FORM 10-KSB

     SECURITIES AND EXCHANGE COMMISSION
         Washington, D.C. 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE
     ACT OF 1934
    For the fiscal year ended December 31, 1999

[ ] 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                                41-1550505

    (State or other jurisdiction                      (I.R.S. Employer
     of incorporation or organization)               Identification No.)

     3804 East 13th Street, Hibbing, MN               55746

     (Address of principal executive offices)     (Zip Code)

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

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
<PAGE>

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, 1999: $12,985,301

     Aggregate Market Value of Stock held by Non-Affiliates of the Company as of
March 15, 2000, : $4,087,846  based on a closing  average bid and asked price on
that date of $1.5469 per share.

     The number of shares of the Company's Common Stock  outstanding as of March
15, 2000, is 4,187,205.

Transitional Small Business Disclosure Form:           Yes: [  ] ; No: [X].
                                               - - -         - - -

Documents Incorporated by Reference

Portions of the Proxy Statement for the 2000 Annual Meeting of Shareholders  are
incorporated by references in Part III.

               TABLE OF CONTENTS

PART I

    Item 1:    Description of Business....................................  4
    Item 2:    Description of Property.................................... 16
    Item 3:    Legal Proceedings.......................................... 18

<PAGE>

    Item 4:    Submission of Matters to a Vote of Security Holders........ 18

Part II

    Item 5:    Market for Common Equity and Related Stockholder Matters... 18

    Item 6:    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations..................... 19

    Item 7:    Financial Statements....................................... 23

    Item 8:    Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure.................... 23
PART III

    Item 9:     Directors, Executive Officers, Promoters and Control
                    Persons; Compliance with Section 16(a) of the
                    Exchange Act.......................................... 23
    Item 10:   Executive Compensation..................................... 24
    Item 11:   Security Ownership of Certain Beneficial Owners
                    and Management........................................ 24
    Item 12:   Certain Relationships and Related Transactions............. 24
    Item 13:   Exhibits and Reports on Form 8-K........................... 24

<PAGE>


PART I

Special Note Regarding Forward-Looking Statements

Certain   matters   discussed   in  this  Annual   Report  on  Form  10-KSB  are
"forward-looking  statements"  intended  to qualify  for the safe  harbors  from
liability  established by the Private Securities  Litigation Reform Act of 1995.
These forward-looking 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
forward-looking  statements.  Such  forward-looking  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
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking  statements.  The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no obligation
to publicly update such forward-looking  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 executive 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
<PAGE>

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 approximately $3 million in 1998 and 1999.

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 has 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 produces 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.

In October of 1999, the Company became the  distributor for Nordberg Sales Corp.
("Nordberg")  covering 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

<PAGE>

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 all  three
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.


<PAGE>

Steel Cast Parts

Industrial  Rubber Products was recently selected by Nordberg as its distributor
in Minnesota and Michigan for Nordberg and Scanmec  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.
<PAGE>

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  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 46 million tons of
<PAGE>

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,  nine 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 the North
American  hard  rock  mining  market  with  its  present  rubber  products,  the
development  and sales of new  products,  sales to new markets  outside of North
America and sales of present and new products to new markets.

Industrial  Rubber's marketing  strategy is to maximize  penetration of domestic
markets,  including mineral  processors,  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

<PAGE>

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,  and Chilean markets and, when
appropriate,  will be implemented  elsewhere.  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.

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.

STATUS OF PUBLICLY ANNOUNCED NEW 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.   The  backlog  for  these  products  on  January  1,  2000,  was
approximately  $1 million.  In March 2000,  the  Company and  Nordberg  signed a
five-year supply alliance with Cleveland Cliffs for their six mining  operations
in Minnesota  and Michigan.  Under the terms of the  alliance,  the Company will
distribute  for  Nordberg,  90% of the Cliffs  operational  needs of the covered
items,  or from $7 to 10 million  annually for the six properties in total.  The
Company  will begin to supply the  Cliff's  properties  in April and May of this
year.


<PAGE>

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
supply of raw materials from large nationally recognized chemical companies. The
Company


<PAGE>

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 the 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,
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.
<PAGE>

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, 2000. 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,  the
Colorado Springs  Irathane  facility,  or any other  Industrial  Rubber 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 part of the
Irathane  acquisition.  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


<PAGE>

elastomeric  research industry, a technician and a clerk.

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  intends  to
participate  with  OSHA in a program  to limit or  correct  future  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
<PAGE>

legislation  andregulations  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.

During 1997,  the  Minnesota  Pollution  Control  Agency  ("MPCA")  notified the
Company  that it was required to complete an initial  investigation  of possible
soil contamination  caused by the previous owner of the Minnesota  facility.  In
June of 1998  representatives  from the  MPCA's  Regulatory  Compliance  Section
("RCS")  collected  samples from the former drum storage area.  All results were
reported as below detection limits;  therefore,  no further soil or ground water
investigation is necessary at this time.

RECENT EVENTS

On December 30, 1999, the Board of Directors,  with the recommendation  from the
Executive Management team, approved two facility consolidation initiatives.

First, the Arizona production facility was shutdown.  The facility,  which began
operations in 1999,  had incurred  continuing  losses and had not  accumulated a
backlog of future work. The manager of the facility will remain in the Southwest
territory  in  a  sales   function   with  orders   directed  to  other  Company
manufacturing facilities.  The facility had only two other employees.  Since the
Company  currently does not have a use for the production  equipment in Arizona,
the equipment  (approximately  $250,000 net book value) was written off in 1999.
In addition,  the
<PAGE>

Company recorded a provision in 1999 of approximately $100,000 to cover the
remaining two years on the leased facility.  The Company is currently attempting
to sublease the facility.

Second,  the Board approved the sale of the Colorado  Springs land and buildings
for about $1.7 million. The proceeds of the sale will be used to retire existing
bank debt. The Colorado  manufacturing  operations  will be moved to the current
Irathane  facility in Hibbing,  Minnesota.  The  Company  anticipates  that most
Colorado  employees  will not  transfer  to  Hibbing,  and  recorded  a $100,000
provision in 1999 to cover the severance  cost of these  employees.  The Company
intends  to  lease a  small  facility  in  Colorado  Springs  for  research  and
development.

EMPLOYEES

As of February 15, 2000,  Industrial Rubber had 115 employees,  all of whom were
fulltime;  75 were  production  workers (51 union);  the other 40 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 out-sourcing of work.

Item 2:  Properties

The Company  currently  has five  manufacturing  facilities.  Three of these are
owned and two are leased. Two are in Hibbing,  Minnesota  (Industrial Rubber and
Irathane);  and one each in Colorado Springs,  Colorado;  West Jordan, Utah; and
Sudbury,  Ontario.  On December 30,  1999,  the Company  closed a  manufacturing
facility in Casa Grande, Arizona that it was leasing.

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 $297,103,  as of December 31, 1999.  This facility is
used to produce  proprietary  rubber and rubber lined  products that are used in
the  taconite  industry  and also shipped
<PAGE>

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 30,000 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. This facility also houses sales and technical support staffs.

The Colorado Springs facility is a 40,000 square foot  manufacturing  and office
facility that the Company owns.  This facility is used to produce  urethane cast
products primarily used in the taconite industry of Minnesota and Michigan. This
facility also produces the liquid  prepolymers for all of Irathane's  facilities
and for licensees in Chile and India.  The Company decided on December 30, 1999,
to sell this facility and consolidate  operations in the Hibbing  facility.  The
closing is  anticipated to take place on March31,  2000. The Company  expects to
lease a facility in the Colorado  Springs area for its research and  development
efforts.

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 course of the lease.

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 distribution center and 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.


<PAGE>

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 25,  1999,  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  mark-ups,   mark-downs  or  commissions  and  do  not
necessarily reflect actual  transactions.  The Company's initial public offering
date was April 24, 1998.
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
         Quarter         High      Low

1998
          1st             n/a       n/a
          2nd            4-7/8     3-1/4
          3rd            3-7/8       2
          4th            2-3/4       1

1999
          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, 1998 and December
31, 1999, was 50 and 1,000, respectively.
<PAGE>

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 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  to 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 $9,405,836 in 1999.  These  increases  were
partially offset by a decrease in major pipelining  projects,  which the Company
had none of during 1999.

Although the Company  continues to pursue major  projects,  depressed  commodity
(copper and gold) prices make the near-term likelihood of such projects low. The
Company is not  projecting any sales from major  projects in 2000.  Rather,  the
Company is projecting  sales growth through a full year of the above  referenced
1999 acquisitions,  which are estimated to produce about $12 million in sales in
2000,  and the addition of the Nordberg  distributorship.  This  distributorship
agreement, which was finalized in October of 1999, is expected to result in 2000
sales of more than $4 million.

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.  The
Company  expects cost of sales in 2000 to improve to levels similar to or better
than 1998 results.
<PAGE>

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  accounting  costs  required  to  complete  the  acquisitions.  Recent
restructuring  and  consolidation  efforts  will lead to a reduction in absolute
dollars  and a  reduction  as a percent  of sales  from just over 30% in 1999 to
under 20% in 2000.

The Company  experienced a $505,991 pre-tax  provision for  restructuring  costs
associated with the closing of the Casa Grande, Arizona facility  (approximately
$408,000) and the closing and transfer of the Colorado Springs  manufacturing to
Hibbing,  Minnesota. These closures and consolidations are expected to result in
cost savings,  with no impact on sales. Also, the Colorado Springs facility will
be sold on March 31, 2000,  for $1.7  million,  with the net proceeds to be used
for debt reduction.

Net non-operating  expense for 1999 was $429,988,  compared to net non-operating
income of $107,466 in 1998.  Interest  income in 1999 was  $41,736,  compared to
$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,
as a C Corporation, 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 accounting provisions previously discussed.

FISCAL 1998 COMPARED WITH 1997

Net sales in the year ended December 31, 1998, of $9,981,268 decreased 30.8%, or
$4,440,091,  when  compared  with 1997 sales of  $14,421,359.  The  decrease was
mainly  attributable  to the decrease in major  contracts.  In 1997, the Company

<PAGE>

realized  nearly  $8.1  million  in net sales  from the  Kennecott  Utah  Copper
pipe-lining  project.  During 1998 the  Company's  net sales  included two major
projects  which totaled  approximately  $4.1 million.  As a result,  the Company
experienced a reduction of about $4.0 million in net sales from major projects.

The Company's order backlog on December 31, 1998, was approximately $789,290.

Cost of sales as a percentage of net sales was 78.0% in 1998 compared with 69.0%
in 1997.  The increase  was  primarily  the result of a loss in major  projects,
which are  generally  more  profitable  and provide  certain  economies-of-scale
benefits.

Selling,  general and administrative  expenses increased from $1,664,611 in 1997
to $2,342,553 in 1998.  Approximately  $300,000 of the $677,942 increase was the
result of increased  administrative personnel and associated expenses related to
organizing and operating a public company.  In addition,  the Company recorded a
$280,000  allowance for doubtful  accounts to cover the entire trade  receivable
balance from Kemess Royal Oak mines,  which filed for protection  under Canadian
bankruptcy  law. The Company also  recorded an $81,000 loss in achieving a final
and complete out-of-court settlement with IRM/NAPTech, concerning certain claims
related to the $10 million pipelining project.

The Company experienced a $209,881 pre-tax provision for the restructuring costs
associated  with  the  closing  of  the   Clearfield,   Utah  facility  and  the
consolidation of Clearfield operations at the acquired facilities of TJ Products
in nearby West Jordan, Utah.

Non-operating  income  increased  from  $3,620  in 1997 to  $245,713.  This
increase  was the result of interest  income  earned on the net  proceeds on the
initial public offering on April 24, 1998, and approximately $81,000 of interest
earned on trade receivable accounts. Interest expense increased from $110,731 in
1997 to  $138,247  in 1998.  The  primary  reasons  for the  increase  is higher
short-term  borrowing  early in the year to fund  trade  receivables,  partially
offset  by  reduced  long-term  borrowing  early  in  the  year  to  fund  trade
receivables,  partially  offset by reduced  long-term  interest due to the early
retirement of equipment loans in 1997.

As  discussed  elsewhere in the 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 1997 would have been $1,038,000. It is estimated that income
taxes for
<PAGE>

1998 would have been a credit of $80,000.

The  pro-forma  net loss of  $168,454,  or $.04 per basic and diluted  share for
1998,  represents a decrease from pro forma net income of $1,663,767 or $.54 per
basic and diluted  share of the prior  year.  This change was due to the reduced
sales and increased costs and expenses previously discussed.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  cash flows  provided by operating  activities  were $166,989 for
1999,  which compared with  $1,651,198 in 1998. The primary  difference was that
1999  included a loss of  $1,618,635,  while 1998  showed net income of $88,546.
Both periods had  favorable  working  capital of about $1.5 million  before debt
reduction in 1999, and $1.1 million in 1998.

Cash flows used for investing  activities were $8,564,648 in 1999, compared with
$2,296,703 in 1998. The 1999  investment  activity  included  $9,716,015 for the
acquisitions of TJ Products and Irathane  Systems.  This was partially offset by
proceeds from marketable  securities of $1,642,784.  In 1998 $2,467,784 was used
for investment in marketable securities.

The Company's cash flows  provided by financing  activities  were  $6,233,752 in
1999. Nearly the entire amount,  $6,500,000,  was proceeds from bank borrowings.
In 1998, the Company's cash flows  provided by financing were  $3,229,127.  This
was  made  up of  proceeds  from  the IPO of  $5,463,276,  partially  offset  by
repayment of bank borrowings of $1,135,000 and dividends,  for tax payments,  of
$1,095,000.

In total,  the Company had a decrease in cash in 1999 of  $2,152,121,  leaving a
cash balance of $563,845 as of December 31, 1999.

The Company  believes  that the recent  extension of the line of credit and term
loan to June 30, 2000, reflects the Company's improved financial  performance in
January and February of 2000,  and the Company's  commitment to use the proceeds
of the  anticipated  sale of its Colorado land and buildings to reduce debt. The
Colorado  sale,  which is scheduled  for March 31, 2000, is expected to generate
proceeds of  $1,700,000.  The Company  voluntarily  reduced  debt by $500,000 in
November of 1999, and therefore anticipates the Bank note to be $4,800,000 after
the Colorado sale. The Company  anticipates  that the events outlined above, and
expected  profitable  performance  in 2000 will  enable it to continue to extend
their financing with US Bank, and in the future conclude a definitive  long-term
loan with US Bank or another lending institution.


<PAGE>

The  Company  believes  that  it can  fund  proposed  capital  expenditures  and
operational  requirements from operations,  currently available cash and renewed
bank credit lines. Proposed capital expenditures for the year ended December 31,
2000, are expected to total approximately $500,000, and compare with $435,000 in
1999, and $618,000 in 1998.

The Company intends to continue to grow its business  through  internal  growth,
including  the  maximization  of  recent  acquisitions,  and  through  strategic
alliances.

Year 2000

In the  ordinary  course of  business  over the last two years,  the Company has
replaced several personal computers and software.  These  replacements  required
minimal expenditures.  The Company established formal Year 2000 plans during the
past several  years to minimize the  potential  impact from  in-house  operating
systems and from suppliers,  with regard to the Year 2000 issue.  These efforts,
which required  minimal  expenditures,  were  successful in that the Company has
experienced  no  interruptions  form  internal  systems  or from  suppliers.  No
critical projects were deferred because of Year 2000 issues.

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 2000.
<PAGE>

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 2000.

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 2000.

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 2000.

Item 13. Exhibits and Reports from 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.


<PAGE>

     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 May 28, 1998 (Filed as Exhibit  10.4 to Form SB-2 dated
          February 20, 1998 File No. 333-46643).

     10(4)* Labor Agreement  between Irathane Systems and Midwestern  Industrial
          Council dated June 30, 1999.

     10(5)* Labor Agreement between Industrial Rubber  Products-Canada  Inc. and
          International  Brotherhood  of Painters  and Allied  Trades Local 1904
          dated April 1, 1999.

     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.

     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 U.S. Bank
          National Association dated September 30, 1999

     10(10) 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(11)*First Amendment to Lease Agreement between DGW Enterprises,  L.C and
          Company dated October 5, 1999.

     10(12)*Lease Agreement between Daniel O. Burkes and Irathane Systems,  Inc.
          dated January 1, 2000.


<PAGE>

     10(13) 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(14) 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(15) Secrecy  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(16)  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

PERIOD-TYPE                   Year
FISCAL-YEAR-END                              DEC-31-1999
PERIOD-START                                 JAN-01-1999
PERIOD-END                                   DEC-31-1999
CASH                                         563,845
SECURITIES                                   -

<PAGE>

RECEIVABLES                                  2,541,582
ALLOWANCES                                   382,000
INVENTORY                                    1,628,459
CURRENT-ASSETS                               4,804,417
PP&E                                         9,360,013
DEPRECIATION                                 1,884,460
TOTAL-ASSETS                                 14,464,220
CURRENT-LIABILITIES                          9,172,858
BONDS                                        291,202
PREFERRED-MANDATORY                          -
PREFERRED                                    -
COMMON                                       4,144
OTHER-SE                                     4,996,016
TOTAL-LIABILITY-AND-EQUITY                   14,464,200
SALES                                        12,985,301
TOTAL-REVENUES                               12,985,301
CGS                                          10,572,259
TOTAL-COSTS                                  15,062,948
OTHER-EXPENSES                               -
LOSS-PROVISION                               98,653
INTEREST-EXPENSE                             461,475
INCOME-PRETAX                                (2,507,635)
INCOME-TAX                                   (889,000)
INCOME-CONTINUING                            (1,618,635)
DISCONTINUED                                 -
EXTRAORDINARY                                -
CHANGES                                      -
NET-INCOME                                   (1,618,635)
EPS-BASIC                                    (0.39)
EPS-DILUTED                                  (0.39)


(b)    Reports on Form 8-K

  None

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.
<PAGE>

                                            INDUSTRIAL RUBBER PRODUCTS, INC.


Dated: March 29, 2000                       /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

/s/ Daniel O. Burkes                      President             March 29, 2000
--------------------                      Chief Executive Officer
Daniel O. Burkes                          And Director

/s/ Christopher M. Liesmaki               Vice President        March 29, 2000
---------------------------               Chief Operating Officer
Christopher M. Liesmaki                   And Director

/s/ Paul A. Friesen                       Director              March 29, 2000
-------------------
Paul A. Friesen

/s/ James D. Mackay                       Director              March 29, 2000
-------------------
James D. Mackay

/s/ John R. Ryan, Jr.                     Director              March 29, 2000
---------------------
John R. Ryan, Jr.


<PAGE>
                INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 1999


<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page

Report of independent auditors                                               1

Consolidated balance sheets as of December 31, 1998 and 1999               2 - 3

Consolidated statements of operations for the years ended December
31, 1998 and 1999                                                            4

Consolidated statements of stockholders' equity for the years ended

Consolidated statements of cash flows for the years ended December
31, 1998 and 1999                                                          6 - 7

Notes to consolidated financial statements                                8 - 22


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

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, 1998 and 1999, 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, 1998 and 1999, 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 4, 2000,  except of the last  paragraph of Note 6, as to which the
date is March 28, 2000

<PAGE>
<TABLE>
<CAPTION>

               INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 1998 and 1999

<S>                                              <C>                <C>
ASSETS (Note 6)                                   1998               1999
-------------------------------------------------------------------------------
Current Assets

   Cash and cash equivalents ................. $  715,966             $ 563,845
   Marketable debt securities (Note 4) .......  1,642,784
   Trade receivables, less allowance for
   doubtful accounts 1998 $280,000; 1999
    $382,000                                      947,364             2,159,582
   Income tax refund receivable ..............    254,200
   Inventories (Note 5) ......................    408,731             1,628,459
   Prepaid expenses ..........................     57,996               115,531
   Deferred taxes (Note 10) ..................    133,000               337,000
                              --------------------------------------------------
              Total current assets ...........  6,160,041             4,804,417
                              --------------------------------------------------

Other Assets

   Cash value of life insurance .............     135,166               180,524
   Goodwill, at cost, less accumulated
                  amortization $68,431 (Note 2) 1,013,520
   Prepaid pension costs (Note 11) ...........     11,206
   Other .....................................     23,884
                              --------------------------------------------------
                              --------------------------------------------------
                                                  159,050             1,205,250
                              --------------------------------------------------

Deferred Taxes (Note 10) .....................    207,000               979,000
                              --------------------------------------------------

Property and Equipment (Note 7)
   Land ......................................     10,000               533,847
   Buildings .....................                572,907             2,057,287
   Automotive equipment ......................    458,759               621,296
   Machinery and equipment ...................  2,030,453             6,147,583
                              --------------------------------------------------
                                                3,072,119             9,360,013
   Less accumulated depreciation ............   1,372,420             1,884,460
                              --------------------------------------------------
                                                1,699,699             7,475,553
                              --------------------------------------------------
                                               $8,225,790           $14,464,220
                              ==================================================
See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                     1998               1999
-------------------------------------------------------------------------------
Current Liabilities
<S>                                                    <C>                <C>
   Bank note payable (Note 6)                    $        0         $6,500,000
   Current maturities of long-term debt (Note 7)    174,263             24,804
   Accounts payable                                 485,493          1,344,478
   Accrued expenses                                 547,034          1,212,576
   Income taxes payable                              91,000
                                                                    ----------
                                                                    ----------
              Total current liabilities           1,206,790          9,172,858
                                                                    ----------

Long-Term Debt, less current maturities (Note 7)    329,108            291,202
                                                                    ----------

Commitments and Contingencies (Notes 6, 13 and 14)

Stockholders' Equity (Note 8)
   Common stock, $.001 par value;
    authorized 25,000,000 shares;
    issued 1998 - 4,187,500 shares;
    1999 - 4,144,000 shares                            4,188             4,144
   Additional paid-in capital                      5,605,832         5,605,832
   Retained earnings (deficit)                     1,079,872          (617,602)
   Accumulated other comprehensive income              7,786
                                                                     ---------
                                                                     ---------
                                                   6,689,892         5,000,160
                                                                     ---------
                                                 $ 8,225,790      $ 14,464,220
                                                                    ==========
</TABLE>
<PAGE>

<TABLE>
               INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     Years Ended December 31, 1998 and 1999

                                                       1998           1999
-------------------------------------------------------------------------------
<S>              <C>   <C>                           <C>          <C>
Net Sales (Notes 2 and 3)                            $9,981,268   $12,985,301

Cost of Sales                                         7,784,754    10,572,259
                                                                   ----------
              Gross profit                            2,196,514     2,413,042

Operating Expenses                                    2,342,553     3,984,698
Provision for Restructuring of Operations (Note 13)     209,881       505,991
                                                                   ----------
              Operating loss                           (355,920)   (2,077,647)
                                                                   ----------

Nonoperating Income (Expense)
   Interest and other income                            245,713        41,736
   Interest expense                                    (138,247)     (461,475)
   Loss on sale of equipment                            (10,249)
                                                                   ----------
                                                                   ----------
                                                        107,466      (429,988)
                                                                   ----------

              Loss before income taxes                 (248,454)   (2,507,635)

Federal and State Income Taxes (Credits) (Note 10)     (337,000)     (889,000)
                                                                   ----------
              Net income (loss)                         $88,546   $(1,618,635)
                                                                   ==========

Unaudited Pro Forma Information (Note 10)
   Loss before income taxes                           $(248,454)
   Provision for income taxes (credits)                 (80,000)
                                                                   ----------
              Net loss                                $(168,454)
                                                                   ==========

   Basic loss per share                               $   (0.04)  $     (0.39)
                                                                   ==========

   Diluted loss per share                             $   (0.04)  $     (0.39)
                                                                   ==========

   Weighted average shares outstanding                3,803,651     4,167,351

See Notes to Consolidated Financial Statements                                                                   ==========
</TABLE>


<PAGE>
<TABLE>

                INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                     Years Ended December 31, 1998 and 1999

                                                                                      Accumulated

                                            Additional      Retained        Other          Total          Total
                         Common Stock         Paid-in       Earnings    Comprehensive  Stockholders'  Comprehensive
                    -----------------------
                     Shares      Amount      Capital        (Deficit)         Loss          Equity     Income (Loss)
--------------------------------------------------------------------------------------------------------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Balance,
December 31, 1997   2,934,000     $2,934     $143,816      $2,097,059       $0             $2,243,809

 Sale of 1,260,000
  of common stock,
  net (Note 8)      1,260,000      1,260    5,462,016       5,463,276
 Purchase of 6,500
  shares of stock      (6,500)      (6)        --             (10,733)         --             (10,739)
Dividends on common
 stock (Note 8)          --          --        --          (1,095,000)         --          (1,095,000)
 Net income              --          --        --              88,546          --              88,546      $88,546
                    ----------------------------------------------------------------------------------------------
Total comprehensive
 income                                                                                                    $88,546
                                                                                                        ==========
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
  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
                    ==================================================================================

</TABLE>
See Notes to Consolidated Financial Statements.

