ASSOCIATION,  a national banking association
(the "Lender").

                                    RECITALS

         A. The Borrower  and the lender have  entered  into a Credit  Agreement
dated as of March 30, 1999, as amended by a First Amendment to Credit  Agreement
dated as of September 30, 1999 (as amended, the Credit Agreement").


         B. The  Borrower and  the Lender wish to make certain amendments to the
Agreement.

         NOW,  THEREFORE,  in  consideration  of the mutual  promises herein set
forth and for other good and valuable consideration, the Borrower and the Lender
agree as follows:

     Section  1.  Capitalized  Terms.  Capitalized  terms  used  herein  and not
otherwise  defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.

     Section 2. Amendments. The Credit Agreement is hereby amended as follows:

     2.1 The  Commitments.  Section 2.1(a) of the Credit Agreement is amended in
its entirety to provide as follows:

     2.1(a)  Revolving  Credit.  A revolving loan (the "Revolving  Loan") to the
Borrower  available  as  Advances  at any time and  from  time to time  from the
Closing  Date to June 30, 2000 (the  "Revolving  Maturity  Date"),  during which
period the  Borrower  may  borrow,  repay and  reborrow in  accordance  with the
provisions  hereof,  provided  that the  unpaid  principal  amount of  revolving
Advances  shall not at any time exceed  $2,000,000  (the  "Revolving  Commitment
Amount");  and  provided,  further,  that no revolving  Advance will be made if,
after giving effect thereto,  the unpaid  principal amount of the Revolving Note
would exceed the Borrowing Base.

     2.2 The Notes.  The  Revolving  Note  attached to the Credit  Agreement  as
Exhibit  2.3(a) is amended in its entirety to read as set forth on the Revolving
Note attached hereto as Exhibit A, all references in the Credit Agreement to the
Revolving Note shall mean the Revolving Note dated as of the date hereof, in the
form attached hereto.  The Term Note attached to the Credit Agreement as Exhibit
2.3(b) is amended in its entirety to read as set forth on the Term Note attached
hereto as Exhibit B, all  references  in the Credit  Agreement  to the Term Note
shall  mean the Term  Note  dated as of the date  hereof,  in the form  attached
hereto.

     2.3  Interest  Rates  and  Interest  Payments.  Section  2.4 of the  Credit
Agreement is amended in its entirety as follows:

     2.4 Interest Rates, Interest Payments and Default Interest.  Interest shall
accrue and be payable on the Advances as follows:

     2.4(a) Each  Advance  shall bear  interest on the unpaid  principal  amount
thereof at a rate per annum equal to the sum of (i) the LIBOR Pricing Rate, plus
(ii) 3.75%.

     2.4(b)  Interest shall be payable (i) on the first day of each month;  (ii)
upon any permitted prepayment (on the amount prepaid);  and (ii) with respect to
all Advances on the Revolving Maturity Date.

     2.4(c)  Interest  on the Term Note is at the rate and  payable  at The Wall
Street Journal Prime Rate plus 1.5%.

     2.5 Year 2000  Compliance.  Section 5.12 of the Credit Agreement is amended
to read in its entirety as follows:

     Section 5.12 Year 2000. The Borrower has reviewed and assessed its business
operations  and  computer  systems  and  applications  to address the "year 2000
problem"  (that  is,  that  computer  applications  and  equipment  used  by the
Borrower,  directly or indirectly through third parties, may have been or may be
unable to properly perform  date-sensitive  functions  before,  during and after
January 1,  2000).  The  Borrower  represents  and  warrants  that the year 2000
problem has not resulted in and will not result in a material  adverse change in
the  Borrower's   business  condition   (financial  or  otherwise)   operations,
properties  or prospects or ability to repay  Lender.  The Borrower  agrees that
this representation and warranty will be true and correct on and shall be deemed
made by the Borrower on each date the Borrower  requests any advance  under this
Agreement  or Note or delivers any  information  to Lender.  The  Borrower  will
promptly deliver to Lender such information relating to this representat9ion and
warranty as Lender requests from time to time.

     2.6  Compliance  Certificate.  The Compliance  Certificate  attached to the
Credit  Agreement  as Exhibit  5.1(c) is amended in its  entirety to read as set
forth on the Compliance Certificate attached hereto as Exhibit C, all references
in the Credit Agreement to the Compliance  Certificate shall mean the compliance
Certificate in the form attached hereto.

     2.7 Tangible Net Worth.  Section 6.8 of the Credit  Agreement is amended in
its entirety to read as follows:

     Section 6.8 Tangible Net Worth.  The Borrower  will not permit its Tangible
Net Worth (the  excess of its  assets,  excluding  intangible  assets,  over its
liabilities, on a consolidated basis) to be less than $4,000,000 at any time.

     2.8 Leverage Ratio.  Section 6.10 of the Credit Agreement is amended in its
entirety to read as follows:

     Section 6.10  Leverage  Ratio.  The  Borrower  will not permit its Leverage
Ratio (the ratio of its Total  Liabilities to its Tangible Net Worth) to be more
than 2.0 to 1.0 at any time.

     Section 3.  Conditions  and  Effectiveness.  This  Amendment  shall  become
effective  on  the  date  hereof,   only  upon  satisfaction  of  the  following
conditions:

     (a) The  Borrower  shall have  executed  and  delivered  to the Lender this
Second Amendment.

