SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C.  20549

                               FORM 10-K

(Mark One)
( X )  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934

OR

(   )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

                  For the year ended December 31, 2001

                     Commission File Number 0-2000


                         METALCLAD CORPORATION
         (Exact name of registrant as specified in its charter)

            Delaware                                    95-2368719
-------------------------------                   ------------------------
(State or other jurisdiction of                   (I.R.S. Employer ID No.)
 incorporation or organization)


      800 Nicollet Mall, Suite 2690
      Minneapolis, Minnesota                               55402
---------------------------------------                  ----------
(Address of Principal Executive Office)                  (Zip Code)


           Registrant's telephone number, including area code
           --------------------------------------------------
                             (612) 333-0614


      Securities registered pursuant to Section 12(b) of the Act:


                                                   Name of each exchange
Title of each class                                 on which registered
-------------------                                ---------------------
        None                                                None


      Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock -- $.10 Par Value
                            (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
( X ) No (  )

     Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.  ( X )

     The aggregate market value of the Common Stock held by
non-affiliates of the registrant on March 7, 2002 was approximately
$12,600,000, based upon the average of the bid and asked prices of the
Common Stock, as reported on The Nasdaq Stock Market'.

     The number of shares of the Common Stock of the registrant
outstanding as of March 7, 2002 was 7,674,015.

     Documents incorporated by reference:

     Portions of the Company's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's 2002
Annual Meeting of Stockholders are incorporated by reference into Part
III hereof.

     All statements, other than statements of historical fact, included
in this Form 10-K, including without limitation the statements under
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business", are, or may be deemed to be,
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934 (the "Exchange Act").  Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance or achievements of Metalclad Corporation (the "Company") to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements
contained in this Form 10-K.  Such potential risks and uncertainties
include, without limitation, potential reversion of liability for the
companies sold in Mexico; competitive pricing and other pressures from
other businesses in the Company's markets; adequacy of insurance,
including the adequacy of insurance to cover potential future
asbestos-related injury claims; economic conditions generally and in the
Company's primary markets; availability of capital; cost of labor; and
other risk factors detailed herein and in other of the Company's filings
with the Securities and Exchange Commission.  The forward-looking
statements are made as of the date of this Form 10-K and the Company
assumes no obligation to update the forward-looking statements or to
update the reasons actual results could differ from those projected in
such forward-looking statements.  Therefore, readers are cautioned not
to place undue reliance on these forward-looking statements.


                                 PART I

ITEM 1.  BUSINESS

(a) Principal Offices.

    On February 14, 2002, the Company's principal executive offices were
moved to 800 Nicollet Mall, Suite 2690, Minneapolis, Minnesota 55402.
The Company's telephone number is (612) 333-0614. Until February 14,
2002, the Company's principal executive offices were located at 2
Corporate Plaza, Suite 125, Newport Beach, California 92660.

(b) General Development of Business


     Corporate Structure.  The Company, incorporated originally in 1947
as an Arizona corporation, was reincorporated in Delaware on November
24, 1993.  The Company conducts its business through three wholly owned
subsidiaries: Eco-Metalclad ("Eco-MTLC"), a Utah corporation, Metalclad
Insulation Corporation ("MIC"), a California corporation and Metalclad
Environmental Contractors ("MEC"), a California corporation.  As of
December 31, 2001, both Eco-MTLC and MEC became inactive.  In the past,
the Company conducted business in Mexico in three wholly owned
subsidiaries, which as of December 31, 2001 became inactive: Ecosistemas
del Potosi, S.A. de C.V. ("ECOPSA"), Consultoria Ambiental Total, S.A.
de C.V. ("CATSA") and Confinamiento Tecnico de Residues Industriales,
S.A. de C.V. ("COTERIN").

     Unless otherwise indicated, the term "Company" refers to Metalclad
Corporation and its United States and, where appropriate, Mexican
subsidiaries.

     On December 20, 2001, Mr. Wayne Mills filed Form 13D/A with the
Securities and Exchange Commission, indicating his intent to seek a
change in management and the Board of the Company.  Mr. Mills indicated
that, absent a cooperative solution, he would seek shareholder consents
to replace the entire Board.  It was management's decision that the
shareholders would benefit by not involving the Company in a proxy
contest, which would hinder its opportunity to move forward with its
strategy for growth.  Consequently, on February 13, 2002, Grant S.
Kesler, Anthony C. Dabbene and Bruce H. Haglund resigned as members of
the Board of Directors of the Company.  The remaining members of the
Board of Directors elected Messrs. Wayne W. Mills, Kenneth W. Brimmer,
Gary W. Copperud and Joseph M. Senser to fill an existing vacancy on the
Board of Directors and the vacancies created by the resignations of
Messrs. Kesler, Dabbene and Haglund.  In addition, Messrs. Kesler and
Dabbene resigned as officers of the Company and Mr. Mills was elected
President and Chief Executive Officer and Brian D. Niebur was elected
Treasurer and Chief Financial Officer.

     Business in the United States.  For over 30 years, the Company has
been providing insulation and asbestos abatement services, primarily on
the West Coast.  Through MIC, the Company provides these services to a
wide range of industrial, commercial and public agency clients.
Insulation services include the installation of high- and
low-temperature insulation on pipe, ducts, furnaces, boilers, and other
types of industrial equipment and commercial applications.  Asbestos
abatement services include removal and disposal of asbestos-containing
products in similar applications.  The Company fabricates specialty
items for the insulation industry, and sells insulation material and
accessories incident to its services business to its customers as well
as to other contractors.  A diverse list of clientele includes
refineries, utilities, chemical/petrochemical plants, manufacturing
facilities, commercial properties, office buildings, and various
governmental facilities.

     Former Business in Mexico.  In 1991, the Company embarked on a
strategy to develop an integrated industrial waste management business
in Mexico.  Through acquisitions and development of projects, it was the
Company's intent to provide a full-service network of locations,
including treatment and disposal facilities, to provide professional,
environmentally safe, handling and disposal of industrial waste streams.

     After eight years of developing this business, the Company
determined that its efforts would not be successful due to political
opposition in Mexico.  In 1997, the Company filed a $90 million claim
against the Mexican government under the North American Free Trade
Agreement ("NAFTA") to recover the value of its investment in a
completed, but unopened, treatment, storage and disposal ("TSD")
facility in San Luis Potosi.  In 1999, the Company sold its operating
and project development subsidiaries in Mexico (except the assets
associated with its NAFTA claim) and withdrew from the Mexican market.
In October 2001, the Mexican government paid the Company $16,002,000 in
settlement of the NAFTA claim, and in connection with that settlement,
the Company transferred its remaining Mexican assets to the Mexican
government, with the exception of approximately 227 acres of land.  (See
Item 2, Properties, Item 3, Legal Proceedings, and Note B of the
Financial Statements.)

(c) Narrative Description of Business

Insulation Contracting Services

     Background.  The Company's insulation contracting services include
the installation of high- and low-temperature insulation on pipe, ducts,
furnaces, boilers, and various other types of equipment.  Insulation
services are provided for new construction and maintenance of existing
facilities.  The Company is a licensed general contractor and typically
provides project management, labor, tools, equipment and materials
necessary to complete the installation.

     The Company usually performs substantially all of the work required
to complete its contracts, generally subcontracting to others the
scaffolding and painting.  In a typical insulation contract, the Company
obtains plans and specifications prepared by the owner of a facility or
its agent.  In projects where the customer is the owner of the facility,
the Company acts as the general contractor.  The Company also works as a
subcontractor for other general contractors.  Insulation contracts for
new construction may require one or more years to complete.  Maintenance
contracts typically extend over a period of one or more years.

     The Company's insulation contracting business has historically
included, among other things, maintenance, removal, repair, and
re-installation of insulation on existing facilities and equipment.
These activities included asbestos removal services in most cases in
which the insulation at such facilities has included asbestos-containing
material ("ACM").


     The Company removes all forms of ACM after first treating the
asbestos with water and a wetting agent to minimize fiber release.  Dry
removal is conducted in special cases where wetting is not feasible,
provided Environmental Protection Agency ("EPA") approval is obtained.
The Company's workers also remove pipe insulation by cutting the
wrapping into sections in an enclosed containment area or utilizing
special "glovebags" which provide containment around the section of pipe
insulation being removed.  In some instances, the Company performs
asbestos removal and provides related re-insulation contracting
services, including insulation material sales; in other cases, the
Company performs only asbestos removal services

     Insulation Contracts.  The Company obtains contracts, which
ordinarily fall within one of the types set forth below, on the basis of
either competitive bids or direct negotiations:

     Cost-plus.  These contracts, sometimes referred to as "time and
materials" contracts, generally provide for reimbursement of costs
incurred by the Company and the payment of a fee equal to a percentage
of the cost of construction.  They generally provide for monthly
payments covering both reimbursement for costs incurred to date and a
portion of the fee based upon the amount of work performed and are
customarily not subject to retention of fees or costs.

     Fixed-price.  These contracts generally require the Company to
perform all work for an agreed upon price, often by a specified date.
Such contracts usually provide for increases in the contract price if
the Company's construction costs increase due to changes in or delays of
the project initiated or caused by the customer or owner or by
escalating project labor rates.  However, absent causes resulting in
increases in contract prices, the Company takes certain risks associated
with its fixed prices.  Under these types of contracts the Company
receives periodic payments based on the work performed to date, less
certain retentions.  The amounts retained are held by the customer
pending either satisfactory completion of the Company's work or in some
cases, satisfactory completion of the entire project.

     In accordance with industry practice, most of the Company's
contracts are subject to termination or modification by the customer,
with provision for the recovery of costs incurred and the payment to the
Company of a proportionate part of its fees, in the case of a cost-plus
contract, and overhead and profit, in the case of a fixed price
contract.  At various times, contracts that the Company has with its
customers have been terminated or modified.  However, such termination
or modification occurs in the regular course of the Company's business
due to changes in the work to be performed as determined by the
customer.  No single termination or modification has had or is expected
to have a material adverse impact on the Company's business.


     Operations and Employee Safety.  All contract work is performed by
trained Company personnel and supervised by project managers trained and
experienced in construction and asbestos abatement.  Each employee
involved in asbestos abatement must complete a general training and
safety program conducted by the Company.  Training topics include
approved work procedures, instruction on protective equipment and
personal safety, dangers of asbestos, methods for controlling friable
asbestos and asbestos transportation and handling procedures.  In
addition, all full-time employees engaged in asbestos abatement
activities are required to attend a minimum four-day course approved by
EPA and the Occupational Safety and Health Administration ("OSHA"), and
all supervisors of abatement projects are required to attend an
eight-hour first aid/CPR/safety course and an eight-hour EPA/AHERA
refresher course annually.  One of the Company's full-time employees and
22 hourly employees have been trained and certified as "competent
individuals" under EPA regulations relating to the training of asbestos
abatement workers.  All employees are issued detailed training materials
and the Company typically conducts a job safety analysis in the job
bidding stage.

     The Company requires the use of protective equipment and sponsors
periodic medical examination of all field employees.  During removal
procedures, ACM is generally wetted to minimize fiber release and
filtration devices are used to reduce contamination levels.  Air
monitoring to determine asbestos fiber contamination levels is conducted
on all abatement projects involving the removal of friable asbestos.
The Company has a comprehensive policy and procedure manual that covers
all activities of an asbestos abatement project and the specific
responsibilities and implementation of Company procedures and policies
to be followed on each project.  The manual is reviewed periodically by
management and updated to insure compliance with federal, state, and
local regulations, to include information from in-house project reviews
findings, and to include updated information regarding industry
practices.  To separate its responsibilities and to limit liability, the
Company utilizes third party, unaffiliated laboratories for asbestos
sampling analysis and licensed independent waste haulers for the
transportation and disposal of asbestos waste from its projects.

     Materials and Supplies.  The Company purchases its insulating and
asbestos abatement materials and supplies from a number of national
manufacturers and the Company is not dependent on any one source for
these materials and accessories used in its insulation services and
asbestos abatement business.

Marketing and Sales

     Insulation Contracting Services.  The Company currently obtains
most of its insulation contracting business from existing customers and
referrals by customers, engineers, architects, and construction firms.
Additional business is obtained by referrals obtained through labor,
industry, and trade association affiliations.


     Projects are also awarded through competitive bidding although
major companies frequently rely on selected bidders chosen by them based
on a variety of criteria such as adequate capitalization, bonding
capability, insurance carried, and experience.  The Company is
frequently invited in this manner to bid on projects and obtains a
significant amount of its contracts through the competitive bidding
process.  The Company believes that its bids are competitively priced
and anticipates that in the future its bids will continue to be
competitively priced with bids submitted by others.

     The Company's marketing and sales effort emphasizes its experience,
reputation for timely performance, and knowledge of the insulation and
asbestos abatement industry.  The Company is a member of the Western
Insulation Contractors Association, the National Insulation Contractors
Association, and various local business associations.

     Curtom-Metalclad Joint Venture.  In 1989, the Company entered into
a joint venture with a minority service firm, which qualifies for
preferential contract bidding because of minority status, with the
Company owning a 49% interest in the joint venture.  The joint venture,
known as "Curtom-Metalclad," submits bids for insulation and asbestos
abatement services.  When contracts are obtained by the joint venture,
the Company performs the work specified in the contract as a
subcontractor to the joint venture.  The Company also receives an
interest in 49% of the profits or losses of the joint venture.  Sales
for the year ended December 31, 2001 to Curtom-Metalclad were
approximately $7,132,000 or 40% of revenue.  Curtom-Metalclad's
operations and financial position are not material to the Company taken
as a whole.  Additionally, the assets and liabilities held by the joint
venture are insignificant.

     Insulation Material Sales.  The current emphasis in this area is to
primarily warehouse and supply material for projects where other Company
services are provided.  The warehoused material is based on economics of
bulk purchases of the most commonly used products or projected needs on
future known projects, to handle emergencies, and to supply material
sales direct to other users as available and when solicited.

     Customers.  The Company's insulation customers are categorized as
Industrial or Commercial.  The Industrial customers are predominately
public utilities (power, natural gas and water/water treatment), major
oil companies for oil refineries and petrochemical plants, chemical and
food processors, other heavy manufacturers, and engineering/
construction companies.  The Commercial customers are primarily
government installations, schools, hospitals, institutions, an array of
manufacturing/commercial facilities, and the general or mechanical
construction contractors.  During 2001, the Company earned a significant
portion of its revenues from Southern California Edison Company (36%)
(through Curtom-Metalclad), AES Corporation (9%) and Equilon Enterprises
LLC (11%).  The Company anticipates that a significant portion of its
revenues in 2002 will continue to be from work performed for these
customers.  (See Note M to the Financial Statements.)

     Competition.  Competition in the insulation contracting services
business is intense and is expected to remain intense in the foreseeable
future.  Competition includes a few national and regional companies that
provide integrated services and many regional and local companies that
provide insulation and asbestos abatement specialty contracting
services.  Most of the national and regional competitors providing
integrated services are well established and have substantially greater
marketing, financial, and technological resources than the Company.  The
regional and local specialty contracting companies which compete with
the Company either provide one service or they provide integrated
services by subcontracting part of their services to other companies.
The Company believes that the primary competitive factors for its
services are price, technical performance, and reliability.  The Company
obtains a significant number of its insulation service contracts through
the competitive bidding process.  The Company believes that its bids are
competitively priced and anticipates that in the future its bids will
continue to be competitively priced with bids submitted by others.

     Insurance and Bonding.  The Company's combined general liability
and contractor pollution insurance policy provides base coverage of
$1,000,000 per occurrence and excess liability coverage of $10,000,000.
The Company's current insulation and asbestos abatement services
customers do not generally require performance bonds.  The Company
believes, however, that its current bonding arrangements are adequate
for the Company's anticipated future needs.  The Company has
historically carried insurance for liability associated with the sale of
asbestos bearing materials.  Because of the age of the Company there
have been several different insurance carriers. As claims are made for
liability associated with asbestos those claims are managed by counsel
for the Company and submitted to the appropriate insurance carrier for
defense depending upon the date the claim originated.  It has been more
than 25 years since the Company supplied any asbestos bearing material.
The Company believes that it has adequate insurance coverage for all
current claims.  If such claims increase significantly, however, there
is no assurance that such coverage will continue to be adequate.

     Backlog.  The Company's backlog for insulation services at December
31, 2001 and December 31, 2000 was $13,200,000 and $20,500,000,
respectively.  The backlog has been reduced due to continuing work on
existing contracts including a major asbestos abatement project at the
San Onofre Nuclear Plant and a utility pole abatement project for
Southern California Edison Company, both of which are slated for
completion during 2002.  Backlog is calculated in terms of estimated
revenues on fixed-price and cost-plus projects in progress or for which
contracts have been executed.  The Company believes that backlog as of
any date is not necessarily indicative of future revenues.  The Company
estimates that its entire backlog as of December 31, 2001 will be
completed during the next eighteen months.  The majority of the
Company's present business is on cost-plus contracts for which backlog
is estimated.  The Company fulfills product and supply orders promptly,
and there is no backlog in the material sales business.

     Employees.  As of December 31, 2001, the Company had four full-time
salaried employees in its executive offices and 13 full-time salaried
employees in its insulation business, for a total of 17 employees.
These include three executive officers, project managers/estimators,
purchasing, accounting, and office staff.

     As of December 31, 2001, the Company employed approximately 82
hourly employees for insulation contracting services, nearly all of whom
are members of the International Association of Heat and Frost
Insulators and Asbestos Workers ("AFL-CIO").  The Company is a party to
agreements with various local chapters of various trade unions.  The
number of hourly employees employed by the Company fluctuates depending
upon the number and size of projects that the Company has under
construction at any particular time.  It has been the Company's
experience that hourly employees are generally available for its
projects, and the Company has continuously employed a number of them on
various projects over an extended period of time.  The Company considers
its relations with its hourly employees and the unions representing them
to be good, and has experienced no recent work stoppages due to strikes
by such employees.  Additionally, the trade union agreements the Company
is a party to include no strike, no work stoppage provisions.  Certain
of these agreements expire in June, August and December of 2003 and July
2004.

Government Regulation

     Insulation Services and Material Sales Regulation.  The Company, as
a general contractor and insulation specialty contractor, is subject to
regulation requiring it to obtain licenses from several state and
municipal agencies.  Other than licensing, the Company's industrial
insulation services and material sales business is not subject to
material or significant regulation.

     Asbestos Abatement Regulation.  Asbestos abatement operations are
subject to regulation by federal, state, and local governmental
authorities, including OSHA and the EPA.  In general, OSHA regulations
set maximum asbestos fiber exposure levels applicable to employees and
the EPA regulations provide asbestos fiber emission control standards.
The EPA requires use of accredited persons for both inspection and
abatement.  In addition, a number of states have promulgated regulations
setting forth such requirements as registration or licensing of asbestos
abatement contractors, training courses for workers, notification of
intent to undertake abatement projects and various types of approvals
from designated entities.  Transportation and disposal activities are
also regulated.  The Company believes that similar legislation may be
adopted in other states and in local building codes.

     OSHA has promulgated regulations specifying airborne asbestos fiber
exposure standards for asbestos workers, engineering and administrative
controls, workplace practices, and medical surveillance and worker
protection requirements.  OSHA's construction standards require
companies removing asbestos on construction sites to utilize specified
control methods to limit employee exposure to airborne asbestos fibers,
to conduct air monitoring, to provide decontamination units and to
appropriately supervise operations.  EPA regulations restrict the use of
spray applied ACM and asbestos insulation, establish procedures for
handling ACM during demolition and renovations, and prohibit visible
emissions during removal, transportation and disposal of ACM.

     The Company believes that it is substantially in compliance with
all regulations relating to its asbestos abatement operations, and
currently has all material government permits, licenses, qualifications
and approvals required for its operations

ITEM 2.  PROPERTIES

     The Company leases space for its offices and warehouse facilities
under leases of varying terms at rentals aggregating approximately
$28,824 per month.  The Company's executive offices are located in
Minneapolis, Minnesota, which consists of approximately 2,400 square
feet leased at a current rate of $6,900 per month.  This lease is a
month-to-month lease.  The Company also maintains an office in Newport
Beach, California, which consists of approximately 3,000 square feet
leased at a current rate of $6,997 per month.  The Newport Beach lease
expires in September, 2002 at which time the Company plans to close that
office.  Facilities in Anaheim, California house the Southern California
industrial insulation services and the insulation material sales
operations.  The Anaheim facility consists of 26,000 square feet of
office and warehouse space that is leased at the current rate of $14,927
per month.  The Anaheim lease expires in April, 2002.  The Company has
entered into an agreement to purchase its Anaheim facility for
$2,047,000.  This purchase is expected to close in April, 2002.

     ECOPSA owns an approximately 92-hectare parcel (approximately 227
acres) of land in Santa Maria del Rio near San Luis Potosi, Mexico.  The
Company is presently attempting to dispose of this property.  Any sale
or disposition will have no material effect on the Company.

     Management believes properties currently leased by the Company are
adequate for its operations for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

Asbestos Related Claims

     Given the Company's long history in the insulation business and in
the sale of insulation materials, it is subject to various claims
related to prior asbestos-related business as well as its current
business.  While the number of these claims is over 300, the Company
believes it has adequate insurance in place, had adequate insurance in
prior years, and is vigorously defending all claims.  The Company does
not believe that these claims, individually or in the aggregate, will
have a material adverse effect on its financial condition.  If such
claims increase significantly, however, there is no assurance that such
insurance coverage will continue to be adequate or that such claims will
not have a material adverse effect on the Company's financial condition.

Claims Against Mexico

     On October 2, 1996, following a long period of negotiation with the
Mexican government in an effort to open its hazardous waste TSD facility
in San Luis Potosi, Mexico, the Company filed a Notice of Claim under
the provisions of the North American Free Trade Agreement ("NAFTA").
The notice was filed with the International Center for the Settlement of
Investment Disputes (ICSID) in Washington, D.C. pursuant to the
provisions of the NAFTA.  On January 2, 1997, the Company filed its
actual claim with ICSID, after which a three-member tribunal was
impaneled which includes one arbitrator from Mexico, one from the United
States and a third, chosen jointly by the parties, from Great Britain.
The first hearing was held in Washington, D.C. on July 15, 1997.

     On August 30, 2000, the tribunal issued its decision.  It ruled
that Mexico had indirectly expropriated the Company's investment in its
completed landfill facility.  The tribunal awarded $16,685,000 in
damages, with interest accruing at 6% per annum compounded monthly,
beginning October 15, 2000.

     On October 27, 2000, the United Mexican States filed a petition
with the Supreme Court of British Columbia, Canada, seeking to have the
award set aside by the court under the Commercial Arbitration Act of
Canada.  On November 14, 2000, the filing was amended to also seek a
setting aside of the award under the International Commercial
Arbitration Act.  A hearing on the case was completed on March 2, 2001.
On May 2, 2001, the court substantially upheld the position of the
Company.  On May 31, 2001, Mexico filed papers with the British Columbia
Court of Appeals to try to overturn the ruling of the Supreme Court of
British Columbia. On October 26, 2001, the company reached a settlement
with the United Mexican States whereby the Company received $16,002,000
in full settlement of its NAFTA claim.  In return, the United Mexican
States received the landfill property and improvements as well as
assumption of all obligations associated with remediation.

Claim Against Former Employee, Etc.

     On November 13, 2000, the Company filed a complaint in the Superior
Court of California against a former employee, the U.S. parent of the
buyer and its representative for breach of contract, fraud, collusion
and other causes of action in connection with the Company's sale of its
Mexican businesses.  This case is one where the Company has suffered
damages and continues to accrue damages and a monetary award is sought
as the remedy.  An arbitration hearing is anticipated to be scheduled
for the summer of 2002 in Mexico City, as requested by one of the
defendants.  This arbitration is solely to determine the validity of the
assignment of the purchase and sale agreement by the buyer to a company
formed by a former employee.  Consequently, until this arbitration is
completed, all legal proceedings in Orange County have been stayed.
Upon completion of the arbitration, the Company believes it will be able
to move forward in the U.S. with its complaint.  No assurances can be
given on the outcome.  (See Note C to the financial statements.)