<PAGE>

               INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                     Years Ended December 31, 1997 and 1998

                                                       1998               1999
--------------------------------------------------------------------------------
Cash Flows from Operating Activities

   Net income (loss)                                       $88,546  $(1,618,635)
   Adjustments to reconcile net income (loss)
     to net cash provided by operating activities:
       Depreciation                                        394,592      800,744
       Amortization                                         98,431
       Provision for bad debts                             362,839       98,653
       Loss on disposal of property and equipment           41,451      250,736
       Deferred taxes                                     (340,000)    (980,000)
       Changes in working capital components, net
          of effects of  business combinations:
          Decrease in trade receivables                    972,434      207,399
          (Increase) decrease in income tax refund
          receivable                                      (254,200)     254,200
          Decrease in inventories                          431,632      179,901
          Increase in prepaid expenses                      (4,629)     (39,515)
          Increase (decrease) in accounts payable
          and accrued expenses                             (41,467)     824,075
          Increase in income taxes payable                  91,000
                                                          --------      --------
            Net cash provided by operating activities    1,651,198      166,989
                                                           --------     --------
Cash Flows from Investing Activities
   Purchase of property and equipment                     (617,649)    (434,714)
   Proceeds from sale of equipment                          18,655
   Disbursements for business combinations              (9,716,015)
   Disbursement for marketable debt securities          (2,467,784)
   Proceeds from maturity of marketable debt securities    825,000    1,642,784
   Disbursement for other assets                           (23,884)     (30,000)
   Increase in cash value of life insurance                (12,386)     (45,358)
                                                        -----------  ----------
              Net cash used in investing activities     (2,296,703)
                                                        -----------  ----------
Cash Flows from Financing Activities
   Net proceeds (repayment) on short-term borrowings    (1,135,000)   6,500,000
   Proceeds from long-term borrowings                      358,800
   Principal payments on long-term borrowings             (245,385)    (187,365)
   Proceeds from sale of common stock, net of
     issuance costs                                      5,463,276
   Disbursement for common stock reacquired                (10,739)     (78,883)
   Dividends paid on common stock                       (1,095,000)
   Repayment to related party                             (106,825)
                                                         ----------   ----------
              Net cash provided by financing activities  3,229,127    6,233,752
                                                         ----------   ----------

Increase in foreign currency translation adjustment                     11,786
                                                        -----------  -----------

             Net increase (decrease) in cash and
                cash equivalents                         2,583,622   (2,152,121)

Cash and cash equivalents:
   Beginning                                               132,344    2,715,966
                                                       -----------   -----------
   Ending                                              $ 2,715,966  $   563,845
                                                       ===========  ============
                                   (Continued)
<PAGE>

               INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                     Years Ended December 31, 1997 and 1998

                                                       1998                1999
--------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
   Cash payments for interest                          $  136,686   $   413,111
                                                       =========================

Cash payments for income taxes (net of refunds)        $  257,200   $  (254,100)
                                                         =========   ===========

Supplemental Schedule of Noncash Investing
   and Financing Activities
   Acquisition 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
                                                                   =============

See Notes to Consolidated Financial Statements.

<PAGE>

               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.

     Investment in debt  securities:  The Company had  investments in marketable
debt securities.  Management  determines the appropriate  classification  of the
securities at the time they are acquired and evaluates  the  appropriateness  of
such classifications at each balance sheet date.  Available-for-sale  securities
are stated at fair value,  and unrealized  holding gains and losses,  net of the
related  deferred  tax  effect,   are  reported  as  a  separate   component  of
stockholders' equity.

     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:

                                                                         Years
--------------------------------------------------------------------------------
Buildings                                                               19 - 39
Automotive equipment                                                     3 - 5
Machinery and equipment                                                  5 - 10

     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.

<PAGE>

     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.  As described in Note 10, the Company  changed its income tax
status during 1998.

     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, 1998 and
1999, advertising expense totaled $74,005 and $98,152, respectively.

     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.
Translation  adjustments  are included as a separate  component  of  accumulated
other comprehensive income (loss) 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  primarily all long-term  debt has interest rates
which fluctuates with or approximates the prime rate.

     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.

<PAGE>

     Earnings per share:  The FASB has issued  Statement  No. 128,  Earnings per
Share, which the Company adopted during the first quarter of 1998. Statement No.
128 requires the  presentation  of earnings per share by all entities  that have
common  stock  or  potential  common  stock,  such  as  options,   warrants  and
convertible  securities,  outstanding  that  trades  in a public  market.  Those
entities that have only common stock  outstanding  are required to present basic
earnings per-share amounts. All other entities are required to present basic and
diluted  per-share  amounts.  Diluted  per-share  amounts assume the conversion,
exercise or issuance of all potential common stock instruments unless the effect
is to reduce a loss or  increase  the income per  common  share from  continuing
operations.

     During the year ended  December 31, 1998,  the Company  granted  options to
employees  to  purchase  173,600  shares of common  stock at $4.50 per share and
issued underwriters warrants to purchase 126,000 shares of common stock at $6.00
per share.  Those options and warrants were not included in the  computation  of
diluted earnings per share 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 for cash certain assets 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.

     Unaudited pro forma consolidated  results of operations for the years ended
December  31,  1998 and 1999 as though  each  company  had been  acquired  as of
January 1, 1998 follows:

                                                       1998                1999
--------------------------------------------------------------------------------
Sales                                     $      22,500,000   $      15,303,155
Net loss                                           (333,000)         (1,592,024)
Loss per common share                              (0.05)              (0.38)

<PAGE>

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,
1998 and 1999:

                                                      1998                1999
--------------------------------------------------------------------------------
Urethane cast parts                                $      *         $ 5,047,809
Pipe and pipe lining products                        6,503,184        3,342,395
Coatings                                                  *             363,429
Spray                                                     *             385,222
Proprietary engineered products                        878,980          891,671
Standard rubber products                             2,107,511        2,097,454
Steel cast parts                                          *             315,741
Other                                                  491,593          541,580
                                                    -----------      -----------
                                                    $ 9,981,268      $12,985,301
                                                    ============================

*Relates to new products and services due to acquisitions in 1999.

     The  Company's  revenue  (based on location of the  customer) for the years
ended December 31, 1998 and 1999 is as follows:

                                                       1998             1999
--------------------------------------------------------------------------------
United States                                      $ 7,207,417      $11,816,264
Canada                                               1,808,399          311,895
Other countries                                        965,452          857,142
                                                    -----------     -----------
                                                   $ 9,981,268      $12,985,301
                                                    ============================

     Net sales for the years ended  December 31, 1998 and 1999 include  sales to
several major  customers,  each of which accounted for 10 percent or more of net
sales:

                                                         Amount of Net Sales
                                                        Year Ended December 31,
                                                      --------------------------
Customer                                               1998               1999
--------------------------------------------------------------------------------
Customer A                                         $ 1,252,635      $ 1,395,948
Customer B                                           2,424,942            *
Customer C                                           1,740,710            *

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


<PAGE>

     The  Company's  long-lived  assets  as of  December  31,  1998 and 1999 are
located as follows:

                                                     1998                 1999
--------------------------------------------------------------------------------
United States                                   $ 1,699,699         $ 6,864,372
Canada                                                                  611,181
                                                 -------------------------------
                                                $ 1,699,699         $ 7,475,553
                                                 ===============================


Note 4.      Marketable Debt Securities

     The  following is a summary of the  Company's  investment  in available for
sale securities in which fair value approximates cost as of December 31, 1998:

                                                                        Amount
--------------------------------------------------------------------------------
US government securities                                            $   448,028
Corporate debt securities                                             1,194,756
                                                           ---------------------
                                                                    $ 1,642,784
                                                           =====================

The debt securities matured in 1999.

Note 5.      Inventories

     Inventories consist of the following as of December 31, 1998 and 1999:

                                                           1998           1999
--------------------------------------------------------------------------------
Raw materials                                          $  241,756    $  891,300
Work in process                                           126,405        40,591
Finished goods                                               --         654,388
                                                      --------------------------
                                                          368,161     1,568,279
Raw materials purchased on behalf of customers             40,570        42,180
                                                     ---------------------------
                                                       $  408,731    $1,628,459
                                                     ===========================

     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
income do not include amounts for sales and purchases of components.

Note 6.      Notes Payable and Liquidity

     During 1999, the Company entered into a $2,000,000 revolving line of credit
for working  capital  financing and a $7,000,000 term loan with a bank which are
due on March  31,  2000  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 LIBOR Pricing Rate, plus 2.25% (8.73% at December 31,
1999).  Interest on the term loan is payable  monthly at the Wall Street Journal
Prime Rate (8.5% at December 31, 1999).

     At December 31, 1999,  $6,500,000 was  outstanding  under the term loan and
there was no outstanding balance on the revolving line of credit.

Among other things, the agreement requires the Company to:

    a. Maintain a tangible net worth of at least $5,500,000.
    b. Maintain a current ratio of at least 1.5 to 1.
    c. Maintain a leverage ratio of less than 1.75 to 1.
    d. Maintain all of its deposits with the bank.
    e. Refrain from  declaring or paying  dividends or redeem any of its common
stock.
    f. Refrain from incurring additional interest-bearing indebtedness.

     As of  December  31,  1999,  the  Company  was in default of certain of the
covenants under the line of credit and term loan with the Bank,  which is due on
March 31,  2000.  Under the  terms of the  agreement,  the Bank has the right to
declare all amounts immediately due and payable and terminate the agreement.  In
addition,  the Bank  exercised  its option  under the terms of the  agreement to
increase  the  interest  on the  line of  credit  and term  loan by 1.5  percent
effective  January 1, 2000.  The Company has received a waiver from the Bank for
loan covenant violations through December 31, 1999, however,  remains in default
subsequent  to December 31, 1999.  The Company and the lender are in the process
of  negotiations.  On March 28, 2000, the Company obtained a 90-day extension on
the line of credit and term loan through June 30,  2000.  Although  they are not
committed to do so, the Bank may extend the maturities of the line of credit and
term notes for an additional 90-day period or periods.  It is the Company's plan
to work with the lender to obtain the needed extensions, and to seek alternative
sources of  financing.  The Company will use the proceeds from the expected sale
of the Colorado facility on March 31, 2000, approximately  $1,700,000, to reduce
the term loan with the Bank.

Note 7.      Long-Term Debt

     A summary of long-term debt as of December 31, 1998 and 1999 is as follows:

                                                             1998         1999
--------------------------------------------------------------------------------
Note payable bank, due in monthly  installments of
   $1,576 including  interest at 8.5% to April 2003,
   at which time the remaining balance is due.          $ 156,527     $ 150,889
Note payable bank, in participation with the
   Iron Range Resources Rehabilitation Board due
   in monthly installments of $1,144 including
   interest at 3.5% to April 2003, at which time
   the remaining balance is due.                          154,589       146,214
Other notes payable due through November 2002.             46,715        18,903
Note payable, paid in full during 1999.                   145,540          -
                                                      --------------------------
                                                          503,371       316,006
Less current maturities                                   174,263        24,804
                                                      --------------------------
                                                       $  329,108    $  291,202
                                                      ==========================



<PAGE>


     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,  1999;  however,  these
violations have been waived by the Bank.

     Aggregate maturities required on long-term debt as of December 31, 1999 are
as follows:

Years Ending December 31,                                            Amount
--------------------------------------------------------------------------------
2000                                                          $          24,804
2001                                                                     21,557
2002                                                                     20,545
2003                                                                    249,100
                                                              ------------------
                                                              $         316,006
                                                              ==================

Note 8.      Stockholders' Equity

     In January  1998,  the Company  amended its  Articles of  Incorporation  to
increase  the number of  authorized  shares of common  stock to  25,000,000  and
declared  a  stock  split  so  that  2,934,000   shares  of  common  stock  were
outstanding.

     On April 24, 1998,  the Company  completed an initial  public  offering and
issued  1,260,000  shares of common  stock  (excluding  the  underwriters'  over
allotment option to purchase an additional 189,000 shares of common stock) at an
offering price of $5.00 per share. Proceeds raised from the sale of common stock
amounted to $5,463,276, net of offering expenses of $836,724.

     In connection with the initial public offering, the Company issued warrants
to the  underwriters  to purchase  126,000 shares of the Company's  common.  The
warrants may not be exercised  during the first year after the effective date of
the offering and are exercisable  during a period of four years  thereafter at a
price equal to $6.00 per share.

     The Company made  distributions  totaling  $1,095,000 during 1998 to enable
the  stockholder to pay income taxes on the Company's  income for the year ended
December 31, 1997 and period ended March 31, 1998.

     In November 1998, the Board of Directors  authorized a plan that allows the
Company to purchase  up to 50,000  shares of the  Company's  common  stock.  The
Company  repurchased and cancelled 6,500 shares at a cost of $10,739 in 1998 and
43,500 shares were  repurchased and cancelled at a cost of $78,883 in 1999. Note
9.

Stock Option and Bonus Plan

     At December 31, 1999, 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 loss and loss per share would have been  reduced to the
pro forma amounts shown below:

                                                     1998               1999
-------------------------------------------------------------------------------
Net loss:
   As reported                             $      (168,454)   $     (1,618,635)
   Pro forma                                      (189,254)         (1,641,956)

Basic loss per share:
   As reported                             $         (0.04)   $          (0.39)
   Pro forma                                         (0.05)              (0.39)

Diluted loss per share:
   As reported                             $         (0.04)   $          (0.39)
   Pro forma                                         (0.05)              (0.39)

     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:

Weighted-average assumptions                        1998              1999
------------------------------------------------------------------------------
Dividend rate                                         -                 -
Price volatility                                      -               55.50%
Risk-free interest rate                            5.75%               5.60%
Expected lives of options                              4                   4


<PAGE>


     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
$1.875 and $4.50 per share which  approximates  fair market value at the date of
grant and  expire  five  years  after  date of  grant.  Options  at $1.875  vest
immediately.  Options at $4.50  generally  vest at a rate of 25 percent per year
over a period of four years from the date of grant.

     A summary of the stock option plan is as follows:

                                  1998                         1999
                          --------------------------  --------------------------
                                   Weighted-Average            Weighted-Average
                          Shares    Exercise Price    Shares     Exercise Price
--------------------------------------------------------------------------------
Under option,
beginning of year           --        $  --          169,200        $  4.50
  Granted                173,600       4.50           33,750           1.875
  Exercised                 --           --             --              --
  Forfeited               (4,400)      4.50          (32,000)          4.50
                          ---------------------------------------------------
Under option,
end of year              169,200                      170,950
                        =========                     ========
Options exercisable,
end of year                --                           44,050
                        =========                     ========

Weighted-average fair
 value per option
 of options granted
 during the year         $.90                             $.46
                       ===========                    =========

A further summary of options outstanding as of December 31, 1999 is as follows:

                            Options Outstanding             Options Exercisable
                         -------------------------------------------------------
                                    Weighted-
                                     Average   Weighted-              Weighted-
                                    Remaining   Average                 Average
                        Numger     Contractual  Exercise     Number    Exercise
Exercise Price       Outstanding   Life (Years)  Price      Exercise     Price
--------------------------------------------------------------------------------
$1.875                 3,750         4.80      $ 1.875       3,750      $ 1.875
$4.50                167,200         3.28        4.50       40,300        4.50
                    ------------------------------------------------------------
                     170,950                     4.44       44,050        4.28
                    ========                               ========

     Subsequent to year end the Company canceled all the $4.50 stock options and
reissued new options at $2.00 per share.

     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.


<PAGE>


Note 10.          Income Tax Matters

     For prior years through the  three-month  period ended March 31, 1998,  the
Company, with the consent of its stockholder, elected to be taxed under sections
of federal and state income tax law,  which provide that, in lieu of corporation
income taxes,  the  stockholder  separately  account for the Company's  items of
income,  deductions,  losses  and  credits.  On March 15,  1998,  the  Company's
stockholder  terminated  this election  effective  with the period  beginning on
April 1, 1998 in  connection  with the  initial  public  offering  of its common
stock.

     As a result of the  termination,  the Company  recorded a net  deferred tax
asset of  $15,000  in 1998 by a credit  to income  tax  expense,  for  temporary
differences between the financial reporting and the income tax basis.

     Deferred taxes credited to income during 1998 consisted of the following:

                                                                      Amount
--------------------------------------------------------------------------------
Effect of change in tax status                                       $  15,000
Change in net deferred tax assets                                      325,000
                                                             -------------------
                                                                    $  340,000
                                                             ===================

     Pro forma income taxes for the year ended  December 31, 1998  represent the
estimated  income  taxes that would have been  reported  had the  Company  filed
federal and state  income tax returns  under the asset and  liability  method of
accounting.

     The following summarizes the pro forma provision for income taxes (credits)
as if the Company was taxed as a C Corporation  for the year ended  December 31,
1998 and the  actual  tax  provision  for the  period  since  the S  Corporation
termination  for  the  year  ended  December  31,  1998.  The  Company  was  a C
Corporation for the entire year ended December 31, 1999:

                                   Pro forma          Actual            Actual
                           -----------------------------------------------------
Year Ended December 31,              1998             1998              1999
--------------------------------------------------------------------------------
Current:
   Federal                    $        4,200   $      --         $       --
   State                               3,800        3,000              1,000
   Foreign                               --            --             90,000
                           -----------------------------------------------------
                                       8,000        3,000             91,000
                           -----------------------------------------------------
Deferred:
   Federal                           (68,000)    (265,000)          (839,000)
   State                             (20,000)     (75,000)          (141,000)
   Foreign                              -             -                -
                           -----------------------------------------------------
                                     (88,000)    (340,000)          (980,000)
                           -----------------------------------------------------
 Total                       $       (80,000) $  (337,000)  $       (889,000)
                           =====================================================



<PAGE>


     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:

                                             Pro forma     Actual      Actual
                            ----------------------------------------------------
Year Ended December 31,                        1998         1998         1999
-------------------------------------------------------------------------------
 Computed "expected" tax expense            $(87,000)     $(87,000)   $(878,000)
 Increase (decrease) in income taxes
   resulting from:
   State income taxes, net of federal
   tax benefit                               (10,700)      (14,800)     (92,000)
   Benefit of income taxed at lower rates      6,800         6,800       25,000
   Deferred taxes recorded due to change
   in tax status:                               --         (15,000)         --
   Effect of S Corporation earnings not
   included in taxable income for
   first quarter of 1998                        --        (241,000)         --
   Nondeductible expenses and other           10,900        14,000       56,000
                            ----------------------------------------------------
                                            $(80,000)    $(337,000)   $(889,000)
                            ====================================================

     Net deferred tax assets consist of the following  components as of December
31, 1998 and 1999:

                                                         1998             1999
--------------------------------------------------------------------------------
Property and equipment, principally due to
  differences in accumulated depreciation
  and bases of assets                          $      (30,000) $        (70,000)
Foreign currency translation adjustment                 --               (4,000)
                                              ----------------------------------
            Total deferred tax liabilities            (30,000)          (74,000)
                                              ----------------------------------
Additional costs capitalized to inventory
 for income tax purposes                               12,000            28,000
Accrued expenses not currently deductible
 for tax purposes                                       9,000           156,000
Allowance for doubtful accounts                       112,000           153,000
Net operating loss carryforwards                      237,000           963,000
Foreign tax credit carryforward                         --               90,000
                                              ----------------------------------
           Total deferred tax assets                  370,000         1,390,000
                                              ----------------------------------

Valuation allowance for deferred tax assets               -                -
                                              ----------------------------------
           Net deferred tax assets              $     340,000   $     1,316,000
                                              ==================================

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

                                                        1998             1999
--------------------------------------------------------------------------------
Current deferred tax assets                   $       133,000 $         337,000
Noncurrent deferred tax assets                        207,000           979,000
                                              ----------------------------------
           Net deferred tax assets            $       340,000 $       1,316,000
                                              ==================================

     The  Company  has  determined  that it 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,  1999,   the  Company  has  federal  net  operating  loss
carryforwards of approximately $2,642,000 and state operating loss carryforwards
for Minnesota and Utah of approximately  $1,295,000 and $520,000,  respectively,
which are  available to reduce future  taxable  income.  The net operating  loss
carryforwards expire in 2018 and 2019.

Note 11.     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 1998 and 1999 were $49,165 and $29,000, 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
plans is presented below:

                                              Amount
------------------------------------------------------
Changes in benefit obligations:
  Obligations at beginning of year          $ 234,750
     Service cost                              13,602
     Interest cost                             13,012
     Participant contributions
     Benefits paid                            (72,060)
     Actuarial gains                          (34,052)
                                            ---------
                                            ---------
  Obligations at end of year                $ 155,252
                                            =========
                                            =========

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

Funded status at end of year:
  Plan assets less than obligations         $  (4,355)
     Unrecognized gains                       (34,378)
     Unrecognized prior service cost
     Unrecognized transition obligation        49,939
                                            ---------
                                            ---------
  Prepaid pension costs                     $  11,206
                                            =========
                                            =========

Costs recognized during the year:

  Service cost                              $  13,602
  Interest cost                                13,012
  Expected return on plan assets              (11,411)
  Amortization of prior losses (gains)
  Amortization of prior service cost
  Amortization of transition obligation         3,228
                                            ---------
                                            ---------
          Total costs recognized in expense $  18,431
                                            =========
                                            =========

                                                                       Amount
------------------------------------------------------------------------------
 Assumptions used in computing ending obligations:
   Discount rate                                                          8%
   Expected return on plan assets                                         6%

Note 12.     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 $6,986 and $86,140 as of December 31, 1998 and 1999,
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  $90,400 in 1998 and $134,000 in 1999. The Company paid $7,874 and
$7,611 in 1998 and 1999, respectively,  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
$50,760 in 1998 and $33,840 in 1999.