     (b) The Lender shall have received an amended and restated  Revolving  Note
executed by the Borrower in form and substance satisfactory to the Lender.

     (c) The  Lender  shall have  received  an amended  and  restated  Term Note
executed by the Borrower in the form and substance acceptable to the Lender.

     (d) The Lender shall have received a copy of the  resolutions  of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this  Amendment  certified as true and accurate by its Secretary or Assistant
Secretary,  along with a certification by such Secretary or Assistant  Secretary
certifying as to (i) no change in the Articles of Incorporation or Bylaws of the
Borrower since true and accurate copies of the same were delivered to the Lender
with a Certificate  of the Secretary of the Borrower and (ii)  identifying  each
officer of the  Borrower  authorized  to execute  this  Amendment  and any other
instrument  or  agreement  executed  by the  Borrower  in  connection  with this
Amendment  (collectively,  the  "Amendment  Documents"),  and  certifying  as to
specimens of such  officer's  signature  and  incumbency in such offices as such
officer holds.

     (e) The  Lender  shall  have  received  the  Deed of  Trust  and the  UCC-1
Financing  Statement covering the Borrower's  Colorado Springs facility executed
by the Borrower in form and  substance  acceptable to the Lender and recorded in
the appropriate filing offices.

     (f) The Lender shall have  received an executed  consent and  reaffirmation
from each guarantor in form and substance acceptable to the Lender.

     (g) The Lender shall have  received an executed  reaffirmation  of security
agreement  from  each  of the  Borrower's  subsidiaries  in form  and  substance
acceptable to the Lender.

     (h) The Lender shall have received  such other  documents as the Lender may
reasonably request.

     (i) The Borrower shall have satisfied such other conditions as specified by
the Lender,  including payment of all unpaid legal fees and expenses incurred by
the Lender  through the date of this  Amendment  in  connection  with the Credit
Agreement and the Amendment Documents.

Section 4.        Waiver.

     4.1 Pursuant to the  provisions of Section 6.8 of the Credit  Agreement the
Borrower agreed to maintain its Tangible Net Worth at no less than $5,500,000 at
all times.  The Borrower has reported  that it has failed or will fail to comply
with the provisions of Section 6.8 of the Credit  Agreement for the period ended
March 31, 2000.  The Lender hereby waives the Events of Default under the Credit
Agreement due to the Borrower's failure to comply with the provisions of Section
6.8 of the Credit Agreement for the period ended March 31, 2000.

     4.2 Pursuant to the provisions of Section 6.10 of the Credit  Agreement the
Borrower  agreed  that its  Leverage  Ratio  would not exceed 1.75 to 1.0 at any
time.  The Borrower has reported  that it has failed or will fail to comply with
the  provisions  of Section  6.10 of the Credit  Agreement  for the period ended
March 31, 2000.  The Lender hereby waives the Events of Default under the Credit
Agreement due to the Borrower's failure to comply with the provisions of Section
6.10 of the Credit Agreement for the period ended March 31, 2000.

     This waiver is limited to the express  terms hereof and shall not extend to
any other Default, Event of Default or period. This waiver is not, and shall not
be deemed, a course of performance upon which the Borrower may rely with respect
to any other Default,  Event of Default or request for a waiver and the Borrower
expressly waive any such claim.

     Section 5.  Acknowledgment.  The  Borrower and the Lender  acknowledge  and
agree  that as hereby  amended  the Credit  Agreement  remains in full force and
effect. All references in the Credit Agreement to "this Agreement",  or "herein"
or similar  references  shall mean the Credit  Agreement as amended herein.  The
Borrower represents and warrants that the Borrower has the power and legal right
and  authority  to  enter  into  this  Amendment  and  has  duly  authorized  as
appropriate the executed and deliver of this Amendment and other  agreements and
documents  executed  and  delivered by the  Borrower in  connection  herewith or
therewith by proper corporate action. The Borrower  acknowledges and agrees that
the security  interests granted to the Lender pursuant to the Security Agreement
secure all  liabilities  and  obligations of the Borrower to the Lender and this
Agreement, as hereby amended.

     Section 6.  Counterparts.  This  Amendment  may be  executed in one or more
counterparts  and by  separate  parties on separate  counterparts  with the same
effect as if the signatures thereto were on the same instrument and shall become
effective  when  counterparts  executed by all parties have been received by the
Lender.

     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Credit  Agreement to be executed by their officers  thereunto duly authorized as
of the date first above written.

                                            INDUSTRIAL RUBBER PRODUCTS, INC.


                                            By:      /s/
                                            Its:     Pres

                                            U.S. BANK NATIONAL ASSOCIATION

                                            By:      /s/
                                            Its:     VP
<PAGE>

                                 REVOLVING NOTE

$2,000,000                                                       March 31, 2000
                                                             Hibbing, Minnesota

     FOR  VALUE  RECEIVED,  INDUSTRIAL  RUBBER  PRODUCTS,  INC.,  a  corporation
organized  under the laws of the State of Minnesota,  hereby  promises to pay to
the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") at its main office in
Hibbing,  Minnesota,  in  lawful  money  of the  United  States  of  America  in
immediately  available  funds on the Revolving  Maturity Date ( as such term and
each other  capitalized  term used  herein are  defined in the Credit  Agreement
hereinafter  referred  to) the  principal  amount of TWO MILLION  DOLLARS AND NO
CENTS  ($2,000,000)  or, if less, the aggregate  unpaid  principal amount of all
Revolving  Advances  made by the Lender under the Credit  Agreement,  and to pay
interest  (computed  on the basis of actual days elapsed and a year of 360 days)
in  like  funds  on the  unpaid  principal  amount  hereof  from  time  to  time
outstanding at the rates and times set forth in the Credit Agreement.