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None

                                PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK
         HOLDER MATTERS

     The Company's Common Stock is traded on The Nasdaq Small Cap Stock
Market(r) under the symbol "MTLC." The following table sets forth, for
the fiscal periods indicated, the high and low sales prices for the
Common Stock as reported by Nasdaq:

                                                    Sales Price
                                                 ----------------
                                                 High         Low
                                                ------      ------
Fiscal Year Ended December 31, 2000
  1st Fiscal Quarter Ended March 31, 2000       $5.5625     $3.25
  2nd Fiscal Quarter Ended June 30, 2000         3.875       3
  3rd Fiscal Quarter Ended September 30, 2000    4.625       2.21875
  4th Fiscal Quarter Ended December 31, 2000     2.90625     1.25

Fiscal Year Ended December 31, 2001
  1st Fiscal Quarter Ended March 31,2001        $2.0312     $0.9375
  2nd Fiscal Quarter Ended June 30, 2001         2.07        1.02
  3rd Fiscal Quarter Ended September 30, 2001    1.98        1.35
  4th Fiscal Quarter Ended December 31, 2001     2.36        1.47

     The Company has not paid any cash dividends on its Common Stock
since its incorporation and anticipates that, for the foreseeable
future, earnings, if any, will continue to be retained for use in its
business.  As of March 7, 2002, the approximate number of record holders
of the Company's Common Stock was 2,800.


ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial data is derived from the
consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements, related notes
and other financial information included herein.


<TABLE><S>                                 <C>         <C>         <C>         <C>        <C>
                                                          Year Ended December 31,
                                            -------------------------------------------------------
                                              2001        2000        1999        1998       1997
                                            --------    --------    --------    --------   --------
                                               (in thousands, except share and per share amounts)
Statement of Operations Data(1)
----------------------------
Revenues from continuing operations         $18,008     $17,769     $13,422     $10,009     $8,971
Loss from continuing operations              (1,503)     (1,702)     (1,971)     (1,775)    (2,000)
Income (loss) from discontinued operations    7,079         (63)     (2,228)     (3,003)    (2,610)
Net income (loss)                             5,576      (1,765)     (4,199)     (4,778)    (4,610)

Earnings per share:(2)
Income  (loss) per share of common stock,
  continuing operations-basic                 $(.21)      $(.31)      $(.50)      $(.58)     $(.68)
                                                ===         ===         ===         ===        ===
Income (loss) per share of common stock,
  continuing operations-diluted               $(.21)      $(.31)      $(.50)      $(.58)     $(.68)
                                               ====        ====        ====        ====       ====
Income (loss) per share of common stock,
  discontinued operations-basic                $.98       $(.01)      $(.57)      $(.99)     $(.89)
                                               ====        ====        ====        ====       ====
Income (loss) per share of common stock,
  discontinued operations-diluted              $.97       $(.01)      $(.57)      $(.99)     $(.89)
                                               ====        ====        ====        ====       ====
Income (loss) per share of common stock-basic  $.77       $(.32)     $(1.07)     $(1.57)    $(1.57)
                                               ====        ====        ====        ====       ====
Income (loss) per share of common stock-
        diluted                                $.77       $(.32)     $(1.07)     $(1.57)    $(1.57)
                                               ====        ====        ====        ====       ====

Weighted average shares outstanding-
  basic(2)                                7,200,490   5,470,002   3,918,912   3,036,277  2,943,806
Weighted average shares outstanding-
  diluted(2)                              7,200,490   5,470,002   3,918,912   3,036,277  2,943,806

Balance Sheet Data
------------------
Total assets                                $17,792     $11,422(3)   $9,472(3)  $11,833(3) $12,059(3)
Convertible notes                                 -       1,029       2,071       1,640      1,500
Convertible debentures                            -         310         360       1,202         20
Shareholders' equity                         13,692       6,891(3)    5,155(3)    4,481(3)   8,700(3)

Common shares outstanding(2)              7,448,015   6,581,114   4,859,498   3,056,912  3,006,387

------------------
(1) In the fourth quarter of 1998, the Company committed to a plan to
discontinue its operations in Mexico and to seek a buyer.  Consequently,
the Statement of Operations Data has been restated to reflect this
decision.

(2) Effective July 2, 1999, the Company implemented a 1 for 10
reverse stock split.  All prior periods have been restated.

(3) Restated to reflect reclassification of certain related party
receivables.

</TABLE>

     No dividends were paid or declared during the years ended December
31, 2001, 2000, 1999, 1998 or 1997.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     This discussion and analysis contains forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act, which are subject to the "safe harbor" created by
those sections.  The Company's actual future results could differ
materially from those projected in the forward-looking statements.  The
Company assumes no obligation to update the forward-looking statements
or such factors.

Presentation of Financial Statements

     The financial statements of the Company reflect the Company's
ongoing business in the insulation contracting segment and the
discontinuance of its waste management segment in Mexico.  The net
assets of the Company's business in Mexico are now classified as
discontinued operations.  Financial statements of prior periods have
been restated to reflect the Company's decision to discontinue
operations in Mexico.

Results of Operations

     General.  Historically, the Company's revenues were generated
primarily by (i) revenues in the United States from insulation services
and sales of insulation products and related materials; and (ii)
revenues in Mexico from the collection of waste oils and solvents for
recycling, rental of parts washing machines, brokering the disposal of
waste and remediation services.

     As discussed in Note B to the consolidated financial statements,
during the fourth quarter of 1998 the Company committed to a plan to
discontinue its Mexican operations and to seek to identify potential
buyers for its Mexican business.  Consequently, the Company's Mexican
operations are classified as discontinued operations.  In October 1999,
the Company completed the sale of its ownership interests in certain
Mexican assets previously classified as discontinued operations.  The
sale specifically excluded those Mexican assets involved in the NAFTA
claim.  The terms of this sale stipulate payment of the purchase price
in stages as various benchmarks are achieved in the operation of the
business, as well as the buyer's assumption of all liabilities.  The
Company received an initial cash payment of $125,000 and recorded a
receivable of $779,000 representing the Company's basis in the assets
sold.

     Under the terms of the sale, the Company can receive up to
$5,000,000 in payments as certain specific milestones are met.  The most
significant milestone payments are associated with the buyer's ability
to complete and open the Aguascalientes landfill project.  If the buyer
can obtain all necessary authorizations, complete construction and open
the facility, payments totaling $1,125,000 will be due the Company under
the milestone payment schedule.  To date, the Company believes that the
buyer has not achieved any of the milestones necessary to trigger
additional payments and has reneged on its commitment to pursue these
milestones.  Moreover, the Company believes that the buyer is in default
of its agreement with the Company under the indemnity provisions and may
have committed fraud in attempting to assign its interest in the
companies purchased to a former employee of Metalclad.  The Company has
filed a complaint in the Superior Court of California against the buyer
and the former Company employee and the Orange County, California based
parent of the buyer as a result of representations said parent made
relative to giving the buyer financial support in its acquisition of the
companies purchased.  On November 13, 2000, a complaint was filed in
Orange County with the Superior Court of California.  The proceedings
have been stayed, pending completion of an arbitration proceeding in
Mexico City.  It is anticipated that the arbitration will be scheduled
in the summer of 2002.  The Company cannot predict the duration of these
proceedings nor can it assume any outcome and therefore the Company has
fully reserved for the note receivable.  (See Note C to the financial
statements.)

     The Company settled its claims against the United Mexican States in
October, 2001, for $16,002,000.  This completes the Company's activities
in Mexico and essentially closes out all discontinued operations in
Mexico.

 Twelve Months Ended December 31, 2001 Compared to Twelve Months Ended
                           December 31, 2000

     Insulation Business.  Total revenues were $18,008,000 in 2001 as
compared to $17,769,000 for 2000, an increase of 1%.  Contract revenues
for the twelve months ended December 31, 2001 were $17,865,000 as
compared to $17,674,000 for the twelve months ended December 31, 2000,
an increase of 1%.  The increase is attributed to the continuing work on
long-term maintenance projects as well as an increase in asbestos
abatement work.

     Contract and Material Costs.  Contract and material costs and
expenses for the twelve months ended December 31, 2001 were $15,540,000
as compared to $15,753,000 for the twelve months ended December 31,
2000, a decrease of 1%.  This decrease is due to the Company's
continuing effort to become more efficient in its project operations.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $1,616,000 for the twelve months ended
December 31, 2001 as compared to $1,553,000 for the twelve months ended
December 31, 2000, an increase of 4% due primarily as a result of hiring
a new full-time director of marketing.

     Gross Operating Profit.  Gross operating profit for the year ended
December 31, 2001 was $852,000 as compared to $463,000 for the twelve
months ended December 31, 2000, an increase of 84%.  This increase is
attributed to the performance of several major emergency jobs, early in
the year, that allowed for higher contract margins.  These emergency
jobs were in response to major fires at a refinery and power plant.

     Corporate Expense.  Corporate expenses were $1,399,000 for the
twelve months ended December 31, 2001 as compared to $1,948,000 for the
twelve months ended December 31, 2000, a decrease of 28%.  The decline
was achieved primarily by reduction in legal costs due to litigation
completion related to the NAFTA claim.

     Interest Expense.  Interest expense was $132,000 for the twelve
months ended December 31, 2001 compared to interest expense of $257,000
for the twelve months ended December 31, 2000.  This reduction in
interest expense was primarily due to the conversions of debt to equity
during the year and the repayment of convertible zero coupon notes, with
an interest rate of 15%, partially offset by new bank borrowings with an
interest rate of 5%, as of December 31, 2001.

     Other Expense.  Other expense of $824,000 in 2001 consists
principally of the reserve established for the note receivable related
to the sale of the Mexican assets not included in the NAFTA claim.

     Discontinued Operations.  The gain of $7,079,000 in 2001 is a
result of the settlement of the NAFTA claim, net of all fees and
expenses, including the write-off of all assets associated with the
claim.  No future costs are anticipated, however, if any arise, they
will be charged to operations as incurred.

     Consolidated Results.  Net income for the year ended December 31,
2001 was $5,576,000 as compared to a loss of $1,765,000 for 2000, an
increase of 416%.  This increase is primarily a result of the NAFTA
settlement.

 Twelve Months Ended December 31, 2000 Compared to Twelve Months Ended
                           December 31, 1999

     Insulation Business.  Total revenues were $17,769,000 in 2000 as
compared to $13,422,000 for 1999, an increase of 32%.  This increase is
attributed to work performed under the Company's various maintenance
agreements, particularly with Arco, and the Company's continuing efforts
in the commercial insulation market.  Contract revenues for the twelve
months ended December 31, 2000 were $17,674,000 as compared to
$13,135,000 for the twelve months ended December 31, 1999, an increase
of 35%.  This increase is attributed to the Company's efforts to
diversify its client base, including its entry into the commercial
insulation market.  The Company's accounts receivable have also
increased due to the increased contract revenues and the timing of cash
receipts.

     Contract and Material Costs.  Contract and material costs and
expenses for the twelve months ended December 31, 2000 were $15,753,000
as compared to $11,606,000 for the twelve months ended December 31,
1999, an increase of 36% which is attributed to the increased level of
direct costs associated with higher revenues.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $1,553,000 for the twelve months ended
December 31, 2000 as compared to $1,297,000 for the twelve months ended
December 31, 1999, an increase of 20%.  This increase reflects a
one-time retention bonus paid to employees and increased legal costs
associated with asbestos claims.

     Gross Operating Profit.  Gross operating profit for the year ended
December 31, 2000 was $463,000 as compared to $520,000 for the twelve
months ended December 31, 1999, a decrease of 11%.  This decrease is
primarily due to an increase in selling, general and administrative
expenses, as discussed above, partially offset by higher gross profit
margins.

     Corporate Expense.  Corporate expenses were $1,948,000 for the
twelve months ended December 31, 2000 as compared to $2,140,000 for the
twelve months ended December 31, 1999, a decrease of 9%.  The decline
was achieved by reductions in staffing and costs.

     Interest Expense.  Interest expense was $257,000 for the twelve
months ended December 31, 2000 compared to interest expense of $392,000
for the twelve months ended December 31, 1999.  This reduction in
interest expense was primarily due to the conversions of debt to equity
during the year.

     Discontinued Operations.  Loss from discontinued operations for the
twelve months ended December 31, 2000 was $63,000 compared to a loss of
$2,228,000 for the twelve months ended December 31, 1999.  The 2000 loss
primarily represents legal fees paid to the International Centre for
Settlement of Investment Disputes ("ICSID") as the Company's share of
the final NAFTA arbitration costs.  These expenses were not anticipated
in the 1999 year end accrual of costs for discontinued operations.

     Consolidated Results.  The net loss for the year ended December 31,
2000 was $1,765,000 as compared to $4,199,000 for 1999, a decrease of
58%.  This decreased loss is attributable to completion of the NAFTA
claim arbitration and the discontinuance of business in Mexico.  Losses
from continuing operations were $1,702,000 versus $1,971,000, a decline
of 14%.

Liquidity and Capital Resources

     As of December 31, 2001, the Company had $13,133,000 in cash and
cash equivalents, and working capital of $12,258,000.  The Company has a
line of credit agreement with a bank for $1,000,000.  Borrowings under
the agreement are limited to the lower of $1,000,000 or the Company's
borrowing base, which consists of a specified percentage of certain
accounts receivable.  As of December 31, 2001, the Company had a balance
of $1,000,000 outstanding on this line of credit.

     Cash provided by continuing operations was $1,187,000 for 2001
compared with a use of cash of $2,357,000 in 2000. For 1999, $1,198,000
of cash was used in continuing operations. In 2001, the positive cash
flow from continuing operations was primarily the result of a decrease
in accounts receivable.  The large workload in the fourth quarter of
2000, as compared with 2001, resulted in a larger accounts receivable
balance at December 31, 2000 as compared with December 31, 2001.  Cash
flows were used primarily to fund operating losses for continuing
operations in each of the years 2001, 2000 and 1999, which were
partially offset by non-cash expenses for depreciation and amortization
in 2001, 2000 and 1999 and the provision for uncollectable notes
receivable related to the 1999 sale of Mexican assets in 2001.
Increases in accounts receivable, primarily related to increased
revenues, reduced cash flows from continuing operations in 2000 and 1999
by $2,321,000 and $816,000, respectively, while increases in current
liabilities, primarily related to the Company's lack of cash and cash
equivalents, increased cash flows from continuing operations in 2000 by
$1,491,000.  Increases in prepaid expenses and other assets, primarily
related to prepaid insurance, also resulted in decreased cash flows from
continuing operations in 2001 of $361,000.

     Cash provided by discontinued operations was $13,450,000 for 2001
compared with $403,000 and $2,008,000 of cash used in discontinued
operations in 2000 and 1999, respectively. In 2001, the positive cash
flow from discontinued operations was primarily the result of the
$16,002,000 received from the Mexican government as settlement of the
Company's claim under the North American Free Trade Agreement, offset by
expenses related to the settlement. The cash used in discontinued
operations in 2000 and 1999 related primarily to expenses of ceasing
business in Mexico and legal costs associated with pursuing the
Company's claim under NAFTA.

     Net investing activities used $1,230,000, $99,000 and $47,000 of
cash in 2001, 2000 and 1999, respectively. Of these uses, $231,000,
$99,000 and $172,000 was used for additions to property and equipment in
2001, 2000 and 1999, respectively, primarily at the Company's
subsidiary, Metalclad Insulation Corporation.  In 2001, the Company used
$1,000,000 of cash to make an equity investment in Catalytic Solutions,
Inc. In 1999, proceeds from the sale of the Company's Mexican assets not
involved in the NAFTA claim provided $125,000 of cash flow.

     Cash used in financing activities totaled $628,000 in 2001 compared
with cash provided by financing activities of $2,444,000 and $3,502,000
in 2000 and 1999, respectively.  In 2001, $1,255,000 of cash was loaned
to a then principal shareholder of the Company under a note secured by
500,000 shares of the Company's stock.  At December 31, 2001, the
unsecured portion of this note receivable was $220,000.  The Company
used $1,176,000 of cash to repay long-term borrowings in 2001, primarily
to repay Five-Year Zero Coupon Notes originally issued in December 1997.
These uses of cash in 2001 were partially offset by the Company
obtaining an accounts receivable revolving line of credit that provided
$1,000,000 of cash flow, which was primarily used to repay the Five-Year
Zero Coupon Notes discussed above. The line of credit matures on July 1,
2002, but it is anticipated that this facility will be renewed in July
2002.  A private placement of the Company's common stock and warrants
completed by the Company in March 2001 also provided $600,000 of cash
flow in 2001.  Long-term borrowings provided $202,000, $301,000 and
$901,000 of cash in 2001, 2000 and 1999, respectively.  During 2000 and
1999 net cash of $2,196,000 and $2,783,000, respectively, was provided
by proceeds from the exercise of stock warrants.

     Given the Company's long history in the insulation business and in
the sale of insulation materials, it is subject to various claims
related to prior asbestos-related business as well as its current
business.  While the number of these claims is over 300, the Company
believes it has adequate insurance in place, had adequate insurance in
prior years, and is vigorously defending all claims.  The Company does
not believe that these claims, individually or in the aggregate, will
have a material adverse effect on its financial condition.  If such
claims increase significantly, however, there is no assurance that such
insurance coverage will continue to be adequate or that such claims will
not have a material adverse effect on the Company's financial condition.

     During the three months ended March 31, 2002, the Company will
recognize $3,200,000 of expense related to the change of management,
including insurance premiums, legal fees, severance pay and relocation
of the Company's headquarters.  The cash payments related to these
expenses will be approximately $2,044,000.  The non-cash charges
primarily relate to the forgiveness of the loan due from Mr. Kesler and
the issuance of common stock to Messrs. Kesler and Dabbene.

     In March 2002, the Company entered into a letter of intent which
obligates the Company, subject to its due diligence review, to negotiate
in good faith for the purchase from Surg II, Inc. ( a Minnesota
corporation) of approximately 120,000,000 shares of Surg II, Inc.'s
authorized but unissued common stock for $3,000,000. If the transaction
is completed, the Company will own 90% of the outstanding common stock
of Surg II, Inc., which it plans to use for the acquisition of a yet
uncommitted business enterprise. The common stock of Surg II, Inc. is
traded on the NASDAQ Bulletin Board under the symbol SUGR.

     On March 2, 2002, the Company entered into an agreement to purchase
the facilities in Anaheim, California, housing the industrial insulation
services operations.  The purchase price is $2,047,000.  It is expected
that the Company will finance this purchase through a long-term mortgage
on the building.

     During 2001, 2000 and 1999 the Company did not pay or declare any
cash dividends and does not intend to pay dividends in the near future.

     Management believes that its cash, cash equivalents and borrowings
available under the credit agreement should be sufficient to satisfy its
cash requirements.

Reverse Stock Split

     On June 2, 1999 the shareholders of the Company approved a reverse
stock split of the Company's common stock in a ratio of one share for up
to ten shares of its outstanding common stock.

     Pursuant to this approval, the Board of Directors of the Company
approved a reverse split of the common shares in a ratio of one share
for every ten shares.  This reverse split was effective on July 2, 1999.

     All shares and per share amounts have been restated to reflect this
reverse split of the common shares.

Foreign Currency Translation

     Effective January 1, 1999, Mexico is no longer considered to be
"highly inflationary".  However, the Company has discontinued its
Mexican operations, therefore, the impact of this change had no effect
on the Company's financial statements.

Impact of Inflation

     The Company reflects price escalations in its quotations to its
insulation customers and in its estimation of costs for materials and
labor.  For construction contracts based on a cost-plus or
time-and-materials basis, the effect of inflation on the Company is
negligible.  For projects on a fixed-price basis, the effect of
inflation may result in reduced profit margin or a loss as a result of
higher costs to the Company as the contracts are completed; however, the
majority of the Company's contracts are completed within 12 months of
their commencement and the Company believes that the impact of inflation
on such contracts is insignificant.

Accounting Policies

     In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial
Statements.  SAB No. 101 establishes guidelines in applying generally
accepted accounting principles to the recognition of revenue in
financial statements based on the following four criteria: (1)
persuasive evidence of an arrangement exists, (2) delivery has occurred
or services have been rendered, (3) the seller's price to the buyer is
fixed or determinable and (4) collectability is reasonably assured.  SAB
101, as amended by SAB 101B, is effective no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999.
Accordingly, the Company has adopted the new guidance in the quarter
ended December 31, 2000 retroactive to the beginning of the year.  The
adoption of SAB 101 has not had a material effect on its consolidated
financial position or results of operations.

New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivatives and Hedging Activities," which establishes accounting
and reporting standards for derivative financial instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities. SFAS No. 133 is
effective for the Company's 2001 fiscal year. The adoption of this
statement did not have an impact on the results of operations, financial
position or cash flows of the Company as the Company does not hold any
derivative financial instruments.

     In June 2001, the FASB approved SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
is required to be adopted for all business combinations occurring after
June 30, 2001 while SFAS no. 142 is required to be adopted for fiscal
years beginning after December 15, 2001.  SFAS No. 141 prospectively
prohibits the pooling of interest method of accounting for business
combinations initiated after June 30, 2001. SFAS No. 142 requires
companies to cease amortizing goodwill that existed at June 30, 2001.
Any goodwill resulting from acquisitions completed after June 30, 2001
will not be amortized. SFAS No. 142 also establishes a new method of
testing goodwill for impairment on an annual basis or on an interim
basis if an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying
value. The adoption of SFAS No. 141 and 142 will not have a significant
impact on the results of operations, financial position or cash flows as
the Company has not completed any business combinations since June 30,
2001 and does not have any goodwill from past business combinations.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It applies
to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the
normal operation of a long-lived asset, except for certain obligations
of lessees. As used in FAS 143, a legal obligation is an obligation that
a party is required to settle as a result of an existing or enacted law,
statute, ordinance, or written or oral contract or by legal construction
of a contract under the doctrine of promissory estoppel. This statement
is effective for financial statements issued for fiscal years beginning
after June 15, 2002, although earlier application is encouraged.  We are
currently assessing the impact of SFAS 143 on our operating results and
financial condition.

     In October 2001, the FASB issued SFAS No.144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 establishes a
single accounting model, based on the framework established in SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", for long-lived assets to be
disposed of by sale, and resolves significant implementation issues
related to SFAS 121. SFAS 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001, although
earlier application is encouraged.  We are currently assessing the
impact of SFAS 144 on our operating results and financial condition.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements and schedules listed in the
accompanying Index to Consolidated Financial Statements are attached
hereto and filed as a part of this Report under Item 14.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

                                PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Item 401 of Regulation S-K is set forth
in the Company's 2002 Annual Meeting Proxy Statement which will be filed
with the Securities and Exchange Commission not later than 120 days
after December 31, 2001.  The Company's 2002 Annual Meeting Proxy
Statement, exclusive of the information set forth under the captions
"Report of the Compensation Committee" and "Company Performance," are
incorporated herein by this reference.


ITEM 11.  EXECUTIVE COMPENSATION

     The information required by Item 402 of Regulation S-K is set forth
in the Company's 2002 Annual Meeting Proxy Statement which will be filed
with the Securities and Exchange Commission not later than 120 days
after December 31, 2001.  The Company's 2002 Annual Meeting Proxy
Statement, exclusive of the information set forth under the captions
"Report of the Compensation Committee" and "Company Performance," are
incorporated herein by this reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 403 of Regulation S-K is set forth
in the Company's 2002 Annual Meeting Proxy Statement which will be filed
with the Securities and Exchange Commission not later than 120 days
after December 31, 2001.  The Company's 2002 Annual Meeting Proxy
Statement, exclusive of the information set forth under the captions
"Report of the Compensation Committee" and "Company Performance," are
incorporated herein by this reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 404 of Regulation S-K is set forth
in the Company's 2002 Annual Meeting Proxy Statement, which will be
filed with the Securities and Exchange Commission not later than 120
days after December 31, 2001.  The Company's 2002 Annual Meeting Proxy
Statement, exclusive of the information set forth under the captions
"Report of the Compensation Committee" and "Company Performance" are
incorporated herein by this reference.


                                PART IV

(a) The following documents are filed as part of this report on Form
10-K:

     1.  Financial Statements Reports of Independent Public Accountants
         Consolidated Balance Sheets Consolidated Statements of
         Operations Consolidated Statements of Shareholders' Equity
         Consolidated Statements of Cash Flows Notes to Consolidated
         Financial Statements

     2.  Schedules to Financial Statements Schedule II - Valuation and
         Qualifying Accounts

     All schedules, other than those listed above, are omitted, as the
information is not required, is not material or is otherwise furnished.