     The Company  rents  warehouse  space from a company  owned by the  majority
stockholder which amounted to $6,700 and $5,500 in 1998 and 1999, 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
three-year  agreement expiring on December 31, 2003. The lease provides that the
Company pay all property taxes, insurance, and maintenance plus a monthly rental
of $8,400.

     On January  30,  1998,  the  Company  entered  into a  two-year  employment
agreement with its president,  who is also the majority  stockholder.  Under the
agreement,  the president  will receive a base salary of $255,216 and bonuses as
determined  by the Board of Directors.  On January 30, 2000 the Company  entered
into a new two-year  agreement 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 of the major  stockholder  which amounted
to $138,873 as of December 31, 1999.


<PAGE>



Note 13.     Business Restructuring and Other Charges

     1999 transactions:  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 will be
consolidated with the Hibbing,  Minnesota facilities. The closure is expected to
be completed by April 2000. At December 31, 1999 the Company accrued $98,000 for
employee termination  benefits.  Subsequent to year end the Company entered into
an  agreement  to sell the real  estate at the site  which  has a book  value of
$1,500,000 for approximately $1,700,000.

     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 has been  expensed as of December 31, 1999.  In addition,
equipment and leasehold improvements with a book value of approximately $263,000
were  consider  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.

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

     1998  transactions:  The Company leased its Utah production  facility under
the terms of an  operating  lease  expiring  January 31,  1999.  Lease  payments
amounted to $13,600 per month at December 31, 1998.  The lease provided that the
Company  pay all  utilities,  and  property  taxes and  insurance  over  certain
amounts.

     On December 16, 1998, the Company  decided to discontinue the operations of
the Clearfield,  Utah facility and relocate certain assets to TJ Products,  Inc.
The Company  terminated  its operating  lease  effective  January 31, 1999.  The
estimated  loss on closing the facility for the year ended  December 31, 1998 is
as follows:

                                                                        Amount
--------------------------------------------------------------------------------
 Loss on disposal of assets                                    $         39,881
 Operating losses from measurement date to
  December 31, 1998                                                      43,000
 Estimated expenses to close from January 1, 1999
  to anticipated disposal date                                          127,000
                                                              ------------------
                                                              $         209,881
                                                              ==================


<PAGE>

Note 14.     Lease Commitments and Total Rental Expense

     The Company leases two office and production facilities under noncancelable
agreements  which expire in December 2003 and December 2008 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 13 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 $301,200 in 1998 and $340,000 in 1999.

     The total minimum rental commitment at December 31, 1999 is due as follows:

Years Ending December 31,                                             Amount
--------------------------------------------------------------------------------
2000                                                          $         296,835
2001                                                                    305,290
2002                                                                    293,628
2003                                                                    156,000
2004                                                                    162,000
Due thereafter                                                          648,000
                                                              ------------------
                                                              $       1,861,753
                                                              ==================

<PAGE>
                                  EXHIBIT 10(1)

                              EMPLOYMENT AGREEMENT

     THIS  AGREEMENT  made  effective  the 30th day of January,  2000, is by and
between   Industrial  Rubber  Products,   Inc.  a  Minnesota   corporation  (the
"Company"),  and Daniel O.  Burkes,  a resident of the State of  Minnesota  (the
"Executive").

     WHEREAS,  the  Employment  Agreement  between the Company and  Executive is
scheduled to terminate on January 30, 2000;

     WHEREAS,  the parties wish to provide for the  continued  employment of the
Executive by the Company; and

     WHEREAS,  the Company  desires  reasonable  protection of its  confidential
business and  technical  information,  which has been and will be acquired,  and
which has been and is being developed by the Company, at substantial expense;

     NOW,  THEREFORE,  in consideration of the mutual promises contained herein,
the Company and the  Executive,  each  intending to be legally  bound,  agree as
follows:

     1.  Employment.  Subject  to  all of  the  terms  and  conditions  of  this
Agreement,  the Company  agrees to employ the Executive on a full-time  basis as
its  President  and Chief  Executive  Officer  and the  Executive  accepts  this
employment.

     2. Duties.  The Executive  will make the best use of his energy,  knowledge
and  training in advancing  the  Company's  interests.  He will  diligently  and
conscientiously  perform the duties of President and Chief Executive  Officer of
the Company,  as such duties may be defined by the Company's  Board of Directors
and such other tasks as may from time to time be reasonably  required to further
the growth of the Company.

     3. Term.  The term of this  contract  shall be until  January 30, 2002 (the
"Term").  Notwithstanding the foregoing, the Executive is employed on an at-will
basis. The Executive may terminate the employment  relationship  created by this
Agreement upon sixty (60) days notice to the Company, and with no notice if such
termination  is for cause (as defined  below).  The Company  may  terminate  the
employment relationship created by this Agreement upon sixty (60) days notice to
the Executive, if such termination is without Cause (as defined below), and with
no notice if such termination is for Cause.

     As used in this  Agreement,  the term  "Cause" as applied to the  Company's
ability to terminate  without notice means (i) the Executive's  breach of any of
his material  duties or obligations  under this  Agreement,  which breach is not
corrected  within thirty (30) days of receipt of written  notice  thereof by the
Executive;  (ii)  embezzlement  or other  misappropriation  of  property  of the
Company;  (iii)  conviction  of  a  felony  offense;  or  (iv)  the  Executive's
persistent  refusal to follow the  directions or  instructions  of the Company's
Board of Directors.  The term "Cause" as applied to the  Executive's  ability to
terminate without notice means any failure to pay or decrease in the Executive's
salary not  consented to by the  Executive.  No  termination  of the  employment
relationship created by this Agreement shall relieve the Executive of his duties
under Sections 5, 6 and 7 hereof.
<PAGE>

     4. Compensation.

     a. Salary.  The Executive  will be entitled to a salary of  $14,583.33  per
month payable  bimonthly  beginning  February 1, 2000.  The  Company's  Board of
Directors may increase  Executive's  salary provided that if it has been raised,
the Company may at any time reduce the salary back to $14,583.33 per month.

     b.  Benefits.  The Executive  shall be entitled to  participate  in benefit
plans and other fringe  benefits which may be established by the Company's Board
of Directors' for similar executive level executives.

     c. Expenses. The Company shall reimburse the Executive for all ordinary and
necessary  business  expenses the Executive  incurs while  performing his duties
under this  Agreement,  provided that the Executive  accounts  properly for such
expenses to the Company in accordance with the general  corporate  policy of the
Company as determined by the Company's Board of Directors and in accordance with
the   requirements  of  Internal   Revenue  Service   regulations   relating  to
substantiation of expenses.

     d. Bonuses.  Employee  shall be entitled to  participate in the bonus plans
described in Exhibit A attached  hereto.  The Executive's  participation  in the
incentive compensation plan for the second year of the contract shall be subject
to the Board's  amendment  of the goals and  allocation  made on a  Company-wide
basis.  The Board of  Directors  may,  but is not  required  to,  provide for an
additional bonus or other incentive compensation plans.

     5. Inventions.

     a. "Inventions", as used in this Section 5, means any discoveries, designs,
improvements  or  software  (whether  or not they are in  writing  or reduced to
practice)  or works of  authorship  (whether  or not  they  can be  patented  or
copyrighted)  that the Executive makes,  authors,  or conceives (either alone or
with others) and that:

     i. concern directly the Company's products, research or development; or

     ii. result from any work the Executive performs for the Company; or

     iii. use the Company's equipment, facilities, or trade secret information.

     b. The Executive  agrees that all Inventions he makes during his employment
with the Company will be the sole and  exclusive  property of the  Company.  The
Executive will, with respect to any such Invention:

<PAGE>

     i. keep current,  accurate,  and complete records, which will belong to the
Company and be kept and stored on the Company's  premises while the Executive is
employed by the Company;

     ii.  promptly and fully  disclose the  existence and describe the nature of
the Invention to the Company in writing (and without request);

     iii.  assign (and the Executive  does hereby  assign) to the Company all of
his rights to the Invention, any applications he makes for patents or copyrights
in any country, and any patents or copyrights granted to him in any country; and

     iv.   acknowledge   and  deliver   promptly  to  the  Company  any  written
instruments,  and perform any other  reasonable  acts necessary in the Company's
opinion and at its expense to preserve  property rights in the Invention against
forfeiture,  abandonment,  or loss and to obtain  and  maintain  letters  patent
and/or copyrights on the Invention and to vest the entire right and title to the
Invention in the Company,  provided  that,  the  Executive  makes no warranty or
representation to the Company as to rights against third parties hereunder.

     Executive  acknowledges  that since April 15, 1986,  the Executive has been
developing  technology  for the Company all of which he hereby  transfers to the
Company  for the  considerations  stated.  Executive  agrees  that the  existing
technology, and all derivations, expansions, improvements, and similar additions
or  modifications to the technology  whenever  developed by him are and shall be
the property of the Company.

     The  Executive  shall  disclose  to the  Company  from  time  to  time  all
inventions  that  Executive  develops  or  conceives.  The  Company  shall  have
thereafter  a  reasonable  period  of time of not less  than 90 days in which to
consider and  evaluate the  inventions  and  determine  whether the Company will
develop the same.  The Executive does not have and will not assert any claims to
or rights under any  inventions  as having been made,  conceived,  authored,  or
acquired by the Executive prior to this Agreement.

     c. NOTICE:  Minnesota  law exempts from this  Agreement  "AN  INVENTION FOR
WHICH NO  EQUIPMENT,  SUPPLIES,  FACILITY  OR TRADE  SECRET  INFORMATION  OF THE
EMPLOYER WAS USED AND WHICH WAS DEVELOPED  ENTIRELY ON THE EMPLOYEE'S  TIME, AND
(1) WHICH DOES NOT RELATE (A) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (B) TO
THE EMPLOYER'S ACTUAL OR DEMONSTRABLY  ANTICIPATED  RESEARCH OR DEVELOPMENT,  OR
(2) WHICH  DOES NOT  RESULT  FROM ANY WORK  PERFORMED  BY THE  EMPLOYEE  FOR THE
EMPLOYER."

     d. Upon  termination of this Agreement,  Executive  agrees to return to the
Company all property of the Company  which  Executive has custody and to deliver
to the Company all notebooks and other data relating to research, experiments or
management  studies  conducted by the  Executive or any  inventions  made by the
Executive.

<PAGE>
     6. Confidential Information.

     a. "Confidential Information", as used in this Section 6, means information
that is not generally  known and that is  proprietary to the Company or that the
Company is obligated to treat as proprietary. This information includes, without
limitation:

     i. trade secret information about the Company and its products or services;

     ii. "Inventions," as defined in subsection 5(a) above;

     iii.  information  concerning  the Company's  business,  as the Company has
conducted it or as it may conduct it in the future; and

     iv. information  concerning any of the Company's past, current, or possible
future products,  including (without limitation) information about the Company's
research,  development,  engineering,  purchasing,   manufacturing,   servicing,
finances, marketing or selling.

     v.  information  concerning any of the Company's past,  current or possible
future customers,  including (without  limitation)  customer lists,  information
about the Company's planned advertising campaigns,  purchasing plans, methods of
operation, servicing, finances, marketing or sales efforts.

     Any  information   that  reasonably  can  be  expected  to  be  treated  as
Confidential  Information  will  be  presumed  to  be  Confidential  Information
(whether the Executive or others originated it and regardless of how he obtained
it).

     b. Except as required in his duties to the Company, the Executive will not,
during his employment or after  termination of his employment  with the Company,
use or disclose  Confidential  Information  to any person not  authorized by the
Company to receive it,  excluding  Confidential  Information  (i) which  becomes
publicly  available  by a source  other  than the  Executive;  or (ii)  which is
received by the Executive after  termination of his employment  hereunder from a
source who did not obtain the information directly or indirectly from Executives
or agents of the Company;  or (iii) for which disclosure thereof the Company has
consented in writing. When the Executive's  employment with the Company ends, he
will  promptly  turn  over to the  Company  all  records  and any  compositions,
articles, devices, apparatus, and other items that disclose, describe, or embody
Confidential Information,  including all copies, reproductions, and specimens of
the Confidential Information in his possession, regardless of who prepared them.

     7. Competitive Activities. Provided that:

     (1) If this  Agreement is  terminated  by the Company  without  Cause,  the
Company has paid to the Executive the salary provided under paragraph 4(a) above
for the Term of the Agreement,
<PAGE>

     (2) If this Agreement is terminated by the Company for Cause, or

     (3) If the Executive terminates this Agreement without Cause,

     the Executive agrees that during the Term of this Contract and for a period
of five years thereafter:

     a. He will not alone, or in any capacity with another firm, (i) directly or
indirectly engage in the development,  design, production,  marketing or sale of
any product,  technology  or services  that is  competitive  with the  Company's
business  as it exists at the time his  employment  is  terminated,  nor will he
participate in the management or operation of, or become a significant  investor
in,  any  venture  or  enterprise  of  whatever  kind as a  principal,  officer,
director,  Executive,  representative,  agent or shareholder of any entity whose
business is the design, development,  production, marketing, or servicing of any
technology,  product or service  competitive with the business of the Company as
it exists at the time his employment with the Company is terminated; (ii) in any
way interfere or attempt to interfere with the Company's  relationships with any
of their  current or potential  customers;  or (iii) employ or attempt to employ
any of the Company's executives on behalf of any other entity competing with the
Company. Provided that, nothing in this Section 7 shall restrict the Executive's
employment  by or  association  with any  entity,  venture or  enterprise  which
engages in a business with a product or service that is not competitive with any
product or service of the  Company,  so long as it does not,  after  Executive's
employment, become competitive.

     b. He will,  prior to accepting  employment  with any new employer,  inform
that employer of this Agreement and provide that employer with a copy of Section
7 of this Agreement, provided that he reasonably believes his new position is or
may be contrary to this Agreement.

     8.  Conflicting  Business.  The Executive  agrees that he will not transact
business  with  the  Company  personally,   or  as  agent,  owner,  partner,  or
shareholder  of  any  other  entity,  except  as  specifically  approved  by the
Company's  Board of  Directors.  The  Executive  further  agrees that during his
employment  with the  Company he will not  engage in any  business  activity  or
outside  employment  that may be in conflict with the Company's  proprietary  or
business interests.

     9. No Adequate Remedy.  Both parties understand that failure to fulfill the
obligations  under of this Agreement  would cause damage to the other that would
be very  difficult to determine.  Therefore,  in addition to any other rights or
remedies  available  to the parties at law, in equity or by statute,  each party
consents to the specific enforcement of this Agreement,  including  specifically
Sections 5, 6, 7 or 8, through an injunction or restraining  order issued by any
appropriate court.

     10. Miscellaneous.

     a.  Successors  and  Assigns.  This  Agreement  may not be  assigned by the
Executive.  Except as provided in the next  sentence,  this Agreement may not be
assigned by the Company without the Executive's consent, which consent shall not
be unreasonably  withheld.  In any event,  the Company may assign this Agreement
without the consent of the Executive in connection with a merger, consolidation,
assignment,  sale or other  disposition  of  substantially  all of its assets or
business.
<PAGE>

     b.  Modification.  This  Agreement  may be  modified  or amended  only by a
writing signed by each of the parties hereto.

     c.  Governing  Law.  The laws of the State of  Minnesota  shall  govern the
validity, construction, and performance of this Agreement.

     d. Construction.  Wherever possible, each provision of this Agreement shall
be  interpreted  so that it is valid under  applicable  law. If any provision of
this  Agreement  is  to  any  extent   invalid  under   applicable  law  in  any
jurisdiction,  that provision  shall still be effective to the extent it remains
valid.  The remainder of this Agreement also shall continue to be valid, and the
entire Agreement shall continue to be valid in other jurisdictions.

     e.  Non-Waiver.  No  failure  or  delay  by any of the  parties  hereto  in
exercising any right or remedy under this Agreement shall waive any provision of
the  Agreement.  Nor shall any single or partial  exercise by any of the parties
hereto of any right or remedy  under this  Agreement  preclude  any of them from
otherwise or further exercising their rights or remedies, or any other rights or
remedies granted by any law or any related document.

     f. Captions.  The headings in this Agreement are for  convenience  only and
shall not affect the interpretation of this Agreement.

     g.  Notices.  All notices and other  communications  required or  permitted
under  this  Agreement  shall  be in  writing  and  hand  delivered  or  sent by
registered   first-class   mail,   postage  prepaid.   Such  notices  and  other
communication  shall be effective  upon receipt if hand  delivered  and shall be
effective  five (5) business days after mailing if sent by mail to the following
addresses, or such other addresses as either party shall have notified the other
party:

         If to the Company:                 Industrial Rubber Products, Inc.
                                            3804 East 13th Avenue
                                            Hibbing, MN 55746

         If to the Executive:               Daniel O. Burkes

                                            Hibbing, MN 55746

     h.  Representation.  Executive  has been  represented  by an  attorney  and
accountant with respect to Executive's entering into this Agreement.

<PAGE>

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

EMPLOYER                                        EXECUTIVE

Industrial Rubber Products, Inc.


By_________________________________             ________________________________
Its________________________________             Daniel O. Burkes

<PAGE>
                                    EXHIBIT A

                                   BONUS PLANS

     Quarterly  Bonus.  The  Executive  shall be entitled to receive a quarterly
bonus of up to $20,000  payable on April 30, July 31, October 31 and February 28
of each year  during the term of this  Agreement.  The  amount of the  quarterly
bonus, if any, shall be ten percent (10%) of the Company's  Operating Income for
the preceding  fiscal quarter as reported on the Company's Forms 10-QSB and Form
10-KSB over $50,000.  No additional  bonus shall be payable for Operating Income
in excess of $250,000 a quarter.  No bonus shall be payable if Operating  Income
is less than  $50,000 in a quarter.  There  shall be no carry over or carry back
under this quarterly bonus plan.

     Annual  Incentive  Bonus. The Executive shall be entitled to participate in
the Company Wide Incentive Plan as adopted by the Compensation  Committee of the
Board of Directors on January 20, 2000. Specifically, the Executive is eligible,
along with other  management  personnel,  for an annual  bonus  based on Company
performance.  The Company Wide Incentive Plan is attached hereto as Exhibit A-1.
The  Executive's  maximum bonus for the fiscal year ending  December 31, 2000 is
$76,500.  The Executive  will further be entitled to  participate in any Company
wide  incentive  plans  adopted  for the  fiscal  year  2001 on  such  terms  as
determined by the Board of Directors.

<PAGE>

                                   EXHIBIT A-1

                           COMPANY WIDE INCENTIVE PLAN

     General.  The bonus pool for the Company Wide  Incentive Plan is calculated
based on  Company  performance.  The bonus  pool is 20% of  Operating  Income as
reported on the Company's Form 10-KSB greater than $1,000,000. The maximum bonus
pool would total approximately  $225,000 Company Wide. The Company would need to
have  Operating  Income of  $2,125,000  ($1,125,000  x 20%) for the  approximate
maximum of $225,000 to be earned.

     Operating  Income greater than  $1,000,000 but less than  $2,125,000  would
result in equal  proportional  bonuses for all  qualifying  participants.  (i.e.
Operating Income of $1,562.520 would result in each participant receiving 50% of
their bonus  opportunity  from the attached  sheet.) If Operating Income is less
than $1,000,000, no annual incentive bonuses will be earned or paid.

     Basis for Awards. Management personnel will be allocated bonuses based on a
combination of division and corporate based performance  system.  Division-based
performance managers must achieve their budget to be eligible.

     Each Manager  will be eligible for a certain  percent of their base salary,
as outlined below.  The President and Chief  Executive  Officer will be eligible
for a bonus of 30% of base salary, including Quarterly Bonuses.

DIVISION-BASED PERFORMANCE
Mid-Level (10% of Base Salary)

Geoff Huaun - IR James  Haddow - ISI Brett Valeri - ISI Paul Bernard - ISI Roger
Maki - ISI Randy Jacobson - ISI Joe Ohrn - TJ Lyle Robinson - TJ Gordon Grenon -
Elliot Jim Koshcher - ISI

Upper-Level (20% of Base Salary)
-------------------------------
Dave Butterfield - TJ
Wayne Paquette - Elliott
Joseph Barach - Irathane

CORPORATE-BASED PERFORMANCE
Mid-Level (10% of Base Salary)
------------------------------
Marty Trenberth
James Skalski
Susan Rostvold
Debbie Gustafson

<PAGE>

Upper-Level (25% of Base Salary)

Chris Liesmaki
John Kokotovich
Gary Shapiro

Executive (30% of Base Salary, including Quarterly Bonuses)

Dan Burkes

     Date  Earned/Paid.  To earn a bonus, a participant  must be employed on the
date the bonus is paid.  Bonuses  shall be paid on or about  February  28 of the
following year.

<PAGE>

                                  EXHIBIT 10(4)



                                    AGREEMENT

                                 By and Between

                          IRATHANE SYSTEMS INCORPORATED
                               HIBBING, MINNESOTA

                                       and

                          MIDWESTERN INDUSTRIAL COUNCIL

                                  July 1, 1999

                                     through

                                  June 30, 2002

<PAGE>

                                      INDEX

ARTICLE                                 TITLE                             PAGE

1         GENERAL PURPOSE OF AGREEMENT                                     1
2         RECOGNITION                                                      1
3         MANAGEMENT                                                       2
4         RESPONSIBILITIES OF PARTIES                                      3
5         HOURS OF WORK, OVERTIME AND ALLOWED TIME                         4
6         HOLIDAYS                                                         6
7         VACATIONS                                                        7
8         SENIORITY                                                        8
9         GRIEVANCE AND ARBITRATION                                        9
10        DISCHARGE AND DISCIPLINE                                         12
11        BULLETIN BOARD                                                   12
12        SAFETY AND HEALTH                                                12
13        LEAVES OF ABSENCE, MATERNITY AND                                 13
          FUNERAL LEAVES
14        JOB POSITIONS, WAGE RATES AND COST OF LIVING                     13
15        INSURANCE AND HOSPITALIZATION BENEFITS                           18
16        PENSION PROGRAM                                                  19
17        TERM OF AGREEMENT                                                20


<PAGE>



                                    AGREEMENT

                                 By and Between

                         IRATHANE SYSTEMS, INCORPORATED
                               HIBBING, MINNESOTA

                                       and

                          MIDWESTERN INDUSTRIAL COUNCIL


     This  Agreement  is made and entered into as of July 1, 1999 by and between
Irathane Systems Incorporated of Hibbing, Minnesota,  hereinafter referred to as
the Company, and Midwestern  Industrial Council,  hereinafter referred to as the
Union.

                                    ARTICLE 1

                          GENERAL PURPOSE OF AGREEMENT

     It is the purpose of this agreement to assure the efficient, economical and
profitable  operation of the Company to secure and sustain maximum  productivity
of  each  employee   covered  by  this  Agreement;   to  maintain  a  harmonious
relationship  between the employees in the bargaining  unit and the Company;  to
establish wages, hours and working  conditions;  to prevent strikes,  slowdowns,
and  other  disturbances  which  interfere  with or  interrupt  production;  and
further,  to set forth the entire agreement  between the Company,  the Union and
the employees covered by this Agreement concerning rates of pay, wages and other
conditions of employment to be observed by the parties hereto.