     This Note is the Revolving Note referred to in the Credit  Agreement  dated
as of March 30, 1999 as amended by the First Amendment to Credit Agreement dated
as of September  30, 1999 and by that Second  Amendment  to Credit  Agreement of
even date (as the same may be hereafter  from time to time amended,  restated or
modified,  the "Credit  Agreement") between the undersigned and the Lender. This
note is secured,  it is subject to certain permissive and mandatory  prepayments
and its  maturity  is  subject  to  acceleration,  in each  case  upon the terms
provided  in said  Credit  Agreement.  This  note  is  issued  in  substitution,
extension  and  replacement  of, but not in payment of, a Revolving  note in the
original  principal amount of $2,000,000 dated as of September 30, 1999 from the
Borrower to the Lender.

     In the event of default hereunder,  the undersigned agrees to pay all costs
and  expenses  of  collection,   including   reasonable   attorneys'  fees.  The
undersigned waives demand, presentment, notice of nonpayment, protest, notice of
protest and notice of dishonor.

     THE  VALIDITY,  CONSTRUCTION  AND  ENFORCEABILITY  OF THIS  NOTE  SHALL  BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS  PRINCIPLES  THEREOF,  BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

                                               INDUSTRIAL RUBBER PRODUCTS, INC.


                                                By:      /s/
                                                Title:   Pres

<PAGE>
                                  EXHIBIT B TO
                               SECOND AMENDMENT TO
                                CREDIT AGREEMENT
                               EXHIBIT 2.3 (b) TO
                                CREDIT AGREEMENT
                                    TERM NOTE

$6,500,000                                                       March 31, 2000
                                                             Hibbing, Minnesota

     FOR VALUE RECEIVED,  INDUSTRIAL  RUBBER PRODUCTS,  INC., a corporation duly
organized  under the laws of the State of Minnesota,  hereby  promises to pay to
the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") at its main office in
Hibbing,  Minnesota,  in  lawful  money  of the  United  States  of  America  in
immediately  available  funds on June 30,  2000,  the  principal  amount  of SIX
MILLION  FIVE HUNDRED  THOUSAND  DOLLARS AND NO CENTS  ($6,500,000),  and to pay
interest  (computed  on the basis of actual days elapsed and a year of 360 days)
in  like  funds  on the  unpaid  principal  amount  hereof  from  time  to  time
outstanding at the rate and times set forth in the Credit Agreement.

     This note is the Term Note referred to in the Credit  Agreement dated as of
March 30, 1999 as amended by that First  Amendment to Credit  Agreement dated as
of September 30, 1999 and by that Second  Amendment to Credit  Agreement of even
date  (as the same may  hereafter  be from  time to time  amended,  restated  or
otherwise  modified,  the "Credit  Agreement")  between the  undersigned and the
Lender.  This note is secured and its  maturity is subject to  acceleration,  in
each case upon the terms provided in said Credit  Agreement.  The note is issued
in  substitution,  extension and  replacement  of, but not in payment of, a Term
Note in the original  principal  amount of $7,000,000  dated as of September 30,
1999 from the Borrower to the Lender.

     In the event of default hereunder,  the undersigned agrees to pay all costs
and  expenses  of  collection,   including   reasonable   attorneys'  fees.  The
undersigned waives demand, presentment,  notice of nonpayment, notice of protest
and notice of dishonor.

     THE  VALIDITY,  CONSTRUCTION  AND  ENFORCEABILITY  OF THIS  NOTE  SHALL  BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS  PRINCIPLES  THEREOF,  BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

                                               INDUSTRIAL RUBBER PRODUCTS, INC.

                                               By:      /s/
                                               Its:     VP-CFO

<PAGE>
                                 EXHIBIT 10(11)

                                 THIRD AMENDMENT
                               TO CREDIT AGREEMENT

     This Third Amendment to Credit Agreement dated as of June 9, 2000 is by and
between  INDUSTRIAL  RUBBER  PRODUCTS,   INC.,  a  Minnesota   corporation  (the
"Borrower") and U.S. BANK NATIONAL  ASSOCIATION,  a national banking association
(the "Lender").

                                    RECITALS

     A. The Borrower and the lender have entered into a Credit  Agreement  dated
as of March 30, 1999, as amended by a First Amendment to Credit  Agreement dated
as of September 30, 1999 and further amended by that Second  Amendment to Credit
Agreement dated as of March 31, 2000 (as amended, the Credit Agreement").

     B. The  Borrower  and the Lender  wish to make  certain  amendments  to the
Agreement.

     NOW,  THEREFORE,  in  consideration of the mutual promises herein set forth
and for other good and valuable consideration, the Borrower and the Lender agree
as follows:

     Section  1.  Capitalized  Terms.  Capitalized  terms  used  herein  and not
otherwise  defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.