     3.  Exhibits

     The following exhibits are being filed with this annual Report on
Form 10-K and/or are incorporated by reference therein in accordance
with the designated footnote references:

         3.   Restated and Amended Certificate of Incorporation and
              Bylaws of the Company, and all amendments thereto.(1)

         3.1  Form of Certificate for Common Stock(2)

        10.1  Form of 1993 Omnibus Stock Option and Incentive Plan(3)

        10.2  Form of 1996 Omnibus Stock Option and Incentive Plan(4)

        10.3  Employent Agreement between the Company and Grant S. Kesler
              dated January 1, 1998(5)

        10.4  Employent Agreement between the Company and Anthony C.
              Dabbene dated January 1, 1998(5)

        10.5  Form of 7% Convertible Debenture Due July 31, 2001 between
              the Company and The Shaar Fund Ltd. Dated July 30, 1998(6)

        10.6  Form of 2000 Omnibus Stock Option and Incentive Plan(7)

        10.7  Employment Agreement between MIC and Robert D. Rizzo dated
              September 1, 2000.

        10.8  Decision of NAFTA Tribunal dated August 30, 2000(8)

        10.9  Decision of supreme Court of British Columbia

        10.10 Non-Recourse Security and Pledge Agreement dated December
              10, 2001(9)

        10.11 Non-Recourse Secured Note dated December 10, 2001(9)

        10.12 Catalytic Solutions Shareholders Agreement dated November
              15, 2001(9)

        10.13 Amended and Restated Articles of Incorporation of
              Catalytic Solutions, Inc. A California Corporation(9)

        10.14 Amended and Restated Employment Agreement between Grant S.
              Kesler and Metalclad Corporation dated January 1, 2002(10)

        10.15 Amended and Restated Employment Agreement between Anthony
              C. Dabbene and Metalclad Corporation dated January 1,
              2002(10)

        10.16 Consulting Agreement between Grant S. Kesler and Metalclad
              Corporation dated February 14, 2002(10)

        10.17 Consulting Agreement between Anthony C. Dabbene and
              Metalclad Corporation dated February 14, 2002(10)

        10.18 Amended and Restated Bylaws adopted February 14, 2002(10)

        10.19 Agreement of Purchase and Sale of Anaheim facility at 2198
              South Dupont Drive, California 92806

        10.20 Curtom-Metalclad Partnership Agreement and Amendment

        21.   List of Subsidiaries of the Registrant



---------------------
(1) Filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by this reference.

(2) Filed with the Company's Registration Statement on Form S-1 dated
December 15, 1987 and incorporated herein by this reference.

(3) Filed with the Company's Transition Report on Form 10-K for the five
months ended May 31, 1993 and incorporated herein by this reference.

(4) Filed with the Company's Proxy Statement dated September 10, 1996
and incorporated herein by this reference.

(5) Filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by this reference.

(6) Filed with the Company's Form S-3/A dated July 2, 1999 and
incorporated herein by this reference.

(7) Filed with the Company's Preliminary Proxy Statement dated October
20, 2000 and incorporated herein by this reference.

(8) Filed with the Company's Annual Report on Form 8-K dated September
5, 2000 and incorporated herein by this reference.

(9) Filed with the Company's Form 8-K on December 21, 2001 and
incorporated herein by this reference.

(10) Filed with the Company's Form 8-K on February 28, 2002 and
incorporated herein by this reference.

(b) Reports on Form 8-K

     The Company filed Form 8-K on December 21, 2001, relating to a
Non-Recourse Security and Pledge Agreement with Blake Capital Partners
LLC and Wayne W. Mills, and the Company's participation to the extent of
$1,000,000 in a private placement of securities in a compay known as
Catalytic Solutions, Inc.

     The Company filed Form 8-K on February 28, 2002, relating to the
transition of the Company's Management and Board of Directors.


                         SUPPLEMENTAL INFORMATION

     An annual report and a proxy statement shall be furnished to the
security holders of the Company subsequent to the filing of this Form
10-K.  The Company shall furnish copies of the annual report to security
holders and the proxy statement to the Securities and Exchange
Commission when it is sent to the security holder.


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

                                    By: /s/Brian D. Niebur
                                        -----------------------
										Brian D. Niebur
										Chief Financial Officer
                                        Date: March 29, 2002

     Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.

    Signatures                  Title                 Date
    ----------                  -----                 ----
/s/Wayne W. Mills      Chief Executive Officer    March 29, 2002
---------------------  and Director (Principal)
Wayne W. Mills         Executive Officer)

/s/Brian D. Niebur     Chief Financial Officer    March 29, 2002
---------------------  (Principal Financial
Brian Niebur           and Accounting Officer)

/s/Bruce H. Haglund    Secretary and General      March 29, 2002
---------------------  Counsel
Bruce H. Haglund

/s/Kenneth W. Brimmer  Director, Chairman         March 29, 2002
---------------------
Kenneth W. Brimmer

/s/Gary W. Copperud    Director                   March 29, 2002
--------------------
Gary W. Copperud

/s/Daniel D. Lane      Director                   March 29, 2002
--------------------
Daniel D. Lane

/s/Raymond J. Pacini   Director                   March 29, 2002
--------------------
Raymond J. Pacini

/s/Joseph M. Senser    Director                   March 29, 2002
--------------------
Joseph M. Senser

/s/J. Thomas Talbot    Director                   March 29, 2002
--------------------
J. Thomas Talbot



ITEM 14(A)(1) and (2)

                 METALCLAD CORPORATION AND SUBSIDIARIES

               INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


The following Consolidated Financial Statements of Metalclad Corporation
and subsidiaries are included in Item 8:


Reports of Independent Public Accountants on Consolidated Financial Statements:

Report of Moss Adams  LLP. . . . . . . . . . . . . . . .  F-1


Financial Statements:

     Consolidated Balance Sheets - December 31, 2001
     and 2000. . . . . . . . . . . . . . . . . . . . . .  F-2, 3

     Consolidated Statements of Operations--the Years
     Ended December 31, 2001, 2000 and 1999. . . . . . .  F-4

     Consolidated Statements of Shareholders' Equity--
     the Years Ended December 31,  2001, 2000 and 1999 .  F-5

     Consolidated Statements of Cash Flows--the Years
     Ended December 31,  2001, 2000 and 1999 . . . . . .  F-6, 7

     Notes to Consolidated Financial Statements. . . . .  F-8


Supplementary Financial Statement Schedules:

     Schedule II - Valuation and Qualifying Accounts . .  F-30







                      INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Shareholders of
Metalclad Corporation:

We have audited the accompanying consolidated balance sheets of
Metalclad Corporation (a Delaware Corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2001.  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 auditing standards generally
accepted in the United States of America.  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 financial statements referred to above present
fairly, in all material respects, the financial position of Metalclad
Corporation and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of
America.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The schedule listed in the index
of financial statements is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements.  The data for the years ended December 31, 2001
and 2000 has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a
whole.


MOSS ADAMS LLP
Irvine, California
March 15, 2002





                 Metalclad Corporation and Subsidiaries

                      CONSOLIDATED BALANCE SHEETS

<TABLE><S>                                           <C>            <C>
                                                             December 31,
                                                      -------------------------
                                                         2001           2000
                                                      -----------    ----------
ASSETS

Current assets:
  Cash and cash equivalents                           $13,133,311    $  354,345
  Accounts receivable, less allowance for
    doubtful accounts of $57,500 and $50,000
    at December 2001 and 2000, respectively             1,853,290     3,965,975
  Costs and estimated earnings in excess of billings
    on uncompleted contracts                              154,601        82,920
  Inventories                                             159,924       114,129
  Prepaid expenses and other current assets               362,885       137,486
  Receivables from related parties, net                   537,794       719,998
                                                       ----------    ----------
           Total current assets                        16,201,805     5,374,853

Property, plant and equipment, net                        428,652       336,497
Net assets of discontinued operations                           -     4,905,754
Note receivable'sale of Mexican assets                          -       779,402
Investment, at cost                                     1,000,000             -
Other assets                                              161,452        25,765
                                                       ----------    ----------
                                                      $17,791,909   $11,422,271
                                                       ==========    ==========



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                    $   735,426   $ 2,166,727
  Current liabilities, net'discontinued operations              -        90,139
  Accrued expenses                                      2,064,326       722,369
  Billings in excess of costs and estimated earnings
    on uncompleted contracts                               59,114        26,724
  Current portion of long-term debt                        84,749        62,451
  Note payable to bank                                  1,000,000             -
  Convertible zero coupon notes                                 -     1,029,194
                                                       ----------    ----------
           Total current liabilities                    3,943,615     4,097,604

Long-term debt, less current portion                      156,692       123,489
Convertible subordinated debentures                             -       310,000
                                                       ----------    ----------
           Total liabilities                            4,100,307     4,531,093
                                                       ----------    ----------

Commitments and Contingencies (Note N)


Shareholders' equity :

  Preferred stock, par value $10; 1,500,000 shares
    authorized; none issued                                     -             -
  Common stock, par value $.10; 80,000,000 shares
    authorized; 7,448,015 and 6,581,114, issued and
    outstanding at December 2001 and 2000, respectively   744,801       658,111
  Additional paid-in capital                           68,496,871    67,659,747
  Accumulated deficit                                 (54,295,549)  (59,871,257)
  Officer's receivable                                 (1,254,521)            -
  Accumulated other comprehensive income (loss)                 -    (1,555,423)
                                                       ----------    ----------
                                                       13,691,602     6,891,178
                                                       ----------    ----------
                                                      $17,791,909   $11,422,271
                                                       ==========    ==========
</TABLE>



   The accompanying notes are an integral part of these consolidated
                            balance sheets.






                 Metalclad Corporation and Subsidiaries

                 CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><S>                             <C>           <C>           <C>
                                                 Year ended December 31,
                                        ---------------------------------------
                                            2001         2000          1999
                                        -----------   -----------   -----------
Revenues
  Contract revenues                     $17,864,776   $17,673,680   $13,134,928
  Material sales                            136,675        79,627       224,850
  Other                                       6,470        15,545        62,136
                                         ----------    ----------    ----------
                                         18,007,921    17,768,852    13,421,914
                                         ----------    ----------    ----------
Operating costs and expenses
  Contract costs and expenses            15,431,410    15,703,563    11,404,866
  Cost of material sales                    108,542        49,263       200,623
  Selling, general and administrative     1,616,080     1,552,696     1,296,615
                                         ----------    ----------    ----------
                                         17,156,032    17,305,522    12,902,104
                                         ----------    ----------    ----------
Gross operating profit                      851,889       463,330       519,810
Corporate expense                        (1,399,287)   (1,947,939)   (2,140,338)
                                         ----------    ----------    ----------
Operating loss                             (547,398)   (1,484,609)   (1,620,528)
Interest expense                           (131,566)     (257,363)     (391,847)
Other income (expense), net                (824,054)       40,362        41,215
                                         ----------    ----------    ----------
Loss from continuing operations          (1,503,018)   (1,701,610)   (1,971,160)
Income (loss) from discontinued
  operations                              7,078,726       (63,187)   (2,227,534)
                                         ----------    ----------    ----------
Net income (loss)                        $5,575,708   $(1,764,797)  $(4,198,694)
                                          =========    ==========    ==========
Weighted average number of common
  shares - basic                          7,200,490      5,470,002    3,918,912
                                          =========      =========    =========
Weighted average number of common
  shares - diluted                        7,261,568      5,470,002    3,918,912
                                          =========      =========    =========
Income (loss) per share of common
  stock, continuing operations - basic     $(.21)         $(.31)        $(.50)
                                            ====           ====          ====
Income (loss) per share of common
  stock, continuing operations -
  diluted                                  $(.21)         $(.31)        $(.50)
                                            ====           ====          ====
Income (loss) per share of common
  stock, discontinued operations - basic   $ .98          $(.01)        $(.57)
                                            ====           ====          ====
Income (loss) per share of common stock
  discontinued operations - diluted         $.97          $(.01)        $(.57)
                                            ====           ====          ====
Income (loss) per share of common
  stock - basic                             $.77          $(.32)       $(1.07)
                                            ====           ====          ====
Income (loss) per share of common
  stock - diluted                           $.77          $(.32)       $(1.07)
                                            ====           ====          ====
</TABLE>


   The accompanying notes are an integral part of these consolidated
                              statements.






                 Metalclad Corporation and Subsidiaries

            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
            The Years Ended December 31, 2001, 2000 and 1999

<TABLE><S>                           <C>        <C>           <C>           <C>            <C>           <C>          <C>
                                                                                             Accumulated                 Total
                                                                Additional                     Other                     Share-
                                            Common Stock         Paid-in      Accumulated   Comprehensive  Officer's     holders'
                                        Shares       Amounts     Capital        Deficit       Income       Receivable    Equity
                                      ----------  -----------  -----------   -------------  ------------   ----------   ----------

Balance at December 31, 1998          30,569,122  $ 3,056,912  $57,404,880  $(53,907,766)  $(2,140,110)   $        -   $4,413,916
Reverse stock split-1 for 10         (27,512,210)  (2,751,221)   2,751,221             -             -             -            -
Issuance of common stock for
  services                                38,500        3,850      103,950             -             -             -      107,800
Debt conversions and interest            612,750       61,275    1,403,058             -             -             -    1,464,333
Common stock issued under warrants     1,151,336      115,134    2,667,838             -             -             -    2,782,972
Foreign currency translation adjustment        -            -            -             -       584,687             -      584,687
Net loss                                       -            -            -    (4,198,694)            -             -   (4,198,694)
                                     -----------   ----------   ----------   -----------   -----------    ----------   ----------

Balance at December 31, 1999           4,859,498      485,950   64,330,947   (58,106,460)   (1,555,423)            -    5,155,014
Debt conversions and interest            843,662       84,366    1,220,706             -             -             -    1,305,072
Common stock issued under warrants       877,954       87,795    2,108,094             -             -             -    2,195,889
Net loss                                       -            -            -    (1,764,797)            -             -   (1,764,797)
                                      ----------   ----------   ----------   -----------   -----------    ----------   ----------

Balance at December 31, 2000           6,581,114      658,111   67,659,747   (59,876,257)   (1,555,423)            -    6,891,178
Debt conversions and interest            266,901       26,690      297,124             -             -             -      323,814
Sale of common stock and warrants        600,000       60,000      540,000             -             -             -      600,000
Officer's loan and interest                    -            -            -             -             -    (1,254,521)  (1,254,521)
Foreign currency translation
  realized in NAFTA settlement                 -            -            -             -     1,555,423             -    1,555,423
Net income                                     -            -            -     5,575,708             -             -    5,575,708
                                     -----------   ----------   ----------   -----------   -----------    ----------   ----------

Balance at December 31, 2001           7,448,015  $  744,801   $68,496,871  $(54,295,549) $          -   $(1,254,521) $13,691,602
                                     ===========   =========    ==========   ===========   ===========    ==========   ==========
</TABLE>



The accompanying notes are an integral part of these consolidated
statements.





                 Metalclad Corporation and Subsidiaries

                 CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><S>                             <C>           <C>            <C>
                                                 Year Ended December 31,
                                        ----------------------------------------
                                            2001          2000          1999
                                        ----------    ----------     -----------
Cash flows from operating activities:

Net income (loss)                       $5,575,709   $(1,764,797)   $(4,198,694)
  Adjustments to reconcile net income
  (loss) to net cash used in operating
  activities:
    (Gain) loss from discontinued
       operations                       (7,078,726)       63,187      2,227,534
    Depreciation and amortization          128,580       106,657        229,327
    Provision for losses on accounts
      receivable                             7,500             -              -
    Provision for losses on note
      receivable, sale of Mexican assets   779,402             -              -
    Issuance of stock for services and
      interest                              13,813             -        107,800
    Issuance of stock for debt
      conversions and interest                   -         2,035      1,464,333
    Loss on disposal of fixed assets         8,933        13,878              -
    Changes in operating assets and
    liabilities:
      Decrease (increase) in accounts
        receivable                       2,105,185    (2,320,984)      (816,305)
      Decrease (increase) in unbilled
        receivables                        (71,681)       65,071         (4,319)
      Decrease (increase) in inventorie    (45,795)       47,703         14,865
      Decrease (increase) in prepaid
        expenses and other current
        assets                            (225,400)      (11,856)       (69,138)
      Decrease (increase) in receivables
        from related parties               182,204       (73,199)        49,872
      Decrease (increase) in other assets (135,687)       (2,679)        20,076
      Increase (decrease) in accounts
        payable and accrued expenses       (89,344)    1,491,275       (152,047)
      Increase (decrease) in billings
        over cost                           32,390        26,724         71,280)
                                        ----------    ----------     ----------
            Net cash provided (used)
            in continuing operations     1,187,083    (2,356,985)    (1,197,976)

            Net cash provided (used)
            in discontinued operations  13,449,766      (402,927)    (2,008,131)
                                        ----------    ----------     ----------
            Net cash provided (used)
            in operating activities     14,636,849    (2,759,912)    (3,206,107)
                                        ----------    ----------     ----------

Cash flows from investing activities:
  Capital expenditures                    (231,169)      (99,263)      (171,809)
  Proceeds from sale of assets               1,500             -        125,000
  Investment, at cost                   (1,000,000)            -              -
                                        ----------    ----------     ----------
            Net cash used in investing
            activities                  (1,229,669)      (99,263)       (46,809)
                                        ----------    ----------     ----------

Cash flows from financing activities:
  Proceeds from note payable to bank     1,000,000             -              -
  Proceeds from long-term borrowings       202,438       300,877        901,472
  Borrowing by an officer/shareholder   (1,254,521)            -              -
  Payments on long-term borrowings      (1,176,131)      (52,422)      (182,292)
  Proceeds from sale of stock and
    warrants                               600,000             -              -
  Proceeds from exercise of warrants             -     2,195,889      2,782,972
                                        ----------    ----------     ----------
            Net cash provided (used)
            in financing activities       (628,214)    2,444,344      3,502,152
                                        ----------    ----------     ----------

Increase (decrease) in cash and cash
  equivalents                           12,778,966      (414,831)       249,236
Cash and cash equivalents at beginning
  of period                                354,345       769,176        519,940
                                        ----------    ----------     ----------
Cash and cash equivalents at end of
  period                               $13,133,311   $   354,345    $   769,176
                                        ==========    ==========     ==========

Supplemental disclosures of cash
  flow information:
  Cash paid for interest               $   279,131   $    92,393    $    71,060
                                        ==========    ==========     ==========

Disclosure of noncash investing and financing activities: During the
twelve months ended December 31, 2001, the Company converted
approximately $324,000 of convertible subordinated debentures, principal
and interest into 266,900 shares of common stock.

During the twelve months ended December 31, 2000, the Company converted
approximately $1,305,000 of zero coupon notes payable into 844,000
shares of common stock.

During the twelve months ended December 31, 1999, the Company sold
certain Mexican assets, previously included in net assets of
discontinued operations, in exchange for a note receivable in the amount
of $779,402.

</TABLE>




The accompanying notes are an integral part of these consolidated
statements.






                 METALCLAD CORPORATION AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENT

NOTE A - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
         POLICIES

Description of Business

Metalclad Corporation (the "Company") is engaged in insulation services,
including asbestos abatement and material sales, to customers primarily
in California (the "Insulation Business").  Until 1999, the Company was
engaged in the development of hazardous and non-hazardous industrial
waste treatment and storage facilities, as well as the collection and
recycling of industrial waste for disposition to landfills or as
alternative fuels for cement kilns in Mexico (the "Mexican Business").

With regards to the Company's Mexican Business, on January 2, 1997, the
Company filed a claim with the International Centre for the Settlement
of Investment Disputes tribunal against the United Mexican States under
the provisions of the North American Free Trade Agreement ("NAFTA").
The Company alleged that since it was not being allowed to operate its
legally authorized and completed landfill facility in San Luis Potosi,
Mexico, it had been effectively expropriated.  On August 30, 2000, the
tribunal issued its decision.  It ruled that Mexico had indirectly
expropriated the Company's investment in its completed landfill
facility.  The tribunal awarded $16,685,000 with interest, accruing at
6% per annum compounded monthly, beginning October 15, 2000.  On October
27, 2000, the United Mexican States filed a petition with the Supreme
Court of British Columbia, Canada, seeking to have the award set aside
by the court under the Commercial Arbitration Act of Canada.  On
November 14, 2000, the filing was amended to also seek a setting aside
of the award under the International Commercial Arbitration Act.  A
hearing on the case was completed on March 2, 2001.  On May 2, 2001 the
Supreme Court of British Columbia issued its ruling, which upheld a
finding of expropriation and upheld an award of damages to the Company,
although modifying the interest calculation.  On May 24, 2001, the
Company was advised that Mexico would appeal again, this time to the
British Columbia Court of Appeal.  The appeal was joined with a
cross-appeal by the Company and filed before the end of May 2001.  On
June 4, 2001, the United Mexican States made a written offer of
settlement for $15,626,260 plus interest of $2,599 per day after June 1,
2001.  The Company accepted the offer on June 11, 2001 provided that the
payment be made without reduction or offset.  On October 26, 2001, the
Company completed the settlement agreement with the United Mexican
States.  All documents have been signed and Mexico has taken possession
of the landfill facility.  In return, the Company received payment of US
$16,002,433.  This closes all NAFTA related claims proceedings.

Principles of Consolidation/Investments

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries.  Investments in other
companies and joint venture corporations which are 20-50% owned are
reported on the equity method and included in "Other Assets" on the
accompanying balance sheet.  Significant intercompany accounts and
transactions have been eliminated in consolidation.  Direct costs
incurred relating to the acquisition or formation of an equity method
investment are capitalized and are amortized over five years.

Cash Equivalents

The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.  The carrying
amount approximates fair value because of the short maturity of those
instruments.  The Company invests its excess cash in a money market
fund, which consists of a portfolio of short-term money market
instruments.  All of the Company's excess cash is with one financial
institution and, therefore, may be subject to certain concentrations of
credit issues.

Inventories

Inventories, which consist principally of insulation products and
related materials, are stated at the lower of cost (determined on the
first-in, first-out method) or market.

Depreciation and Amortization

Property, plant and equipment is stated at cost.  Depreciation and
amortization is computed using the straight-line method over the
estimated useful lives of related assets which range from between five
to seven years for machinery, equipment and leasehold improvements.

Revenue Recognition

Fixed price insulation installation and asbestos abatement contracts are
accounted for by the percentage-of-completion method wherein costs and
estimated earnings are included in revenues as the work is performed.
If a loss on a fixed price contract is indicated, the entire amount of
the estimated loss is accrued when known.  Time and material contracts
are accounted for under a cost plus fee basis.  Retentions by customers
under contract terms are due at contract completion.

Income/Loss Per Share

The Company computes income (loss) per share in accordance with
Statement of Financial Accounting Standards ("SFAS") 128, "Earnings Per
Share".  This statement requires the presentation of both basic and
diluted net income (loss) per share for financial statement purposes.
Basic net income (loss) per share is computed by dividing the net income
(loss) available to common shareholders by the weighted average number
of common shares outstanding.  Diluted net income (loss) per share
includes the effect of the potential shares outstanding, including
dilutive stock options, warrants and convertible debt using the treasury
stock method.  Weighted average share calculations for all periods
presented have been adjusted to reflect the 1 for 10 reverse stock
split.  (See Note K.)

Stock-Based Compensation

The Company accounts for stock-based compensation for employees under
the provisions of APB 25.  As required, the Company complies with the
disclosure provisions of SFAS 123, "Accounting for Stock-Based
Compensation".  SFAS 123 requires the Company to disclose pro forma net
income and earnings per share as if the fair value based accounting
method of SFAS 123 had been used to account for stock based
compensation.  These disclosures are included in Note K.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit
risk consist principally of cash and contract receivables.  Contract
receivables are concentrated primarily with utility companies located in
Southern California.  Historically, the Company's credit losses have
been insignificant.  The Company places its cash with major financial
institutions.  At December 31, 2001 and 2000, and throughout the years,
the Company had bank deposits in excess of federally insured limits.

Income Taxes

The Company accounts for income taxes using the liability method as
prescribed by SFAS 109, "Accounting for Income Taxes".

Comprehensive Income - Foreign Currency Translation

In 1998, the Company adopted SFAS 130, "Reporting Comprehensive Income".
This statement establishes rules for the reporting of comprehensive
income and its components.  Comprehensive income consists of net income
and foreign currency translation adjustments and is presented in the
Consolidated Statement of Shareholders' Equity.  The adoption of SFAS
130 had no impact on total shareholders' equity.  The Company recorded
other comprehensive income (loss) on its Mexican subsidiaries for
foreign currency translation gains (losses).  During 2001, as a result
of the NAFTA settlement and the write-off of the remaining Mexican
assets from discontinued operations, the Company realized $1,555,423 of
foreign currency translation losses.  The amount is included in the net
gain from discontinued operations during 2001.