                                    ARTICLE 2
                                   RECOGNITION

     Section 1. The term  "employee" as used in this Agreement shall mean all of
the production and  maintenance  employees of the Company,  excluding  managers,
office  employees,  guards,  driver salesmen,  laboratory  technicians,  and any
employee  defined by the National Labor  Relations  Ace, as amended,  as guards,
professional employees or supervisors.

     Section 2. The Company recognizes the Union as the exclusive representative
of all  production  and  maintenance  employees  for the  purpose of  collective
bargaining in accordance  with the  provisions of the National  Labor  Relations
Act.

     Section 3. As a condition of employment,  all  production  and  maintenance
employees  shall become  members of the Union,  and must remain in good standing
during the life of this Agreement.  All new production and maintenance employees
shall become and remain members of the Union in good standing during the life of
this Agreement  beginning on the 91st calendar day following the commencement of
such employment.


<PAGE>

     Section 4. For the  purpose  of this  Agreement,  the term "good  standing"
shall mean the "payment of periodic dues and initiation fees uniformly  required
as a condition of acquiring or retaining members".

     Section 5. The company  agrees to deduct Union dues from such Union members
as may authorize the Company in writing to do so. Such deductions are to be made
monthly and be remitted by the Company to the  Secretary of the Union,  monthly.
All members of the Union shall remain  members in good standing  during the life
of the Agreement as a condition of employment.

     Section  6.  It  is  agreed  by  both   parties  that  there  shall  be  no
discrimination  of any nature on the part of the employer,  the Union, or by the
employees  themselves  against any employee based of race, creed,  color, sex or
age.

                                    ARTICLE 3
                                   MANAGEMENT

     The  management of the plants and works of the Company and the direction of
the  working  force and all  operations  including  the  hiring,  promoting  and
rehiring of employees,  the  suspending,  discharging or other  disciplining  of
employees,  the layoff and calling to work of employees in  connection  with any
reduction  or increase in the working  forces,  the  scheduling  of work and the
control and  regulation of the use of all  equipment  and other  property of the
Company, are the exclusive functions of the Company provided,  however,  that in
the  exercise  of  such  functions,  the  Company  shall  not  alter  any of the
provisions of this Agreement and shall not discriminate  against any employee or
applicant for  employment  because of his  membership  in or lawful  activity on
behalf of the Union.

                                    ARTICLE 4

                           RESPONSIBILITIES OF PARTIES

     Section  1.  Each  of  the  parties  hereto  acknowledges  the  rights  and
responsibilities of the other party and agrees to discharge its responsibilities
under this Agreement. The Union, its officers and representatives of all levels,
and all employees are bound to observe the  provisions  of this  Agreement.  The
Company and its officers and  representatives of all levels are bound to observe
the provisions of this Agreement.

     Section 2. In addition  to the  responsibilities  that may be provided  for
elsewhere in this Agreement, the following shall be observed:

     a. The  Company  will not  interfere  with the rights of its  employees  to
become  members of the Union;  there shall be no  discrimination,  interference,
restraint  or coercion by the Company or any of its agents  against any employee
in such Union activities while such employees are on Company time.

     b. The Union agrees that neither it nor any of its officers or members will
engage in any Union  activities on Company time or engage any other employees in
such Union activities while such employees are on Company time.

     c. The Union, its officers,  agents and members agree that for the duration
of this Agreement, there shall be no strikes, sit-downs, slowdowns, stoppages of
work nor any acts of a similar nature which would interfere with production,  no
picketing of any kind or form, however peaceful,  and that it will not otherwise
permit,  countenance or suffer the existence or continuance of any kind of these
acts.
<PAGE>

     d. The Company agrees that for the duration of this  Agreement  there shall
be no lockouts.

     e. The  applicable  procedures of this  Agreement  will be followed for the
settlement of all grievances,  which shall be considered carefully and processed
promptly in accordance herewith.

     Section 3. The  parties  acknowledge  that  during the  negotiations  which
resulted in this Agreement, each had the unlimited right and opportunity to make
demands and  proposals  with respect to any subject or matter not removed by law
from  the  area of  collective  bargaining,  and  that  the  understandings  and
agreements  arrived  at by the  parties  after the  exercise  of that  right and
opportunity are set forth in this Agreement.  Therefore,  each party voluntarily
and  unqualifiedly  waives the right and each agrees that the other shall not be
obligated  to  bargain  collectively  with  respect  to any  subject  matter not
referred  to  specifically  or not  covered in this  Agreement  even though such
subject or matter may not have been within the  knowledge  or  contemplation  of
either party at the time that they negotiated or executed this Agreement.

     Section  4. If any  article or  section  of this  contract  or if any rider
thereto  should  be held  invalid  by  operation  of law or by any  tribunal  of
competent  jurisdiction  or if compliance  with or enforcement of any article or
section should be restrained  pending a final  determination as to its validity,
the remainder of this persons or  circumstances  other than those as to which it
has been held invalid or as to which  compliance with or enforcement of has been
restrained, shall not be affected thereby.

     Section  5. In the event that any  article  or  section is held  invalid or
enforcement of or compliance  with which has been restrained as above set forth,
the parties  affected thereby shall enter into immediate  collective  bargaining
negotiations  upon the  request of the Union for the  purpose of  arriving  at a
mutually satisfactory  replacement for such article or section during the period
of  invalidity  or  restraint.  If  the  parties  do  not  agree  on a  mutually
satisfactory replacement,  either party shall be permitted all legal or economic
recourse  in  support  of its  demands  notwithstanding  any  provision  in this
contract to the contrary.

     Section 6. Once each month on a designated  day, the Union's  grievance man
and the plant manager or his designee will meet for one-half hour, 15 minutes of
which will be on Company  time and 15 minutes of which  shall be on  non-Company
time.  The purpose of such meeting will be to provide an  opportunity to discuss
any shop problems and working conditions.

                                    ARTICLE 5

                    HOURS OF WORK, OVERTIME AND ALLOWED TIME

     Section 1. This Article is intended only to provide a basis of  calculating
overtime  and shall not be  construed as a guarantee of hours of work per day or
per week.

<PAGE>

     Section 2. The  normal  hours of work shall be eight (8) per day and 40 per
week.  Daily hours of work shall be consecutive  except for unpaid lunch periods
of fifteen (15) minutes. The normal workday shall be from 7:00 a.m. to 3:15 p.m.
When two shifts are routinely scheduled, they will be run from 7:00 a.m. to 3:15
p.m. and 3:15 p.m. to 11:30 p.m.  The Company will be exempt from paying  double
time for any shift with a startup  Sunday  evening of 11:00 p.m.  or later.  The
normal  workweek shall be five days from Monday through  Friday  inclusive.  The
normal  work  pattern  may be changed by the  Company  from time to time to suit
varying  conditions  of the business;  provided,  however,  that changes  deemed
necessary  by the Company  shall be made known to the Union as far in advance of
such changes as  practicable.  Employees shall be paid by lunch breach Friday of
ever other week.

     Section 3. Overtime (time and one-half) shall be paid for hours worked;  a.
in excess of any ten (10) hours in any workday;  b. in excess of 40 hours in any
workweek; c. on any Saturday;  employees covered herein will be paid overtime at
the rate of  twice  the  employee's  regular  rate of pay for  hours  worked  on
Sundays.  d. All  vacation  and holiday  hours  shall  count as hours  worked in
computing overtime.

     Section 4. The company agrees to grant two, fifteen (15) minute rest period
for each shift.

     Section 5.  Employees who are regularly  scheduled or who, with more than 8
hours notice, are notified to report and who do report for work shall e allowed:
a. in the event no work for which  they were  scheduled  or for which  they were
notified to report is available for 2 hours at the  employees'  standard  hourly
wage  rate;  however,  any  employee  called  out early by the  Company  will be
permitted to complete his regularly  scheduled  sift; b.  employees who actually
being work shall be paid for at least four (4) hours of such  additional time as
they actually  worked.  There shall be no  duplication of hours paid for whether
worked or allowed. allowed time not worked shall not be paid for as overtime nor
included in computing overtime.

     Section 6. Any  employee  working four hours or  unscheduled  overtime on a
shift  shall have a meal  provided by the Company  whenever  possible,  for each
fours hours of unscheduled overtime actually worked. Whenever meals are provided
by the Company,  Employees shall be given a ten minute paid rest period.  In the
event the  Company  is unable to  provide  a meal,  then the  employee  shall be
entitled to a meal  allowance  up to $5.00  provided a receipt  for  purchase is
presented.

     Section  7.  When the  Company  has  reasonable  advance  knowledge  of the
necessity of working  overtime,  it will give  reasonable  advance notice to the
employees  selected to work  overtime.  In the event of overtime work  extending
four (4) or more hours beyond the compensation of the employees'  regular shift,
the employees will be given a one-half hour unpaid rest period.

     Section  8. No  employees  shall  be  required  to work  more  than six (6)
consecutive days.

                                   ARTICLE 6
                                    HOLIDAYS

     Section 1. Legal  holidays  shall be New Year's Day, Good Friday,  Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and Christmas
Eve Day. The Company will provide an additional paid holiday; such holiday shall

<PAGE>

be a floating  holiday.  The Company will designate the floating  holiday during
the contract  years.  All work performed by the employees  covered herein on the
legal  holidays set forth above will be paid at the rate of twice the employee's
regular  rate of pay.  On  those  aforesaid  legal  holiday  on which no work is
performed,  employees  covered  herein  shall be  compensated  at their  regular
straight time rate of pay for eight (8) hours.  Should any of the above holidays
fall on Sunday,  the day observed by decree of proclamation  shall be considered
as the  legal  holiday,  and work  performed  shall  be paid  for at  twice  the
employee's regular rate of pay; and if no work is performed,  employees shall be
compensated  at their  regular  straight  time  hourly  rate of pay.  Sunday and
holiday work shall be option by the employee.

     Section 2. If a holiday  falls within an  employee's  vacation  period,  he
shall  receive an  additional  day's paid vacation or eight (8) hours pay at his
established  straight  time rate in lieu  thereof  as  follows:  If an  employee
informs the Company prior to the commencement of his vacation that he desires to
work  the  day  substituted  for the  holiday  rather  than  receive  simply  an
additional  day's  vacation  pay,  the Company will give  consideration  to such
request and if allowed,  will pay the employee  eight (8) hours  holiday pay and
eight (8) hours regular pay, each at the straight time hourly rate for such days
worked.

     Section 3. In order than an employee be qualified  for holiday pay, he must
have  completed his  probationary  period and have worked the scheduled  workday
before and the scheduled  workday after such holiday or have been excused by the
Company.

     Section 4.  Holidays  falling on a weekend  shall be observed on Fridays or
Mondays as designated by the Employer. Such Friday or Monday designated as a day
off shall be with pay.

                                    ARTICLE 7
                                    VACATIONS

     Section 1.  Employees  will be eligible for vacation based on the following
criteria:  Completion of their anniversary year and hours of actual and credited
work per the attached schedule.  This includes employees on layoff or excused in
accordance  with this  Agreement.  Vacations  will be granted  by the  following
schedule:

Years of                         Total Vacation Days
Service                                                           Not to Exceed:
-------                                                           -------------
1                       1 day for every 360 hours actually                  5
                        worked, including credited hours

2                       1 day for every 180 hours actually                  10
                        worked, including credited hours

7                       1 day for every 120 hours actually                  15
                        worked, including credited hours

15                      1 day for every 90 hours actually                   20
                        worked, including credited hours

20                      1 day for each year of service in
                        excess of 20 years to a maximum
                        of 5 additional days not to exceed
                        25 days of vacation                                 25

     Credited  hours for the purpose of Article 7, Section 1, means the total of
vacation,  holiday and funeral  leave  hours.  Actual  hours worked mean regular
straight  time hours,  but  excluding  workers  compensation  lost time hours in
calculations.

     Section 2. Vacation pay shall be equal to forty (40) hours for each week.

     Section 3.  Employees  shall receive their  vacation pay before  leaving on
vacation, provided such request is submitted two weeks in advance in writing.

     Section  4.  Consistent  with the needs of the  operation,  employees  will
receive  consideration  for their vacation  preference based on their respective
length of continuous service.

     Section 5. If  required  by the needs of the  operation,  the  Company  may
reschedule an employee's vacation subject to agreement of the affected employee.

     Section  6.  There  shall be no carry  over of  vacation  from year to year
unless approved by the employer.

     Section 7. An employee  who has been  employed by the Company for a minimum
of one year and who  voluntarily  terminates with two week written notice to the
employer shall receive vacation pay earned per the schedule in Section 1.

     An  employee  on layoff on his  anniversary  date  shall  receive  pro-rata
vacation  pay earned per the  schedule in Section 1,  provided  he is  otherwise
eligible for such pay.

                                    ARTICLE 8
                                    SENIORITY

     Section 1.  Computation  of length of continuous  service shall be computed
from the date of employment by the Company.

     In computing length of continuous  service,  there shall be no deduction of
any  time  lost  which  does  not  constitute  a break  in  continuous  service.
Continuous  service  shall be broken for any reasons set forth in the  following
paragraphs, a, b, c, d, e, f, and g.

     a. Voluntarily quitting the service

     b. Discharge

     c. Failing  within five (5) days after being  notified in person or receipt
of written notice by the Company, addressed by registered mail to his last-known
address on record with the Company,  to report for available work or to obtain a
leave of absence therefrom.

     d. Failing to report for work at the  termination  of a leave of absence or
extension thereof.

<PAGE>

     e. If an  employee  shall be absent  because of layoff or non  occupational
injury or illness,  he shall  continue to accumulate  continuous  service during
such absence for a period equal to seniority, but not to exceed 18 months.

     f. Employees  injured while on duty shall accumulate  credit for continuous
service until the termination of the period for which statutory  compensation is
payable,  but their continuous service shall be broken if they do not report for
work after the termination of such period.

     g.  Employees  failing  to  report  for work  for  three  (3) days  without
reasonable excuse.

     Section  2. New  employees  and  those  hired  after a break of  continuous
service  will be regarded  as  probationary  employees  for the first 90 days of
their  employment,  and will receive no  continuous  service  credit during such
period. During the period of probationary employment, probationary employees may
be laid off or discharged, as exclusively determined by management. Probationary
employees   continued  in  the  service  of  the  Company   subsequent  to  such
probationary  period shall receive full continuous  service credit from the date
of hiring at the beginning of the probationary period.

     Section 3. For the purpose of layoffs,  employees with the least continuous
service  in each  job  classification  shall  be laid off  first,  provided  the
remaining employees are qualified,  in management's good faith and judgment,  to
perform the  necessary  work.  In the event the lay off exceeds five (5) working
days,  the  Company  shall  consider  the  status of any  employee  on layoff to
determine whether the employee has the qualifications to perform work then being
performed  by an employee in another job  classification,  with less  continuous
service with the Company.  If the Company  concludes  that laid off employee has
such requisite qualifications,  he will be recalled and substituted for the more
junior employee,  who will then be placed on layoff status. During the period of
a layoff,  no new employees  shall be hired to perform the same job which a laid
off employee is then able to perform. The employees shall be recalled to work in
the order of their  seniority  within  each job  classification  with a laid off
employee  in each  class  having  the  greatest  amount  of  continuous  service
receiving the first recall.

     Section  4.  Designated  leadman  shall be the last to be laid off in their
respective divisions in the event of a layoff.

     Section  5.  When  the  Company  has  reasonable  advance  knowledge  of  a
prospective  layoff,  it will attempt to notify the affected  employee three (3)
days before the commencement of such.

     Section 6. If an employee at the plants or works of the Company has been or
shall be promoted to a  supervisory  position,  he shall  retain and continue to
accumulate length of service in the seniority unit from which he was or shall be
promoted.

                                    ARTICLE 9

                            GRIEVANCE AND ARBITRATION

     Section 1. The purpose of this  section is (1) to provide  opportunity  for
discussion of any request or complaint,  and (2) to establish procedures for the
processing and settlement of grievances as defined in Section 2 of this article.
<PAGE>

     Section 2.  "Grievance" as used in this Agreement is limited to a compliant
or request of an employee which involves the  interpretation of, application of,
or compliance with the provisions of this Agreement.

     Section 3.

     Step 1. Any  employee  who believes  that he has a  justifiable  request or
complaint,  shall discuss the request or complaint with is  supervisor,  with or
without the grievance  committeeman  being present as the employee may elect, in
an attempt to settle  same.  However,  any such  employee  may  instead if he so
desires, report the matter directly to his grievance  committeeman,  and in such
event the grievance committeeman, if he believes the request or complaint merits
discussion,  shall take it up with the employee's supervisor in a sincere effort
to resolve the problem.  The employee involved may be present in such discussion
if he so desires.  A grievance to be  considered  beyond Step 1 must be filed in
writing with the  supervisor  on forms  furnished  by the Company,  promptly and
within five (5) working  days after the  conclusion  of Step 1  discussions.  It
shall be dated and signed by the  grievance  committeeman  and the  employee (or
other employee affected) and should include such information and facts as may be
of aid to the Company and the Union in arriving at a fair,  prompt and  informed
decision.  The  supervisor  should write on the grievance  form:  "The grievance
committeeman  and/or  employee and I have fully  discussed  this grievance and I
have determined as follows: ." Indicate the date he received the grievance form,
sign it and deliver it to the Plant Manager.

     Step 2. A  grievance  in this step  shall be  discussed  in an  attempt  of
settlement at a mutually convenient time between the grievance  committeeman and
the Plant  Manager or his designee,  and answered  within ten (10) working dates
from the date of initial filing of the written grievance with the foreman.

     Brief  minutes of all Step 2 meetings  shall be prepared by the Company and
jointly signed by the Company representative and the grievance committeeman.  If
the Union  representative  shall  disagree  with the  accuracy of the minutes as
prepared  by the  Company,  he shall  set forth  and sign his  reasons  for such
disagreement  or they shall be regarded as agreed to. Two copies of such minutes
shall be handed the  grievance  committeeman  not later than ten (10) days after
the date on which the meeting was held.

     If the Plant  Manager's  decision is not appealed to Step 3, the  grievance
shall be considered settled on the basis of the decision last made and shall not
be eligible for further appeal.

     Step 3. In order for a grievance to be considered  further,  written notice
of appeal to  arbitration  shall be served within ten (10) days after receipt of
the Step 2 minutes by the representative of the International  Union,  certified
to  Management  in writing upon the  representative  of the  Company,  similarly
certified to the Union by the Company.

     The parties shall agree to a system  whereby a single  arbitrator  shall be
designated to hear the cases arising  under this  Agreement.  If the parties are
unable to agree on the designation of an arbitrator to hear any grievance,  then
the parties shall  request the Federal  Mediation  and  Conciliation  Service to
furnish the names of five (5) arbitrators, each of whom shall be a member of the
National  Academy of  Arbitrators,  and the parties shall then proceed to strike
four (4) names from the list,  and the  arbitrator  whose name remains  shall be
designated the arbitrator to hear the grievance.  The decision of the arbitrator

<PAGE>

on any issue  properly  before him, in  accordance  with the  provisions of this
Agreement,  shall be final  and  binding  upon the  Company,  the  Union and all
employees  concerned.  The  expense and salary  incident to the  services of the
arbitrator  shall be shared equally by the Company and the Union.  Awards of the
Arbitrator may or may not be retroactive as the equities of the particular cases
may demand, but in any event that shall be no retroactive award earlier than the
date the grievance was first presented in written form as described in Step 1 of
this article.

     a. The arbitrator shall have  jurisdiction and authority only to interpret,
apply or determine compliance with the provisions of this Agreement,  insofar as
shall  be  necessary  to  the  determination  of  grievances   appealed  to  the
arbitrator.  The arbitrator shall not have  jurisdiction or authority to add to,
detract form or alter in any way the provisions of this Agreement.

     b. The  grievance  procedure  may be  utilized  by the Union in  processing
grievances  which  allege a violation of the  obligations  of the Company to the
Union as such.  In  processing  such  grievances,  the Union  shall  observe the
specified time limits in appealing,  and the Company shall observe the specified
time limits in answering.

     c. If this  Agreement  is  violated  by the  occurrence  of a strike,  work
stoppage or interruption  or impeding of work at the plant, no grievances  shall
be  discussed  or  processed in the third step level or above in the plant while
such  violation  continues,  but  under no  circumstances  shall  any  grievance
concerning  employees  engaged in the violation be discussed or processed  while
such violation continues.

     d.  Notwithstanding  the procedure  herein  provided,  any grievance may be
submitted  to the  arbitrator  at any time by  agreement  of the parties to this
Agreement.

     e. If this  Agreement  is  violated  by the  occurrence  of a strike,  work
stoppage or interruption or impeding of work at the plant,  the arbitrator shall
refuse  to  consider  to  decide  any cases  concerning  employees  at the plant
involved in such violation  while such strike,  work stoppage or interruption or
impeding of work is in effect.

     f. When  arbitration  hearings are conducted  during regular working hours,
those  employees  who are  necessary  witnesses  shall suffer no loss of regular
income during the time they testify at such hearings.

     g.  One  copy of the  arbitrator's  decision  shall  be sent to each of the
parties thereto and to the office of the International Union.

                                   ARTICLE 10

                            DISCHARGE AND DISCIPLINE

     All employees are expected to abide by any  reasonable  rules of Management
as  outlined in the  Irathane  Systems  Corporate  Guidelines  for  Disciplinary
Action.  Any violation of the  employer's  rules shall be  sufficient  cause for
discipline  of an  employee  by  suspension  for three  (3)  days,  and a second
violation of such rules shall be sufficient cause of an immediate dismissal. The
employer  shall have the right to  immediately  discharge  an  employee  without
warning if the cause of such discharge is dishonesty,  intoxication, drinking on
duty,  or improper use of  controlled  substances,  willful  destruction  of the
employer's property or recklessness  resulting in either the threat of a serious
accident or a serious accident while on duty.
<PAGE>

                                   ARTICLE 11

                                 BULLETIN BOARD

     The Union  shall have the right to post  notices of Union  business  on the
shop bulletin board.

                                   ARTICLE 12

                                SAFETY AND HEALTH

     Section 1. The Company shall continue to make reasonable provisions for the
safety and health of its  employees in the shop,  and all employees are required
to comply to these provisions.

     Section 2. The Company  agrees to provide  adequate  and decent  health and
sanitation facilities including adequate ventilation.

                                   ARTICLE 13

                 LEAVE OF ABSENCE, MATERNITY AND FUNERAL LEAVES

     Section 1. Employees  desiring a leave of absence not to exceed thirty (30)
days for the purposes other than non-company  employment or the seeking thereof,
may  request  such from the  Company  which may allow such leave if the  Company
determines  that  such will not  impair  the  efficiency  of the  operation.  An
additional  eave of  absence of thirty  (30) days may be  mutually  agreed  upon
between the employee and the Company.

     Section 2. The Company  agrees to provide a funeral  leave with pay for the
actual  time  lost from  work,  providing  employee  is absent to attend or make
funeral  arrangements  for up to three  (3) days  for the  following  relations:
Spouse,  parents,  children,  brothers  and  sisters.  Up to two (2)  days  for:
mother-in-law or father-in-law. Up to one (1) day for: Aunt, uncle, grandparents
or other in-laws.