     Section 2. Amendments. The Credit Agreement is hereby amended as follows:

     2.1 The Commitments.  Section 2.1 of the Credit Agreement is amended in its
entirety to provide as follows:

     2.1(a)  Revolving  Credit.  A revolving loan (the "Revolving  Loan") to the
Borrower  available  as  Advances  at any time and  from  time to time  from the
Closing Date to December 31, 2000 (the "Revolving Maturity Date"),  during which
period the  Borrower  may  borrow,  repay and  reborrow in  accordance  with the
provisions  hereof,  provided  that the  unpaid  principal  amount of  revolving
Advances  shall not at any time exceed  $2,000,000  (the  "Revolving  Commitment
Amount");  and  provided,  further,  that no revolving  Advance will be made if,
after giving effect thereto,  the unpaid  principal amount of the Revolving Note
would exceed the Borrowing Base.

     2.1(b) A term loan (the "Term Loan") form the Lender to the Borrower in the
amount of $4,848,106.77 (the "Term Loan Commitment Amount.")

     2.2 The Notes.  The  Revolving  Note  attached to the Credit  Agreement  as
Exhibit  2.3(a) is amended in its entirety to read as set forth on the Revolving
Note attached hereto as Exhibit A, all references in the Credit Agreement to the
Revolving Note shall mean the Revolving Note dated as of the date hereof, in the
form attached hereto.  The Term Note attached to the Credit Agreement as Exhibit
2.3(b) is amended in its entirety to read as set forth on the Term Note attached
hereto as Exhibit B, all  references  in the Credit  Agreement  to the Term Note
shall  mean the Term  Note  dated as of the date  hereof,  in the form  attached
hereto.

     2.3 Current  Ratio.  Section 6.9 of the Credit  Agreement is amended in its
entirety to read as follows:

     Section 6.9 Current  Ratio.  The Borrower  will not permit the ratio of its
consolidated  current assets to its consolidated  current  liabilities (the Term
Loan shall not be treated as a current liability for purposes of determining the
current ratio) to be less than 1.5 to 1.0 at any time.

     Section 3.  Conditions  and  Effectiveness.  This  Amendment  shall  become
effective  on  the  date  hereof,   only  upon  satisfaction  of  the  following
conditions:

     (a) The  Borrower  shall have  executed  and  delivered  to the Lender this
Second Amendment.

     (b) The Lender shall have received an amended and restated  Revolving  Note
executed by the Borrower in form and substance satisfactory to the Lender.

     (c) The  Lender  shall have  received  an amended  and  restated  Term Note
executed by the Borrower in the form and substance acceptable to the Lender.

     (d) The Lender shall have received a copy of the  resolutions  of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this  Amendment  certified as true and accurate by its Secretary or Assistant
Secretary,  along with a certification by such Secretary or Assistant  Secretary
certifying as to (i) no change in the Articles of Incorporation or Bylaws of the
Borrower since true and accurate copies of the same were delivered to the Lender
with a Certificate  of the Secretary of the Borrower and (ii)  identifying  each
officer of the  Borrower  authorized  to execute  this  Amendment  and any other
instrument  or  agreement  executed  by the  Borrower  in  connection  with this
Amendment  (collectively,  the  "Amendment  Documents"),  and  certifying  as to
specimens of such  officer's  signature  and  incumbency in such offices as such
officer holds.

     (e) The Lender shall have  received an executed  consent and  reaffirmation
from each guarantor in form and substance acceptable to the Lender.

     (f) The Lender shall have  received an executed  reaffirmation  of security
agreement  from  each  of the  Borrower's  subsidiaries  in form  and  substance
acceptable to the Lender.

     (g) The Lender shall have received  such other  documents as the Lender may
reasonably request.

     (h) The Borrower shall have satisfied such other conditions as specified by
the Lender,  including payment of all unpaid legal fees and expenses incurred by
the Lender  through the date of this  Amendment  in  connection  with the Credit
Agreement and the Amendment Documents.

     Section 4. Waiver.  Pursuant to the provisions of Section 6.9 of the Credit
Agreement the Borrower agreed that its current ration would not be less than 1.5
to 1.0.  The  Borrower  has  reported  that it has  failed  to  comply  with the
provisions of Section 6.9 of the Credit  Agreement for the periods ended January
31, 2000,  February 29, 2000 and March 31, 2000.  The Lender  hereby  waives the
Events of Default under the Credit  Agreement due to the  Borrower's  failure to
comply with the provisions of Section 6.9 of the Credit Agreement for the period
ended January 31, 2000, February 29, 2000 and March 31, 2000.

     This waiver is limited to the express  terms hereof and shall not extend to
any other Default, Event of Default or period. This waiver is not, and shall not
be deemed, a course of performance upon which the Borrower may rely with respect
to any other Default,  Event of Default or request for a waiver and the Borrower
expressly waive any such claim.