Reclassifications

Certain reclassifications have been made to prior period consolidated
financial statements to conform with the current year presentation.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivatives and Hedging Activities," which establishes accounting
and reporting standards for derivative financial instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities. SFAS No. 133 is
effective for the Company's 2001 fiscal year. The adoption of this
statement did not have an impact on the results of operations, financial
position or cash flows of the Company as the Company does not hold any
derivative financial instruments.

In June 2001, the FASB approved SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
is required to be adopted for all business combinations occurring after
June 30, 2001 while SFAS no. 142 is required to be adopted for fiscal
years beginning after December 15, 2001.  SFAS No. 141 prospectively
prohibits the pooling of interest method of accounting for business
combinations initiated after June 30, 2001. SFAS No. 142 requires
companies to cease amortizing goodwill that existed at June 30, 2001.
Any goodwill resulting from acquisitions completed after June 30, 2001
will not be amortized. SFAS No. 142 also establishes a new method of
testing goodwill for impairment on an annual basis or on an interim
basis if an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying
value. The adoption of SFAS No. 141 and 142 will not have a significant
impact on the results of operations, financial position or cash flows as
the Company has not completed any business combinations since June 30,
2001 and does not have any goodwill from past business combinations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It applies
to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the
normal operation of a long-lived asset, except for certain obligations
of lessees. As used in FAS 143, a legal obligation is an obligation that
a party is required to settle as a result of an existing or enacted law,
statute, ordinance, or written or oral contract or by legal construction
of a contract under the doctrine of promissory estoppel. This statement
is effective for financial statements issued for fiscal years beginning
after June 15, 2002, although earlier application is encouraged.  We are
currently assessing the impact of SFAS 143 on our operating results and
financial condition.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 establishes a
single accounting model, based on the framework established in SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", for long-lived assets to be
disposed of by sale, and resolves significant implementation issues
related to SFAS 121. SFAS 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001, although
earlier application is encouraged.  We are currently assessing the
impact of SFAS 144 on our operating results and financial condition.

Use of Estimates

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.

Accounting for the Impairment of Long-Lived Assets

The Company addresses the realization of its assets as required by SFAS
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of".  This statement requires that
long-lived assets and certain identifiable intangibles to be held and
used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable.  The Company has conducted this review and believes that no
impairment currently exists and no material adjustments are necessary to
the valuation of its assets.


NOTE B - DISCONTINUED OPERATIONS

In 1991, the Company embarked on a strategy to develop an integrated
industrial waste management business in Mexico.  After seven years of
developing this business, the Company determined that its efforts would
not be successful due to political opposition in Mexico.  Consequently,
in the fourth quarter of 1998, Management committed to a plan to sell
its Mexican operations to a third party.

The Company's discontinued operations contain two components:  1)
ongoing operations and development and 2) the landfill assets associated
with its NAFTA claim.  In the fourth quarter of 1999, the Company
completed a sale of its ongoing businesses (see Note C).

The loss from discontinued operations during fiscal 1999 includes a
provision of $107,000 for anticipated costs to complete the ongoing
NAFTA claim.  For the twelve months ended December 31, 2000, the Company
incurred additional costs of $91,000 which were charged against the
December 31, 1999 accrual.  Additionally, $63,000 in fees for continuing
costs of the NAFTA proceedings were charged to discontinued operations
in 2000.

In October 2001, the Company settled its claim against the United
Mexican States for $16,002,433.  After writing off all assets associated
with the settlement of the claim and recognizing expenses related to the
settlement, the Company realized a net gain of $7,079,000.  This
completes the Company's activities in Mexico and essentially closes out
all discontinued operations in Mexico.

The consolidated financial statements for prior periods have been
restated to reflect the accounting for discontinued operations.

Selected financial data from discontinued operations are as follows:


                                              Year Ended December 31,
                                     ----------------------------------------
                                         2001          2000          1999
                                     ----------    ----------     -----------

  Net sales                                   -             -      $4,140,571
  Operating loss                              -             -      (2,116,496)
  Interest expense                            -             -        (111,038)
  Income (loss) from discontinued
    operations                       $7,078,726       (63,187)     (2,227,534)


The net assets of discontinued operations are as follows:

                                                 December 31,
                                            -----------------------
                                              2001            2000
                                            --------        -------

  Current assets                           $       -     $   19,029
  Current liabilities                              -       (109,168)
                                            --------      ---------
       Net current liabilities                     -        (90,139)
                                            --------      ---------

  Property, plant and equipment, net               -      4,466,890
  Other assets                                     -        438,864
                                            --------      ---------
       Net non-current assets                      -      4,905,754
                                            --------      ---------
  Net assets of discontinued operations    $       -     $4,815,615
                                            ========      =========

Included in net assets of discontinued operations, at December 31, 2000
is approximately $4,816,000 representing the Company's investment in its
completed hazardous waste treatment facility in the State of San Luis
Potosi, Mexico, known as "El Confin". The Company was granted all
necessary federal governmental authorizations to open and operate the
facility, but, never received the support of the state and local
governments.  Consequently, on October 2, 1996, the Company filed a
Notice of Intent to File Claim Under the North American Free Trade
Agreement ("NAFTA").  The claim was filed with the International Centre
for Settlement of Investment Disputes ("ICSID") in Washington, D.C.  On
January 13, 1997, the Secretary General of ICSID registered the
Company's claim and notified both the United States and Mexican
governments of the registration.  A final hearing on the claim was
completed on September 9, 1999.  On August 30, 2000, the tribunal issued
its decision.  It ruled that Mexico had indirectly expropriated the
Company's investment in its completed landfill facility.  The tribunal
awarded $16,685,000 with interest, accruing at 6% per annum compounded
monthly, beginning October 15, 2000.  On October 27, 2000, the United
Mexican States filed a petition with the Supreme Court of British
Columbia, Canada, seeking to have the award set aside by the court under
the Commercial Arbitration Act of Canada.  On November 14, 2000, the
filing was amended to also seek a setting aside of the award under the
International Commercial Arbitration Act.  A hearing on the case was
completed on March 2, 2001.  On May 2, 2001 the Supreme Court of British
Columbia issued its ruling, which upheld a finding of expropriation and
upheld an award of damages to the Company, although modifying the
interest calculation.  On May 24, 2001, the Company was advised that
Mexico would appeal again, this time to the British Columbia Court of
Appeal.  The appeal was joined with a cross-appeal by the Company and
filed before the end of May 2001.  On June 4, 2001, the United Mexican
States made a written offer of settlement for $15,626,260 plus interest
of $2,599 per day after June 1, 2001.  The Company accepted the offer on
June 11, 2001 provided that the payment be made without reduction or
offset.  On October 26, 2001, the Company completed the settlement
agreement with the United Mexican States.  All documents have been
signed and Mexico has taken possession of the landfill facility.  In
return, the Company received payment of US $16,002,433.  This closes all
NAFTA related claims proceedings.  The Company recorded a gain of
$7,079,000, net of legal fees of $1,171,991, NAFTA related bonuses of
$840,000, the write-off of all assets associated with the settlement of the
Company's claim of $5,356,293 and a foreign currency translation
write-off of $1,555,423.  No future costs are anticipated, however, if
any arise, they will be charged to operations as incurred.


NOTE C - NOTE RECEIVABLE - SALE OF MEXICAN ASSETS

In October 1999, the Company completed the sale of its operating
businesses and its development project located in Aguascalientes,
Mexico.  The sale specifically excluded those Mexican assets involved in
the NAFTA claim.  Under the terms of the sale the Company received an
initial cash payment of $125,000 and recorded a receivable for $779,000.
Furthermore, the sale terms stipulate payment of up to $5,000,000, in
stages, as various benchmarks are achieved in the operation of the
business as well as the buyer's assumption of all liabilities.  To date,
the Company believes that the buyer has not achieved any of the
milestones necessary to trigger additional payments.  Moreover, the
Company believes that the buyer is in default of its agreement with the
Company under the indemnity provisions and may have committed fraud in
attempting to assign its interest in the companies purchased to a former
employee of Metalclad.  The Company has filed a complaint in the
Superior Court of California against the buyer and the former Company
employee, and the Orange County, California based parent of the buyer as
a result of representations said parent made relative to giving the
buyer financial support in its acquisition of the companies purchased.
The defendants have moved for an arbitration proceeding in Mexico, which
is anticipated to be scheduled for the summer of 2002.  Consequently,
all actions in California have been stayed pending its completion.  The
Company believes strongly in the merits of its case, but cannot assure
its outcome.  The Company has fully reserved its $779,000 receivable,
which was recorded at the date of sale, but will continue to pursue its
claims.  The amount is included in "Other income (expense)" on the
accompanying Statement of Operations.


NOTE D - INVESTMENTS IN UNCONSOLIDATED AFFILIATES

In 1989, the Company entered into a joint venture with a minority
service firm ("Curtom-Metalclad") to perform industrial insulation and
industrial asbestos abatement services similar to those performed by the
Company.  When contracts are obtained by the joint venture, the Company
performs the work specified in the contract as a subcontractor to the
joint venture.  Curtom-Metalclad's operations and financial position are
not material to the Company taken as a whole.  Additionally, the assets
and liabilities held by the joint venture are insignificant.

In November 2001, the Company purchased 56,338 shares of Series C
Convertible Preferred Stock of Catalytic Solutions, Inc. for $1,000,000.
Catalytic Solutions is a privately held materials science technology
company focused on applying its technology to improve the performance
and reduce the cost of automotive catalytic converters.  Each preferred
share may be converted into one share of common stock at any time by the
Company, subject to customary adjustments for stock splits, stock
combinations, stock dividends, reclassifications and the like.  All
preferred shares will automatically convert into fully paid and
nonassessable shares of common stock (1) if Catalytic Solutions closes a
firmly underwritten public offering of shares of common stock with
aggregate net proceeds of at least $20 million and a per share public
offering price of at least 1.5 times the per share purchase price of the
preferred shares or (2) upon the consent or agreement of the holders of
a majority of the outstanding shares of Series C Preferred Stock.


NOTE E - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

                                                December 31,
                                            -------------------
                                             2001        2000
                                           --------    --------

     Machinery and equipment             $  569,743   $ 546,649
     Automotive equipmen                    522,552     386,964
     Leasehold improvements                   3,039       3,039
                                          ---------    --------
                                          1,095,334     936,652
     Less accumulated depreciation
       & amortization                      (666,682)   (600,155)
                                          ---------    --------

                                         $  428,652   $ 336,497
                                          =========    ========

NOTE F - ACCRUED EXPENSES

Accrued expenses consist of the following:

                                                December 31,
                                            -------------------
                                             2001        2000
                                           --------    --------

     Accrued interest                    $    4,382    $ 15,500
     Wages, bonuses and taxes               293,548     244,316
     Union dues                              99,521     154,155
     Accounting and legal fees            1,287,940      88,000
     Insurance                              340,279     179,803
     Other                                   38,656      40,595
                                          ---------     -------
                                         $2,064,326    $722,369
                                          =========     =======


NOTE G - CONVERTIBLE DEBT

Convertible Zero Coupon Notes

In December 1997, the Company issued $2,200,000 of Five-Year Zero Coupon
Secured Notes, due December 31, 2002, netting the Company $1,500,000.
The effective interest rate of these notes was 9.33%.  The Company was
amortizing the difference between the value at maturity and the purchase
price over five years.  Upon the market price of the Company's common
stock closing at or above $1.50 for ten consecutive trading days, the
notes became convertible into common stock of the Company at $1.50 per
share and the Company was to issue warrants to purchase 1,500,000 common
shares of stock with an exercise price of $1.50 per share.  Both the
conversion price and warrant exercise price also contained anti-dilution
provisions.  Additionally, the notes were redeemable at the option of
the holder, or the Company, any time after March 31, 2000.  These notes
were secured by 100% of the stock of Metalclad Insulation Corporation
("MIC").  In February 1998, the conditions triggering convertibility of
the notes and the issuance of warrants were met.

In June 1998, the Company negotiated a bridge loan with the holder of
these notes in the amount of $250,000.  As additional consideration for
the bridge loan, the Company issued 250,000 warrants exercisable at
$1.25.  In connection with this financing, certain amendments were made
to the original Five-Year Zero Coupon Notes which granted the holder an
additional 400,000 warrants exercisable at $1.50 as part of the
anti-dilution provision of the original warrants and clarifying the
anti-dilution language contained in the original notes.  The bridge loan
was paid in its entirety from the proceeds of the Company's July 1998
financing.  Due to the anti-dilution provisions contained in both the
notes and the warrants, the holder of these notes had rights similar to
those of the Company's existing warrant holders.  As part of the
Company's negotiations with the warrant holders to solve the issue of
the ongoing anti-dilution effects on the number of shares underlying the
warrants, the holder of these notes also had to be addressed to solve
the anti-dilution provisions contained in the notes.  In February 1999,
the Company and the holder reached agreement on the conversion price of
the notes, originally priced to convert at $15.00 per share, and
modified to be convertible into shares of the Company's common stock at
$2.50 per share.

On July 30, 1999 the Company entered into an amendment of the terms of
its Five-Year Zero Coupon Notes with the holder.  The amendment included
the conversion of accrued interest through July 30, 1999 into principal
notes, the interest rate was adjusted from 9.3% to 12% effective July
31, 1999, the convertibility of the notes and the holder's redemption
option on the notes was extended until the earlier of March 31, 2000 or
completion of the NAFTA proceedings and the conversion rate per share
was the lesser of 70% of the average market price per share or $2.50 per
share.  In no event, however, could the holder convert its principal
into common shares such that it would result in the holder obtaining
shares that would exceed 19.99% of the outstanding common stock of the
Company.  Should the holder exercise its right to convert the notes, all
accrued interest would be forfeited.  As part of this amendment, the
note holder agreed to exercise certain of its warrants and to purchase
$250,000 in additional notes.  During the twelve months ended December
31, 2000 the note holder exercised its rights and converted $1,092,000
of note principal, into 795,910 shares at an average price of $1.37.  As
a result of these conversions the note holder forfeited accrued interest
in the amount of $161,000.  As of December 31, 2000 the note holder
reached the maximum allowable conversion option of the notes.

During the quarter ended March 31, 2001, the Company and the holder of
its Five-Year Zero Coupon Notes reached agreement under the terms of the
notes, to apply the maximum interest rate of 15% (default rate) to the
outstanding notes, effective February 1, 2001.  This was in lieu of any
formal review or redemption options available to the holder.

In June 2001, a notice of redemption was received by the Company from
the holders of the Five-Year Zero Coupon Notes and the Company
subsequently secured bank financing to redeem the notes.  On July 16th,
the Noteholders were paid in full all principal and interest due,
totaling $1,098,000, and the notes were cancelled.  These notes bore
interest at the rate of 15%.

Convertible Subordinated Debentures

In July 1998, the Company issued $1,000,000 in 7% Convertible Debentures
due in July 2001.  The debentures were convertible into shares of the
Company's common stock at $1.25 or 75% of current market price,
whichever was lower.  The Company had the option to redeem all or
portions of this debenture at 125% of the principal amount of the
redemption.  The debenture also allowed for a mandatory redemption in
the event of an award in the NAFTA arbitration or, in certain cases, if
the Company obtained additional equity investment.  The mandatory
redemption was also at 125% of the then-outstanding principal balance.
In February 1999, the Company redeemed $150,000 of the principal amount
of the debentures.  As of December 31, 1999, all of the remaining
debentures were converted into common stock of the Company.

In August 1998, the Company issued $350,000 in 10% Convertible
Subordinated Debentures due in August 2001 on terms similar to the
previously issued debentures.  The debentures were convertible into
shares of the Company's common stock at $1.25 per share through June 30,
1999.  After June 30, the debentures were convertible at 75% of current
market price or $1.25 whichever was lower.  As of December 31, 1999 all
of these debentures were converted into common stock of the Company.

During the third quarter of 1999, the Company issued $360,000 in
three-year 10% convertible subordinated debentures on terms similar to
the previously issued debentures, with the conversion price being the
lower of $2.50 per share or 75% of the market price per share.  These
debentures were due in August and September, 2002.  In the fourth
quarter of 2000, $52,035 of debenture principal and interest was
converted into 47,752 shares at an average price of $1.09 per share.
During the second quarter of 2001, the Company converted the remaining
$323,814 of convertible subordinated debentures, principal and interest,
into 266,901 shares at an average price of $1.21 per share.


NOTE H - BANK CREDIT FACILITY, NOTE PAYABLE

On July 16, 2001, the Company secured a new credit facility with
Community Bank in the form of a $1,000,000 60-day bridge loan, bearing
interest at a floating rate based upon the bank's reference rate plus
1%.  The bridge loan was secured by the assets of the Company's
insulation subsidiary and guaranteed by the Company.

On September 11, 2001, the $1,000,000 bridge loan was converted to an
accounts receivable revolving line of credit.  The loan matures on July
1, 2002 with an interest rate based on the bank's reference rate plus
..25%.

As of December 31, 2001, this interest rate was 5.0%.  The loan terms
stipulate that the Company's insulation subsidiary maintain compliance
with certain financial covenants and ratios.  As of December 31, 2001,
the Company's subsidiary was not in compliance with certain of the
covenants.  The Company received a bank waiver regarding this default.
The Company believes that future compliance with all covenants can be
achieved.  It is anticipated that this facility will be renewed in July
2002.


NOTE I - LONG-TERM DEBT

Long-term debt consists of various notes payable to a finance company
for vehicles used in the ordinary course of the Company's insulation
business.  The notes are secured by the vehicles and bear interest at
rates ranging from .9% to 8.65% for periods of 48 to 60 months with the
last payment due in 2006.  Principal maturities over the next five years
are as follows:

           Year ending December 31,
           ------------------------
                   2002              $ 84,749
                   2003                58,767
                   2004                48,139
                   2005                39,999
                   2006                 9,787
                                      -------
                                      241,441
               Less current portion   (84,749)
                                      -------
               Long-term portion     $156,692
                                      =======


NOTE J - INCOME TAXES

There is no current provision for income taxes for the periods presented
due to losses incurred prior to 2001 and the availability of net
operating loss carry forwards in the current year.  A deferred tax
provision also has not been recorded, as the Company was unable to
recognize certain loss carryforwards in years prior to 2001 and it is
uncertain whether the Company will produce sufficient taxable income in
the future to recognize the benefits of any deferred tas assets.

The major deferred tax items are as follows:

                                             December 31,
                                       ------------------------
                                          2001         2000
                                       ----------    ----------
   Assets:
     Allowances established against
       realization of certain assets   $  377,000   $    48,000
     Net operating loss carryforwards   4,800,000     8,754,000
     Capital loss carryforwards                 -     3,433,000
     Accrued liabilities and other              -        66,000
                                        ---------    ----------
                                        5,177,000    12,301,000
   Valuation allowance                 (5,177,000)  (12,301,000)
                                        ---------    ----------
                                       $        -   $         -
                                        =========    ==========

The difference between the actual income tax benefit and the tax benefit
computed by applying the statutory Federal income tax rate to the net
loss before income taxes is attributable to the recognition of net
operating loss and capital loss caryforwards.

At December 31, 2001, the Company has available for U.S. federal and
California state income tax purposes net operating loss carryforwards of
approximately $10,000,000.  These carryforwards expire in the year 2010
through 2020.  The ultimate utilization of the net operating loss
carryforwards may be limited in the future due to changes in the
ownership of the Company.  This limitation, if applicable, has not been
determined by the Company.  The Company also has Mexican net operating
loss carryforwards of approximately $4,000,000 which may be available to
offset future taxable income.  The Mexican losses are subject to a
ten-year tax carryforward period and expire in the years 2004 through
2011.

The realization of the Company's deferred tax assets is dependent upon
the Company's ability to generate taxable income in the future.  The
Company has recorded a 100% valuation allowance against all of the
deferred tax assets due to the uncertainty regarding their
realizability.


NOTE K - SHAREHOLDERS' EQUITY

Reverse Stock Split

On June 2, 1999, the shareholders of the Company approved a reverse
stock split of the Company's common stock in a ratio of one share for up
to ten shares of its outstanding common stock.  Pursuant to this
approval, the Board of Directors of the Company approved a reverse split
of the common shares in a ratio of one share for every ten shares.  This
reverse split was effective on July 2, 1999.  All reference to shares
and per share amounts in the accompanying footnotes have been restated
to reflect this action.

Stock Options

On August 18, 1992, the Company adopted an omnibus stock option plan
(the "1992 Plan") which authorized options to acquire 160,000 shares of
the Company's common stock.  At December 31, 2001, there were options
outstanding under the 1992 Plan for 14,500 shares, and 62,500 shares
available for grant.  These options will expire 10 years from the date
of grant.

On March 24, 1993, the Company adopted an omnibus stock option plan (the
"1993 Plan") which authorized options to acquire 100,000 shares of the
Company's common stock.  The terms of the 1993 Plan are the same as the
1992 Plan.  At December 31, 2001, there were options outstanding under
the 1993 Plan for 11,300 shares, and 56,200 shares available for grant.
These options expire 10 years from the date of the grant.

On May 15, 1997, the Company adopted an omnibus stock option plan (the
"1997 Plan") which authorized options to acquire 600,000 shares of the
Company's common stock.  At December 31, 2001, there were 460,000
options outstanding under this plan and 140,000 options available for
grant.

On November 20, 2001, the Company adopted an omnibus stock option plan
(the "2000 Plan") which authorized options to acquire 1,000,000 shares
of the Company's stock.  At December 31, 2001, there were options
outstanding under the 2000 plan for 990,000 shares and 10,000 shares
available for grant.  These options expire 10 years from date of grant.
The terms of the 2000 Plan are the same as the 1997 Plan.

Subsequent to December 31, 2001, the Board of Directors approved an
increase of 1,000,000 common shares of options which could be granted
under the 2000 Plan.  On March 4, 2002, options for 350,000 common
shares were granted to members of the Company's Board of Directors and
executive officers of the Company.  This increase and, as a result the
options, are subject to approval by the shareholders of the Company.

During the years ended December 31, 2001 and 2000, the Board of
Directors and its Compensation Committee approved the grant to various
officers, directors and employees of the Company of options to purchase
an aggregate of 520,000 and 540,000 shares of common stock,
respectively.  The options were granted at exercise prices equal to or
exceeding the fair market value of the Company's common stock on the
measurement date, expire 10 years from the date of grant and have
various vesting schedules.

The following is a summary of options granted:

<TABLE><S>                        <C>          <C>         <C>         <C>          <C>         <C>
                                                           Year ended December 31,
                                  -----------------------------------------------------------------------
                                            2001                     2000                     1999
                                  ---------------------    ---------------------    ---------------------
                                               Weighted                 Weighted                 Weighted
                                               Average                  Average                  Average
                                               Exercise                 Exercise                 Exercise
                                    Shares       Price       Shares      Price        Shares      Price
                                  ----------   --------    ----------  ---------    ----------   --------
     Options outstanding at
     beginning of the year         1,452,800    $ 8.92       954,800    $12.49        607,650    $19.30
        Granted                      520,000      2.00       540,000      3.00        390,000      2.99
        Exercised                          -         -             -         -              -         -
        Canceled                    (279,300)    17.22       (42,000)    13.84        (42,850)    22.69
                                    --------               ---------                 --------
     Options outstanding at
     end of the year               1,693,500    $ 5.43     1,452,800    $ 8.92        954,800    $12.49
                                   =========               ========-                 ========
     Options Exercisable             783,911    $ 8.53       874,312    $12.49        886,430    $12.76
                                   =========               =========                 ========
</TABLE>

The following significant assumptions were utilized to calculate the
fair value information presented utilizing the Black-Scholes Single
Option Approach:

                                    Year ended December 31,
                                 ----------------------------
                                  2001       2000       1999
                                 ------     ------     ------
     Risk Free interest rate       3.0%      5.95%      6.00%
     Expected life              3.0 years  5.0 years  1.82 years
     Expected volatility           1.47      1.32       1.247
     Expected dividends             -         -          -
     Weighted average fair
      value of options granted    $1.26     $1.49       $1.67

<TABLE><S><C>             <C>               <C>                 <C>               <C>                <C>
                                  Options Outstanding                                     Options Exercisable
        -----------------------------------------------------------------           ----------------------------
                                                Weighted
                                                average          Weighted                              Weighted
                               Number           remaining        average                Number         average
            Range of         outstanding     contractual life    exercise             exercisable      exercise
        exercise prices    as of 12/31/01       in years          price             as of 12/31/01      price
        ---------------    --------------    ----------------    --------           --------------     --------
         $2.50 -  $2.50       550,000             9.32            $2.03                  20,001          $2.50
         $3.00 - $ 3.00       890,000             8.40            $3.00                 536,670          $3.00
        $ 4.05 - $45.00       253,500             4.30           $21.33                 277,240         $22.13
        ---------------     ---------                                                   -------
         $2.50 - $45.00     1,693,500             8.08            $5.43                 783,911          $8.53
        ===============     =========             ====            =====                 =======         ======
</TABLE>

As the Company has adopted the disclosure requirements of SFAS 123, the
following table shows pro forma net loss and loss per share as if the
fair value based accounting method had been used to account for
stock-based compensation cost.