     Section  3.  Maternity  leave of  absence  shall  be  granted  to  eligible
employees in compliance with applicable State and Federal rules and regulations.
An employee  wishing to return from  maternity  leave shall provide the employer
with her request  for  reinstatement  accompanied  by an  attending  physician's
statement of satisfactory health.

                                   ARTICLE 14

                  JOB POSITIONS, WAGE RATES AND COST OF LIVING

     Section 1. Job positions  require that  significant  facts be recorded on a
job  description  which shall set forth the  identification,  location,  primary
function,  tools and  equipment,  materials,  source of  supervision,  direction
exercised,  and  working  procedure.  It should be written in simple,  clear and
meaningful  language,  and  confined  to  information  considered  necessary  to
describe the principal function of the job. Job descriptions are not intended to
be  and  rarely  are  definitive  and  all  inclusive  descriptions  of  working
procedures and tolls used. All the duties and work requirements of a job are not
expected to be cataloged  in a job  description.  Consequently,  the fact that a
particular duty is not referred to in a job description is not to be controlling
in determining  whether the incumbent of the job may be required to perform that
duty.
<PAGE>

     A. Significant details concerning the function and requirements of each job
shall be set forth in a job description and shall:

     Provide a means of identifying the job under consideration,  the processes,
equipment  and products  with which it is  concerned,  and shall serve only as a
basis for which to classify the job.

     Reflect the general details considered  necessary to describe the principal
functions  of the job  identified  and  shall  not be  construed  as a  detailed
description of all the work requirements that may be inherent in the job.

     Provide,  together with the reasons for the classification,  the basis from
which to judge  changes  in job  content  which may  result  from new or changed
conditions when such are established from time to time.

     B. The job description form shall be completed in the following manner:

     IDENTIFICATION  DATA shall  contain as a minimum,  the name of the company,
department and plant in which the job is located, date and job title.

     PRIMARY  FUNCTION shall be limited to a concise  statement of the principal
duties of the job.

     TOOLS AND  EQUIPMENT  are those  used in the  performance  of the job which
actually come under the control of the workman and should be shown in sufficient
detail to identify such tools and equipment.

     MATERIALS  are  those  which  are  produced,  consumed  or  handled  in the
performance  of the job and  should  be shown in  sufficient  detail  to  assure
correct identity.  Only those materials for which the subject job is responsible
should be shown.

     EQUIPMENT is considered as material for some jobs.  For example,  a machine
would be  equipment  for a  Machine  Operation,  but would be a  material  for a
Maintenance employee who maintains it.

     INCLUSIVE  TERMS,  such as rubber or urethane plant  additions or processes
commonly  associated  with jobs or processes,  should be used where  appropriate
instead of detailed lists of such materials.

     SOURCE  OF  SUPERVISION  should  show the  title or  titles  of  managerial
personnel who exercise direct  supervision  over the job. If an hourly rated job
leads or directs the subject job, its plant title also should be shown.

<PAGE>

     DIRECTION  EXERCISED should show the title of other jobs, if any, for which
the job being described has  responsibility for on-the-job  directions,  such as
helpers or other  positions.  Merely relaying  information or signaling does not
constitute direction.

     WORKING PROCEDURE should not contain a detailed  elemental  breakdown,  but
should contain sufficient  information to permit  classification of the job in a
factual basis.

     Section 2. When it is determined by the Company that a vacancy  (other than
a  temporary  vacancy)  exists  as set forth in  Section 8 of  Article 8 of this
Agreement,  the  Company  shall post a notice of such  vacancy  on the  bulletin
boards.

     A. The Company may  temporarily  fill such vacancy during the time required
to give the posted notice stipulated herein, and for such reasonable time as may
be necessary to consider such  applications  presented  without being subject to
grievance.

     B. Notice of vacancies shall be posted for five (5) working days and during
this  time,  applications  shall be made in  writing  on forms  provided  by the
Company.

     C. If no applications are received in the five (5) day period,  the Company
may fill such vacancy in any manner it desires.  Notice of vacancy posting shall
include the job title and rate of pay.

     D. The  Company  may  disregard  any  employee  who has  failed  to file an
application  for a position  within  the time set forth  above,  and  failure to
consider any such employee for  appointment  to such position  shall not be made
the subject of grievance.

     E. In filling  permanent  vacancies,  if the ability to perform the work of
the job to which the  promotion  is to be made and  physical  fitness are equal,
applicants shall receive consideration in order of their continuous service.

     F. The  successful  applicant  shall have a thirty (30) day trial period in
which to  demonstrate  his  qualifications  and  ability to perform  the job. If
during such period the Company deems the employee unqualified or the employee is
dissatisfied, the employee shall be returned to his former position without loss
of  seniority.  If an  employee is  successful  in his bid for a posted job of a
higher  classification,  he  will  retain  his  current  rate of pay  until  the
completion of his 30-day trial period.

     G. Each employee  shall be restricted to one (1)  successful bid in any one
year. If an employee is disqualified by the Company,  this shall not be deemed a
successful  bid. If the employee  disqualified  himself,  this shall be deemed a
successful bid for the purpose of this Agreement.

     H. Downward bidding will be permitted only at the discretion of the Company
and for the established rate of the job.

     I. Additional  vacancies occurring within a period of fifteen (15) calendar
days  subsequent to the selection of an applicant may be filled from the list of
applicants  for the  vacancy  and no new  notice  will be  posted  unless  it is
determined by the Company that such notice is necessary.

     Section  3. The job  positions  and  rates of pay  during  the term of this
Agreement shall be as follows:

<PAGE>

     a. Job Classifications and Rate of Pay:

                                  EFFECTIVE         EFFECTIVE        EFFECTIVE
                                   07/01/99         07/01/00         07/01/01
                                 --------------    --------------   -----------

Casting Machine Operator             $15.63           $15.98            $16.28

Casting Machine Helper                14.03            14.38             14.68

Maintenance Mechanic                  15.13            15.48             15.78

Warehouse                             13.03            13.38             13.68

Utility "A"                           13.03            13.38             13.68

Utility "B"                           12.03            12.38             12.68

General Labor                         11.48            11.83             12.13

Differential Rates:

         Leadman                      $1.00
         Afternoon shift              .35
         Night shift                  .50
         Boiler license               .50

     Section  4. The rate  for  summer  students  shall  be  established  by the
Company, not to exceed the General Labor rate in effect at the time of hire.

     Section 5. For all new employees hires, the following  progression schedule
shall apply:

         Start                                                         70%
         After 30 days                                                 75%
         After 90 days                                                 80%
         After six months                                              90%
         After 2 years                                                 100%

     Section 6.  Employees  working any shift  commencing at 3:00 p.m. or later,
shall receive a shift bonus of $.35 per hour for each hour worked on such shift.
Employees working on any shift commencing at 11:00 p.m. or later shall receive a
shift bonus of $.50 per hour for each hour worked on such shift.

     Section 7. The  employer  may  designate an employee of its choice from the
bargaining  unit as leadman.  An employee so designated  shall receive $1.00 per
hour in addition to his base rate of pay. In the event no employee is interested
in such designate or lacks the skills,  ability and physical  fitness to perform
such lead  function,  the  employer  may hire an employee  to fill such  leadman
position.  The  company  shall not use this  position  to defeat  the  seniority
provisions of this Agreement.

<PAGE>

     a. An employee who is in the position of Maintenance Mechanic shall receive
a premium of $.50 per hour for the boiler license that they hold.

     Section 8. The plant manager and other  supervisors  shall not perform work
on a job  normally  performed  by employees  in the  bargaining  unit;  provided
however,  this  provision  shall not be  construed to prohibit  supervisor  from
performing the following type of work:

     a. Experimental  work.

     b. Demonstration work performed for the purpose of instructing and training
employees.

     c. Work required of the  supervisors by emergency  conditions  which if not
performed might result in interference with operations, bodily injury or loss or
damage to material or equipment.

     Section 9.  Employees may be assigned or  transferred to such jobs and such
work areas as  management in its good faith  discretion  determines is necessary
for the efficient operation of the business.  Employees will not be assigned out
of their  regular work areas on a permanent  basis unless their  previous job is
changed or discontinued.

     Section  10.  Job  transfers  due to daily  fluctuations  in work  load and
operations:

     a. Employees who actually being work and are later  transferred  during the
shift to a position  with a lower or higher  rate of pay,  shall be paid for all
hours on that shift at his standard  rate.  However,  if on the  succeeding  day
(regular  scheduled  shift) he is  assigned  to the  position  with the lower or
higher rated pay, he will be paid the job class rate for al hours worked on that
and all succeeding days until transferred back to his regular position.

     b.  Job  transfers  due to  layoffs:  Employees  will  be  assigned  to the
remaining positions  according to qualifications.  Qualifications and ability to
perform  the work will be made in good faith  judgment  of  management.  The job
class rate application to the position assigned will be paid.

     c. Job vacancies:  Employees transferred by the Company to temporarily fill
a job vacancy  being posted as outlined in Section 2 of this  Articles  shall in
the event the job class of the vacant job is lower,  receive  his  standard  job
class rate.

     Section  11.  COST OF LIVING  ADJUSTMENT:  NOTWITHSTANDING  ANYTHING TO THE
CONTRARY  CONTAINED  HEREIN,  THE  APPLICATION OF ANY COST OF LIVING  ADJUSTMENT
DURING THE TERM OF THIS AGREEMENT SHALL BE NULL AND VOID.

     Cost of  living  adjustments  shall be an "add on" and shall not be part of
the employees  standard hourly wage scale. Such adjustment shall be payable only
for hours actually  worked and for reporting  allowance and shall be included in
the  calculation  of overtime,  but shall not be used in the  calculation of any
other pay, allowance or benefit.

                                   ARTICLE 15

                     INSURANCE AND HOSPITALIZATION BENEFITS

<PAGE>

     Section 1. The Company shall provide medical insurance and  hospitalization
benefits for eligible  employees.  The Company will pay the premium of the above
group  insurance  plan.  Employees  shall share the cost by contributing up to a
maximum amount as follows:

                  Single coverage:          $10 per month
                  Family coverage:          $65 per month

     The  terms and  conditions  of the Plan are not  subject  to  grievance  or
arbitration  and shall be determined by the Company and  controlled by the Trust
Agreement.  Further,  the Company retains the right to amend and change the Plan
providing such changes do not discriminate against Union employees.

     Section  2.  The  Company  shall  provide  dental   insurance  to  eligible
employees.  The terms and conditions of the Plan are not subject to grievance or
arbitration  and shall be determined  by the Company and  controlled by the Plan
Agreement.  Further the  Company  retains the right to amend and change the Plan
providing such changes do not discriminate against the Union employees.

     Section 3. The Company  will  provide a Sickness & Accident  benefit  which
will pay $325 per week for all union  employees  and for a maximum  of 13 weeks.
Benefits commence on the eighth calendar day of certified disability.

     Section 4. The Company will provide a Long Term  Disability  benefit  which
will equal 60 percent of your monthly earnings prior to your disability,  not to
exceed a maximum  of $5,000 per  month.  Monthly  earnings  do not  include  any
bonuses,  overtime pay or other extra compensation.  The employees must meet the
eligibility requirements as stated in the plan to qualify.

     Section  5. The  Company  will  provide  a Life and  Accidental  Death  and
Dismemberment benefit to the employees.  This plan provides basic life insurance
coverage  equal  to  $50,000.  The  employee  will  have an  option  to  acquire
additional life insurance based on the rates  established by our insurer.  Also,
the Accidental Death and Dismemberment benefits are subject to the provisions of
the Company's plan.

     Section  6. The  company  will  provide  a  Safety  Glass  program  for the
employees.  This plan provides for the  following  expense  reimbursement  on an
annual basis:

                           Exam Only:                         $38.00
                           Exam & Single Vision Glasses:      $58.00
                           Exam & Bi-focal glasses:           $78.00

                                   ARTICLE 16

                                 PENSION PROGRAM

     Article 1. The Company agrees to continue the current pension  program,  on
the same basis as outlined in prior  agreements  and at a  retirement  income of
$200.00 times years of credited service from date of employment.

<PAGE>

     Effective  July 1, 1993, the Company will provide an additional $25 benefit
per year of credited service from July 1, 1993.

     Effective  July 1, 1994, the Company will provide an additional $25 benefit
per year of credited service from July 1, 1994.

     Effective  July 1, 1995, the Company will provide an additional $25 benefit
per year of credited service from July 1, 1995.

     Effective  July 1, 1996, the Company will provide an additional $25 benefit
per year of credited service from July 1, 1996.

     Section 2. The Company agrees to implement a 401(k) plan for the employees.
All  people  employed  by  Irathane  Systems  and a member of the union who have
completed  sixty (60) days of service  and have  attained at least the age of 20
may join the first of the month  after their  sixty day  anniversary.  As a Plan
participant,  you may authorize payroll deductions of 1% up to 18% of your gross
salary for  investment  in the Plan.  You may increase or decrease  your deposit
percentage  on January  1,  April 1, July 1 or  October  1. You may stop  making
contributions  at  any  time.  As  of  this  time,  there  will  be  no  company
contribution made to this Plan.

                                   ARTICLE 17

                                TERM OF AGREEMENT

     Section 1. The term of this  Agreement  shall be from the first day of July
1999 and remain in full force and effect through June 30, 2002.

     Section 2. Any party has the right to terminate or amend this  Agreement by
giving notice to the other party,  sixty (60) days before the expiration of this
Agreement.  Failure to give such notice shall cause this Agreement to be renewed
automatically for a further period of twelve (12) months.

     Section 3. In the event such written notice is given and a new Agreement is
not signed before the  expiration  date of this  Agreement,  then this Agreement
shall  continue  in force  until a new  agreement  is signed,  negotiations  are
formally broken off or until a strike or lockout occurs.

     IN WITNESS WHEREOF,  we have set our hands and seals this day of June 1999.

IRATHANE SYSTEMS INCORPORATED                        MIDWESTERN INDUSTRIAL
COUNCIL

/s/ Daniel O. Burkes                                /s/ Lowell Schultz
/s/ John Kokotovich                                 /s/ Albert A. Guddeir
/s/ Deb Gustafson                                   /s/ John Koslucher
                                                    /s/ Ernie ?

<PAGE>



                                  EXHIBIT 10(5)

                                    AGREEMENT

                                     between

                             ITW IRATHANE / ELLIOTT
                           "A DIVISION OF ITW CANADA"

                        3015 CKSO ROAD, SUDBURY, ONTARIO

                                       and

                          THE INTERNATIONAL BROTHERHOOD

                                       OF

                           PAINTERS AND ALLIED TRADES

                                   LOCAL, 1904

                                SUDBURY, ONTARIO

                                    Effective

                           June 1, 1999 - May 31, 2001


<PAGE>

                                    AGREEMENT

     ITW IRATHANE / ELLIOT, "a Division of ITW Canada",  hereinafter referred to
as "The  Company"  and The  International  Brotherhood  of  Painters  and Allied
Trades,  Local 1904,  hereinafter  referred to as "The Union" as the  bargaining
agent for the employees covered by this agreement, agree as follows:

                                   ARTICLE 1

                             DEFINITION OF EMPLOYEE

     1.01 The terms of  "Employee"  and  "Employees"  as used in this  Agreement
(except where the context clearly indicates otherwise) shall mean an employee or
employees within the bargaining unit represented by the Union.

     1.02  The  Company  may  hire   temporary   employees  with  the  following
provisions:

     a) This  Company  agrees to advise the Union of the nature and  duration of
the work and the number of temporaries that the Company expects to hire.

     b) All  employment  mentioned  in  1.02  shall  be  subject  to  the  Union
membership as outlined in Article 3 with the exception that the Union will allow
work permits for jobs of less than six (6) months duration.

     c) They shall not  receive any  benefits  as laid out in Article  #21.

     d) A  temporary  position  will  become  regular  subject  to all terms and
conditions of the  Agreement if it continues  beyond six (6) months of that time
or is reactivated within six (6) months of that time.

     e) None of the  conditions  under 1.02 will result in the reduction of full
time positions or hours normally worked by regular full time employees.

                                    ARTICLE 2

                              DESCRIPTION OF UNIT

     2.01 The  Company  recognizes  that  the  Union  is  certified  as the sole
collective bargaining agent of all its employees at Sudbury, save and except the
supervisors,  guards,  persons  above the rank of  supervisor,  office and sales
staff.

                                    ARTICLE 3

                                 UNION SECURITY

     3.01 All  Employees  covered by this  Agreement  shall,  as a condition  of
continued  employment,  become a member of the Union within  thirty (30) days of
ratification  of this Agreement.  All employees hired after the  ratification of
this Agreement shall, as a condition of continued employment, become a member of
the Union within  thirty (30) days of his/her  hiring date.  However,  employees
hired under the provisions of Article 1.02 are exempt from Union  membership and
will work under work permits issued by the Union.  It if further agreed that all
aforementioned  employees shall maintain such membership or work permits in good
standing as a condition of continued employment.

<PAGE>

     3.02  Employees  hired under the provisions of Article 1.02 are exempt from
Union membership and will work under work permits issued.

     3.03 The Company will,  commencing with the date of signing this Agreement,
honor an authorization  for the deduction and remittance of an amount equivalent
to the regular weekly Union dues and initiation  fees, when  applicable,  of any
employee who  instructs  the Company to make such a deduction on a form provided
by the Union.

     3.04 The  Company  will remit the monies so  deducted  to the office of the
Union  prior to the  twentieth  (20th) day of the month  following  the month in
which  deductions  are made and will  name the  employees  from  whose  pay such
payment has been deducted.

     3.05 Except in cases of emergency,  production  difficulties,  instruction,
experimental or research work, or situations where no qualified  employee within
the bargaining  unit is available to do such work,  supervisory  employees shall
not work on any job normally performed by an employee in the bargaining unit.

     3.06 In cases involving the training of employees,  senior  employees shall
be entitled to preference subject to the following factors:

     a) seniority;

     b) physical fitness of the employee to do the job;

     c) the ability,  knowledge, state of training, and skill of the individual;

     Where factors b) and c) are relatively equal, then seniority shall govern.

                                    ARTICLE 4

                                 DISCRIMINATION

     4.01 It is agreed by both parties that there shall be no  discrimination of
any nature on the part of the employer, the Union or by the employees themselves
against any employee on the ground of: race, ancestry,  place of origin, colour,
ethnic origin,  citizenship,  creed,  sex, sexual  orientation,  handicap,  age,
marital  status,  family  status,  the receipt of public  assistance,  record of
offenses, or any other provision of the Human Rights Code, 1981.

                                    ARTICLE 5

                                 UNION NOTICES

     5.01 At the request of the Union,  the Company  shall let the Union post on
the Company bulletin  boards,  located in the shop, Union notices that have been
approved by the Company.

                                    ARTICLE 6

                             NO STRIKES OR LOCKOUTS

     6.01  During  the life of this  agreement  the  Union  shall  not  cause or
support, nor shall any employee or employees take part in any action against the
Company such as a strike,  international slowdown in rate of production,  or any
other,  interference  with or stoppage for the Company's work. The Company shall
not conduct a lockout during the term of the Agreement.
<PAGE>

                                    ARTICLE 7

                               SAFETY AND HEALTH

     7.01 The Company will make safety  equipment  available to its employees in
accordance with job requirements and existing safety legislation.

     7.02 The Company  welcomes from the Union,  its members,  or any employees,
suggestions regarding safety and health.

     7.03  Employees  shall  abide  by and  obey  reasonable  safety  rules  and
regulations established by the Company.

     7.04 The  Company  will  supply  one (1)  pair of  C.S.A.  approved  safety
footwear per year,  per  employee,  based on the employees  anniversary  date of
hire. In the event the employee elects to purchase  alternate (Company approved)
footwear the Company  will  reimburse  up to the amount of  sixty-five  ($65.00)
dollars upon proof of purchase.

                                    ARTICLE 8

                               WORKING CONDITIONS

     8.01 The  Company  agrees  that its  policy  is to  provide  proper  safety
facilities,  proper ventilation and heat in accordance with the standards set by
the laws of the Province of Ontario and/or Canada.

                                    ARTICLE 9

                                 WORK SCHEDULES

     9.01 The regular work shift shall consist of:

     a) Five (5)  consecutive  days of eight  (8) hour  shifts,  Monday  through
Friday or;

     b) Four (4)  consecutive  daysof ten (10) hour shifts within Monday through
Friday.

     These shifts will be scheduled as follows:

         Day shift
         Afternoon shift
         Night shift

     9.02 The  Company may change the above work  schedule  but will confer with
the Union Representative before making any changes.

     9.03 The Company  may  establish a special  work  schedule to meet:

     1) The special requirements arising out of the inherent  characteristics of
any job or

     2) Any temporary work situation.

<PAGE>

     9.04 The  Company  does  not  guarantee  to  provide  work for any  regular
schedule or for any other schedules.

                                   ARTICLE 10

                                    OVERTIME

     10.01 The  Company's  policy  will be to keep  overtime  to a  minimum.  If
conditions  arise  necessitating  overtime,  the  overtime  will be given to the
employees in a fair and  equitable  manner,  with regard to skill and ability of
the employee to perform the work available.

     10.02  Overtime at the rate of one and one-half (1 + 1/2) times the regular
rate shall be paid for all work  performed in excess of the hours  scheduled per
day,  under Article  9.01,  sections a) and b) and in excess of forty (40) hours
per week, or for work on a Saturday.

     10.03  Overtime at the rate of double  time the regular  rate shall be paid
for all work  performed  on Sundays and  Statutory  Holidays,  there shall be no
pyramiding of overtime pay.

     10.04 Employees reporting to work at the regular starting time who have not
been told in  advance  not to report  will be given  work for at least  four (4)
hours or shall be paid at their  hourly  rate for any  portion  of said four (4)
hours during which work is offered to them.

     10.05 The above  provisions do not apply if the employee is prevented  from
working because of power shortage or failure of power supply or other conditions
beyond the control of the Company.

                                   ARTICLE 11

                                 PAID HOLIDAYS

     11.01 The  following  Statutory  Holidays will be paid during the 1998-2001
contract.  Canada Day,  Christmas Day, August Civic Holiday,  Boxing Day, Labour
Day, New Years Day, Thanksgiving Day, Victoria Day, Good Friday, and Remembrance
Day.

     Two (2) Floating Holidays for employees hired prior to June 1, 1992.

     11.02 Should any of the above  mentioned  holidays  fall on a Saturday or a
Sunday,  either Monday immediately following or the Friday immediately preceding
such holiday  shall be  considered  as the holiday as may be  determined  by the
Company.

                                   ARTICLE 12

                                   JURY DUTY

     12.01 An  employee  will be  excused  for jury  duty and the  Company  will
reimburse the difference between jury pay and the employee's regular wages.


<PAGE>

                                   ARTICLE 13

                               FUNERAL LEAVE PAY

     13.01  The  Company  will pay  employees  for time  lost at the  employee's
straight  time rate for the number of hours in his/her  regular  scheduled  work
time three (3) days when there is a death in the  immediate  family  (defined as
Father, Mother, Sister, Brother, Spouse, Children, Mother-in-law, Father-in-law)
for the purpose of attending funeral services.