     Section 5.  Acknowledgment.  The  Borrower and the Lender  acknowledge  and
agree  that as hereby  amended  the Credit  Agreement  remains in full force and
effect. All references in the Credit Agreement to "this Agreement",  or "herein"
or similar  references  shall mean the Credit  Agreement as amended herein.  The
Borrower represents and warrants that the Borrower has the power and legal right
and  authority  to  enter  into  this  Amendment  and  has  duly  authorized  as
appropriate the executed and deliver of this Amendment and other  agreements and
documents  executed  and  delivered by the  Borrower in  connection  herewith or
therewith by proper corporate action. The Borrower  acknowledges and agrees that
the security  interests granted to the Lender pursuant to the Security Agreement
secure all  liabilities  and  obligations of the Borrower to the Lender and this
Agreement, as hereby amended.

     Section 6.  Counterparts.  This  Amendment  may be  executed in one or more
counterparts  and by  separate  parties on separate  counterparts  with the same
effect as if the signatures thereto were on the same instrument and shall become
effective  when  counterparts  executed by all parties have been received by the
Lender.

     IN WITNESS WHEREOF,  the parties hereto have caused this Third Amendment to
Credit  Agreement to be executed by their officers  thereunto duly authorized as
of the date first above written.

                                              INDUSTRIAL RUBBER PRODUCTS, INC.

                                              By:      /s/
                                              Its:     VP-CFO

                                              U.S. BANK NATIONAL ASSOCIATION

                                              By:
                                              Its:
<PAGE>

                                 EXHIBIT 10(12)

                                FOURTH AMENDMENT
                               TO CREDIT AGREEMENT

     This Fourth  Amendment to Credit Agreement dated as of December 31, 2000 is
by and between  INDUSTRIAL RUBBER PRODUCTS,  INC., a Minnesota  corporation (the
"Borrower") and U.S. BANK NATIONAL  ASSOCIATION,  a national banking association
(the "Lender").

                                    RECITALS

     A. The Borrower and the lender have entered into a Credit  Agreement  dated
as of March 30, 1999, as amended by a First Amendment to Credit  Agreement dated
as of  September  30,  1999,  as  amended  by that  Second  Amendment  to Credit
Agreement  dated as of March  31,  2000 and as  further  amended  by that  Third
Amendment to Credit  Agreement dated as of June 9, 2000 (as amended,  the Credit
Agreement").

     B. The  Borrower  and the Lender  wish to make  certain  amendments  to the
Agreement.

     NOW,  THEREFORE,  in  consideration of the mutual promises herein set forth
and for other good and valuable consideration, the Borrower and the Lender agree
as follows:

     Section  1.  Capitalized  Terms.  Capitalized  terms  used  herein  and not
otherwise  defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.

     Section 2. Amendments. The Credit Agreement is hereby amended as follows:

     2.1 Definitions. Section 1.1 of the Credit Agreement is amended by deleting
the  definitions  of "Board",  "Eurodollar  Business Day",  "Eurodollar  Reserve
Percentage", "Libor Pricing Rate", "Regulatory Change", and "Wall Street Journal
Prime Rate" in their entireties.

     Section  1.1 of the  Credit  Agreement  is  further  amended  by adding the
definition of Reference Rate in correct alphabetical order as follows:

     "Reference Rate": The rate of interest form time to time publicly announced
by the Lender as its  "reference  rate." The Lender may lend to its customers at
rates  that  are at,  above  or  below  the  Reference  Rate.  For  purposes  of
determining  any interest rate hereunder or under the Note which is based on the
Reference  Rate,  such interest rate shall change as and when the Reference Rate
changes.

     2.2 The  Commitments.  Section 2.1(a) of the Credit Agreement is amended in
its entirety to provide as follows:

     2.1(a)  Revolving  Credit.  A revolving loan (the "Revolving  Loan") to the
Borrower  available  as  Advances  at any time and  from  time to time  from the
Closing Date to March 31, 2001 (the  "Revolving  Maturity  Date"),  during which
period the  Borrower  may  borrow,  repay and  reborrow in  accordance  with the
provisions  hereof,  provided  that the  unpaid  principal  amount of  revolving
Advances  shall not at any time exceed  $2,000,000  (the  "Revolving  Commitment
Amount");  and  provided,  further,  that no revolving  Advance will be made if,
after giving effect thereto,  the unpaid  principal amount of the Revolving Note
would exceed the Borrowing Base.

     2.1(b) A term loan (the "Term Loan") form the Lender to the Borrower in the
amount of $4,848,106.77 (the "Term Loan Commitment Amount.")

     2.3 Procedure for Advances.  Section 2.2 of the Credit Agreement is amended
to provide in its entirety as follows:

     Section 2.2  Procedure  for  Advances.  Any request by the  Borrower for an
Advance on the  Revolving  Loan shall be in writing or by telephone  and must be
given so as to be  received  by the Lender  not later  than 10:00  (Minneapolis,
Minnesota  time) of the  date of the  requested  Advance.  Each  request  for an
Advance  shall be  irrevocable  and  shall be  deemed  a  representation  by the
Borrower  that on the  requested  Advance date and after  giving  effect to such
Advance the  applicable  conditions  specified in Article III have been and will
continue  be  satisfied.  Each  request  for an Advance  shall  specify  (i) the
requested  Advance date (which must be a Business  Day),  and (ii) the amount of
such  Advance  which shall be in a minimum  amount of $100,000  or, if more,  an
integral  multiple  thereof.  Unless the Lender  determines  that any applicable
condition specified in Article III has not been satisfied,  the Lender will make
available  to the  Borrower at the  Lender's  principal  office in  Minneapolis,
Minnesota in  immediately  available  funds not later than 3:00 PM  (Minneapolis
time) on the requested Advance date the amount of the requested Advance.