                                  Year ended December 31,
                           ------------------------------------
                             2001         2000         1999
                           ---------  -----------   -----------
Net income (loss) as
  reported                $5,575,708  $(1,765,000)  $(4,199,000)
Proforma compensation
  expense                   (657,773)     (806,00)     (651,000)
                           ---------   ----------    ----------
Proforma net income
  (loss)                  $4,917,935  $(2,571,000)  $(4,850,000)
                           =========   ==========    ==========
Pro forma income
  (loss) per share -
   basic                     $.68        $( .47)      $(1.24)
                              ===         =====        =====

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts.

Stock Purchase Warrants

In connection with various debt offerings, stock placements and services
provided, the Company has issued various stock purchase warrants.  All
such warrants were issued at prices which approximated or exceeded fair
market value of the Company's common stock at the date of grant and are
exercisable at dates varying from one to five years.

Summarized information for stock purchase warrants is as follows:

<TABLE><S>                                <C>             <C>
                                              Number           Price
                                           of Warrants       Per Share
                                           ----------      ------------

Warrants outstanding at December 31, 1999   2,138,513      $2.50-$12.50
  Issued                                            -           -
  Exercised                                  (877,954)     $1.69-$ 3.50
  Expired                                    (311,464)        $3.50
  Ratchet Adjustment                          318,400         $2.50
                                            ---------

Warrants outstanding at December 31, 2000   1,267,495      $2.50-$12.50
  Issued                                      600,000         $1.50
  Expired                                    (737,406)     $3.50-$12.50

Warrants outstanding at December 31, 2001   1,130,089      $1.50-$ 4.80
</TABLE>

Common Stock

During the year ended December 31, 1999, the Company issued 1,802,586
shares, with 1,151,336 being the result of warrant exercises, 38,500 to
certain employees in exchange for payroll obligations and 612,750 being
the result of debt conversions.

During the year ended December 31, 2000, the Company issued 1,721,616
shares, with 877,954 being the result of warrant exercises and 843,662
being the result of debt conversion.

During the year ended December 31, 2001, the Company issued 866,901
shares, with 266,901 being the result of debt conversions and 600,000 as
the result of a private placement of units, each unit consisted of one
share of common stock and one common stock purchase warrant exercisable
at $1.50 per share.


NOTE L - EMPLOYEE BENEFIT PLANS

Effective January 1, 1990, the Company established a contributory profit
sharing and thrift plan for all salaried employees.  Discretionary
matching contributions may be made by the Company based upon participant
contributions, within limits provided for in the plan.  No Company
contributions were made in the years ended December 31, 2001, 2000 and
1999.

Additionally, the Company participates in several multi-employer plans,
which provide defined benefits to union employees of its participating
companies.  The Company makes contributions determined in accordance
with the provisions of negotiated labor contracts. The contributions
were $376,922, $372,606 and $334,670 for the years ended December 31,
2001, 2000 and 1999, respectively.


NOTE M - SIGNIFICANT CUSTOMERS

Sales for the year ended December 31, 2001 to Curtom-Metalclad were
approximately $7,132,000, primarily representing work performed at
Southern California Edison Company ("SCE") plants under the strategic
alliance program with Curtom-Metalclad.  The Company had trade accounts
receivable of $621,000 from Curtom-Metalclad/SCE as of December 31,
2001.  Additionally, the Company had sales of $1,910,000 and $1,540,000
to Equilon Enterprises LLC and AES Corporation, respectively, during
2001.  Accounts receivable from these two customers were $63,000 and
$412,000, respectively, as of December 31, 2001.  Given the Company's
client base, the energy market problems in California could adversely
affect the Company's ability to collect the receivable from one of its
major clients, should they experience financial problems.

Sales for the year ended December 31, 2000 to Curtom-Metalclad were
approximately $8,470,000 representing work at Edison plants.
Additionally, the Company had sales of $2,323,000 to ARCO and $1,049,000
to Equilon. As of December 31, 2000 the Company had accounts receivables
of $2,294,000 from Curtom-Metalclad, $312,000 from ARCO and $84,000 from
Equilon.

Sales for the year ended December 31, 1999 to Curtom-Metalclad were
approximately $4,287,000 representing work performed at Edison plants
under the strategic alliance program.  Additionally, the Company had
sales of $3,093,000 to ARCO and $2,930,000 to Equilon (formerly Texaco).


NOTE N - COMMITMENTS AND CONTINGENCIES

Employment Agreements

The Company has employment agreements with its executive officers.
These agreements continue until terminated by the executive or the
Company and provide for minimum salary levels, as adjusted for cost of
living changes.  These agreements include incentive bonuses based upon
specified management goals, change in control provisions and a covenant
against competition with the Company extending for a period of time
after termination.  (See Subsequent Events, Note P.)

Collective Bargaining Agreements

Approximately 83% of the Company's employees are covered under
collective bargaining arrangements.  Certain of these agreements expire
in June, August and December of 2003 and July 2004.

Leases

The Company leases its facilities under non-cancelable operating lease
agreements which expire at various dates through 2002.  Total rent
expense under operating leases was $262,746, $248,677 and $209,042 for
the years ended December 31, 2001, 2000, and 1999, respectively.  Future
minimum non-cancelable lease commitments are as follows:

               Year ending
			   December 31,
               ------------
                   2002          $122,684
                   2003                 -
                                  -------
                                 $122,684
                                  =======

Litigation

In the ordinary course of its insulation business, certain parties have
filed a substantial number of claims against the Company for actual and
punitive damages.  Presently, the number of these claims exceed 300.
The potential aggregate value of the claims is in the range of
$1,000,000 to $5,500,000.  The Company continues to have adequate
insurance coverage with financially sound carriers responding to these
claims and does not foresee any significant financial exposure resulting
from these claims.  Throughout its history, the Company has maintained
insurance policies that typically respond to these claims.  Based on the
advice of counsel, it is management's opinion that these actions,
individually and in the aggregate, will not have a significant adverse
impact on the Company's financial position or results of operations.  If
such claims increase significantly, however, there is no assurance that
such insurance coverage will continue to be adequate or that such claims
will not have a material adverse effect on the Company's financial
condition.

In October 1999, the Company completed a sale of its operating
businesses and its development project located in Aguascalientes,
Mexico.  The sale specifically excluded those Mexican assets involved in
the NAFTA claim.  Under the terms of the sale the Company received an
initial cash payment of $125,000.  Furthermore, the sale terms stipulate
payment of up to $5,000,000, in stages, as various benchmarks are
achieved in the operation of the business as well as the buyer's
assumption of all liabilities.  To date, the Company believes that the
buyer has not achieved any of the milestones necessary to trigger
additional payments.  Moreover, the Company believes that the buyer is
in default of its agreement with the Company under the indemnity
provisions and may have committed fraud in attempting to assign its
interest in the companies purchased to a former employee of Metalclad.
The Company has filed a complaint in the Superior Court of California
against the buyer and the former Company employee and the Orange County,
California based parent of the buyer as a result of representations said
parent made relative to giving the buyer financial support in its
acquisition of the companies purchased.  The defendants have moved for
an arbitration proceeding in Mexico, which has been scheduled for Summer
2002.  Consequently, all actions in California have been stayed pending
its completion.  The Company believes strongly in the merits of its
case, but cannot assure its outcome.  The Company has fully reserved its
$779,000 note receivable, which was recorded at the date of sale, but
will continue to pursue its claims.


NOTE O - RELATED PARTY TRANSACTIONS

Receivables from related parties are comprised of the following:

                                         December 31,
                                     --------------------
                                       2001       2000
                                     --------   ---------
   Loans to executive officers,
   directors and employees           $529,184    $669,998

   Other                                8,610      50,000
                                      -------     -------
                                     $537,794    $719,998
                                      =======     =======


Loans to executive officers, directors and employees are represented by
promissory notes, due on demand and bear interest at 6%.

An officer and director of the Company is a partner in a law firm which
has received payments for legal fees of approximately $196,637, $36,000
and $37,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.  As of December 31, 2001, fees totaling $14,627 remain
unpaid.

During fiscal 1995 the Company loaned $740,000 to two officers of the
Company.  In February 1996, the officers each repaid $150,000 to the
Company.  In March 1996, the notes were amended to modify the loan
principal and to adjust the interest rates, effective March 1, to a
variable rate based upon the Company's quarterly investment rate.  In
December 2001, Mr. Neveau's note was written off and a 1099 issued.  In
February 2002, Mr. Kesler's note was amended to be forgiven over time,
in consideration for consulting services.  (See Note P.)

In November, 2000, the Board of Directors approved advances against
legal costs on behalf of Mr. Kesler, Metalclad CEO, in his pursuit of
certain personal legal matters related to his position in the Company.
As of December 31, 2000, Mr. Kesler owed the Company $57,000 related to
these advances, which may be recoverable from pending litigation.  In
December, 2001, the Company assumed these legal fees and all rights of
recovery against the defendants.

On December 10, 2001 the Company issued a $1,250,000, 6%, non-recourse
secured note to Blake Capital Partners, LLC ("Blake"), an entity
controlled 100% by Mr. Mills.  At the time of the loan, Mr. Mills had
filed a Form under 13(d) of the Securities Exchange Act of 1934, and
owned 20% of the Company.  On February 14, 2002 Mr. Mills became
President and CEO of the Company.  (See Note P, Subsequent Events).  The
note is collateralized by 500,000 shares of the Company's common stock,
owned by Blake and Mr. Mills.  The interest on the note is guaranteed by
Mr. Mills The principal and interest is due June 10, 2002.  Blake shall
have the right to extend the maturity date of this note for a period of
90 days.  In the event Blake elects to extend the maturity date, during
the pendency of the 90-day extension period, simple interest shall be
payable at 12% per annum.  The principal amount of the note, together
with accrued, unpaid interest, may be prepaid at anytime without
penalty.  In this regard Blake may direct the escrow agent to sell all
or any part of the pledged securities held in escrow and to use the
proceeds therefrom to reduce the principal balance of the note or have
the same held in escrow pending further instructions from Blake.  Blake
may also instruct the Company through the agent, to cancel any of the
shares held in escrow at $2.50 per share, or at a higher price at the
Company's discretion, and to have that amount applied to the then
remaining principal balance of the note.  The Company and the agent
shall immediately perform any of the foregoing requests.  The principal
balance then due and owing under the note shall thereupon be reduced by
an amount equal to the number of pledged securities cancelled multiplied
by $2.50 per share, or by such higher price, as applicable.  The Company
views any share cancellations as a buy back of its stock.  As such, the
note has been classified in the equity section on its financial
statements.  At December 31, 2001, the unsecured portion of this note
receivable was $220,000.


NOTE P - SUBSEQUENT EVENTS (Unaudited)

Change of Management/Severance Payments.

On December 20, 2001, Mr. Wayne Mills filed Form 13D/A with the
Securities and Exchange Commission, indicating his intent to seek a
change in management and the Board of the Company.  Mr. Mills indicated
that, absent a cooperative solution, he would seek shareholder consents
to replace the entire Board.

It was management's decision that the shareholders would benefit by not
involving the Company in a proxy contest which would hinder its
opportunity to move forward with its strategy for growth.  Consequently,
on February 13, 2002, Grant S. Kesler, Anthony C. Dabbene and Bruce H.
Haglund resigned as members of the Board of Directors of the Company.
The remaining members of the Board of Directors elected Messrs. Wayne W.
Mills, Kenneth W. Brimmer, Gary W. Copperud and Joseph M. Senser to fill
an existing vacancy on the board of Directors and the vacancies created
by the resignations of Messrs. Kesler, Dabbene and Haglund.  In
addition, Messrs. Kesler and Dabbene resigned as officers of the Company
and Mr. Mills was elected President and Chief Executive Officer and
Brian D. Niebur was elected Treasurer and Chief Financial Officer.

In connection with their resignations, and in lieu of compensation which
would otherwise be due under change of control provisions contained in
previously executed and adopted employment contracts, which were amended
and restated as of January 1, 2002, the Company issued Mr. Kesler
140,000 shares of the Company's common stock, forgave a loan due from
Mr. Kesler in the amount of $543,000 in exchange for future consulting
services and paid Mr. Kesler $832,000 in cash, and issued Mr. Dabbene
86,000 shares of the Company's common stock and paid Mr. Dabbene
$637,000 in cash.  Messrs. Kesler and Dabbene have each agreed to act as
a consultant to Metalclad under two-year and three-month consulting
agreements, respectively.  In addition to the payment discussed above,
Mr. Dabbene's compensation for consulting will be $5,000 per month.  A
portion of the cash payments due to Mr. Kesler and Mr. Dabbene ($482,000
and $425,000, respectively) will be deposited by Metalclad as income and
payroll tax withholding on the total compensation paid to each of them.

In March 2002, the Company reimbursed Mr. Mills $100,000 for legal fees
expended by him to effect this change in management.

During the three months ended March 31, 2002, the Company will recognize
$3,200,000 of expense related to the change of management, including
insurance premiums, legal fees, severance pay and relocation of the
Company's headquarters.  The cash payments related to these expenses
will be approximately $2,044,000.  The non-cash charges primarily relate
to the forgiveness of the loan due from Mr. Kesler and the issuance of
common stock to Messrs. Kesler and Dabbene.

Building Purchase

On March 2, 2002, the Company entered into an agreement to purchase the
facilities in Anaheim, California, housing the industrial insulation
services operations.  The facility consists of 26,000 square feet of
office and warehouse space.  The purchase price is $2,047,000 and the
sale is expected to close in April, 2002.

Letter of Intent

In March 2002, the Company entered into a letter of intent which
obligates the Company, subject to its due diligence review, to negotiate
in good faith for the purchase from Surg II, Inc. (a Minnesota
corporation) of approximately 120,000,000 shares of Surg II, Inc.'s
authorized but unissued common stock for $3,000,000.  The Company and
its officers and directors do not have common ownership or prior
affiliations with Surg II, Inc.  If the transaction is completed, the
Company will own 90% of the outstanding common stock of Surg II, Inc.,
which it plans to use for the acquisition of a yet uncommitted business
enterprise. As indicated in Surg II, Inc.'s Form 8-K filing on January
22, 2002, Surg II, Inc. has no remaining operations and no significant
assets or liabilities.  The common stock of Surg II, Inc. is traded on
the NASDAQ Bulletin Board under the symbol SUGR.

Stock Grants

On March 4, 2002, options for 350,000 common shares were granted to
members of the Company's Board of Directors and executive officers of
the Company.

            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE><S>                                <C>          <C>          <C>           <C>         <C>
                                                                     Additions
                                           Balance at   Charged to   Charged to                Balance at
                                           Beginning    Costs and      Other                     End of
              Description                  of Period    Expenses      Accounts     Deductions    Period
              -----------                  ----------   ----------   ----------    ----------  ----------

   Year ended December 31, 2001
   ----------------------------
   Deducted from asset accounts:
     Allowance for doubtful accounts        $50,000       $7,500            -            -       $57,500
                                             ======                                               ======
     Allowance for excess and obsolete
       inventory                             $5,000      $47,124            -            -       $52,124
                                              =====                                               ======

   Year ended December 31, 2000
   ----------------------------
   Deducted from asset accounts:
     Allowance for doubtful accounts        $20,000      $30,000            -            -       $50,000
                                             ======                                               ======
     Allowance for excess and obsolete
       inventory                             $5,000            -            -            -        $5,000
                                              =====                                                =====

   Year ended December 31, 1999
   ----------------------------
   Deducted from asset accounts:
     Allowance for doubtful accounts        $20,000            -            -            -       $20,000
                                             ======                                               ======
     Allowance for excess and obsolete
       inventory                             $5,000            -            -            -        $5,000
                                              =====                                                =====
</TABLE>













                             EXHIBIT 10.19
     OF METALCLAD CORPORATION FORM 10-K FOR PERIOD ENDING 12-31-01



                        2198 SOUTH DUPONT DRIVE
                       ANAHEIM, CALIFORNIA  92806
                     AGREEMENT OF PURCHASE AND SALE

     This Agreement, dated as of February 2, 2002, is between CALWEST
INDUSTRIAL PROPERTIES, LLC, a California limited liability company,
("Seller"), and METALCLAD INSULATION CORPORATION, a California
Corporation ("Buyer").

                               ARTICLE I

                     PURCHASE AND SALE OF PROPERTY

Section 1.1  Sale.

Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, subject to the terms, covenants and conditions set forth
herein, that certain real property located at 2198 South Dupont
Drive, Anaheim, California 92806, together with any and all rights,
privileges and easements appurtenant thereto owned by Seller, which
real property will be more particularly described in an Exhibit A
attached hereto and made a part hereof (collectively the "Real
Property"), together with the personal property owned by Seller, if
any, located on the Real Property and used exclusively in the
operation or maintenance of the Real Property, as the same may be
further described in any list which is in Seller's possession and
is furnished to Buyer within the Delivery Period as defined in
Section 2.1(a) below but excluding any such personal property in
Seller's property management office, if any, on the Real Property
(the "Personal Property").  The Real Property and Personal Property
are collectively referred to herein as the "Property". Section 1.2
Purchase Price. (a) The purchase price of the Property is Two
Million Forty Seven Thousand Three Hundred Sixty Four Dollars
($2,047,364) (the "Purchase Price"). (b) The Purchase Price shall
be paid as follows: (1) Upon the execution of this Agreement by
Buyer and Seller, Buyer shall deposit in escrow with Chicago Title
Company at 388 Market Street, Suite 1300, San Francisco, CA 94111,
Attn:  Mary Hart, Telephone: (415) 291-5118, Facsimile: (415)
434-2176 (the "Title Company") an all-cash payment in the amount of
Fifty Thousand Dollars ($50,000) (the "Deposit").

(2) The Deposit shall be held in an interest bearing account and all
interest thereon shall be deemed a part of the Deposit.  If the sale of
the Property as contemplated hereunder is consummated, then the Deposit
shall be paid to Seller at the Closing and credited against the Purchase
Price.  If the sale of the Property is not consummated due to Seller's
default hereunder, then, as Buyer's sole remedies, Buyer may either: (1)
terminate this Agreement and receive a refund of the Deposit, in which
event neither party shall have any further rights or obligations
hereunder except as provided in Sections 6.1, 9.3 and 9.9 below, and
Buyer shall promptly return the Due Diligence Materials (as such terms
is defined herein) to Seller or (2) Buyer may enforce specific
performance of this Agreement.  Buyer shall not have any other remedy
hereunder as a result of any default by Seller prior to Closing, and
Buyer hereby waives any other such remedy as a result of a default
hereunder by Seller.  If the sale is not consummated due to any default
by Buyer hereunder, then Seller shall retain the Deposit as liquidated
damages.  The parties have agreed that Seller's actual damages, in the
event of a failure to consummate this sale due to Buyer's default, would
be extremely difficult or impracticable to determine.  After
negotiation, the parties have agreed that, considering all the
circumstances existing on the date of this Agreement, the amount of the
Deposit is a reasonable estimate of the damages that Seller would incur
in such event.  By placing their initials below, each party specifically
confirms the accuracy of the statements made above and the fact that
each party was represented by counsel who explained, at the time this
Agreement was made, the consequences of this liquidated damages
provision.  The foregoing is not intended to limit Buyer's obligations
under Sections 6.1, 9.3 and 9.9. INITIALS:  SELLER ________ BUYER
_______ (3) The balance of the Purchase Price, which is One Million Nine
Hundred Ninety-Seven Thousand Three Hundred Sixty Four Dollars
($1,997,364) shall be paid to Seller all in cash at the consummation of
the purchase and sale contemplated hereunder (the "Closing").

                               ARTICLE II

                               CONDITIONS

Section 2.1 Condition Precedent.

Buyer's obligation to
purchase the Property is conditioned upon the following:

(a) Buyer's review and approval of updated preliminary title report,
together with copies of the underlying documents (the "Title Report"),
and any survey of the Property in Seller's possession.  Seller shall
furnish to Buyer a copy of such report, together with the underlying
documents, and any survey in Seller's possession, within ten (10) days
after the date Seller receives a fully executed original of this
Agreement (the "Delivery Period"). (b) Buyer's review and approval of
the physical condition of the Property. (c) Buyer's review and approval
of all zoning, land use, building, environmental and other statutes,
rules, or regulations applicable to the Property. (d) Buyer's review and
approval of operating statements with respect to the Property for 2000
and 2001, the most current tax bills for the 2001- 2002 tax year,
certificates of occupancy, plans and specifications, soils, Hazardous
Materials (as such term is defined herein) reports and other reports,
service contracts, and other contracts or documents.  Seller shall make
available to Buyer within the Delivery Period copies of all such items
in Seller's possession for Buyer's inspection and copying, at Buyer's
expense, during reasonable business hours.  Notwithstanding the
foregoing, Buyer's review shall not include a review of Seller's
internal economic memoranda or reports, attorney-client privileged
materials or Seller's appraisals of the Property, if any. (e) Buyer's
review and approval of any other matters Buyer deems relevant to the
Property. Section 2.2 Contingency Period. Buyer shall have until the
date which is forty-five (45) days from the date hereof, which date is
March 19, 2002 (such period being referred to herein as the "Contingency
Period") to review and approve the matters described in Sections
2.1(a)-(e) above in Buyer's sole discretion.  If Buyer determines to
proceed with the purchase of the Property, then Buyer shall, before the
end of the Contingency Period, notify Seller in writing that Buyer has
approved all of the matters described in Section 2.1(a)-(e) above,
including, without limitation, all documents, agreements, surveys,
reports and other items and materials delivered to or made available to
Buyer in connection with this Agreement (the "Due Diligence Materials").
If before the end of the Contingency Period Buyer fails to give Seller
such written notice, then Buyer shall be deemed to have elected to
terminate this Agreement, the Deposit shall be returned to Buyer, Buyer
shall promptly return all of the Due Diligence Materials to Seller, and
neither party shall have any further rights or obligations hereunder
except as provided in Sections 6.1, 9.3 and 9.9 below.

                              ARTICLE III

                          BUYER'S EXAMINATION

Section 3.1  Representations and Warranties of Seller.

Subject to the provisions of Sections 3.2 and 3.3 below, Seller hereby
makes the following representations and warranties with respect to the
Property, provided that Seller makes no representations or warranties
with respect to the matters (the "Disclosure Items") which are set forth
in a Schedule 1 attached hereto and made a part hereof.  Notwithstanding
anything to the contrary contained herein or in any document delivered
in connection herewith, Seller shall have no liability with respect to
the Disclosure Items.

(a) Seller has not (i) made a general assignment for the benefit of
creditors, (ii) filed any voluntary petition in bankruptcy or suffered
the filing of any involuntary petition by Seller's creditors, (iii)
suffered the appointment of a receiver to take possession of all, or
substantially all, of Seller's assets, (iv) suffered the attachment or
other judicial seizure of all, or substantially all, of Seller's assets,
(v) admitted in writing its inability to pay its debts as they come due,
or (vi) made an offer of settlement, extension or composition to its
creditors generally.

(b) Seller is not a "foreign person" as defined in Section 1445 of the
Internal Revenue Code of 1986, as amended (the "Code") and any related
regulations.

(c) This Agreement (i) has been duly authorized, executed and delivered
by Seller, and (ii) does not violate any provision of any agreement or
judicial order to which Seller is a party or to which Seller or the
Property is subject.

(d) Seller has the power and authority to enter into this Agreement and
to perform its obligations hereunder.

(e) There are no tenant leases in force for the Property other than that
certain lease between Seller, as landlord, and Metalclad Insulation
corporation, as tenant (the "Lease"). The Lease constitute all of the
written or oral agreements of any kind for the leasing, rental, or
occupancy of any portion of the Property.

(f) Seller has received no written notice of any pending actions, suits,
arbitrations, claims or proceedings, at law or in equity, affecting all
or any portion of the Property or in which Seller is or will be a party
by reason of Seller's ownership of the Property.