     13.02 One day  absence  shall be paid to an  employee  for the  purpose  of
attending  the  funeral  of  a  Sister-in-law,  Brother-in-law,  Grandmother  or
Grandfather.

                                   ARTICLE 14

                                   SENIORITY

     14.01 The purpose of  seniority is to provide a fair and  equitable  policy
governing layoff,  rehires, and job promotion.  Job promotions are offered based
on ability to perform the job responsibility. Seniority will prevail if there is
more than one candidate qualified.

     14.02 In the event of a reduction of the work force,  Company service shall
be applied by job  classifications  group so senior  employees shall be retained
provided   they  have  the   qualifications,   capability   and   experience  to
satisfactorily perform the remaining jobs in that group.

     14.03   Employees   with  the  least   continuous   service   in  each  job
classification  shall be laid off first,  provided the  remaining  employees are
qualified,  in management's  good faith and judgement,  to perform the necessary
work.  In the event of layoff exceed five (5) working days (this will be two (2)
weeks on field jobs),  the Company shall  consider the status of any employee on
layoff to determine whether the employee has the  qualifications to perform work
then being  performed  by an employee in another job  classification,  with less
continuous  service with the Company.  If the Company  concludes that a laid off
employee  has  such  requisite  qualifications,  he/she  will  be  recalled  and
substituted  for the more  junior  employee,  who will  then be placed on layoff
status.  During  the  period of a  layoff,  no new  employees  shall be hired to
perform  the same job which a laid off  employee  is then able to  perform.  The
employees shall be recalled to work in the order of their seniority  within each
job  classification  with a laid off  employee in each class having the greatest
amount of continuous service receiving first recall.  Recall from layoff will be
made with the same consideration as those used in the workforce reduction.

     14.04 For the purpose of this  Agreement a  "probationary  employee"  is an
employee  whose  length  of  employment  with the  Company  is less than six (6)
months.  Such  employee  has no  seniority  rights and his/her  retention  as an
employee is entirely within the discretion of the Company.

     14.05 The Company  agrees that  probationary  employees  shall be the first
laid off.

     14.06 An  employee  shall be  considered  to have  lost all  seniority  and
continuous service with the Company if:

     a) He/She voluntary quits the employ;

<PAGE>

     b) Is discharged for just cause and such discharge is not reversed  through
the  grievance  procedures;

     c) If on a continuous layoff in excess of nine (9) months;

     d) The employee retires.

     14.07 In the event of a layoff  situation,  employees  will be given notice
five (5) working days notice prior to layoff.

                                   ARTICLE 15

                                 PAID VACATIONS

     15.01 An  employee  will be  entitled  to an  annual  vacation  with pay in
accordance with the following  schedule based on his/her continuous service with
the  Company to December  thirty-first  (31st)  preceding  the year in which the
vacation is to be taken.

     15.02 a) Less  than one year of  continuous  service,  the  employee  shall
receive four percent (4%) of gross earnings.

     b) One or more years of  continuous  service  but less than four (4) years,
two (2) weeks  vacation  remunerated  at either (i) 4% of the  employee's  total
earnings for the preceding calendar year or (ii) eighty (80) hours of pay at the
employee's  hourly rate at the time of taking  his/her  vacation,  whichever  is
greater.

     c) Four (4) or more years of continuous  service,  three (3) weeks vacation
remunerated at either (i) 6% of the employee's  total earnings for the preceding
year, or (ii) one-  hundred-twenty  (120) hours of pay at the employee's  hourly
rate at the time of taking his/her vacation, whichever is greater.

     d) Twelve (12) or more years of continuous service, four (4) weeks vacation
remunerated at either (i) 8% of the employee's  total earnings for the preceding
calendar  year, or (ii)  one-hundred-sixty  (160) hours of pay at the employee's
hourly rate at the time of taking his/her vacation, whichever is greater.

     If any employee  has  performed no work for the Company for four (4) months
or longer during the preceding  vacation year, option "ii" in paragraphs "b" "c"
and "d" will not apply.

     15.03 Vacations shall be taken at a time which is mutually  satisfactory to
the employee and the Company,  with the  understanding  that vacations shall not
interfere with  production.  For all employees  subject to this  Agreement,  the
vacation  schedule  shall be determined  and posted prior to April15th each year
during the term of this Agreement.

                                   ARTICLE 16

                              GRIEVANCE PROCEDURES

     16.01 It is the mutual desire of parties to this agreement that  complaints
and  grievances of the employees  shall be adjusted as quickly as possible.  The
Union Steward and/or  Business  Representative  will take any matter up directly
with the  Supervisor  for the purpose of  adjusting  the  condition  causing the
complaint before lodging a formal  grievance,  in writing,  within the next five
(5)  working  days if a  settlement  is not  reached.  Any  grievance  regarding
discharge must be presented within 24 hours or it will be barred.

<PAGE>

     16.02 If a settlement  is not  reached,  within the next fifteen (15) days,
the grievance may be referred to the General Manager or a delegate  appointed by
him/her who will meet with the Union Steward and/or Business  Representative for
the final decision.

     16.03 If no settlement  can be reached within the next fifteen (15) working
days  following  this meeting,  the  grievance  may be referred  within the next
thirty (30) working days to a sole Arbitrator for final and binding  decision as
provided in Article 17 - Arbitration.  Upon receipt of the request to arbitrate,
the  General  Manager  or  a  delegate   appointed  by  him/her  and  the  Union
Representative will meet to decide upon a mutually acceptable Arbitrator.

                                   ARTICLE 17

                                  ARBITRATION

     17.01   Both   parties   to  this   Agreement   agree   that  any   alleged
misinterpretation or violation of the provision of this Agreement, including any
grievances which has been carried through the grievance  procedures  outlined in
Article  16 and  which  has not  been  settled,  may be  referred  to a board of
Arbitration  at the  written  request of the party  instituting  the  grievances
providing  such notice shall state the specific  issues to be arbitrated and the
provisions  of the Agreement  alleged to be violated.  The notice shall be given
not later than  thirty  (30) days after final  grievance  proceedings  failed to
settle the issue.

     (a) If within ten (10) days after their first meeting, the two parties have
been  unable to agree upon a mutually  acceptable  Arbitrator,  the  Ministry of
Labour, for the Province of Ontario shall be requested to appoint an Arbitrator.

     17.02 the referral of grievance(s) to a sole Arbitrator shall be subject to
the following rules:

     a) The Arbitrator shall afford the parties reasonable opportunity to submit
briefs;

     b) The Arbitrator shall render his/her decision as soon as possible;

     c) The Arbitrator, in rendering a decision shall be bound by the Principles
of Law to the interpretation of contracts followed by Ontario Provincial Courts;

     d) The Arbitrator shall have  jurisdiction and authority only to interpret,
apply or determine compliance with the provisions of this Agreement,  insofar as
shall  be  necessary  to  the  determination  of  grievances   appealed  to  the
Arbitrator.  The Arbitrator shall not have  jurisdiction or authority to add to,
or detract from or alter in any way, the provisions of the Agreement.

     e) The expenses of the Arbitrator  shall be born equally by both parties in
arbitration;

     f) No person may be appointed as an Arbitrator  who has been involved in an
attempt to negotiate or settle the matter at issue.

                                   ARTICLE 18

                              UNION REPRESENTATIVE

     18.01 The  Union  shall  furnish  the  Company  with the names of the Union
Officers and the company agrees that the Union shall have the right to appoint a
Steward.  The Steward shall be recognized as being a representative of the Union
on the job. The Company  shall be  notified,  in writing,  of any  changes.  The
Company shall not recognize any employees as a Steward or Union officer  without
such notice.
<PAGE>

     18.02 No Steward or other Union  Representative  may be absent from his/her
work  except for the purpose of  investigating  or  handling  grievances  in the
manner specifically provided for in this Agreement, and then only provided that,
before  absenting  himself/herself  from his/her job,  he/she  notified  his/her
supervisor  for such purpose.  After each absence,  such  representatives  shall
report to the supervisor in charge at the time he/she returns to work.

                                   ARTICLE 19

                                LEAVE OF ABSENCE

     19.01 The Company  will grant time off  without pay to the elected  Steward
and/or  Union  Officer in order to attend  conventions  in  connection  with the
Union's activities.

     19.02  Leave of absence  shall mean an absence  from work  requested  by an
employee in writing anc  consented to by the Company.  Leave granted shall be in
writing  covering  a  specified  period  of  time.  Leave  of  absence  shall be
permissive only and shall be without pay or any other form of compensation,  and
the employee shall not work any other  position  during such leave unless agreed
to by the  Company  in  writing.  No such  leave  of  absence  will  affect  any
employee's  seniority  rights  when used for the  purpose  granted  provided  he
returns to work at the expiration of his/her leave.

                                   ARTICLE 20

             METHODS OF PAY IN WAGES AND TERMINATIONS OF EMPLOYMENT

     20.01 Wages shall be paid one each week on or before Friday,  no later than
one (1) hour  before the regular  quitting  time.  Method of payment  will be by
direct deposit.

     20.02  When an  employee  is laid  off,  discharged  for  cause,  quits  or
otherwise  leaves the Company,  he/she  shall  receive all wages due on the next
regular pay day.

     20.03  Continuous   service  and  the  employment   relationship  shall  be
considered terminated when:

     a) An employee voluntarily quits or is discharged for proper cause;

     b) an employee who has been laid-off  fails to report to work when recalled
by registered mail to his last known address within a period of five (5) working
days;

     c) An employee is absent for more than three (3) days without notifying the
company for reasons of such absence.

                                   ARTICLE 21

                                GENERAL BENEFITS

     The benefits  provided under ITW Irathane / Elliott,  a unit of ITW Canada,
Inc. In Sudbury,  are in effect at the signing of the  Agreement and will not be
changed during the life of this Agreement except as may be required by law.

<PAGE>

     21.01  Benefits  and plans  referred  to in this  article  are  necessarily
qualified in their entirety by reference to the underlying policies of contracts
of insurance.

     21.02 The Company will pay one-hundred  (100%) percent of the premium costs
for the following benefit plans for seniority employees.  (1) ITW Life/A.D. & D.
Insurance (2) Dependent Life (3) Weekly Indemnity Coverage (4) O.H.I.P. standard
coverage for employees  and  dependents  (5) ITW Major Medical  Coverage (6) ITW
Dental Plan (7) The Company  will  continue to make RRSP  contributions  to each
full-time  employee's  account on an accrual  basis to a maximum of $550.00  per
year for all contract years through May 31st, 2001.

                                   ARTICLE 22

                          WAGES AND JOB CLASSIFICATION

     22.01 The  Company  agrees to pay and the  Union  agrees to accept  the pay
scale as shown in Attachment "A" which is made part of this Agreement.

     22.02 With the Union and the Company's  mutual  agreement new employees may
start at a higher  rate than  indicated  in  Attachment  "a" in  recognition  of
previous working experience.

     22.03 The Company  will pay  authorized  accommodation  and  transportation
costs for  hourly  employees  required  to travel  from  their  normal  place of
employment to perform field  assignments.  Employees will be paid one (1) dollar
per hour premium while  performing  field work at the customer's  premise.  This
premium does not apply to truck drivers.

                                   ARTICLE 23

                               GENERAL PROVISIONS

     23.01 The parties  acknowledge that during the negotiations  which resulted
in this Agreement,  each had the unlimited right and opportunity to make demands
and proposals  with respect to any subject or matter not removed by law from the
area of  collective  bargaining,  and that  the  understandings  and  agreements
arrived at by the parties after the exercise of that right and  opportunity  are
set forth in this Agreement. Therefore, each party voluntarily and unqualifiedly
waives the right and agrees  that the other  shall not be  obligated  to bargain
collectively  with respect to any subject matter not referred to specifically or
not covered in this  Agreement  even though such  subject or matter may not have
been within the  knowledge  or  contemplation  of either  party at the time they
negotiated or executed this Agreement.

     23.02 If any article or section of this  contract  or if any rider  thereto
shall  beheld  invalid  by  operation  of law or by any  tribunal  of  competent
jurisdiction  or if  compliance  with or  enforcement  of any article or section
should be  restrained  pending a final  determination  as to its  validity,  the
remainder of this contract and of any rider thereto or the  application  of such
article or section to persons or  circumstances  other than those as to which it
has been held invalid or as to which  compliance with or enforcement of has been
restrained, shall not be affected thereby.
<PAGE>

     23.03  In the  event  that  any  article  or  section  is held  invalid  or
enforcement of or compliance  with which has been restrained as above set forth,
the parties  affected thereby shall enter into immediate  collective  bargaining
negotiations  upon the  request of the Union for the  purpose of  arriving  at a
mutually satisfactory  replacement for such article or section during the period
of  invalidity  or  restraint.  If  the  parties  do  not  agree  on a  mutually
satisfactory replacement,  either party shall be permitted all legal or economic
recourse  in  support  of its  demands  notwithstanding  any  provision  in this
contract to the contrary.

                                   ARTICLE 24

                                    DURATION

     24.01 This Agreement shall become  effective on the first (1st) day of June
1998 and shall remain in effect  until May 31,  2001.  It shall be binding for a
further  period of one (1) year  unless  either  party shall have been given the
other written notice of the  termination of the Agreement,  not less than thirty
(30) days and not more than  sixty  (60) days  before the last day of the period
prescribed by this Agreement.

SIGNED FOR THE COMPANY:

/s/                          6/29/99         /s/
------------------------------------        ------------------------------------
Wayne Paquette               Date           Chuck Brown                    Date
Operations Manager, ITW                     Controller, ITW

SIGNED FOR THE UNION

/s/                        6/29/99          /s/                        06/29/99
------------------------------------        -----------------------------------
Bill Laberge               Date            Michael McKerral                Date
Union Steward, ITW                         Business Representative, L.U. 1904


<PAGE>

                                 ATTACHMENT "A"
                             Effective June 1, 1998


Position Indicates               Time         Percentage    Variance  Maximum
Advancement                     Increase       Increase                Wage
1st Class                       6 months         100 %                  $ 17.26
Level #1                        3 months          50 %        $ 0.19    $ 17.08
2nd Class                       12 months        100 %                  $ 16.89
Level #3                        9 months          75 %        $ 0.71    $ 16.19
Level #2                        6 months          50 %        $ 0.70    $ 15.48
Level #1                        3 months          25 %        $ 0.71    $ 14.78
Utility Operator                18 months        100 %                  $ 14.07
Level #2                        12 months         66 %        $ 1.07    $ 12.99
Level #1                        6 months          33 %        $ 1.05    $ 11.93
Trainee                         Starts          at this       Wage      $ 10.88
Trainee                         6 months        Probation     Only      $  9.59

Shift Premium     2nd Shift - $0.20/hr                    3rd Shift = $0.30/hr
**Temporary**     Start: $8.00/hr   Maximum: $8.50/hr
**Student Help**  Minimum Wage as per Current Canadian Government Levels.


Approvals

FOR THE COMPANY                                      FOR THE UNION


/s/                     6/29/99          /s/                             6/29/99
-------------------------------          ---------------------------------------
Wayne Paquette             date          Bill Laberge                       date


N/A                                      /s/                           06/29/99
-------------------------------          ---------------------------------------
Charles Brown              date          Michael McKerral                   date


<PAGE>

                                 ATTACHMENT "A"
                             Effective June 1, 1999


Position Indicates         Time          Percentage     Variance   Maximum
Advancement               Increase      Increase                  Wage

1st Class                  6 months      100 %                     $   17.66
Level #1                   3 months      50 %           $    0.20  $   17.50
2nd Class                  12 months     100 %                     $   17.31
Level #3                   9 months      75 %           $    0.73  $   16.59
Level #2                   6 months      50 %           $    0.73  $   15.87
Level #1                   3 months      25 %           $    0.73  $   15.14
Utility Operator           18 months     100 %                     $   14.42
Level #2                   12 months     66 %           $    1.10  $   13.31
Level #1                   6 months      33 %           $    1.36  $   12.23
Trainee                    Starts        at this        Wage       $   11.15
Trainee                    6 months      Probation      Only       $    9.83

Shift Premium     2nd Shift - $0.20/hr                    3rd Shift = $0.30/hr
**Temporary**     Start: $8.20/hr   Maximum: $8.71/hr
**Student Help**  Minimum Wage as per Current Canadian Government Levels.


Approvals

FOR THE COMPANY                          FOR THE UNION


/s/                     6/29/99          /s/                            6/29/99
-------------------------------         ---------------------------------------
Wayne Paquette             date         Bill Laberge                     date


 N/A                                    /s/                             06/29/99
-------------------------------         ----------------------------------------
Charles Brown              date         Michael McKerral                   date



<PAGE>

                                 ATTACHMENT "A"
                             Effective June 1, 2000


Position Indicates         Time          Percentage     Variance   Maximum
Advancement               Increase        Increase                  Wage
1st Class                 6 months        100 %                      $   18.13
Level #1                  3 months        50 %           $    0.20   $   17.94
2nd Class                 12 months       100 %                      $   17.74
Level #3                  9 months        75 %           $    0.74   $   17.00
Level #2                  6 months        50 %           $    0.74   $   16.26
Level #1                  3 months        25 %           $    0.74   $   15.52
Utility Operator          18 months       100 %                      $   14.78
Level #2                  12 months       66 %           $    1.14   $   13.64
Level #1                  6 months        33 %           $    1.10   $   12.54
Trainee                   Starts          at this        Wage        #   12.43
Trainee                   6 months        Probation      Only        $   10.08


Shift Premium     2nd Shift - $0.20/hr                    3rd Shift = $0.30/hr
**Temporary**     Start: $8.41/hr   Maximum: $8.93/hr
**Student Help**  Minimum Wage as per Current Canadian Government Levels.


Approvals

FOR THE COMPANY                                      FOR THE UNION


/s/                     6/29/99          /s/                             6/29/99
--------------------------------         ---------------------------------------
Wayne Paquette             date          Bill Laberge                      date


N/A                                      /s/                            06/29/99
--------------------------------         ---------------------------------------
Charles Brown              date          Michael McKerral                  date


<PAGE>


                              ASSIGNMENT AGREEMENT

     This Agreement made this 1st day of April 1999.

                                    BETWEEN:

     INDUSTRIAL  RUBBER  PRODUCTS  -  CANADA  INC.   (carrying  on  business  as
IRATHANE/ELLIOT  SYSTEMS),  having an  office in  Sudbury,  in the  Province  of
Ontario (hereinafter called "Irathane/Elliott Systems")

                                     - and -

     INTERNATIONAL  BROTHERHOOD OF PAINTERS & ALLIED TRADES, LOCAL 1904, a trade
union, having members employ in the Province of Ontario ("hereinafter called the
Union")

     WHEREAS the union and ITW Canada are currently  parties to a union contract
covering certain employees of Irathane/Elliott Systems.

     NOW, THEREFORE THIS AGREEMENT WITNESSETH THAT:

     1. The Irathane/Elliott  Systems has accepted an assignment of the existing
union contract between the Union and ITW Canada and hereby agrees with the Union
that it shall be bound by,  observe  and  perform  all the terms and  conditions
contained in the existing union  contract for the period  commencing on April 1,
1999 and ending on the termination of such contract.

     2. The Union does hereby  consent to the  assignment of the existing  union
contract by ITW Canada to  Irathane/Elliott  Systems,  accepts  Irathane/Elliott
Systems as a party to the existing  union contract and covenants and agrees that
Irathane/Elliott  Systems  shall be  entitled to hold and enforce all the rights
and privileges under the existing contract.

     IN WITNESS  WHEREOF the parties  hereto have  executed and  delivered  this
Agreement as of the day and year first above written.

Industrial Rubber Products - Canada Inc.,  International Brotherhood of Painters
carrying on business as                     & Allied Trades.
IRATHANE/ELLIOTT SYSTEMS


Per:/s/                        4/2/99      Per:/s/                      04/02/99
    ---------------------------------       -----------------------------------
    Wayne Paquette                          Mike McKerral
    Director                                Business Manager, Local 1904


<PAGE>

                                  EXHIBIT 10(7)

                                STOCK BONUS PLAN

                                       OF

                        INDUSTRIAL RUBBER PRODUCTS, INC.

     1.  Purpose.  The purpose of this Stock Bonus Plan (the "Bonus Plan") is to
reward  management of Industrial  Rubber  Products,  Inc. (the "Company") with a
proprietary interest in the Company, thereby creating an additional incentive to
such  personnel to promote the Company's  best  interests and to continue in its
employ,  and further to provide an additional  inducement for the acquisition of
the services of persons  capable of  contributing  to the future  success of the
Company. Stock granted under this Plan will be unregistered, Rule 144, stock.

     2. Administration.

     a. This Bonus Plan shall be  administered by the Stock Bonus Committee (the
"Committee")  of the  Board of  Directors  of the  Company  (the  "Board").  The
Committee shall be comprised of the entire Board or, if the Board so determines,
of two or more "non-employee  directors" as defined in Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934.

     b. The Committee  shall have full  authority  and  discretion to determine,
consistent  with the  provisions of the Bonus Plan,  the employees to be granted
awards and the times at which awards shall be granted.  The Committee shall also
have full authority and discretion to adopt and revise such rules and procedures
as it shall deem necessary for the administration of this Bonus Plan.

     c. The  Committee's  interpretation  and  construction of any provisions of
this Bonus Plan or any award granted  hereunder  shall be final,  conclusive and
binding on the Company and all other persons.

     3. Eligibility.

     a. The  Committee  shall from time to time  determine the  individuals  who
shall be granted  awards  under this Bonus Plan.  Bonus stock awards may only be
granted  under this Bonus Plan to any full or  part-time  employee  (which  term
includes,  but is not limited to, officers and directors who are also employees)
of the Company or of its present and future  subsidiary  corporations.  The term
"subsidiary  corporation" shall, for the purposes of this Bonus Plan, be defined
in the same  manner as such term is defined in  Section  425(f) of the  Internal
Revenue Code.

     b. An individual who has been granted an award may be granted an additional
award  under this  Bonus  Plan if the  Committee  shall so  determine,  with the
restriction  that no  individual  employee  may receive  stock awards for shares
having an aggregate  Fair Market Value  (determined  as of the time the award is
granted) in excess of $100,000.

     c. The  granting  of an award  under  this  Bonus Plan shall not affect any
stock award  previously  granted  under this Bonus Plan or any other plan of the
Company.

     4. Shares of Stock  Subject to This Bonus Plan.  The number of shares which
may be issued  pursuant to the awards granted by the Committee  under this Bonus
Plan shall not exceed fifty thousand  (50,000) shares of the common voting stock
of the Company (the "Common  Stock"),  subject to  adjustment as provided in its
Bonus Plan.

     5.  Issuance and Terms of Award  Agreements.  Each award granted under this
Bonus Plan shall be  evidenced  by a written  Award  Agreement,  which  shall be
subject  to the  provisions  of this  Bonus  Plan and to such  other  terms  and
conditions as the Committee may deem appropriate.

     6. Terms of Awards.  Each award under this Bonus Plan shall be unregistered
restricted, Rule 144 stock.
<PAGE>
                                  EXHIBIT 10(9)

                                 FIRST AMENDMENT

                                       TO

                                CREDIT AGREEMENT

     This First Amendment to Credit Agreement dated as of September 30,1999,  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 (the "Credit Agreement")

     B. The  Borrower  and the Lender  wish to make  certain  amendment  to this
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  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, 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 Borrower Base.