     2.4  Interest  Rates  and  Interest  Payments.  Section  2.4 of the  Credit
Agreement is amended in its entirety as follows:

     2.4 Interest Rates, Interest Payments and Default Interest.  Interest shall
accrue and be payable on the Advances as follows:

     2.4(a) Each  Advance  shall bear  interest on the unpaid  principal  amount
thereof at a rate per annum  equal to the sum of (i) the  Reference  Rate,  plus
(ii) 1%.

     2.4(b) Upon the happening of any Event of Default,  each Advance shall,  at
the option of the Lender,  bear interest  until paid in full at a rate per annum
equal to the sum of the rate applicable to such Advance plus 2.0%.

     2.4(c)  Interest shall be payable (i) on the first day of each month;  (ii)
upon any permitted prepayment (on the amount prepaid);  and (ii) with respect to
all Advances on the Revolving Maturity Date; provided that interest under clause
(b) shall be payable on demand.

     2.4(d)  Interest  on the Term  Note is at the rate and  payable  (i) at the
Reference  Rate plus (ii) 1.5%.  Upon the happening of an Event of Default,  the
Term Note,  shall at the option of the Lender,  bear interest until paid in full
at a rate per annum  equal to the sum of the rate  otherwise  applicable  to the
Term Note plus 2.0%.

     2.5  Interest  Rate Not  Ascertainable,  Etc.  Section  2.13 of the  Credit
Agreement is deleted in its entirety.

     2.6 Increased Cost.  Section 2.14 of the Credit Agreement is deleted in its
entirety.

     2.7  Illegality.  Section  2.15 of the Credit  Agreement  is deleted in its
entirety.

     2.8 Funding Losses.  Section 2.16 of the Credit Agreement is deleted in its
entirety.

     2.9  Discretion  of Lender as to Manner  of  Funding.  Section  2.17 of the
Credit Agreement is deleted in its entirety.

     2.10 The Notes.  The  Revolving  Note  attached to the Credit  Agreement as
Exhibit  2.3(a) is amended in its entirety to read as set forth on the Revolving
Note attached hereto as Exhibit A, all references in the Credit Agreement to the
Revolving Note shall mean the Revolving Note dated as of the date hereof, in the
form attached hereto.  The Term Note attached to the Credit Agreement as Exhibit
2.3(b) is amended in its entirety to read as set forth on the Term Note attached
hereto as Exhibit B, all  references  in the Credit  Agreement  to the Term Note
shall  mean the Term  Note  dated as of the date  hereof,  in the form  attached
hereto.

     Section 3.  Conditions  and  Effectiveness.  This  Amendment  shall  become
effective  on  the  date  hereof,   only  upon  satisfaction  of  the  following
conditions:

     (a) The  Borrower  shall have  executed  and  delivered  to the Lender this
Fourth Amendment.

     (b) The Lender shall have received an amended and restated  Revolving  Note
executed by the Borrower in form and substance satisfactory to the Lender.

     (c) The  Lender  shall have  received  an amended  and  restated  Term Note
executed by the Borrower in the form and substance acceptable to the Lender.

     (d) The Lender shall have received a copy of the  resolutions  of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this  Amendment  certified as true and accurate by its Secretary or Assistant
Secretary,  along with a certification by such Secretary or Assistant  Secretary
certifying as to (i) no change in the Articles of Incorporation or Bylaws of the
Borrower since true and accurate copies of the same were delivered to the Lender
with a Certificate  of the Secretary of the Borrower and (ii)  identifying  each
officer of the  Borrower  authorized  to execute  this  Amendment  and any other
instrument  or  agreement  executed  by the  Borrower  in  connection  with this
Amendment  (collectively,  the  "Amendment  Documents"),  and  certifying  as to
specimens of such  officer's  signature  and  incumbency in such offices as such
officer holds.

     (e) The Lender shall have  received an executed  consent and  reaffirmation
from each guarantor in form and substance acceptable to the Lender.

     (f) The Lender shall have  received an executed  reaffirmation  of security
agreement  from  each  of the  Borrower's  subsidiaries  in form  and  substance
acceptable to the Lender.

     (g) The Lender shall have received  such other  documents as the Lender may
reasonably request.

     (h) The Borrower shall have satisfied such other conditions as specified by
the Lender,  including payment of all unpaid legal fees and expenses incurred by
the Lender  through the date of this  Amendment  in  connection  with the Credit
Agreement and the Amendment Documents.

     Section 4. Waiver.  Pursuant to the provisions of Section 6.8 of the Credit
Agreement the Borrower agreed that its Tangible Net Worth would not be less than
$4,000,000  at any time.  The Borrower has reported that it has failed to comply
with the provisions of Section 6.8 of the Credit Agreement for the periods ended
July 1, 2000 through  September 30, 2000. The Lender hereby waives the Events of
Default under the Credit Agreement due to the Borrower's  failure to comply with
the provisions of Section 6.8 of the Credit Agreement for the periods ended July
1, 2000 through September 30, 2000.