(g) To the best of Seller's knowledge, except as set forth in Schedule 1
or as may be disclosed in Due Diligence Materials, Seller has received
no written notice from any governmental authority that the present use
and operation of the Property is in violation of any of the applicable
law (including, without limitation, (i) the Americans with Disabilities
Act ("ADA"), Title 24 of the California Administrative Code, and other
similar federal, state and local laws , (ii) building codes and any
other laws relating to the construction or design of the improvements on
the Property, including, without limitation, fire, safety, handicapped
access, or seismic design (collectively, "Building Codes"), and (iii)
any laws relating to environmental matters (the "Environmental Laws").

(h) Except as set forth in Schedule 1 or as may be disclosed in Due
Diligence Materials, Seller has received no written notice of any
pending improvement liens or special assessments to be made against the
Property.

(i) To the best of Seller's knowledge, the only contract or agreements
for the operation or maintenance of the Property entered into by Seller
is the landscaping contract with Arbor Care, a copy of which shall be
made available to Buyer during the Contingency Period.

(j) To the best of Seller's knowledge, there are no rights of first
offer or refusal to purchase the Property held by any tenant or other
third party.

Each of the representations and warranties of Seller contained in this
Section 3.1:  (1) is true as of the date of this Agreement; (2) shall be
deemed remade by Seller, and shall be true in all material respects as
of the date of Closing, subject to (A) any Exception Matters (as defined
below), (B) the Disclosure Items, and (C) other matters expressly
permitted in this Agreement or otherwise specifically approved in
writing by Buyer including, without limitation, the Due Diligence
Materials; and (3) shall survive the close of escrow as provided in
Section 3.3 below. Section 3.2 No Liability for Exception Matters.

As used herein, the term "Exception Matter" shall refer to a matter
disclosed to Buyer in writing or discovered by Buyer before the
Closing, that would make a representation or warranty of Seller
contained in this Agreement untrue or incorrect, including, without
limitation, matters disclosed in writing to Buyer by Seller or by
any other person.  If Buyer obtains knowledge of any Exception
Matter after the date hereof, Buyer may terminate this Agreement
and receive a return of the Deposit upon written notice to Seller
within five (5) business days after Buyer learns of such Exception
Matter if Seller elects not to cure or remedy any such Exception
Matter.  Seller shall have five (5) business days after receipt of
Buyer's written notice to notify Buyer of whether or not Seller has
elected to cure such matter prior to Closing.  Buyer shall promptly
notify Seller in writing of any Exception Matter of which Buyer
obtains knowledge before the Closing.  If Buyer obtains knowledge
of any Exception Matter before the Closing, but nonetheless elects
to proceed with the acquisition of the Property, Buyer shall
consummate the acquisition of the Property subject to such
Exception Matter and Seller shall have no liability with respect to
such Exception Matter, notwithstanding any contrary provision,
covenant, representation or warranty contained in this Agreement.
If Buyer elects to terminate this Agreement on the basis of any
Exception Matter, Buyer shall so notify Seller in writing within
five (5) business days following Buyer's discovery of the Exception
Matter, and the Deposit shall be returned to Buyer.  Buyer's
failure to give such notice within such five (5) business day
period shall be deemed a waiver by Buyer of such Exception Matter.
Upon any such termination of this Agreement, Buyer shall promptly
return all of the Due Diligence Materials to Seller, and neither
party shall have any further rights or obligations hereunder,
except as provided in Sections 6.1, 9.3 and 9.9 below.  Seller
shall have no obligation to cure or remedy any Exception Matter,
and, subject to Buyer's right to terminate this Agreement as set
forth above, Seller shall have no liability whatsoever to Buyer
with respect to any Exception Matters.  Section 3.3 Survival of
Representations and Warranties. The representations and warranties
of Seller and Buyer contained herein shall survive for a period of
one twelve (12) months after the Closing, except that Buyer's
representations and warranties in Sections 3.5(d) and (f) shall
survive indefinitely.  Any claim which Buyer or Seller may have at
any time against the other for a breach of any such representation
or warranty (other than those contained in Sections 3.5(d) and
(f)), whether known or unknown, which is not asserted (i) by
written notice to Seller or Buyer within such twelve (12) month
period and (ii) by Seller's or Buyer's filing a legal action with
respect thereto whether such twelve (12) month period, shall not be
valid or effective, and the other party shall have no liability
with respect thereto. Section 3.4 Seller's Knowledge. For purposes
of this Agreement and any document delivered at Closing, whenever
the phrase "to the best of Seller's knowledge" or the "knowledge"
of Seller or words of similar import are used, they shall be deemed
to refer to the current actual knowledge of David Breuner, at the
times indicated only and not any implied, imputed or constructive
knowledge, without any independent investigation having been made
or any implied duty to investigate.

Section 3.5 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows: (a) Buyer represents
and warrants to Seller that this Agreement and all documents
executed by Buyer which are to be delivered to Seller at Closing do
not and at the time of Closing will not violate any provision of
any agreement or judicial order to which Buyer is a party or to
which Buyer is subject.  (b) Buyer represents and warrants to
Seller that Buyer has not (i) made a general assignment for the
benefit of creditors, (ii) filed any voluntary petition in
bankruptcy or suffered the filing of any involuntary petition by
Buyer's creditors, (iii) suffered the appointment of a receiver to
take possession of all, or substantially all, of Buyer's assets,
(iv) suffered the attachment or other judicial seizure of all, or
substantially all, of Buyer's assets, (v) admitted in writing its
inability to pay its debts as they come due, or (vi) made an offer
of settlement, extension or composition to its creditors generally.
(c) Buyer is duly formed, validly existing and in good standing
under the laws of the State of Delaware.  Buyer has duly
authorized, executed and delivered this Agreement. (d) Buyer is
purchasing the Property as investment rental property, and not for
Buyer's own operations or use.  (e) Intentionally Deleted. (f)
Other than Seller's Broker, as defined below, Buyer has had no
contact with any broker or finder with respect to the Property.
Each of the representations and warranties of Buyer contained in
this Section shall be deemed remade by Buyer as of the Closing and
shall survive the Closing as provided in Section 3.3 above.
Section 3.6 Buyer's Independent Investigation. (a) Buyer
acknowledges and agrees that it has been given or will be given
before the end of the Contingency Period, a full opportunity to
inspect and investigate each and every aspect of the Property,
either independently or through agents of Buyer's choosing,
including, without limitation:  (1) All matters relating to title,
together with all governmental and other legal requirements such as
taxes, assessments, zoning, use permit requirements and building
codes.

(2) The physical condition and aspects of the Property, including,
without limitation, the interior, the exterior, the square footage
within the improvements on the Real Property and within each tenant
space therein, the structure, seismic aspects of the Property, the
paving, the utilities, and all other physical and functional aspects of
the Property.  Such examination of the physical condition of the
Property shall include an examination for the presence or absence of
Hazardous Materials, as defined below, which shall be performed or
arranged by Buyer at Buyer's sole expense.  For purposes of this
Agreement, "Hazardous Materials" shall mean inflammable explosives,
radioactive materials, asbestos, polychlorinated biphenyls, lead,
lead-based paint, under and/or above ground tanks, hazardous materials,
hazardous wastes, hazardous substances, oil, or related materials, which
are listed or regulated in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
6901, et seq.), the Resources Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901, et seq.), the Clean Water Act (33 U.S.C. Section
1251, et seq.), the Safe Drinking Water Act (14 U.S.C. Section 1401, et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section
1801, et seq.), and the Toxic Substance Control Act (15 U.S.C. Section
2601, et seq.), the California Hazardous Waste Control Law (California
Health and Safety Code Section 25100, et seq.), the Porter-Cologne Water
Quality Control Act (California Water Code Section 13000, et seq.), and
the Safe Drinking Water and Toxic Enforcement Act of 1986 (California
Health and Safety Code Section 25249.5, et seq.) and any other
applicable federal, state or local laws. (3) Any easements and/or access
rights affecting the Property.  (4) The service contracts and any other
documents or agreements of significance affecting the Property.  (5) All
other matters of material significance affecting the Property.

(b) BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT SELLER IS
SELLING AND BUYER IS PURCHASING THE PROPERTY ON AN "AS IS WITH ALL
FAULTS" BASIS AND THAT BUYER IS NOT RELYING ON ANY REPRESENTATIONS
OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM
SELLER, ITS AGENTS, OR BROKERS AS TO ANY MATTERS CONCERNING THE
PROPERTY EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.1 ABOVE,
INCLUDING WITHOUT LIMITATION:  (i) the quality, nature, adequacy
and physical condition and aspects of the Property, including, but
not limited to, the structural elements, seismic aspects of the
Property, foundation, roof, appurtenances, access, landscaping,
parking facilities and the electrical, mechanical, HVAC, plumbing,
sewage, and utility systems, facilities and appliances, the square
footage within the improvements on the Real Property and within
each tenant space therein, (ii) the quality, nature, adequacy, and
physical condition of soils, geology and any groundwater, (iii) the
existence, quality, nature, adequacy and physical condition of
utilities serving the Property, (iv) the development potential of
the Property, and the Property's use, habitability,
merchantability, or fitness, suitability, value or adequacy of the
Property for any particular purpose, (v) the zoning or other legal
status of the Property or any other public or private restrictions
on use of the Property, (vi) the compliance of the Property or its
operation with any applicable codes, laws, regulations, statutes,
ordinances, covenants, conditions and restrictions of any
governmental or quasi-governmental entity or of any other person or
entity, (vii) the presence of Hazardous Materials on, under or
about the Property or the adjoining or neighboring property, (viii)
the quality of any labor and materials used in any improvements on
the Real Property, (ix) the condition of title to the Property, (x)
the service contracts, or other agreements affecting the Property,
and (xi) economics of the operation of the Property.  Section 3.7
Release.

(a) Without limiting the above, and subject to the representations and
warranties of Seller contained in Section 3.1 hereof, Buyer on behalf of
itself and its successors and assigns waives its right to recover from,
and forever releases and discharges, Seller, Seller's affiliates,
Seller's investment manager, the partners, trustees, beneficiaries,
shareholders, members, directors, officers, employees and agents of each
of them, and their respective heirs, successors, personal
representatives and assigns (collectively, the "Seller Related
Parties"), from any and all demands, claims, legal or administrative
proceedings, losses, liabilities, damages, penalties, fines, liens,
judgments, costs or expenses whatsoever (including, without limitation,
attorneys' fees and costs), whether direct or indirect, known or
unknown, foreseen or unforeseen, that may arise on account of or in any
way be connected with (i) the physical condition of the Property
including, without limitation, all structural and seismic elements, all
mechanical, electrical, plumbing, sewage, heating, ventilating, air
conditioning and other systems, the environmental condition of the
Property and Hazardous Materials on, under or about the Property, or
(ii) any law or regulation applicable to the Property, including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
6901, et seq.), the Resources Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901, et seq.), the Clean Water Act (33 U.S.C. Section
1251, et seq.), the Safe Drinking Water Act (14 U.S.C. Section 1401, et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section
1801, et seq.), and the Toxic Substance Control Act (15 U.S.C. Section
2601, et seq.), the California Hazardous Waste Control Law (California
Health and Safety Code Section 25100, et seq.), the Porter-Cologne Water
Quality Control Act (California Water Code Section 13000, et seq.), and
the Safe Drinking Water and Toxic Enforcement Act of 1986 (California
Health and Safety Code Section 25249.5, et seq.) and any other federal,
state or local law.  (b) In connection with section 3.7(a) above, Buyer
expressly waives the benefits of Section 1542 of the California Civil
Code, which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Section 3.8
Survival. The provisions of this Article III shall survive the Closing
subject to the limitations and qualifications contained in such
provisions.

                               ARTICLE IV

                                 TITLE

Section 4.1 Conditions of Title.

At the Closing, Seller shall convey title to the Property to Buyer by
grant deed (the "Deed") subject to no exceptions other than:  (a)
Interests of tenants in possession; (b) Non-delinquent liens for real
estate taxes and assessments; and (c) Any exceptions disclosed by the
preliminary title report and any amendments or supplements thereto, the
public records or the Due Diligence Materials, and any other exceptions
to title which would be disclosed by an inspection and/or survey of the
Property.

Buyer may disapprove any exceptions to title which Buyer first discovers
after the Contingency Date (collectively, the "Supplemental Exceptions")
within five (5) business days after the date on which Buyer discovers a
Supplemental Exception.  Buyer shall have a right to approve all such
Supplemental Exceptions.  If Buyer disapproves of a Supplemental
Exception, then Buyer may either (i) terminate this Agreement, in which
event the Deposit shall be returned to Buyer, any and all Due Diligence
Materials provided to Buyer shall be promptly returned to Seller, and
neither party under this Agreement shall have any rights or obligation
except as provided in Sections 6.1, 9.3, and 9.9 or (ii) waive its
disapproval and take title to the Property subject to such Supplemental
Exception.  If Buyer does not provide notice of its disapproval or
waiver within such five (5) day period, Buyer shall be deemed to have
disapproved such Supplemental Exception and to have elected to terminate
this Agreement with the effect as provided in clause (i) above. All of
the foregoing exceptions (including, without limitation, the
Supplemental Exceptions) shall be referred to collectively as the
"Conditions of Title." By acceptance of the Deed and the Closing of the
purchase and sale of the Property, (i) Buyer agrees it is assuming for
the benefit of Seller all of the obligations of Seller with respect to
the Conditions of Title from and after the Closing, and (ii) Buyer
agrees that Seller shall have conclusively satisfied its obligations
with respect to title to the Property.  The provisions of this Section
shall survive the Closing. Section 4.2 Evidence of Title. Delivery of
title in accordance with the foregoing shall be evidenced by the
willingness of the Title Company to issue, at Closing, its Owner's CLTA
Policy of Title Insurance (or ALTA policy if Buyer so elects) in the
amount of the Purchase Price showing title to the Real Property vested
in Buyer, subject to the Conditions of Title (the "Title Policy").
Buyer shall have prepared, at Buyer's cost, the ALTA survey of the
Property necessary to support the issuance of the ALTA title policy if
Buyer so elects to have such policy issued.  Buyer shall provide Seller
with a copy of such survey at no cost to Seller.

                               ARTICLE V

                  RISK OF LOSS AND INSURANCE PROCEEDS

Section 5.1  Minor Loss.

Buyer shall be bound to purchase the Property for the full Purchase
Price as required by the terms hereof, without regard to the
occurrence or effect of any damage to the Property or destruction
of any improvements thereon or condemnation of any portion of the
Property, provided that:  (a) the cost to repair any such damage or
destruction, or the diminution in the value of the remaining
Property as a result of a partial condemnation, does not exceed One
Hundred Fifty Thousand Dollars ($150,000) and (b) upon the Closing,
there shall be a credit against the Purchase Price due hereunder
equal to the amount of any insurance proceeds or condemnation
awards collected by Seller as a result of any such damage or
destruction or condemnation, plus the amount of any insurance
deductible, less any sums expended by Seller toward the restoration
or repair of the Property.  If the proceeds or awards have not been
collected as of the Closing, then such proceeds or awards shall be
assigned to Buyer, except to the extent needed to reimburse Seller
for sums expended to repair or restore the Property, and Seller
shall retain the rights to such proceeds and awards.  Section 5.2
Major Loss.  If the amount of the damage or destruction or
condemnation as specified above exceeds On Hundred Fifty Thousand
($150,000), then Buyer may, at its option to be exercised within
five (5) days of Seller's notice of the occurrence of the damage or
destruction or the commencement of condemnation proceedings, either
terminate this Agreement or consummate the purchase for the full
Purchase Price as required by the terms hereof.  If Buyer elects to
terminate this Agreement or fails to give Seller notice within such
five (5) day period that Buyer will proceed with the purchase, then
the Deposit shall be returned to Buyer, Buyer shall promptly return
all of the Due Diligence Materials to Seller, and neither party
shall have any further rights or obligations hereunder except as
provided in Sections 6.1, 9.3 and 9.9 below.  If Buyer elects to
proceed with the purchase, then upon the Closing, there shall be a
credit against the Purchase Price due hereunder equal to the amount
of any insurance proceeds or condemnation awards collected by
Seller as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible, less any
sums expended by Seller toward the restoration or repair of the
Property.  If the proceeds or awards have not been collected as of
the Closing, then such proceeds or awards shall be assigned to
Buyer, except to the extent needed to reimburse Seller for sums
expended to repair or restore the Property, and Seller shall retain
the rights to such proceeds and awards.

                               ARTICLE VI

                          BROKERS AND EXPENSES

Section 6.1  Brokers.

The parties represent and warrant to each other that no broker or
finder was instrumental in arranging or bringing about this
transaction except for Cushman & Wakefield ( "Seller's Broker").
At Closing, Seller shall pay the commission due, if any, to
Seller's Broker, which shall be paid pursuant to a separate
agreement between Seller and Seller's Broker.  If any other person
brings a claim for a commission or finder's fee based upon any
contact, dealings or communication with Buyer or Seller, then the
party through whom such person makes his claim shall defend the
other party (the "Indemnified Party") from such claim, and shall
indemnify the Indemnified Party and hold the Indemnified Party
harmless from any and all costs, damages, claims, liabilities or
expenses (including without limitation, reasonable attorneys' fees
and disbursements) incurred by the Indemnified Party in defending
against the claim.  The provisions of this Section 6.1 shall
survive the Closing or, if the purchase and sale is not
consummated, any termination of this Agreement.  Section 6.2
Expenses. Except as provided in Sections 4.2 above and 8.5(b)
below, each party hereto shall pay its own expenses incurred in
connection with this Agreement and the transactions contemplated
hereby.

                              ARTICLE VII

                      LEASES AND OTHER AGREEMENTS

Section 7.1  Intentionally Deleted.

Section 7.2  Agreements.

On and after the Closing, Seller shall have no further obligations
with respect to any agreements affecting the Property.  The
provisions of this Section shall survive the Closing. Section 7.3
Initially Deleted.

                              ARTICLE VIII

                           CLOSING AND ESCROW

Section 8.1  Escrow Instructions.

Upon execution of this Agreement, the parties hereto shall deposit
an executed counterpart of this Agreement with the Title Company,
and this instrument shall serve as the instructions to the Title
Company as the escrow holder for consummation of the purchase and
sale contemplated hereby.  Seller and Buyer agree to execute such
reasonable additional and supplementary escrow instructions as may
be appropriate to enable the Title Company to comply with the terms
of this Agreement; provided, however, that in the event of any
conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement
shall control.  Section 8.2 Closing.

The Closing hereunder shall be held and delivery of all items to be
made at the Closing under the terms of this Agreement shall be made
at the offices of the Title Company on that date which is fifteen
(15) days from the expiration of the Contingency Period, which date
is April 3, 2002, and before 9:00 a.m. local time, or such other
earlier date and time as Buyer and Seller may mutually agree upon
in writing (the "Closing Date").  Such date and time may not be
extended without the prior written approval of both Seller and
Buyer.  Section 8.3 Deposit of Documents. (a) At or before the
Closing, Seller shall deposit into escrow the following items:  (1)
the duly executed and acknowledged Deed, in the form attached
hereto as Exhibit B conveying the Real Property to Buyer subject to
the Conditions of Title; (2) four (4) duly executed counterparts of
the Bill of Sale in the form attached hereto as Exhibit C (the
"Bill of Sale"); (3) four (4) duly executed counterparts of an
Assignment and Assumption of Leases, Service Contracts and
Warranties in the form attached hereto as Exhibit D pursuant to the
terms of which Buyer shall assume all of Seller's obligations under
the equipment leases, service contracts, leasing commission
agreements and tenant improvement agreements affecting the Property
(the "Assignment of Leases"); (4) an affidavit pursuant to Section
1445(b)(2) of the Federal Code, and on which Buyer is entitled to
rely, that Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Federal Code; and (5) California 597-W
Certificate. (b) At or before Closing, Buyer shall deposit into
escrow the following items:  (1) funds necessary to close this
transaction; (2) four (4) duly executed counterparts of the Bill of
Sale; and (3) four (4) duly executed counterparts of the Assignment
of Leases. (c) Seller and Buyer shall each deposit such other
instruments as are reasonably required by the Title Company or
otherwise required to close the escrow and consummate the
acquisition of the Property in accordance with the terms hereof.
Seller and Purchaser hereby designate Title Company as the
"Reporting Person" for the transaction pursuant to Section 6045(e)
of the Internal Revenue Code and the regulations promulgated
thereunder and agree to execute such documentation as is reasonably
necessary to effectuate such designation.

(d) Seller shall deliver to Buyer originals of the items which
Seller was required to furnish Buyer copies of or make available at
the Property pursuant to Section 2.1(d) above, except for Seller's
general ledger and other internal books or records which shall be
retained by Seller, within five (5) business days after the Closing
Date.  Seller shall deliver to Buyer a set of keys to the Property
on the Closing Date.  Section 8.4 Intentionally Deleted. Section
8.5 Prorations. (a) Rents, including, without limitation,
percentage rents, if any, and any additional charges and expenses
payable under tenant leases, all as and when actually collected
(whether such collection occurs prior to, on or after the Closing
Date); real property taxes and assessments; water, sewer and
utility charges; amounts payable under any service contracts;
annual permits and/or inspection fees (calculated on the basis of
the period covered); and any other expenses of the operation and
maintenance of the Property (including, without limitation,
expenses already paid by Seller but which are being amortized over
time by Seller and with respect to which Seller shall receive a
credit at Closing in the amount of the unamortized portion
thereof), shall all be prorated as of 12:01 a.m. on the date the
Deed is recorded, on the basis of a 365-day year.  Any sums
collected by Buyer from tenants after the Closing shall be promptly
paid to Seller to the extent of any rents and other sums which were
delinquent at Closing, and the remainder shall be retained by Buyer
to apply to current obligations.  Buyer shall use reasonable
efforts to collect such delinquent rents.  Seller retains the
rights to collect any such delinquent rents from tenants after
Closing.  The amount of any security deposits under tenant leases
shall be credited against the Purchase Price.  Seller shall receive
credits at Closing for the amount of any utility or other deposits
with respect to the Property.  Buyer shall cause all utilities to
be transferred into Buyer's name and account at the time of
Closing.  Seller and Buyer hereby agree that if any of the
aforesaid prorations and credits cannot be calculated accurately on
the Closing Date, then the same shall be calculated as soon as
reasonably practicable after the Closing Date and either party
owing the other party a sum of money based on such subsequent
proration(s) or credits shall promptly pay said sum to the other
party.

(b) Seller shall pay one-half (1/2) of the escrow fee, all of
the applicable County transfer taxes and the CLTA portion of
the title insurance policy.  Buyer shall pay the costs of
obtaining the extended coverage title insurance policy, if
Buyer elects to obtains such coverage, the cost of any
endorsements, and one-half (1/2) of the escrow fee.  Recording
charges, and any other expenses of the escrow for the sale
shall be paid by Buyer and Seller in accordance with customary
practice of Orange County, California, as determined by the
Title Company.  (c) The provisions of this Section 8.5 shall
survive the Closing.

                               ARTICLE IX

                             MISCELLANEOUS

Section 9.1  Notices.

Any notices required or permitted to be given hereunder shall be
given in writing and shall be delivered (a) in person, (b) by
certified mail, postage prepaid, return receipt requested, (c)
by facsimile with confirmation of receipt, or (d) by a
commercial overnight courier that guarantees next day delivery
and provides a receipt, and such notices shall be addressed as
follows: To Buyer:  c/o Metalclad Corporation 2 Corporate
Plaza, Suite 125 Newport Beach, CA 92660 Attention: Anthony
Dabbene Fax No.:  949-719-1240 Tel. No.:  949-719-1234 with a
copy to:  C.J. Farley 140 Newport Center Drive Suite 250
Newport Beach, Ca 92660 Fax No.:  949-721-8185 Tel. No.:
949-721-8182 To Seller:  c/o The RREEF Funds 101 California
Street, 26th Floor San Francisco, CA 94111 Attention:  David
Breuner Fax No.:  (415) 391-9015 Tel. No.  (415) 781-3300 with
a copy to:  Orrick, Herrington & Sutcliffe LLP 400 Sansome
Street San Francisco, CA 94111 Attention:  Michael H. Liever,
Esq. and Natasha L. Hyman Fax No.:  (415) 773-5759 Tel. No.:
(415) 392-1122 or to such other address as either party may
from time to time specify in writing to the other party.  Any
notice shall be effective only upon delivery.

Section 9.2 Entire Agreement. This Agreement, together with the
Exhibits hereto, contains all representations, warranties and
covenants made by Buyer and Seller and constitutes the entire
understanding between the parties hereto with respect to the
subject matter hereof.  Any prior correspondence, memoranda or
agreements are replaced in total by this Agreement together with
the Exhibits hereto.  Section 9.3 Entry and Indemnity.