     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  too the Lender this
First 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.
<PAGE>

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

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

     (e) 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.

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

     Section 4.  Acknowledgment.  The  Borrower and the Lender  acknowledge  and
agree  that as hereby  amended  the Credit  Agreement  remains in full force and
effect. All referenced in the Credit Agreement to "this Agreement,"  "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 execution and delivery 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 5.  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 First Amendment to
Credit Agreement to be executed by their officer thereunto duly authorized as of
the date first above written.

                                            INDUSTRIAL RUBBER PRODUCTS, INC.

                                             By: /s/
                                             Its: President

                                            U.S. BANK NATIONAL ASSOCIATION


                                            By: /s/
                                            Its:   VP

<PAGE>

                                 REVOLVING NOTE
$2,000,000                                                    September 30, 1999
                                                              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 that First  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 March 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: President





<PAGE>


                                    TERM NOTE

$7,000,000                                                    September 30, 1999
                                                              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 March 31, 2000,  the principal  amount of SEVEN
MILLION DOLLARS AND NO CENTS ($7,000,000),  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 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 $7,000,000  dated as of March 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,  present,  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 President


<PAGE>
                                 EXHIBIT 10(11)

                       FIRST AMENDMENT TO LEASE AGREEMENT

     THIS FIRST  AMENDMENT  TO LEASE  AGREEMENT  (the  "Amendment")  is made and
executed as of the 5th day of  October,  1999,  by and between DGW  ENTERPRISES,
L.C.,  a Utah  limited  liability  company  ("Lessor"),  and  INDUSTRIAL  RUBBER
PRODUCTS-UTAH,  INC.,  a Utah  corporation  ("Lessee"),  and this  Amendment  is
executed in connection with the following facts:

     A. Lessor and Lessee entered into that Lease  Agreement,  dated January 20,
1999,  between  Lessor and Lessee (the  "Lease"),  for the lease of certain real
property located in Salt Lake County, Utah, and described therein.

     B. Lessor and Lessee  desire to amend the terms of the Lease in  accordance
with the terms of this Amendment.

     NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt  and
sufficiency of which are hereby acknowledged, Lessor and Lessee hereby amend the
Lease as follows:

     1.  Definitions.  Except  as  otherwise  set forth in this  Amendment,  the
capitalized  terms  appearing  herein  shall have the  meanings set forth in the
Lease.

     2.  Purchase  Option.  The  exercise  period for  exercise  at the  Initial
Purchase  Price  referred to in Section 16.2 of the Lease is hereby  extended to
December 31, 2000, and for purposes of defining the Initial Purchase Price under
Section  16.5 of the Lease,  the parties  also to use the date of  December  31,
2000.  Further,  under Section 16.5 of the Lease, the Initial Purchase Price for
all three (3)  parcels  comprising  the  Premises  shall be  $1,100,000.00  and,
alternatively,  the  Initial  Purchase  Price for that  portion of the  Premises
consisting  of the two (2)  parcels  located  on the north side of Leo Park Road
shall be  $725,000.00.  Thus, the Option shall permit Lessee to exercise a right
to purchase  the entire  Premises or until  December  31,  2000,  only a portion
thereof in the form of such two (2) parcels,  at Lessee's  election.  Lessee may
only exercise the Option once, and if Lessee exercises the Option as to such two
(2) northern parcels, the Option and the Lease shall automatically terminate for
all other purposes.

     3.  Consistency.  Except  as set  forth in this  Amendment,  the  terms and
provisions of the Lease shall remain unchanged and in full force and effect.

     4. No Defaults. Lessor and Lessee hereby represent to each other that as of
the date of this Amendment there are no defaults or breaches  existing under the
Lease and no events have occurred  that,  but for the passage of any  applicable
cure period, will constitute a default or breach under the Lease.
<PAGE>


     IN WITNESS  WHEREOF,  Lessee and Lessor have executed this  Amendment as of
the day and year first set forth above.

                                DGW ENTERPRISES, L.C., a Utah limited liability


                                By________________________________
                                  Dean G. Wilson, manager

                               INDUSTRIAL RUBBER PRODUCTS-UTAH,
                               INC., a Utah corporation

                               By__________________________________
                               Daniel O. Burkes, president
                                                         2


<PAGE>
                                 EXHIBIT 10(12)

                                      LEASE

     THIS LEASE,  made and entered into as of the 1st day of January,  2000,  by
and between DANIEL O. BURKES,  the  "Landlord,"  and IRATHANE  SYSTEMS,  INC., a
Minnesota corporation, the "Tenant",

                                   WITNESSETH:

     ARTICLE 1. PREMISES AND TERM. The Landlord, in consideration of the rentals
herein agreed to be paid by the Tenant and the other conditions, agreements, and
stipulations of the Tenant herein  expressed and agreed to be kept and performed
by the  Tenant,  does  hereby  demise  and lease  unto  Tenant a portion  of the
following  described  property,  with a portion of the building and improvements
thereon as shown on the  attached  Exhibit "A"  attached  hereto and made a part
hereof,  situated  in the  City  of  Hibbing,  County  of St.  Louis,  State  of
Minnesota, and described as follows:

                 Lots 6 and 8, Block 4, Hibbing Industrial Park

     The  portion of said land and  premises,  together  with the portion of the
building and  improvements  located  therein,  including 90% of the parking lot,
being hereinafter collectively called the "demised premises"; and

     Subject,  however,  to the  encumbrances,  and all  zoning  ordinances  and
resolutions  affecting the demised  premises now or hereinafter in force; to any
state of facts which an accurate survey would show; to restrictive  covenants of
record, if any.

     TO HAVE AND TO HOLD the demised premises for a term of three (3) years from
and after January 1, 2000, to and including December 31, 2002, unless this Lease
shall sooner end and terminate as hereinafter provided,  said term including the
portion  thereof as  shortened  by any earlier  termination  of this Lease or as
extended, being hereafter called the "demised term".

     ARTICLE 2. RENT. Landlord reserves and Tenant covenants to pay to Landlord,
without demand, and without offset, at 3804 13th Avenue, Hibbing,  Minnesota, or
at such  other  address  as the  Landlord  may from  time to time  designate  in
writing,  in advance,  rent in successive  equal  installments  of NINE THOUSAND
NINETY AND NO/100THS--($9,090.00)-- DOLLARS per month.

     ARTICLE 3. ADDITIONAL RENT/TAXES.  Tenant agrees to pay, as additional rent
hereunder,  before  the last day on which  they may be paid  without  penalty or
interest,  Seventy  five  percent  (75%) of the real  estate  taxes and  special
assessments, and other governmental charges, e.g. County Landfill charges, which
shall be levied,  assessed,  or which become liens upon the demised  premises or
any part  thereof,  during the demised term with respect to any tax year, or any
portion  thereof,  beginning with those taxes and special  assessments,  if any,
payable in 2000; provided,  however, that if any such tax, assessment, or charge
may be payable in installments,  Tenant may pay each such installment before the
last day upon which it may be paid without penalty or interest. Payment shall be
made to the Landlord.


<PAGE>



     Anything contained herein to the contrary notwithstanding,  if Tenant deems
any such tax,  assessment  or charge  illegal  or  excessive,  Tenant  may defer
payment  thereof so long as the  validity or amount  thereof is contested by the
Tenant in good faith,  and Tenant  adequately  secures the Landlord  against the
nonpayment of such taxes.

     In case Tenant  fails to make any of the  payments to be made by the Tenant
under this  Article as  aforesaid,  Landlord  may pay the amount of any such tax
assessment,  or charge,  without penalty and interest  thereon,  if any, and the
amount so paid by  Landlord  with  interest  thereon at the rate of ten  percent
(10%) per annum from the date of payment  thereof by the Landlord shall be added
to and become part of the next monthly installment of rent.

     If at any time during the term of this  Lease,  under the laws of the State
of Minnesota or any political subdivision thereof, in which the demised premises
are  situated,  a tax or excise on rents or other  tax,  however  described,  is
levied or assessed by said state or political  subdivision against the Landlord,
or the annual or monthly rent expressly  reserved  under this Lease,  the Tenant
covenants to pay and  discharge  such tax or excise tax on rents,  or other tax,
but only to the extent of the  amount  thereof  which is  lawfully  assessed  or
imposed  upon the  Landlord  and which was so  assessed  or  imposed as a direct
result of the Landlord's interest in the demises premises,  or of this Lease, or
of the rentals  accruing under this Lease, it being the intention of the parties
hereto that the rent to be paid hereunder  shall be paid to Landlord  absolutely
net, without deduction of any nature  whatsoever,  foreseeable or unforeseeable,
except as in this Lease otherwise expressly  provided.  Nothing contained herein
shall require Tenant to pay any estate, inheritance,  succession,  capital levy,
or transfer tax imposed on the Landlord, or any income, excess profits, or other
tax.

     ARTICLE 4. NET LEASE.  It is the  intention  and purpose of the  respective
parties  hereto that this Lease shall be a "Net Net Net Lease" to Landlord,  all
costs or expenses of whatever character or kind,  general and special,  ordinary
and  extraordinary,  foreseen  or  unforeseen,  and of  every  kind  and  nature
whatsoever, save and except as otherwise expressly provided for herein, that may
be necessary in or about the operation of the demised premises, and the Tenant's
authorized  use thereof  during the entire term of this Lease,  shall be paid by
Tenant,  and all  provisions  of  this  Lease  relating  to  expenses  are to be
construed in the light of such  intention or purpose to construe this Lease as a
"Net Net Net Lease".

     ARTICLE 5. BUSINESS USE. The demised premises shall be used and occupied by
Tenant for the purpose of the manufacturing of urethane products  including cast
parts and pipe lining and coating and all other related uses in conformity  with
all  building  codes and zoning  requirements  of the City of Hibbing,  State of
Minnesota, and such use and occupancy shall be in compliance with all applicable
laws,  ordinances,  and  governmental  regulations  including but not limited to
hazardous waste disposal and buried fuel tanks.  The demised  premises shall not
be used in such manner that in accordance  with any requirement of law or of any
public authority,  the Landlord shall be obligated, on account of the purpose or
manner of said use, to make any addition or alteration to or in the building.

     ARTICLE  6.   SUBORDINATION.   Tenant  agrees  that  this  lease  shall  be
subordinate  to any  first  mortgage  or  trust  deed or  contract  for deed now
existing  or  hereafter  placed  upon the  demised  premises  and to any and all
advances to be made  thereunder  and to the interest  thereon and all  renewals,
replacements,  and  extensions  thereof,  provided  the  mortgagee or trustee or
seller  namedin said  mortgages or trust deeds or contracts for deed shall agree
to recognize the Lease of Tenant in the event of foreclosure or  cancellation if
Tenant is not then in default.


<PAGE>

     Tenant  agrees  that in the  event  any  proceedings  are  brought  for the
foreclosure  of or for the exercise of any sale under any  mortgage  made by the
Landlord  covering the premises or any part thereof or the  cancellation  of the
contract for deed,  to attorn to and to recognize  such  transferee,  purchaser,
mortgagee or contract vendor as Landlord under this lease.

     ARTICLE 7.  UTILITIES.  Tenant  agrees to pay,  when due,  all gas,  water,
electric, or other utility service used in the demised premises.  Landlord shall
not be liable in damages or otherwise if the  furnishing of utility  services be
interrupted or contained for any cause.

     ARTICLE 8. CARE OF PREMISES.  Tenant  shall,  at its own expense,  keep the
interior of the demised  premises  and all parts  thereof used by it in a clean,
safe,  sanitary,  and first class  condition,  conforming  to  applicable  laws,
ordinances,  regulations  and codes;  store and remove  regularly  all trash and
garbage; forthwith replace broken glass in interior windows and doors with glass
(and exterior windows and doors if breakage is caused by tenant,  its employees,
agents or invitees)  of the same quality  except where the breakage is caused by
occurrences covered by the insurance taken out as hereinafter provided.  Without
Landlord's consent, Tenant shall not deface, injure, waste, damage, or alter the
demised  premises.  Tenant  shall not conduct  business on the demised  premises
which is extra  hazardous or so as to  constitute a nuisance to other tenants or
occupants,  if any; burn trash or garbage within the demised premises;  overload
any floor or facility;  make any  alterations  except as provided in this Lease;
throw foreign substances in plumbing  facilities or use the same for any purpose
other than that for which constructed. Tenant shall also remove all ice and snow
from  abutting  sidewalks  and  entrances.  Tenant  shall also cut the grass and
maintain the grounds of the demised  premises so that said premises are neat and
well kept.

     ARTICLE 9. REPAIRS.  After the Tenant has accepted the premises pursuant to
Article 13; Landlord shall have no obligation for making any replacements to any
of the  equipment  or  appurtenances,  or any  repairs or  improvements,  to the
interior of the demised  premises,  or to any of the  equipment,  machinery,  or
appurtenances.  Tenant agrees to comply with all orders, regulations,  rules and
requirements of every kind and nature relating to the premises, now or hereafter
in effect, of any federal,  state,  municipal,  or other governmental  authority
having power to enact, adopt, impose, or require the same, whether they be usual
or unusual,  ordinary or extraordinary and whether they or any of them relate to
structural  changes  or  requirements  of  whatever  nature,  or to  changes  or
requirements  incident to, or as a result of, any use or  occupation  thereof or
otherwise,  and Tenant  agrees to pay all costs and expenses  incidental to such
compliance, and shall indemnify and save harmless the Landlord from all expense,
and damages by reason of any notices,  orders,  violations,  or penalties  filed
against or imposed  upon the demised  premises  or against  the  Landlord as the
owner thereof because of the failure of the Tenant to comply with this covenant.

     If Tenant  refuses or neglects to replace,  if  required,  or to repair the
demised  premises,  any  structural  portions  thereof,  or any of the plumbing,
heating,  electrical,  or any of the  appurtenances  of the demised  premises as
required  hereunder  to the  reasonable  satisfaction  of  Landlord  as  soon as
reasonably  possible after written demand,  Landlord may make such  replacements
and/or  repairs  without  liability  to Tenant  for any loss or damage  that may
accrue to  Tenant's  merchandise,  fixtures,  or other  property  or to Tenant's
business by reason thereof,  and upon completion  thereof,  Tenant shall pay the
Landlord's  cost for  making  such  repairs,  plus  fifteen  percent  (15%)  for
overhead,  upon  presentation  of a  bill  therefor,  as  additional  rent.  The
obligation  of the Tenant to repair or  replace  under  this  article  shall not
extend to any latent defects.
<PAGE>

     ARTICLE 10. ALTERATIONS, INSTALLATIONS, FIXTURES. Tenant shall not make any
alterations in or additions to the demised  premises without the written consent
of Landlord  which will not be  unreasonably  withheld.  If  alterations  become
necessary because of the application of laws or ordinances or of the directions,
rules,  or  regulations  of any  regulatory  body to the business  carried on by
Tenant,  or because  of any act or  default  on the part of  Tenant,  or because
Tenant has overloaded any electrical or other  facility,  Tenant shall make such
alterations at its own cost and expense after first obtaining Landlord's written
consent to the plans and  specifications  and  furnishing  such  indemnification
against liens, costs,  damages, and expenses as Landlord may reasonably require.
Tenant shall not,  without the advance written consent of Landlord,  install any
exterior  lighting or plumbing  fixtures,  canopies,  marquees,  or any exterior
decorations or painting or similar  devices on the roof or exterior walls of the
building.

     ARTICLE  11.  GENERAL  LIABILITY  INSURANCE.  During the  occupancy  of the
demised  premises by the Tenant,  Tenant  shall keep in full force and effect at
its expense a policy or policies of public  liability  insurance with respect to
the demised premises and the business of Tenant and any subtenant,  on terms and
with  companies  approved  in writing  by  Landlord,  in which  both  Tenant and
Landlord  shall be  adequately  covered by being named as insured  parties under
reasonable limits of liability not less than One Million Dollars ($1,000,000.00)
for injury or death to one or more  persons and for damage to  property.  Tenant
shall  furnish  Landlord  with  certificates  or  acceptable  evidence that such
insurance is in effect.  Said insurance and any other  insurance  required to be
maintained by Tenant, as hereinafter provided,  shall contain a certificate from
the  insurance  carrier  that it will not  terminate  or cancel  said  insurance
without giving at least ten (10) days written notice to the Landlord.

     ARTICLE 12. COVENANTS TO HOLD HARMLESS.  All property placed on or moved to
the demised premises shall be solely at the risk of the Tenant or owner thereof,
and Landlord shall not be liable for any damage to said property,  or to Tenant,
arising from any cause  whatsoever,  whether  from the  bursting,  stoppage,  or
leaking of water pipes, gas pipes, or sewer pipes, floods,  storms,  explosions,
leaks in the roof,  downspouts,  walls, or natural causes or otherwise,  whether
causing  property  damage or damage  because  of  interruption  in  business  or
otherwise, nor shall Landlord be liable for any act or omission or negligence of
any other  tenant or  occupant of other  portions  of the  building of which the
demised premises are a part, or area, or of any other person whomsoever.

     Tenant agrees to defend,  indemnify  and hold the Landlord,  its agents and
employees,  harmless  from any  liability or expense for damage to any person or
property in or about the demised  premises,  including  the adjacent  sidewalks,
including  the person and property of Tenant,  its  employees and all persons in
the building or the demised  premises at its or their  invitation from any cause
or claim  whatsoever.  Tenant  agrees to pay all sums of money in respect of any
labor, services, materials,  supplies, or equipment furnished or alleged to have
been  furnished to Tenant in or about the demised  premises and not furnished on
order of  Landlord,  which may be secured by any  mechanic's,  materialman's  or
other lien against the demised  premises or the Landlord's  interest therein and
will  cause  each  such lien to be  discharged  at the time  performance  of any
obligation secured thereby matures,  provided that Tenant may contest such lien,
but if such lien is reduced to final  judgment  and if such  judgment or process
thereon is not  stayed,  or, if stayed and such stay  expires,  then and in such

<PAGE>

event,  Tenant shall  forthwith pay and discharge said judgment.  Landlord shall
have  the  right  to  post  and  maintain  on the  demised  premises  notice  of
nonresponsibility under the laws of the State of Minnesota.

     ARTICLE  13.  CONDITION  OF  PREMISES  AT TIME OF  LEASING.  The  taking of
possession of the demised  premises by the Tenant shall be  conclusive  evidence
that the same were in good and satisfactory condition at the time possession was
taken.

     ARTICLE 14. ASSIGNMENT OR SUBLETTING. The Tenant shall not assign or sublet
this Lease without the Landlord's prior written consent. Such consent, if given,
shall not release Tenant.

     Every  assignee or sublessee of this Lease shall be subject to and be bound
by all of the  covenants,  provisions  and conditions of this Lease and shall be
entitled  to all of the  benefits  of this  Lease,  to the  same  extent  as the
original Tenant.

     Landlord's  rights to assign this Lease are and shall  remain  unqualified.
Upon any sale of the demised  premises,  and providing the purchaser assumes all
of the obligations under this Lease,  Landlord shall thereupon be entirely freed
of all  obligations  of the Landlord  hereunder  and shall not be subject to any
liability  resulting  from any act or  omission  or event  occurring  after such
conveyance,  except  that any  covenant  or  obligation  of  Landlord  hereunder
affecting  land  owned by  Landlord  shall  continue  for its term  during  such
ownership, but no longer.

     ARTICLE 15. ACCESS TO PREMISES.  Landlord  reserves the right to enter upon
the demised premises during normal business hours to inspect the same or to make
repairs,  additions or alterations to the demised premises or other property, or
to exhibit the premises to prospective tenants,  purchasers, or others; to enter
at any time in the event of an emergency;  and to display during the last ninety
(90) days of the term, without hindrance or molestation by Tenant, "For Rent" or
similar signs on windows or doors in the leased  premises.  Tenant may designate
specific  areas of the demised  premises  as "top  secret" and such areas may be
entered  by  Landlord,  prospective  tenants,  purchasers  or others  only after
reasonable notice to Tenant and after all such persons sign a statement agreeing
to maintain the  confidentiality  of anything  which the  Landlord,  prospective
tenants, purchasers or others might observe.

     ARTICLE 16.  EMINENT  DOMAIN.  In the event of eminent  domain  proceedings
commenced by the filing of a petition in respect to the demised  premises during
the  term  hereof,  or in the  event  that  the  premises  are  sold  in lieu of
condemnation, the following provisions shall apply:

     (a) Total Condemnation of the Demised Premises. If the whole of the demised
premises  shall be acquired  or  condemned  by eminent  domain for any public or
quasi-public use or purpose or sold to the condemning authority in lieu thereof,
then the term of this Lease shall cease and terminate as of the date  possession
shall be taken in such  proceedings,  and all  rentals  shall be paid up to that
date  and  Tenant  shall  have no  claim  against  Landlord  nor the  condemning
authority for the value of any unexpired  term of this Lease.  Landlord shall be
entitled to and shall  receive the award or payment  therefor,  and Tenant shall
assign and does hereby assign and transfer to the Landlord such award or payment
as may be made therefor.
<PAGE>
     (b)  Partial  Condemnation.  If any part of the demised  premises  shall be
taken or condemned as  aforesaid,  and in the event that such partial  taking or
condemnation  shall render the demised  premises  unsuitable for the business of
the Tenant in the reasonable opinion of the Landlord then the term of this Lease
shall  cease  and  terminate  as of the date  possession  shall be taken in such
proceedings.  Tenant shall have no claim  against  Landlord  nor the  condemning
authority for the value of any unexpired term of this Lease,  and the rent shall
be adjusted to the date of such termination. In the event of a partial taking or
condemnation which is not extensive enough to render the premises unsuitable for
the  business  of the Tenant in the  reasonable  opinion of the  Landlord,  then
Landlord  shall  promptly  restore the demised  premises so as to constitute the
remaining premises a complete  architectural unit, and this Lease shall continue
in full force and effect  with a  proportionate  abatement  of rent based on the
portion  of the  demised  premises  taken.  The rent  shall  also  abate  during
restoration as to the portion of the demised premises rendered untenantable.  If
the  parties  are  unable to  determine  the amount of rent to be paid after the
taking,  the same shall be referred to a board of arbitration  composed of three
(3)  arbitrators,  each  of the  parties  being  entitled  to  appoint  one  (1)
arbitrator  and the  two  arbitrators  so  appointed  shall  appoint  the  third
arbitrator. If the two arbitrators are unable to select a third arbitrator, then
the third arbitrator shall be selected by the Senior Judge of the District Court
of St. Louis County, Minnesota, and in any event a decision of a majority of the
arbitrators shall be binding upon the parties hereto.

     (c)  Landlord's  Damages.  In the  event of any  condemnation  or taking as
aforesaid,  whether  whole or partial,  the Tenant  shall not be entitled to any
part of the award paid for such condemnation, and the Landlord is to receive the
full  amount of such award,  the Tenant  hereby  expressly  waiving any right or
claim to any part thereof.