     This waiver is limited to the express  terms hereof and shall not extend to
any other Default, Event of Default or period. This waiver is not, and shall not
be deemed, a course of performance upon which the Borrower may rely with respect
to any other Default,  Event of Default or request for a waiver and the Borrower
expressly waive any such claim.

     Section 5.  Acknowledgment.  The  Borrower and the Lender  acknowledge  and
agree  that as hereby  amended  the Credit  Agreement  remains in full force and
effect. All references in the Credit Agreement to "this Agreement",  or "herein"
or similar  references  shall mean the Credit  Agreement as amended herein.  The
Borrower represents and warrants that the Borrower has the power and legal right
and  authority  to  enter  into  this  Amendment  and  has  duly  authorized  as
appropriate the executed and deliver of this Amendment and other  agreements and
documents  executed  and  delivered by the  Borrower in  connection  herewith or
therewith by proper corporate action. The Borrower  acknowledges and agrees that
the security  interests granted to the Lender pursuant to the Security Agreement
secure all  liabilities  and  obligations of the Borrower to the Lender and this
Agreement, as hereby amended.

     Section 6.  Counterparts.  This  Amendment  may be  executed in one or more
counterparts  and by  separate  parties on separate  counterparts  with the same
effect as if the signatures thereto were on the same instrument and shall become
effective  when  counterparts  executed by all parties have been received by the
Lender.

     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
Credit  Agreement to be executed by their officers  thereunto duly authorized as
of the date first above written.

                                                INDUSTRIAL RUBBER PRODUCTS, INC.


                                                By:      /s/
                                                Its:     VP-CFO

                                                U.S. BANK NATIONAL ASSOCIATION

                                                By:      /s/
                                                Its:     VP



<PAGE>

                                  EXHIBIT A TO
                               SECOND AMENDMENT TO
                                CREDIT AGREEMENT
                               EXHIBIT 2.3 (a) TO
                                CREDIT AGREEMENT
                                 REVOLVING NOTE

$2,000,000                                                    December 31, 2000
                                                             Hibbing, Minnesota

     FOR  VALUE  RECEIVED,  INDUSTRIAL  RUBBER  PRODUCTS,  INC.,  a  corporation
organized  under the laws of the State of Minnesota,  hereby  promises to pay to
the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") at its main office in
Hibbing,  Minnesota,  in  lawful  money  of the  United  States  of  America  in
immediately  available  funds on the  Revolving  Maturity Date (as such term and
each other  capitalized  term used  herein are  defined in the Credit  Agreement
hereinafter  referred  to) the  principal  amount of TWO MILLION  DOLLARS AND NO
CENTS  ($2,000,000)  or, if less, the aggregate  unpaid  principal amount of all
Revolving  Advances  made by the Lender under the Credit  Agreement,  and to pay
interest  (computed  on the basis of actual days elapsed and a year of 360 days)
in  like  funds  on the  unpaid  principal  amount  hereof  from  time  to  time
outstanding at the rates and times set forth in the Credit Agreement.

     This Note is the Revolving Note referred to in the Credit  Agreement  dated
as of March 30, 1999 as amended by the First Amendment to Credit Agreement dated
as of September 30, 1999, by that Second  Amendment to Credit Agreement dated as
of March 31, 2000, by that Third Amendment to Credit  Agreement dated as of June
9, 2000 and as further  amended by that  Fourth  Amendment  to Credit  Agreement
dated of even  date (as the same may be  hereafter  from  time to time  amended,
restated or modified,  the "Credit  Agreement")  between the undersigned and the
Lender.  This note is secured, it is subject to certain permissive and mandatory
prepayments and its maturity is subject to  acceleration,  in each case upon the
terms provided in said Credit  Agreement.  This note is issued in  substitution,
extension  and  replacement  of, but not in payment of, a Revolving  note in the
original  principal  amount  of  $2,000,000  dated as of June 9,  2000  from the
Borrower to the Lender.

     In the event of default hereunder,  the undersigned agrees to pay all costs
and  expenses  of  collection,   including   reasonable   attorneys'  fees.  The
undersigned waives demand, presentment, notice of nonpayment, protest, notice of
protest and notice of dishonor.

     THE  VALIDITY,  CONSTRUCTION  AND  ENFORCEABILITY  OF THIS  NOTE  SHALL  BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS  PRINCIPLES  THEREOF,  BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

                                               INDUSTRIAL RUBBER PRODUCTS, INC.


                                               By: /s/
                                               Title:  Pres

<PAGE>
               EXHIBIT B TO SECOND AMENDMENT TO CREDIT AGREEMENT
                 EXHIBIT 2.3 (b) TO CREDIT AGREEMENT TERM NOTE

$4,848,106.77                                                December 31, 2000
                                                        Minneapolis, Minnesota

     FOR VALUE RECEIVED,  INDUSTRIAL  RUBBER PRODUCTS,  INC., a corporation duly
organized  under the laws of the State of Minnesota,  hereby  promises to pay to
the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") at its main office in
Hibbing,  Minnesota,  in  lawful  money  of the  United  States  of  America  in
immediately  available  funds on April 30, 2001,  the  principal  amount of FOUR
MILLION EIGHT HUNDRED  FORTY-EIGHT  THOUSAND ONE HUNDRED SIX AND 77/100  DOLLARS
($4,848,106.77),  and to pay  interest  (computed  on the basis of  actual  days
elapsed  and a year of 360 days) in like  funds on the unpaid  principal  amount
hereof  from  time to time  outstanding  at the rate and  times set forth in the
Credit Agreement.