In connection with any entry by Buyer, or its agents, employees or
contractors onto the Property, Buyer shall give Seller reasonable
advance notice of such entry and shall conduct such entry and any
inspections in connection therewith so as to minimize, to the
greatest extent possible, interference with Seller's business and
the business of Seller's tenants and otherwise in a manner
reasonably acceptable to Seller.  Without limiting the foregoing,
prior to any entry to perform any on-site testing, Buyer shall give
Seller written notice thereof, including the identity of the
company or persons who will perform such testing and the proposed
scope of the testing.  Seller shall approve or disapprove, in
Seller's sole discretion, the proposed testing within three (3)
business days after receipt of such notice.  If Seller fails to
respond within such three (3) business day period, Seller shall be
deemed to have disapproved the proposed testing.  If Buyer or its
agents, employees or contractors take any sample from the Property
in connection with any such approved testing, Buyer shall provide
to Seller a portion of such sample being tested to allow Seller, if
it so chooses, to perform its own testing.  Seller or its
representative may be present to observe any testing or other
inspection performed on the Property.  Upon the request of Seller,
Buyer shall promptly deliver to Seller copies of any reports
relating to any testing or other inspection of the Property
performed by Buyer or its agents, employees or contractors.  Buyer
shall not contact any governmental authority without first
obtaining the prior written consent of Seller thereto, and Seller,
at Seller's election, shall be entitled to have a representative on
any phone or other contact made by Buyer to a governmental
authority and present at any meeting by Buyer with a governmental
authority.  Buyer shall maintain, and shall assure that its
contractors maintain, public liability and property damage
insurance in amounts and in form and substance adequate to insure
against all liability of Buyer and its agents, employees or
contractors, arising out of any entry or inspections of the
Property pursuant to the provisions hereof, and Buyer shall provide
Seller with evidence of such insurance coverage upon request by
Seller.  Buyer shall indemnify and hold Seller harmless from and
against any costs, damages, liabilities, losses, expenses, liens or
claims (including, without limitation, reasonable attorney's fees)
arising out of or relating to any entry on the Property by Buyer,
its agents, employees or contractors in the course of performing
the inspections, testings or inquiries provided for in this
Agreement.  The foregoing indemnity shall survive beyond the
Closing, or, if the sale is not consummated, beyond the termination
of this Agreement.  Section 9.4 Time. Time is of the essence in the
performance of each of the parties' respective obligations
contained herein. Section 9.5 Attorneys' Fees. If either party
hereto fails to perform any of its obligations under this Agreement
or if any dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Agreement, then
the defaulting party or the party not prevailing in such dispute,
as the case may be, shall pay any and all costs and expenses
incurred by the other party on account of such default and/or in
enforcing or establishing its rights hereunder, including, without
limitation, court costs and reasonable attorneys' fees and
disbursements.  Section 9.6 Assignment. Buyer's rights and
obligations hereunder shall not be assignable without the prior
written consent of Seller.  Buyer shall in no event be released
from any of its obligations or liabilities hereunder in connection
with any assignment.  Without limiting the above, in connection
with any assignment pursuant to the terms hereof, the assignee
shall reconfirm in a written instrument acceptable to Seller and
delivered to Seller prior to the assignment said representation and
warranty as applied to the assignee.  Subject to the provisions of
this Section, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and
assigns.  Subject to the foregoing, Buyer reserves the right to
assign its interest under this Agreement to any subsidiary,
affiliate, or partner of Buyer (a "Permitted Assignee"), provided
that any such permitted assignee is solely owned, directly or
indirectly by Buyer and provided that Seller receives prior written
notice of any such assignment and reasonably approves the form of
assignment of this Agreement prior to the Closing. Section 9.7
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.

Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
Section 9.9 Confidentiality and Return of Documents. Buyer and
Seller shall each maintain as confidential any and all material
obtained about the other or, in the case of Buyer, about the
Property, this Agreement or the transactions contemplated hereby,
and shall not disclose such information to any third party, except
to consultants and advisors retained by Buyer to evaluate the
Property, provided that any such consultants and advisors agree to
maintain such information as confidential, and except as otherwise
may be required by law.  This provision shall survive the Closing
or any termination of this Agreement.  Section 9.10 Interpretation
of Agreement. The article, section and other headings of this
Agreement are for convenience of reference only and shall not be
construed to affect the meaning of any provision contained herein.
Where the context so requires, the use of the singular shall
include the plural and vice versa and the use of the masculine
shall include the feminine and the neuter.  The term "person" shall
include any individual, partnership, joint venture, corporation,
trust, unincorporated association, any other entity and any
government or any department or agency thereof, whether acting in
an individual, fiduciary or other capacity.  Section 9.11 Limited
Liability. The obligations of Seller are intended to be binding
only on the property of Seller and shall not be personally binding
upon, nor shall any resort be had to, the private properties of any
of its trustees, officers, beneficiaries, directors, members, or
shareholders, or of its investment manager, the general partners,
officers, directors, members, or shareholders thereof, or any
employees or agents of Seller or its investment manager.  Section
9.12 Amendments. This Agreement may be amended or modified only by
a written instrument signed by Buyer and Seller. Section 9.13 No
Recording. Neither this Agreement or any memorandum or short form
thereof may be recorded by Buyer.

Section 9.14 Drafts Not an Offer to Enter Into a Legally Binding
Contract. The parties hereto agree that the submission of a draft
of this Agreement by one party to another is not intended by either
party to be an offer to enter into a legally binding contract with
respect to the purchase and sale of the Property.  The parties
shall be legally bound with respect to the purchase and sale of the
Property pursuant to the terms of this Agreement only if and when
the parties have been able to negotiate all of the terms and
provisions of this Agreement in a manner acceptable to each of the
parties in their respective sole discretion, including, without
limitation, all of the Exhibits and Schedules hereto, and both
Seller and Buyer have fully executed and delivered to each other a
counterpart of this Agreement, including, without limitation, all
Exhibits and Schedules hereto. Section 9.15 Intentionally Deleted.
Section 9.16 No Partnership. The relationship of the parties hereto
is solely that of Seller and Buyer with respect to the Property and
no joint venture or other partnership exists between the parties
hereto.  Neither party has any fiduciary relationship hereunder to
the other. Section 9.17 No Third Party Beneficiary. The provisions
of this Agreement are not intended to benefit any third parties.
Section 9.18 Intentionally Deleted. Section 9.19 Limitation on
Liability. Notwithstanding anything to the contrary contained
herein, after the Closing the maximum aggregate liability of
Seller, and the maximum aggregate amount which may be awarded to
and collected by Buyer under this Agreement (including, without
limitation, for any breach of representation, warranty and/or
covenant contained herein), and any and all documents executed
pursuant hereto or in connection herewith (collectively the "Other
Documents") including, without limitation, the Deed, the Bill of
Sale and the Assignment of Leases, shall under no circumstances
whatsoever exceed two percent (2%) of the Purchase Price.

Section 9.20 Seismic Disclosure. Seller hereby informs Buyer that
the building on the Property may have been constructed during or
prior to 1975, and the construction method may have been that of
pre-cast tilt-up concrete.  In accordance with California law,
attached hereto as Exhibit F is a copy of the Commercial Property
Owner's Guide to Earthquake Safety published by the State of
California Seismic Safety Commission (the "Guide").  In connection
with the Commercial Property Earthquake Weakness Disclosure Report
(the "Disclosure Report") which is made a part of the Guide, Seller
hereby notifies Buyer that with respect to Questions Nos. 1 through
9 in such Disclosure Report, Seller does not know the answers to
such questions and that, by the execution of this Agreement by
Seller, Seller shall have been deemed to have executed and
delivered the Disclosure Report and shall be deemed to have checked
the "Don't Know" box following each such question. Section 9.21
Survival. Except as expressly set forth to the contrary herein, no
representations, warranties, covenants or agreements of the Seller
contained herein shall survive the Closing. Section 9.22 Survival
of Article IX. The provisions of this Article IX shall survive the
Closing.

                        [Signature Page Follows]

The parties hereto have executed this Agreement as of the date set
forth in the first paragraph of this Agreement. Seller:
CALWEST INDUSTRIAL PROPERTIES, LLC, a California limited
liability company

                    By:  RREEF America LLC,
                         a Delaware limited liability company
                    Its: Investment Manager


                         By:
                             ---------------------------------
                         Its:
                             ---------------------------------


           Buyer:   METALCLAD INSULATION CORPORATION,
                    a California Corporation

                    By:
                        ------------------------------
                    Its:
                        ------------------------------




                     LIST OF EXHIBITS AND SCHEDULES

                                Exhibits

     Exhibit A   Real Property Description

     Exhibit B   Grant Deed

     Exhibit C   Bill of Sale

     Exhibit D   Assignment of Leases, Service Contracts and
                 Warranties

     Exhibit E   Intentionally Deleted

     Exhibit F   Commercial Property Owners Guide to Earthquake
                 Safety




                               Schedules

     Schedule 1  Disclosure Items






                               Exhibit A
                       Real Property Description




                               Exhibit B
                           Form of Grant Deed



RECORDING REQUESTED BY and
WHEN RECORDED RETURN IT
AND ALL TAX STATEMENTS TO:


-----------------------------       -----------------------

Documentary Transfer Tax is         SPACE ABOVE THIS LINE
not of public record and is         FOR RECORDER'S USE
shown on a separate sheet
attached to this deed.
GRANT DEED

     FOR VALUABLE CONSIDERATION, receipt of which is hereby
     acknowledged, CALWEST INDUSTRIAL PROPERTIES, LLC, a California
     limited liability company ("Grantor"), hereby grants to
     _______________________ ("Grantee"), the real property located in
     the County of Orange County, State of California, described on
     Exhibit A attached hereto and made a part hereof, subject to the
     exceptions to title described on Exhibit B attached hereto and made
     a part hereof. Executed as of this ____ day of _________, 2002.
     Grantor:  CALWEST INDUSTRIAL PROPERTIES, LLC, a California limited
     liability company

                    By:  RREEF America L.L.C.,
                         a Delaware limited liability company
                    Its: Investment Manager


                         By:  -----------------------------
                              David Breuner
                         Its: Authorized Representative



                               Exhibit C
                              Bill of Sale

     This Bill of Sale (the "Bill of Sale") is made and entered into
_________, 2001, by and between ______________ ("Assignor"), and
__________________("Assignee").

     In consideration of the sum of Ten Dollars ($10) and other good and
valuable consideration paid by Assignee to Assignor, the receipt and
sufficiency of which are hereby acknowledged by Assignor, Assignor does
hereby assign, transfer, convey and deliver to Assignee, its successors
and assigns, free and clear of any liens or encumbrances created by,
through or under Assignor, all items of tangible personal property, if
any, owned by Assignor and situated upon and used exclusively in
connection with the land described on the attached Exhibit A (the
"Land") and the improvements located thereon (the "Improvements"), and
described on the attached Exhibit B, but specifically excluding any and
all personal property owned by tenants or otherwise considered the
property of tenants under any leases affecting the Land or Improvements
(the "Personal Property").

     This Bill of Sale is made subject, subordinate and inferior to the
easements, covenants and other matters and exceptions set forth on
Exhibit C, attached hereto and made a part hereof for all purposes.

     ASSIGNEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED
IN THAT CERTAIN AGREEMENT OF PURCHASE AND SALE DATED _____, 2001, BY AND
BETWEEN ASSIGNOR AND ASSIGNEE (THE "AGREEMENT"), ASSIGNOR HAS NOT MADE,
DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS,
WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR
CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST,
PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE
NATURE, QUALITY OR CONDITIONS OF THE PERSONAL PROPERTY, (B) THE INCOME
TO BE DERIVED FROM THE PERSONAL PROPERTY, (C) THE SUITABILITY OF THE
PERSONAL PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH ASSIGNEE MAY
CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PERSONAL PROPERTY OR
ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY
APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PERSONAL
PROPERTY, OR (F) ANY OTHER MATTER WITH RESPECT TO THE PERSONAL PROPERTY.
ASSIGNEE FURTHER ACKNOWLEDGES AND AGREES THAT, HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PERSONAL PROPERTY, ASSIGNEE IS RELYING SOLELY
ON ITS OWN INVESTIGATION OF THE PERSONAL PROPERTY AND NOT ON ANY
INFORMATION PROVIDED OR TO BE PROVIDED BY ASSIGNOR, EXCEPT AS
SPECIFICALLY PROVIDED IN THE AGREEMENT.  ASSIGNEE FURTHER ACKNOWLEDGES
AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT
TO THE PERSONAL PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT
ASSIGNOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF
SUCH INFORMATION.  ASSIGNEE FURTHER ACKNOWLEDGES AND AGREES THAT THE
SALE OF THE PERSONAL PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS
IS, WHERE IS" CONDITION AND BASIS "WITH ALL FAULTS," EXCEPT AS
SPECIFICALLY PROVIDED IN THE AGREEMENT.

     The obligations of Assignor are intended to be binding only on the
property of Assignor and shall not be personally binding upon, nor shall
any resort be had to, the private properties of any of its trustees,
officers, beneficiaries, directors, members, or shareholders, or of its
investment manager, the general partners, officers, directors, members,
or shareholders thereof, or any employees or agents of Assignor or its
investment manager.

     Assignor represents and warrants to Assignee that the Personal
Property is transferred free and clear of all liens and encumbrances
created by Assignor, other than the lien of property tax not delinquent.

     This Bill of Sale may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which taken together
shall constitute one and the same agreement.

     IN WITNESS WHEREOF, Assignor and Assignee have caused this Bill of
Sale to be executed on the date and year first above written.

          Assignor:
                     -------------------------------
                     a
                       -----------------------------

                     By:
                         ----------------------------------
                     Its Investment Manager

                         By:
                              -----------------------------
                         Its:
                              -----------------------------


          Assignee:
                     -------------------------------
                     a
                       -----------------------------

                     By:
                         ----------------------------------
                     Its:
                         ----------------------------------

                         By:
                              -----------------------------
                         Its:
                              -----------------------------





                Assignment of Leases, Service Contracts
                             and Warranties

     This Assignment of Lease, Service Contracts and Warranties (this
     "Assignment") is made and entered into _______________, 2001, by
     and between ________________________ ("Assignor"), and
     ____________________________________________ ("Assignee").  For
     good and valuable consideration paid by Assignee to Assignor, the
     receipt and sufficiency of which are hereby acknowledged by
     Assignor, Assignor does hereby assign, transfer, set over and
     deliver unto Assignee all of Assignor's right, title, and interest
     in (i) those certain leases (the "Leases") listed on Exhibit A,
     attached hereto and made a part hereof for all purposes except for
     Seller's right to collect delinquent rent and other delinquent sums
     owing under such Leases for the period prior to the date hereof,
     (ii) those certain service contracts, equipment leases, tenant
     improvement agreements and leasing agreements (the "Contracts")
     listed on Exhibit B, if any, attached hereto and made a part hereof
     for all purposes, and (iii) those certain warranties held by
     Assignor (the "Warranties") listed on Exhibit C, attached hereto
     and made a part hereof for all purposes.  Assignor agrees that the
     Leases, Service Contracts, and Warranties is transferred free and
     clear of all liens and encumbrances created by Assignor, except for
     the Conditions of Title as defined in the Agreement (as such term
     is defined below).  ASSIGNEE ACKNOWLEDGES AND AGREES, BY ITS
     ACCEPTANCE HEREOF, THAT, EXCEPT AS EXPRESSLY PROVIDED IN THAT
     CERTAIN AGREEMENT OF PURCHASE AND SALE, DATED AS OF
     _______________, 2001, BY AND BETWEEN ASSIGNOR AND ASSIGNEE (THE
     "AGREEMENT"), THE LEASES, THE CONTRACTS AND THE WARRANTIES ARE
     CONVEYED "AS IS, WHERE IS" AND IN THEIR PRESENT CONDITION WITH ALL
     FAULTS, AND THAT ASSIGNOR HAS NOT MADE, DOES NOT MAKE AND
     SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES,
     COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER
     WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST,
     PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE
     NATURE, QUALITY OR CONDITION OF THE LEASES, THE CONTRACTS OR THE
     WARRANTIES, THE INCOME TO BE DERIVED THEREFROM, OR THE
     ENFORCEABILITY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
     PURPOSE OF THE LEASES, THE CONTRACTS OR THE WARRANTIES.

     Except as otherwise expressly provided in the Agreement, by
     accepting this Assignment and by its execution hereof, Assignee
     assumes the payment and performance of, and agrees to pay, perform
     and discharge, all the debts, duties and obligations to be paid,
     performed or discharged from and after the date hereof, by (a) the
     "landlord" or the "lessor" under the terms, covenants and
     conditions of the Leases, including, without limitation, brokerage
     commissions and compliance with the terms of the Leases relating to
     tenant improvements and security deposits, and (b) the owner under
     the Contracts and/or the Warranties.  Assignee agrees to indemnify,
     hold harmless and defend Assignor from and against any and all
     claims, losses, liabilities, damages, costs and expenses
     (including, without limitation, reasonable attorneys' fees)
     resulting by reason of the failure of Assignee to pay, perform or
     discharge any of the debts, duties or obligations assumed or agreed
     to by Assignee hereunder. Except as otherwise provided in the
     Agreement, Assignor agrees to indemnify Assignee and hold harmless
     and defend Assignee from and against any and all claims, damages,
     liabilities, losses, costs and expenses (including, without
     limitation, reasonable attorneys' fees) resulting from any failure
     by Assignor to have paid, performed or discharged any debts, duties
     or obligations which have accrued for the period prior to the date
     hereof, (a) by Seller as the "landlord" or the "lessor" under the
     terms, covenants and conditions of the Leases, or (b) the owner
     under the Contracts and Warranties, excluding with respect to
     clauses (a) and (b) any such debts, duties or obligations arising
     out of or in any way related to whether the Property, as such term
     is defined in the Agreement, complies with applicable laws or to
     the physical condition of the Property, including, without
     limitation, any environmental conditions affecting the Property
     and/or Hazardous Materials (as defined in the Agreement) affecting
     the Property. The obligations of Assignor are intended to be
     binding only on the property of Assignor and shall not be
     personally binding upon, nor shall any resort be had to, the
     private properties of any of its trustees, officers, beneficiaries,
     directors, members, or shareholders, or of its investment manager,
     the general partners, officers, directors, members, or shareholders
     thereof, or any employees or agents of Assignor or its investment
     manager.  All of the covenants, terms and conditions set forth
     herein shall be binding upon and shall inure to the benefit of the
     parties hereto and their respective successors and assigns.  This
     Assignment may be executed in two or more counterparts, each of
     which shall be deemed an original, but all of which taken together
     shall constitute one and the same instrument.

     IN WITNESS WHEREOF, Assignor and Assignee have caused this
          Assignment to be executed on the day and year first above
          written.

		  Assignor:  -----------------------
		  a --------------------------------

		  By: ------------------------------
		  Its Investment Manager

		  By: ------------------------------
		  Its: -----------------------------

		  Assignee:-------------------------
          a --------------------------------

		  By: ------------------------------
		  Its:------------------------------

		  By: ------------------------------
		  Its: -----------------------------


                               Exhibit E
                         Intentionally Deleted





                               Exhibit F


         Commercial Property Owner's Guide to Earthquake Safety


                               Schedule 1
                            Disclosure Items

     Natural hazards described in the following California code sections
(the "Natural Hazard Laws") may affect the Property:  (A) Govt. Code
Section 8589.3 (Special Flood Hazard Area); (B) Govt. Code Section
8589.4 (Inundation Area); (C) Govt. Code Section 51183.5 (Fire Hazard
Severity Zone); (C) Public Resource Code Section 2621.9 (Earthquake
Fault Zone); (D) Public Resource Code Section 2694 (Seismic Hazard
Zone); and (E) Public Resource Code Section 4136 (Wildland Area).
Seller's Broker shall execute and deliver to Buyer a Natural Hazards
Disclosure Statement with respect to the foregoing matters (the "Natural
Hazards Disclosure Statement").  Buyer acknowledges and agrees that
Buyer will independently evaluate and investigate whether any or all of
such Natural Hazards affect the Property, and Seller shall have no
liabilities or obligations with respect thereto.  Prior to the
expiration of the Contingency Period, Buyer shall execute and deliver to
Seller the Natural Hazards Disclosure Statement.  BUYER ACKNOWLEDGES AND
REPRESENTS THAT BUYER HAS EXTENSIVE EXPERIENCE ACQUIRING AND CONDUCTING
DUE DILIGENCE REGARDING COMMERCIAL PROPERTIES.  THIS PROVISION IS AN
ESSENTIAL ASPECT OF THE BARGAIN BETWEEN THE PARTIES. 1) Environmental
matters disclosed or referred to in that certain 2001 Environmental
Management Plan Update, Orangewood-Stadium Business Park, 2141, 2151,
2161, 2181, 2198, 2200, 2230 &2240 South Dupont Drive and 2130, 2210 &
2300 East Orangewood Avenue, Anaheim, California, prepared by:
Hygienetics Environmental Services, Inc., dated August 1, 2001, Project
No. 4414.462, a copy of which has been or shall be delivered to Buyer.















                              EXHIBIT 10.20
     OF METALCLAD CORPORATION FORM 10-K FOR PERIOD ENDING 12-31-01




                         PARTNERSHIP AGREEMENT

                                   OF

                           CURTOM METALCLAD,

                    A CALIFORNIA GENERAL PARTNERSHIP







                                 INDEX

TITLE                                                       PAGE

ARTICLE I - ORGANIZATION OF THE PARTNERSHIP. . . . . . . . .  1

1.1  Formation . . . . . . . . . . . . . . . . . . . . . . .  1
1.2  Name of the Partnership . . . . . . . . . . . . . . . .  2
1.3  Purpose of Business . . . . . . . . . . . . . . . . . .  2
1.4  Principal Place of Business . . . . . . . . . . . . . .  2
1.5  Term. . . . . . . . . . . . . . . . . . . . . . . . . .  2
1.6  Documents . . . . . . . . . . . . . . . . . . . . . . .  2
1.7  Definition of "Majority in Interest of the Partners". .  2
1.8  Representations and Warranties of Curtom. . . . . . . .  3
     1.8.1  Due Organization, etc. . . . . . . . . . . . . .  3
     1.8.2  Due Authorization, etc.  . . . . . . . . . . . .  3
     1.8.3  No Violation . . . . . . . . . . . . . . . . . .  3
     1.8.4  No Suits . . . . . . . . . . . . . . . . . . . .  3
     1.8.5  Compliance with Law. . . . . . . . . . . . . . .  3

ARTICLE II - CONTRIBUTIONS OF CAPITAL. . . . . . . . . . . .  3

2.1  Initial Capital Contributions . . . . . . . . . . . . .  3
2.2  Borrowing and Additional Capital. . . . . . . . . . . .  3
2.3  No Third Party Rights . . . . . . . . . . . . . . . . .  4
2.4  No Voluntary Contributions or Loans . . . . . . . . . .  4
2.5  Withdrawals of Capital:  No Interest on Capital . . . .  4

ARTICLE III - PARTNERSHIP PERCENTAGE INTEREST
              AND DISTRIBUTIONS. . . . . . . . . . . . . . .  4

3.1  Partnership Percentage Interest . . . . . . . . . . . .  4
     3.1.1  Partnership Percentage Interest. . . . . . . . .  4
     3.1.2  Adjustments. . . . . . . . . . . . . . . . . . .  4
3.2  Capital Accounts. . . . . . . . . . . . . . . . . . . .  5
     3.2.1  Initial Capital Accounts . . . . . . . . . . . .  5
     3.2.2  Adjustments to Capital Accounts. . . . . . . . .  5
3.3  Distribution to the Partners. . . . . . . . . . . . . .  5
     3.3.1  Distribution of Net Cash Flow. . . . . . . . . .  5
     3.3.2  Determination of Net Cash Flow . . . . . . . . .  5
3.4  Allocation of Profits and Losses. . . . . . . . . . . .  6
     3.4.1  Definitions. . . . . . . . . . . . . . . . . . .  6
     3.4.2  Allocation of Profits and Losses . . . . . . . .  6
3.4.3  Allocation of Profits from Sale or Disposition
              of Capital Assets. . . . . . . . . . . . . . .  7
3.4.4 Allocation of Losses from Sale or Disposition
              of Capital Assets. . . . . . . . . . . . . . .  7
     3.4.5  Allocation on Transfer of Partnership Interest .  7
     3.4.6  Code Section 704(c). . . . . . . . . . . . . . .  7
     3.4.7  Adjustment of Basis of Partnership . . . . . . .  8


ARTICLE IV - MANAGEMENT OF THE PARTNERSHIP . . . . . . . . .  8

4.1  CONTROL OF BUSINESS . . . . . . . . . . . . . . . . . .  8
     4.1.1  Deal with Partnership Assets . . . . . . . . . .  8
     4.1.2  Purchase Insurance . . . . . . . . . . . . . . .  8
     4.1.3  Employment . . . . . . . . . . . . . . . . . . .  8
4.1.4  Execution of Instruments, Documents and
              Statements . . . . . . . . . . . . . . . . . .  9
     4.1.5  Partnership Books and Records. . . . . . . . . .  9
     4.1.6  Other Action . . . . . . . . . . . . . . . . . .  9
4.2  Action by Mutual Consent of the Partners. . . . . . . .  9
4.3  Day-to-Day Management of Partnership Affairs. . . . . . 11
     4.3.1  Curtom's Duties. . . . . . . . . . . . . . . . . 11
     4.3.2  Metalclad's Duties . . . . . . . . . . . . . . . 11
4.4  Transactions Between a Partner and the Partnership. . . 11
4.5  Preparation of Project Bids; Lease of Premises. . . . . 12
     4.5.1  Examiner . . . . . . . . . . . . . . . . . . . . 12
     4.5.2  Bidding by Metalclad for Materials Contracts . . 12
     4.5.3  Lease of Premises. . . . . . . . . . . . . . . . 12
4.6 Fees and Reimbursement of Expenses, Organization
       Fees and Expenses . . . . . . . . . . . . . . . . . . 12
     4.6.1  Fees and Reimbursement . . . . . . . . . . . . . 12
     4.6.2  Reimbursement Procedures . . . . . . . . . . . . 13
     4.6.3  Organizational Fees and Costs. . . . . . . . . . 13
     4.6.4  Treatment of Fees and Reimbursement. . . . . . . 14
4.7  Time Devoted to the Partnership . . . . . . . . . . . . 14
4.8  Other Business Activities . . . . . . . . . . . . . . . 14
4.9  Qualification as an MBE . . . . . . . . . . . . . . . . 15
4.10 Indemnification by Partnership. . . . . . . . . . . . . 15
     4.10.1	Indemnification of Partners . . . . . . . . . . . 15
     4.10.2	Indemnification by Partners . . . . . . . . . . . 15
4.11 Representatives . . . . . . . . . . . . . . . . . . . . 15
4.12 Licenses, Permits and Bonds . . . . . . . . . . . . . . 16

ARTICLE V - SALE, TRANSFER OR MORTGAGE OF PARTNERSHIP
            INTERESTS. . . . . . . . . . . . . . . . . . . . 16

5.1  Generally . . . . . . . . . . . . . . . . . . . . . . . 16
     5.1.1  Restriction. . . . . . . . . . . . . . . . . . . 16
     5.1.2  Exceptions . . . . . . . . . . . . . . . . . . . 16
5.2  Adjustments on Sale of a Partnership Interest . . . . . 17







                         PARTNERSHIP AGREEMENT


     THIS PARTNERSHIP AGREEMENT (this "Agreement") is made and entered
into as of November 1, 1988, by and between Curtom Building &
Development Corporation, a California Corporation, ("Curtom"), and
Metalclad Environmental Contractors ("Metalclad") (each sometimes
referred to herein individually as a "Partner" and collectively as
"Partners").