     (d) Tenant's Damages. Although all damages in the event of any condemnation
are to belong to the Landlord,  whether such damages are awarded as compensation
for  diminution in value of the leasehold or to the fee of the leased  premises,
Tenant shall have the right to claim and recover from the condemning  authority,
but not from the Landlord,  such  compensation  as may be separately  awarded or
recoverable  by Tenant in Tenant's own right for and on account of any damage to
cost or loss to which  Tenant  might be put in  removing  Tenant's  merchandise,
furniture, fixtures, and equipment.

     ARTICLE 17. DAMAGE.

     (a)  Partial or Total  Destruction.  Damage to or  destruction  of all or a
portion of the demised  premises by fire or any other casualty  insured  against
shall not  terminate  this  Lease or entitle  Tenant to  surrender  the  demised
premises. The rent provided for herein shall not be abated during such period of
time as such  premises  are being  restored  or  repaired.  Tenant may, if it so
desires,  carry rent  insurance  to  reimburse it for the amount of rent it pays
during the period of time the premises are being restored.  In case of damage or
destruction by fire or other casualty  insured against to the demised  premises,
Landlord  agrees to promptly  repair,  restore and rebuild such  improvements in
such  manner  that the  value  thereof  shall be not less than the value of such
improvements  immediately  prior to such damage or destruction,  and so that the
condition  of such  improvements  will  be the  same or as  nearly  the  same as
possible as their  condition  immediately  prior to such damage or  destruction;
provided,  however,  if the  improvements  located on the demised  premises  are
totally  destroyed by fire or other casualty at any time during the last year of
the term hereof, then anything hereinabove to the contrary notwithstanding, this
Lease shall  terminate and Landlord  shall not have any  obligation to repair or
restore such building and  improvements,  nor shall the Landlord be obligated to
utilize any of the insurance proceeds for any such purpose.
<PAGE>

     All insurance proceeds, if any, actually recovered by Landlord with respect
to any particular casualty resulting in damage or destruction,  less any cost to
Landlord of such  recovery  (such  proceeds less such cost and such amount being
herein termed "net  proceeds")  shall be retained by the Landlord and applied by
it to the  payment  of the  cost of  repairing,  restoring  and  rebuilding  the
improvements located on the demised premises (herein in this Article referred to
as the "work"),  and shall be paid out from time to time as the work progresses,
(i) to the contractors, subcontractors,  materialmen, and other persons who have
rendered  services  or  furnished  materials  for the  work,  or is then due and
payable to one or more of such persons; and (ii) no part of the cost of the work
has been paid out of  insurance  proceeds  not  required to be paid by Landlord.
Upon  completion of the work, if any part of the net insurance  proceeds has not
been paid out and all of the work has been paid for, the net  proceeds  shall be
retained by the Landlord.  The obligations of the Landlord under this Article to
repair,  restore,  and/or  rebuild  is not  conditioned  upon  the  recovery  of
insurance proceeds from any insurance company.

     (b) Fire Insurance Provisions.

     (1) Tenant  shall not carry any stock of goods or do  anything  in or about
the demised  premises  which will in any way impair or invalidate the obligation
of any policy of insurance  on or in  reference  to the demised  premises or the
building in which the demised  premises are  situated.  Landlord  agrees that it
will,  during the term of this Lease, keep the building and the improvements now
standing upon the demised  premises,  insured  against loss by fire and extended
insurance  coverage,  together with an  endorsement  for vandalism and malicious
mischief with solvent insurance companies authorized and licensed to do business
in the State of Minnesota.

     (2) Tenant  covenants and agrees at its own cost and expense to procure and
keep in force and effect at all times,  with premiums  paid,  general  liability
insurance,  as above set forth, and boiler and machinery insurance,  all of said
insurance  to  insure  both the  Landlord  and the  Tenant  as their  respective
interests  may appear.  Tenant shall assign any policy for boiler and  machinery
insurance  procured  pursuant  to this lease to  Landlord  as  security  for the
replacement of any building that may be destroyed by any of the hazards  insured
against. All policies shall provide for thirty (30) days' notice for insurers to
Landlord of any  cancellation  or  amendment to any of the  insurance  policies.
Tenant agrees to insure its own property and its leasehold  improvements in such
manner as it may desire.

     (3) Tenant hereby waives and releases all claims, liabilities and causes of
action against Landlord and its agents,  servants and employees or other tenants
in  the  building  for  loss  or  damage  to,  or  destruction  of,  any  of the
improvements,  fixtures,  equipment,  supplies,  merchandise  and other property
whether  that of Tenant or of others in, upon,  or about the leased  premises or
the buildings or  improvements of which the leased premises are a part resulting
from  fire,  explosion  or the other  perils  included  in  standard  boiler and
machinery insurance,  whether caused by the negligence of any of said persons or
otherwise. This waiver shall remain in force whether or not the Tenant's insurer
shall consent  thereto  without  additional  premium.  If additional  premium is
charged for this waiver, Tenant shall pay for same.


<PAGE>

     (4) Landlord hereby waives and releases all claims,  liabilities and causes
of action against Tenant and its agents, servants and employees or other tenants
in  the  building  for  loss  or  damage  to,  or  destruction  of,  any  of the
improvements,  fixtures,  equipment,  supplies,  merchandise  and other property
whether  that of Tenant or of others in, upon,  or about the leased  premises or
the buildings or  improvements of which the leased premises are a part resulting
from fire,  explosion or the other perils included in standard extended coverage
insurance, whether caused by the negligence of any of said persons or otherwise.
This waiver shall remain in force  whether or not the  Landlord's  insurer shall
consent thereto without additional premium. If additional premium is charged for
this waiver, Landlord shall pay for same.

     ARTICLE 18. SURRENDER. On the last day of the term demised or on the sooner
termination  thereof,  Tenant shall peaceably  surrender the demised premises in
good order,  condition,  and repair,  broom- clean,  fire and other  unavoidable
casualty,  reasonable wear and tear only excepted.  On or before the last day of
the term or the sooner  termination  thereof,  Tenant shall, at its own expense,
remove its trade fixtures, personal property (including at its option carpeting)
and equipment  and signs from the demised  premises and any property not removed
shall be deemed  abandoned.  Any damage  caused by Tenant in the removal of such
items shall be repaired by and at Tenant's expense. All alterations,  additions,
improvement,  and fixtures  (other than Tenant's  trade  fixtures and equipment)
which shall have been made or  installed by either  Tenant or Landlord  upon the
demised premises and all flooring,  except  carpeting,  shall remain upon and be
surrendered  with the demised premises as a part thereof,  without  disturbance,
molestation or injury,  and without charge,  at the expiration or termination of
this Lease. If the demised premises be not surrendered at the end of the term or
the sooner termination thereof,  Tenant shall indemnify Landlord against loss or
liability  resulting  from  delay by Tenant  in so  surrendering  the  premises,
including,  without limitation,  claims made by any succeeding tenant founded on
such delay. Tenant shall promptly surrender all keys for the demised premises to
Landlord at the place then fixed for payment of rent and shall  inform  Landlord
of the combination of any locks and safes on the demised premises.

     ARTICLE 19. COVENANT OF QUIET ENJOYMENT. Landlord covenants and agrees that
Tenant, on paying the rents and observing and keeping the covenants, agreements,
and  stipulations  of this  Lease,  on its  part  to be  kept,  shall  lawfully,
peaceably and quietly hold,  occupy,  and enjoy the demised  premises during the
demised term.

     ARTICLE 20. DEFAULT OF TENANT AND REMEDIES.

     (a)  Right to  Reenter.  In the event of any  failure  of Tenant to pay any
rental due  hereunder  within ten (10) days after the same shall be due,  or any
failure to perform  any other of the terms,  conditions,  or  covenants  of this
Lease to be observed or performed by Tenant for more than thirty (30) days after
written notice of such default shall have been given to Tenant,  or if Tenant or
an agent of Tenant shall falsify any report required to be furnished to Landlord
pursuant  to the terms of this  Lease,  or if Tenant  shall  become  bankrupt or
insolvent,  or file any debtor proceedings or take or have against Tenant in any
court  pursuant  to any  statute  either of the United  States or of any state a
petition  in  bankruptcy  or  insolvency  or  for   reorganization  or  for  the
appointment  of a receiver or trustee of all or a portion of Tenant's  property,
or if Tenant makes an assignment for the benefit of creditors,  or petitions for
or enters into an  arrangement,  or if Tenant  shall  abandon  said  premises or
suffer the Lease to be taken under any writ of execution, then Landlord, besides
other rights or remedies it may have, shall have the immediate right of re-entry
and may remove all  persons and  property  from the  demised  premises  and such

<PAGE>

property  may be removed and stored in a public  warehouse  or  elsewhere at the
cost of, and for the account of, Tenant, all without service of notice or resort
to legal process and without being deemed guilty of trespass, or becoming liable
for any loss or damage which may be occasioned thereby.

     (b) Right to Relet.  Should Landlord elect to reenter,  as herein provided,
or should it take  possession  pursuant to legal  proceedings or pursuant to any
notice  provided for by law, it may either  terminate this Lease or it may, from
time to time, without  terminating this Lease, make such alterations and repairs
as may be necessary in order to relet the  premises,  and relet said premises or
any part  thereof  for such  term or terms  (which  may be for a term  extending
beyond the term of this Lease) and at such rental or rentals and upon such other
terms and conditions as Landlord in its sole discretion may deem advisable. Upon
each such  reletting all rentals  received by the Landlord  from such  reletting
shall be applied  first to the payment of any  indebtedness  other than rent due
hereunder  from  Tenant to  Landlord;  second,  to the  payment of any costs and
expenses of such reletting,  including brokerage fees and attorney's fees and of
costs of such  alterations  and repairs;  third,  to the payment of rent due and
unpaid hereunder, and the residue, if any, shall be held by Landlord and applied
in payment of future rent as the same may become due and payable  hereunder.  If
such rentals  received from such reletting during any month be less than that to
be paid  during  that  month by  Tenant  hereunder,  Tenant  shall  pay any such
deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No
such  reentry  or  taking  possession  of said  premises  by  Landlord  shall be
construed  as an election on its part to  terminate  this Lease unless a written
notice of such intention be given to Tenant,  or unless the termination  thereof
be  decreed  by a court  of  competent  jurisdiction.  Notwithstanding  any such
reletting  without  termination,  Landlord  may at any time  hereafter  elect to
terminate  this Lease for such  previous  breach.  Should  Landlord  at any time
terminate  this Lease for any breach,  in addition to any other  remedies it may
have,  it may  recover  from  Tenant all  damages it may incur by reason of such
breach,  including  the cost of  recovering  the  demised  premises,  reasonable
attorney's  fees, and including the worth at the time of such termination of the
excess, if any, of the amount of rent and charges equivalent to rent reserved in
this Lease for the remainder of the stated term over the then reasonable  rental
value of the demised premises for the remainder of the stated term, all of which
amounts shall be immediately due and payable from Tenant to Landlord.

     (c)  Landlord's  Rights to Cure  Tenant's  Default.  Landlord  may,  at its
option,  instead of exercising  any other rights or remedies  available to it in
this  Lease or  otherwise  by law,  statute  or  equity,  spend such money as is
reasonably  necessary  to cure any default or covenant  herein and the amount so
spent,  and costs incurred,  including  attorney's fees, in curing such default,
shall be paid by Tenant, as additional rent, upon demand.

     (d) Legal and Other  Expenses..  In case suit shall be brought for recovery
of  possession  of the demised  premises,  for the recovery of rent or any other
amount due under the  provisions of this Lease,  or because of the breach of any
other covenant herein  contained on the part of Tenant or Landlord to be kept or
performed,  and a breach shall be established,  Tenant or Landlord,  as the case
may be,  shall pay to  Landlord  or  Tenant,  as the case may be,  all  expenses
incurred therefor, including a reasonable attorney's fee.

     (e) Waiver of Rights of Redemption.  Tenant hereby expressly waives any and
all  rights of  redemption  granted  by or under  section  504.02  of  Minnesota
Statutes  Annotated,  or any other present or future laws in the event of Tenant
being  evicted  or  dispossessed  for any  cause,  or in the  event of  Landlord

<PAGE>

obtaining  possession  of the demised  premises,  by reason of the  violation by
Tenant of any of the covenants or conditions of this Lease, or otherwise. Tenant
also waives any demand for  possession of the demised  premises,  and any demand
for payment of rent and any notice of intent to reenter the demised  premises or
of intent to terminate this Lease, other than the notices above provided in this
Article,  and  waives any and every  other  notice or demand  prescribed  by any
applicable statutes or laws.

     (f)  Cumulative  Remedies.  No remedy  herein or elsewhere in this Lease or
otherwise by law,  statute or equity,  conferred upon or reserved to Landlord or
Tenant shall be exclusive of any other remedy, but shall be cumulative,  and may
be exercised from time to time and as often as the occasion may arise.

     ARTICLE  21.  GENERAL.  This  Lease does not  create  the  relationship  of
principal and agent or of partnership or of joint venturer or of any association
between Landlord and Tenant,  the sole relationship  between Landlord and Tenant
being that of Landlord and Tenant.  No waiver of any default of Tenant hereunder
shall be implied  from any omission by Landlord to take any action on account of
such default if such  default  persists or is  repeated,  and no express  waiver
shall affect any default other than the default  specified in the express waiver
and that only for the time and to the extent therein stated. One or more waivers
by Landlord  shall not be construed  as a waiver of a  subsequent  breach of the
same covenant, term, or condition. The consent to or approval by Landlord of any
act by Tenant requiring Landlord's consent or approval shall not waive or render
unnecessary  Landlord's  consent to or approval of any subsequent similar act by
Tenant.  Each term and each provision of this Lease  performable by Tenant shall
be  construed  to be both a covenant  and a  condition.  No action  required  or
permitted to be taken by or on behalf of Landlord  under the terms or provisions
of this Lease  shall be deemed to  constitute  an  eviction  or  disturbance  of
Tenant's possession of the demised premises. The marginal or topical headings of
the several articles,  paragraphs,  and clauses are for convenience only, and do
not define,  limit,  or construe the contents of such articles,  paragraphs,  or
clauses.  All preliminary  negotiations are merged into and incorporated in this
Lease. The laws of the State of Minnesota shall govern the validity, performance
and enforcement of this Lease.

     (a) Entire Agreement.  This Lease and the exhibits, if any, attached hereto
and forming a part hereof,  set forth all the covenants,  promises,  agreements,
conditions,  and  understandings  between  Landlord  and Tenant  concerning  the
demised premises and there are no covenants, promises,  agreements,  conditions,
or  understandings,  either oral or written,  between them other than are herein
set  forth.  Except as herein  otherwise  provided,  no  subsequent  alteration,
amendment,  change,  or addition to this Lease shall be binding upon Landlord or
Tenant unless reduced to writing and signed by them.

     (b) Partial Invalidity.  If any term, covenant,  or condition of this Lease
or the application  thereof to any person or circumstance  shall, to any extent,
be invalid or unenforceable,  the remainder of this lease, or the application of
such term,  covenant,  or condition to persons or circumstances other than those
as to which it is held invalid or  unenforceable,  shall not be affected thereby
and each  term,  covenant,  or  condition  of this  Lease  shall be valid and be
enforced to the fullest extent permitted by law.


<PAGE>


     ARTICLE 22. LANDLORD'S  CONSENT NOT TO BE UNREASONABLY  WITHHELD.  Landlord
covenants and agrees that wherever and whenever Landlord's consent,  permission,
or  approval  shall be  required  hereunder,  Landlord  shall  not  unreasonably
withhold or delay such consent, permission, or approval.

     ARTICLE 23.  HOLDING OVER. In the event Tenant remains in possession of the
premises  herein  leased  after the  expiration  of this Lease and  without  the
execution of a new Lease,  it shall be deemed to be occupying said premises as a
tenant  from month to month,  subject  to all the  conditions,  provisions,  and
obligations  of  this  Lease  insofar  as  the  same  can  be  applicable  to  a
month-to-month tenancy.

     ARTICLE 24.  TERMINATION  BY TENANT.  Tenant  hereby  reserves the right to
terminate  this Lease and  surrender  the  demised  premises  by giving nine (9)
months  written  notice to the Landlord from any rent due date provided that the
Tenant  intends  to and will by the  expiration  of the nine  (9)  month  period
relocate its business outside the State of Minnesota.

     ARTICLE 25. NOTICES.  Any notice,  demand, or request which under the terms
of this  Lease or by any  statute  or  ordinance  now or  hereafter  in force is
provided or required to be given,  may be given  personally  or by Registered or
Certified  mail  (return  receipt  requested)  by  enclosing  such  notice  in a
postage-paid envelope directed as follows:

     (a) To Tenant at the demised  premises at  Hibbing,  Minnesota,  or at such
other address as the Tenant may from time to time designate in writing;

     (b) To Landlord at:

                  Daniel O. Burkes
                  3805 13th Avenue
                  Hibbing, Minnesota 55746

     or at such other address as the Landlord may from time to time designate in
writing.

     Any demand,  notice,  or request which shall be served upon the Landlord or
the Tenant in the manner  aforesaid shall be deemed  sufficiently  served at the
time such notice, demand, or request shall have been mailed to such party at the
address herein designated for such service.

     ARTICLE 26. SHORT FORM LEASE.  A Short Form Lease suitable for recording in
the office of the Register of Deeds or Registrar of Titles shall be executed and
delivered at the request of either party.

     ARTICLE 27. SUCCESSORS AND ASSIGNS.  The terms,  covenants,  and conditions
hereof shall be binding upon and inure to the successors in interest and assigns
of the parties hereto.

     ARTICLE 28.  TERM.  The initial term of this Lease is from January 1, 2000,
to and including December 31, 2002.


<PAGE>

     ARTICLE 29.  OPTION TO PURCHASE.  Tenant shall have the right and option to
purchase the demised premises, and all of the structures,  buildings,  and other
improvements  constructed  by  Landlord  not  belonging  to the  Tenant  for the
purchase  price  determined  below.  Tenant may  exercise  this option by giving
notice to Landlord at any time during the term of this Lease,  or any renewal or
extension hereof.  Upon exercise of this option,  Tenant will deposit $10,000 in
cash with the escrow agent hereinafter designated;  and in such event all terms,
conditions and provisions  herein  contained  shall serve as a binding  purchase
agreement between the parties hereto.

     If Tenant shall  exercise this option,  Landlord  shall give Tenant a good,
clear  and  marketable  title to the  demised  premises,  free and  clear of all
tenancies,  liens,  encumbrances,  encroachments,   restrictions,  reservations,
conditions of record,  and easements,  except: (1) those existing as of December
31,1999  other than the contract for deed from Landlord to Mesaba  Realty,  Inc.
which shall be satisfied and discharged before or at closing;  (2) taxes due but
not yet payable; (3) zoning ordinances, if any; and (4) any lease of the portion
of the  premises not being leased to Tenant which has a term ending on or before
December 31,  2002.  Transfer of the demised  premises  shall be made by general
warranty deed with dower rights,  if any,  released,  and revenue or documentary
stamps, if required,  affixed and canceled  thereon,  conveying title therein to
Tenant, in fee simple. If there is any lien or encumbrance of record against the
demised  premises,  Tenant may elect to take the demised premises subject to any
such lien or encumbrance;  in such event, the full amount thereof, together with
any interest and penalties accrued thereon as of the date of transfer,  shall be
deducted from the purchase price herein;  and Tenant will  thereafter  indemnify
and save Landlord harmless from all further liability thereunder.

     Within 30 days after Tenant exercises this option, all documents and monies
required  hereunder shall be deposited by the respective parties with the escrow
agent, which shall be either any reputable title company licensed to do business
in the  state  wherein  the  demised  premises  are  located  or the law firm of
Johnson, Killen & Seiler of Duluth, Minnesota. This agreement shall serve as the
escrow instructions, subject to the escrow agent's usual condition of acceptance
where not contrary to any of the terms hereof. Real estate taxes, insurance, and
any other prepaid or accrued charged  customarily  prorated shall be prorated as
of the date of transfer according to the calendar year. Landlord,  at Landlord's
expense,  shall furnish Tenant with an owner's or fee policy of title insurance,
issued by a title insurance  company first approved by Tenant,  in the amount of
the above purchase  price, as evidence or assurance that there has been conveyed
to Tenant, the title required to be conveyed  hereunder.  The escrow agent shall
cause title to the demised premises to be searched, and if and when the required
evidence of title can be issued and the escrow  agent has received all funds and
documents required to be deposited  hereunder,  the escrow agent shall cause the
deed to be filed of record and the funds disbursed in accordance herewith.

     The escrow agent shall charge  Landlord with the cost of the owner's or fee
policy  of title  insurance,  including  premium,  location  survey,  and  title
examination  charges;  revenue or other  documentary  stamps,  if required;  any
transfer,  or  similar  tax or  charge,  imposed  by  reason  of this  sale  and
conveyance of the demised  premises;  and one half of the escrow fee. The escrow
agent shall  charge  Tenant with the  recording  fees and one half of the escrow
fee.  However,  in the event Landlord shall be unable to convey title to Tenant,
as  hereinbefore  required,  then Tenant shall have the right to  terminate  and
rescind the exercise of this option  without any  liability;  and in such event,
any and all sums that Tenant  deposited in escrow  hereunder  shall be forthwith
returned to Tenant by the escrow agent.


<PAGE>


     The purchase price of the demised premises,  shall be SIX HUNDRED AND FIFTY
THOUSAND AND NO/100 DOLLARS ($650,000.00)

     IN WITNESS WHEREOF,  the parties  comprising  "Landlord" herein have hereto
set their  hands as of the day and year  first  above  written,  and  Tenant has
caused this lease to be executed by its duly  authorized  officers as of the day
and year first above written.

                                                     LANDLORD:


                                                     ---------------------------
                                                     Daniel O. Burkes

                                                     TENANT:
                                                     Irathane Systems, Inc.


                                                     By:
                                                     Its:

                                     CONSENT

     Nancy J. Burkes,  spouse of Daniel O. Burkes, hereby consents to this Lease
for the sole purpose of subjecting her interest in the premises to the terms and
conditions of this Lease.

                                                     Nancy J. Burkes

                                ACKNOWLEDGEMENTS

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

     On this _____ day of ___________,  2000,  before me, a Notary Public within
and for said County,  personally  appeared  Daniel O. Burkes,  to me  personally
known,  who being duly sworn did say that he signed this  instrument  as his own
free act and deed.

                                                     --------------------------
                                                     Notary Public

<PAGE>
STATE OF MINNESOTA                  )
                                    ) ss.
COUNTY OF ST. LOUIS                 )

     On this _____ day of ____________,  2000, before me, a Notary Public within
and for said County, personally appeared ______________, to me personally known,
who being duly sworn did say that he is the  ___________  of  Industrial  Rubber
Applicators,  the corporation named in the foregoing  instrument,  and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and said ________________________  acknowledged said instrument to be
the free act and deed of said corporation.

                                               --------------------------------
                                               Notary Public

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

     On this _____ day of ___________,  2000,  before me, a Notary Public within
and for said  County,  personally  appeared  Nancy J. Burkes,  to me  personally
known,  who being duly sworn did say that she signed this  instrument as her own
free act and deed.

                                                  -----------------------------
                                                  Notary Public

THIS INSTRUMENT DRAFTED BY:
Johnson, Killen & Seiler, P.A.
By:  John N. Nys
811 Norwest Center
230 West Superior St.
Duluth, MN  55802
(218) 722-6331

<PAGE>