     This note is the Term Note referred to in the Credit  Agreement dated as of
March 30, 1999 as amended by that First  Amendment to Credit  Agreement dated as
of September 30, 1999, by that Second  Amendment to Credit Agreement dated March
31, 2000, by that Third  Amendment to Credit  Agreement dated as of June 9, 2000
and by that Fourth  Amendment to Credit  Agreement of even date (as the same may
hereafter  be from time to time  amended,  restated or otherwise  modified,  the
"Credit Agreement") between the undersigned and the Lender. This note is secured
and its  maturity  is  subject  to  acceleration,  in each  case  upon the terms
provided  in said  Credit  Agreement.  This  note  is  issued  in  substitution,
extension and replacement of, but not in payment of, a Term Note in the original
principal amount of $4,848,106.77  dated as of June 9, 2000 from the Borrower to
the Lender.

     In the event of default hereunder,  the undersigned agrees to pay all costs
and  expenses  of  collection,   including   reasonable   attorneys'  fees.  The
undersigned waives demand, presentment,  notice of nonpayment, notice of protest
and notice of dishonor.

     THE  VALIDITY,  CONSTRUCTION  AND  ENFORCEABILITY  OF THIS  NOTE  SHALL  BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS  PRINCIPLES  THEREOF,  BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

                                               INDUSTRIAL RUBBER PRODUCTS, INC.

                                               By:      /s/
                                               Its:     VP-CFO


<PAGE>

                            LEASE ADDENDUM AGREEMENT

     This Lease Addendum is made effective the 30th day of June,  2000,  between
Daniel  O.  Burkes   ("Landlord")  and  Irathane  Systems,   Inc.,  a  Minnesota
corporation ("Tenant"), for the following reasons:

     A. The Landlord and Tenant  entered into a lease dated January 1, 2000 (the
"Lease")  whereby  Landlord  leased to Tenant  certain  portions of the premises
legally  described  as  Lots  6  and  8,  Block  4,  Hibbing   Industrial  Park,
specifically,  the portion of the building and improvements shown on the Exhibit
A  attached  to  the  Lease  and a  portion  of the  parking  lot,  all as  more
particularly described in the Lease;

     B. The Lease had been entered into prior to the  finalization  of the plans
of Irathane Systems with respect to its Colorado facility, and subsequent to the
Lease,  Irathane  Systems has transferred to Hibbing,  Minnesota  certain of the
assets,  facilities  and  equipment  of the  Colorado  facility and has incurred
substantial  expenses in connection with the remodeling and  reconfiguration  of
the leased premises;

     C. Landlord and Tenant both understand and agree that the term of the Lease
must be  extended,  and that  certain  other of the terms of the Lease should be
amended; and

     D. Landlord and Tenant having  agreed on such  amendments,  are desirous of
setting forth in writing their amendments and modifications to the Lease;

         NOW,  THEREFORE,  the  parties  hereto in  consideration  of the mutual
covenants herein contained and for other good and valuable consideration, hereby
agree that the Lease is hereby amended as follows:

     1. The term of the Lease is extended  for seven (7)  additional  years from
and after  December  31,  2002,  so that the term of the Lease  will be ten (10)
years from January 1, 2000 to and including December 31, 2009, unless the Lease,
as amended, shall sooner end and terminate as provided in the Lease.

     2.  Commencing  with the fourth  lease year,  the lease year  beginning  on
January 1, 2003, and continuing  through  December 31, 2003, and each lease year
thereafter, the basic rent (the rent payable pursuant to Article 2 of the Lease)
shall be increased by an inflation  adjustment in accordance with the provisions
of Exhibit A, attached hereto.

     3. The  Purchase  Price under the terms of Article 29,  Option to Purchase,
shall for the fourth  lease year,  the lease year from  January 1, 2003  through
December  31,  2003,  and for each  lease  year  thereafter,  be  subject  to an
inflation  adjustment  in accordance  with the  provisions of Exhibit A attached
hereto.

     4. Except as otherwise  amended  herein,  the terms and  conditions  of the
Lease remain in full force and effect.

     IN WITNESS WHEREOF the undersigned have executed this agreement this day of
, 2000.

                                                       IRATHANE SYSTEMS, INC.


                                                       By:
Daniel O. Burkes                                       Its:



Nancy J. Burkes

STATE OF MINNESOTA                  )
                                    )SS
COUNTY OF ST. LOUIS                 )

     On this day of , 2000,  before me personally  appeared Daniel O. Burkes and
Nancy J. Burkes, to me known to be the persons described in and who executed the
foregoing  instrument and acknowledged that they executed the same as their free
act and deed.



                                                     Notary Public

STATE OF MINNESOTA                  )
                                    )ss
COUNTY OF ST. LOUIS                 )

     On this day of , 2000,  before me  personally  appeared  , the of  Irathane
Systems,  Inc.,  to me known to be the person  described in and who executed the
foregoing  instrument and acknowledged that he executed the same as his free act
and deed, and the free act and deed of said corporation.



                                                              Notary Public