                                RECITALS

     A.  Curtom is, and for some time past has been, engaged in the
business of providing general insulation and asbestos abatement services
for it customers, primarily in greater Los Angeles, California.  Curtom
is licensed to provide such services in California.

     B.  In connection with the services it provides, Curtom has
determined that it is in its best interest to seek to fully realize its
potential in the marketplace.  To accomplish this goal, Curtom has
further determined that it must seek additional support with respect to
finance and experience in those fields in which it operates its business
from more seasoned businesses, in a flexible manner advantageous to the
long term overall success of Curtom.  Curtom believes that the formation
of a partnership with a more seasoned business will provide it with a
flexible and efficient means of meeting its goals as set forth in this
Paragraph B.

     C.  Metalclad has determined that its goals and objectives do not
conflict with those of Curtom, and that consequently, it is in its best
interests to provide the additional support Curtom needs in the manner
set forth herein.

     D.  Curtom and Metalclad have determined that their respective
goals and objectives can efficiently be met by forming a partnership on
the basis of the covenants, agreements, terms and conditions more
particularly set forth herein.

     NOW, THEREFORE, the parties hereto hereby agree as follows:

                               ARTICLE I
                    ORGANIZATION OF THE PARTNERSHIP

     1.1 Formation.  The parties hereto hereby form a partnership (the
"Partnership") as a general partnership pursuant to the provisions of
the Corporation Code of the State of California, Title 2, Chapter 1,
Sections 15001 through 15045, inclusive, which sections constitute the
California Uniform Partnership Act (the "Act") and shall govern the
relationship among the parties hereto, except as expressly provided to
the contrary herein.

     1.2 Name of the Partnership.  The name of the Partnership shall be
Curtom Metalclad, a California general partnership.

     1.3 Purpose of Business.  The principal purpose of the Partnership
will be to conduct the business of providing general insulation and
asbestos abatement services, primarily in California, in connection with
such project or projects as the Partners deem would be in the best
interests of the Partnership to undertake.  No other business or
activities shall be carried on by the Partnership without the specific
written consent of all of the Partners.

     1.4 Principal Place of Business.  The principal place of business
of the Partnership shall be 9410 South Western Avenue, Los Angeles,
California 90047.  The principal place of business may be changed to
such other locations as hereafter may be selected by mutual agreement of
the Partners.

     1.5 Term.  The term of the Partnership shall commence as of the
date of this Agreement and shall continue through and including October
31, 1993, unless sooner terminated and dissolved pursuant to the
provisions of Article VI hereof.

     1.6 Documents.  Upon execution of this Agreement, the Partners
shall prepare, execute, file and record such documents as are necessary
to comply with the requirements of the laws of the State of California
for the formation and operation of a general partnership, including,
without limitation, (i) a fictitious business name statement in the form
and manner required by applicable law, and (ii) by mutual consent of all
of the Partners, a statement of partnership in the form required by
Sections 15010.5 and 15010.7 of the California Corporation Code.  Each
of the parties hereto appoints Glenn Meyer as his agent and
attorney-in-fact, to act in the place of each for the sole purpose of
executing on each of their behalf any such fictitious business name
statement relating to the Partnership for the term of this Agreement.

     1.7 Definition of "Majority in Interest of the Partners".  For
purposes of this agreement, the term "majority in interest of the
Partners" means more than fifty percent (50%) of the aggregate
Partnership Percentage Interests (as defined at Section 3.1.1, hereof)
of the Partners.  Whenever a vote of the Partners is required or
permitted by the terms of the Agreement, each Partner's vote shall be in
proportion to such Partner's Partnership Percentage Interest.

     1.8 Representations and Warranties.  Curtom.  Curtom represents and
warrants to the other Partners as follows:

          1.8.1 Due Organization, etc.  Curtom is a corporation duly
organized and validly existing under the laws of the State of
California, all of the issued and outstanding stock of which is owned
directly be Brenda Curry.

          1.8.2 Due Authorization, etc.  Curtom has the requisite full
power and authority to enter into this Agreement, all actions necessary
to enter into this Agreement have been taken, and when duly executed by
an officer of Curtom, this Agreement will constitute a binding Agreement
of Curtom enforceable in accordance with its terms.

          1.8.3 No Violation.  Neither execution or delivery of this
Agreement not the performance thereof will result in a violation or
breach of any law or regulation, or constitute default under any
contract or agreement to which Curtom is a party.

          1.8.4 No Suits.  Curtom is not a party to any action or
proceeding of any nature whatsoever, not has any party threatened or
indicated a desire to initiate any such action or proceeding , nor do
facts exist which would give another party the right to initiate any
such action or proceeding.

          1.8.5 Compliance with Law.  No judgment or order of any
federal or state court has been issued to the effect that Curtom has
violated any federal, state or local law, ordinance or regulation.  In
addition, no federal, state or local regulatory agency or body has
issued to Curtom a citation or other notice of violation of law, rule,
regulation or practice which violation has not been cured to the express
satisfaction of such agency or body as of the date of this Agreement,
including, without limitation, citations or other notices of violation
of rules respecting the licensing of persons or entities engaged in
asbestos abatement work.

                               ARTICLE II
                        CONTRIBUTIONS OF CAPITAL

     2.1 Initial Capital Contributions.  The Partners, shall make
initial capital contributions to the Partnership in such form, amount
and manner as the Partners may mutually agree.

     2.2 Borrowing and Additional Capital Contributions.  The
Partnership may borrow funds directly from Partners, or from any person
or entity not a party to this Agreement, in the Partnership's name,
endorsing Partnership notes if required, and such loans may be secured
by liens on the properties of the Partnership.  Loans from any Partner
to the Partnership shall not be regarded as an increase in the lending
Partner's capital, nor shall it entitle the lending Partner to any
increased share of the Partnership Profits.  All costs and expenses of
the Partnership in excess of the initial capital contributions of the
Partners, which are not satisfied from the Partnership's income or the
proceeds of any borrowing, shall be borne by the Partners out of funds
provided by the Partners in such form and amounts as all of the Partners
may mutually agree.  Except as provided in Article IV hereof, or as
otherwise provided herein, no Partner shall have the right in any manner
to incur any expense or obligation, or to bind the other Partners or the
Partnership.

     2.3 No Third Party Rights.  No person or entity not a party to this
Agreement shall have any right to rely on any Partner making, or shall
have any right to require any Partner to make, any capital contribution
to the Partnership.

     2.4 No Voluntary Contributions or Loans.  No Partner shall make
voluntary contributions of capital, or lend or advance money to or for
the Partnership's benefit, without the approval of all of the Partners.

     2.5 Withdrawals of Capital; No Interest on Capital.  No Partner may
withdraw capital from the Partnership without the consent of the other
Partners.  Interest earned on Partnership funds shall inure solely to
the benefit of the Partnership.  No interest shall be paid upon any
contribution to the capital of the Partnership nor upon any
undistributed or reinvested income or profits of the Partnership.

                               ARTICLE III
           PARTNERSHIP PERCENTAGE INTEREST AND DISTRIBUTIONS

     3.1 Partnership Percentage Interest.

          3.1.1 Partnership Percentage Interest.  The Partners shall
have the following percentage interests ("Partnership Percentage
Interest") in the Partnership's assets, profits and losses:

                       Name           Percentage Interest
                    ----------        -------------------
                    Curtom                    51%
                    Metalclad                 49%
                                             ----
                    Total                    100%

          3.1.2 Adjustments.  Except as provided in Article V hereof, no
adjustment to the Partnership Percentage Interest of any Partner shall
be made without the approval of all of the Partners.

     3.2 Capital Accounts.

          3.2.1 Initial Capital Accounts.  An individual capital account
(the "Capital Account") shall be maintained and adjusted for each
Partner in accordance with the requirements for maintaining and
adjusting capital accounts of Partners in partnerships set forth in
Internal Revenue Code of 1986 (the "Code") Section 704(b), and the
regulations promulgated thereunder (the "Treasury Regulations") (or any
corresponding provisions of succeeding law or regulation).

          3.2.2 Adjustments to Capital Accounts.  In furtherance of the
provisions of Section 3.2.1, and not in limitation thereof (it being
understood and agreed that in the event of a conflict between the
provisions of Section 3.2.1 and this Section 3.2.2, the provision of the
former shall control), the Capital Accounts of each Partner shall be
maintained in accordance with the rules set forth in Treasury
Regulations Section 1.704-1(b)(2)(iv), within the following guidelines:

                 (a) Each Partner's Capital Account shall be increased
by (i) the amount of money contributed by such Partner, and the fair
market value of property contributed by such Partner to the Partnership,
net of liabilities securing such contributed property that are assumed,
or taken subject to, by the Partnership, and (ii) the amount of profits
allocated to such Partner, and decreased by (iii) the amount of money
distributed to such Partner, and the fair market value of property
distributed to such Partner by the Partnership, net of liabilities
securing such distributed property that are assumed, or taken subject
to, by such Partner, and (iv) the amount of losses allocated to such
Partner.

                  (b) Increases or decreases in the Capital Accounts of
the Partners to reflect a revaluation of Partnership property may be
made in accordance with Treasury Regulations Section
1.704-2(b)(2)(iv)(f), upon the mutual agreement of the Partners.

                  (c) In the event of a revaluation pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(f), allocations of depreciation,
amortization, gain or loss attributable to such assets shall be made to
each Partner's Capital Account in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(g).

     3.3 Distribution to the Partners.

          3.3.1 Distribution o Net Cash Flow.  As soon as reasonably
practicable after the end of each fiscal year of the Partnership (as
such may be determined pursuant to Section 7.1 hereof), or more
frequently, at such times and in such manner as the Partners may
mutually agree, all "Net Cash Flow" (defined in subparagraph (b) below)
of the Partnership for such calendar year (or for such shorter period as
the case may be) shall be distributed to each of the Partners in
accordance with each Partner's respective Partnership Percentage
Interest.  Nothing contained herein shall prevent the Partners from
making interim distributions of Net Cash Flow from time to time, and at
any time before the end of the Partnership's fiscal year and, subject to
adjustment after such fiscal year end to reflect the final determination
of the Partnership's actual Net Cash Flow as at the end of such fiscal
year.

          3.3.2 Determination of Net Cash Flow.  "Net Cash Flow" shall
be computed on a yearly basis and shall consist of the gross cash
receipts of the Partnership from all sources during the Partnership's
fiscal year less the following:

                 (a) all fees, reimbursements, and costs described in
Article IV, including, without limitation Sections 4.4 and 4.6, hereof;

                 (b) rents payable, and all other costs of operation of
the Partnership to the extent paid during such fiscal year, including
costs and expenses which are capital in nature, but not including any
payments to the extent that such amounts were reserved in any prior
Partnership fiscal year and funded from such reserves; and

                 (c) such additional amounts as the Partners mutually
determine from time to time in any year to be an adequate reserve for
the liabilities of the Partnership, provided, however, that for purposes
of calculating Net Cash Flow, no deduction shall be made for
depreciation or amortization.

     3.4 Allocation of Profits and Losses.

          3.4.1 Definitions.  As used herein, the terms "Profits" and
"Losses" shall mean and refer, for each accounting year, or portion
thereof, of the Partnership, to the Partnership's taxable income or loss
for such year or period, determined in accordance with Code Section
703(a).

          3.4.2 Allocation of Profits and Losses.  For accounting, and
federal and state income tax purposes, all Profits and Losses of the
Partnership, other than from the sale or disposition of the Partnership
property which is deemed to be a capital asset for tax purposes, shall
be allocated in accordance with the Partners' respective Partnership
Percentage Interest.

          3.4.3 Allocation of Profits from Sale or Disposition of
Capital Assets.  All Profits from the sale or other disposition of all
or any part of the Partnership property which is deemed to be a capital
asset for tax purposes shall be allocated as among the Partners, prior
to the distribution of any proceeds therefrom, as follows:

                  (i) First, any Profits treated as ordinary income
under any section of the Code which is attributable to the recapture of
deductions previously taken, shall be allocated among the Partners in
the same proportion as the corresponding deductions were allocated to
them.

                 (ii) Second, in proportion to and in an amount
sufficient to cause the Capital Account balances of each Partner to be
positive, and to cause the ratio of the respective positive Capital
Account balances of each Partner to be the same as the ratio of the
Partnership Percentage Interest of each Partner; and

                (iii) Third, to the Partners in accordance with their
Partnership Percentage Interests.

          3.4.4 Allocation of Losses from Sale or Disposition of Capital
Assets.  All Losses from the sale or other disposition of all or any
part of Partnership property which is deemed to be a capital asset for
tax purposes shall be allocated among the Partners, pari passu, in such
a manner to bring the Partners Capital Accounts in balance with their
respective Partnership Percentage Interests.

          3.4.5 Allocation on Transfer of Partnership Interest.
Partnership income, gain, loss or deduction allocable to any Partner
with respect to any interest in the Partnership which may have been
transferred during any year shall be allocated in accordance with the
provision so Code Section 706(d).

          3.4.6 Code Section 704 (c ) Allocations.  Notwithstanding
anything to the contrary contained herein, and in accordance with Code
Section 704 (c ) and the Treasury Regulations thereunder, income, gain,
loss, and deduction with respect to any property contributed to the
capital of the Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income
tax purposes and its fair market value on the date of contribution.

          3.4.7 Adjustment of Basis of Partnership.  The Partnership may
elect, upon mutual agreement of the Partners, (i) to file an election
pursuant to the provisions of Code Section 754, to adjust the basis of
the assets of the Partnership under the circumstances and in the manner
provided in Code Sections 734 and 743, or (ii) to revoke such election
in the manner permitted under Code Section 754.

                               ARTICLE IV
                     MANAGEMENT OF THE PARTNERSHIP

     4.1 Control of Business.  Except as otherwise expressly provided in
this Agreement, including, without limitation, Sections 4.2 and 4.3
hereof, each Partner shall participate in the control, management, and
direction of the business of the Partnership in direct proportion to its
respective Partnership Percentage Interest.  All questions of control,
management and direction shall be determined by affirmative vote of a
majority in interest of the Partners at such meeting or meetings of the
Partners held from time to time as the Partners may mutually agree.
Specifically, and without limiting the generality of the foregoing, a
majority in interest of the Partners, by affirmative vote at a meeting
duly held for the purpose, shall have the authority and power on behalf
of the Partnership and at its expense:

          4.1.1 Deal with Partnership Assets.  To del in and with any
and all of the assets of the Partnership, whether real or personal or
mixed, in the course of the day-to-day management of the business of the
Partnership.

          4.1.2 Purchase Insurance.  To purchase such insurance as may
be deemed appropriate for the protection of the Partnership and/or any
or all of the Partners, including, without limitation, workmen's
compensation insurance, public liability insurance, fire and extended
coverage insurance and burglary and theft insurance.

          4.1.3 Employment.  From time to time to employ, engage, hire
or otherwise secure the services, for such compensation and upon such
terms and conditions, of such persons, firms or corporations, as may be
deemed advisable for the proper operation of the business of the
Partnership, including, without limitation, laborers, asbestos
consultants, accountants and attorneys, whether or not such may be
Partners or affiliates of Partners.

          4.1.4 Execution of Instruments, Documents and Statements.  To
prepare, execute and acknowledge, either by the signature of a Partner
authorized to sign, or by signature of an attorney-in-fact appointed by
written instrument executed and acknowledged by such authorized Partner,
and to file, record, publish and deliver (i) any and all instruments,
documents or statements necessary or convenient to effectuate any and
all actions authorized or required of the Partnership, including,
without limitation, any and all contracts, purchase orders, and
certifications, (ii) any and all other instruments, documents or
statements for the investment, sale, lease or encumbrance of any or all
of the assets of the Partnership, (iii) any and all other instruments
documents or statements required to effectuate the formation,
continuation or dissolution, liquidation and termination of the
Partnership and (iv) any and all amendments to or modifications of any
or all of the instruments, documents and statements described in this
Section 4.1.4.

          4.1.5 Partnership Books and Records.  To be responsible for
maintaining the Partnership's books and records, and the preparation of
the Partnership's tax returns in accordance with the provisions of
Article VII hereof; including, without limitation, the hiring of such
independent certified public accountants as may be deemed necessary for
this purpose.

          4.1.6 Other Action.  To take any and all other action
permitted or required of the Partnership as set forth in this Agreement
or as permitted by law.

     4.2 Actions by Mutual Consent of the Partners.  Notwithstanding
anything to the contrary contained in Section 4.1 hereof, no Partner,
nor a majority in interest of the Partners shall have the authority and
power, for or on behalf of the Partnership, and at its expense, to do
any of the following acts, without the prior agreement of all of the
Partners:

          (a) select any one or more projects on which the Partnership
may bid;

          (b) approve or submit any project bids, or execute or submit
any purchase orders for, in the name of, or on behalf of the
Partnership, without the signatures of the representatives (as described
in Section 4.11, hereof) of all of the Partners;

          (c ) purchase such insurance as may be deemed appropriate in
connection with any project bids, including, without limitation,
asbestos abatement or exposure insurance, and all workmen's compensation
insurances, public liability insurance, fire and extended coverage
insurance and burglary and theft insurance as may be required in
connection with any project.

          (d) knowingly suffer or cause anything to be done whereby
Partnership property may be sold, seized, allocated or taken in
exchange, or its ownership or possession otherwise endangered;

          (e) act in any manner which would materially impair the
ability of the Partnership to carry on its business in ordinary course;

          (f) confess a judgment against the Partnership;

          (g) possess Partnership property or assign to any person or
entity all of any portion of the rights of the Partnership to any
specific Partnership property;

          (h) admit or remove a person as a Partner;

          (i) terminate the Partnership, except as otherwise permitted
in Section 6.1 hereof;

          (j) sell, transfer, mortgage, or place or suffer any other
encumbrance upon, finance or refinance any assets of the Partnership, or
any part or parts thereof, or enter into any contract for any such
purpose, including, without limitation, in connection with the financing
of the operations of the Partnership;

          (k) borrow any funds on behalf of the Partnership;

          (l) transfer, hypothecate, compromise, arbitrate, or otherwise
pay any disputed claim or disputed demand of or against the Partnership;

          (m) make any expenditure or incur any obligation by or on
behalf of the Partnership involving an aggregate sum in excess of One
Thousand Dollars ($1,000.00) for any transaction or group of similar
transactions, provided, however, that any Partner may make expenditures
or incur obligations on behalf of the Partnership where such
expenditures or obligations are incurred to make any emergency repair or
replacement that, in the reasonable opinion of the Partner under the
circumstances, is necessary to preserve or protect the assets of the
Partnership from damage or destruction, and provided, further, that all
the Partners are notified of such expenditure or the incurrence of such
obligation promptly upon its incurrence.

     4.3 Day-to-Day Management of Partnership Affairs.  Subject to the
general rights of the Partners to manage and direct the affairs of the
Partnership as set forth in Sections 4.1 and 4.2 hereof, the Partners
shall divide the management of the day-to-day affairs of the Partnership
as follows:

          4.3.1 Curtom's Duties.  Curtom will be responsible for the
general administration of the affairs of the Partnership.  In connection
with such duties, Curtom will have principal responsibility for
overseeing the preparation of bids and bills of materials, procuring
such insurance, licenses, certifications and registrations as the
Partnership may require, purchasing materials to be used on particular
jobs, arranging for project related dumping, hauling, and scaffolding,
on an as-needed basis, and securing bonding as needed for jobs.  Curtom
will provide such staff support as may be necessary to carry out its
duties as a Partner and will agree to make available the services of
Brenda Curry o the Partnership on an as-needed basis.  Brenda Curry will
be principally responsible for Curtom's obligations to the Partnership.
Curtom will not use more than the equivalent of one full-time employee
for Partnership purposes, other than Brenda Curry, without the approval
of all of the Partners.

          4.3.2 Metalclad's Duties.  Metalclad will have principal
responsibility for job site management and for procuring all labor
necessary to complete projects awarded to the Partnership.  Metalclad
will directly procure for the Partnership all labor to be used on any
project awarded to the Partnership.

     4.4 Transactions Between a Partner and the Partnership.  Nothing
contained in this Agreement shall prohibit a Partner from engaging in a
transaction with the Partnership other than in his capacity as a member
of the Partnership.  Any Partner may receive a fee or commission arising
out of services rendered to the Partnership, on such terms and in such
manner as the Partners may agree.  No payment to a Partner respecting
services rendered or property transferred to the Partnership (including,
but not limited to, in the later case, the leasing of property to the
Partnership) shall be made with regard to Partnership Profits or Losses
or treated or deemed to be a distribution of profits or proceeds of the
Partnership.  All such payments shall be treated as an expense of the
Partnership for all purposes, including, without limitation, for
determining Partnership Profits and Losses, and Net Cash Available.

     4.5 Preparation of Project Bids; Lease of Premises.

          4.5.1 Estimator.  The Partners shall mutually select one or
more estimators to prepare all bids and bills of materials in connection
with all projects in which the Partnership seeks to bid who shall work
under the direction of Brenda Curry.  The initial estimators will be the
persons designated as such on Exhibit A attached hereto.  The Partners
may, by mutual agreement, (i) remove or replace such estimators, or (ii)
appoint any one or more supplemental estimators.

          4.5.2 Bidding by Metalclad for Materials and Contracts.  It is
understood that Metalclad will have the right to bid, along with any
other interested third party person or entity, to become the materials
supplier to the Partnership with respect to any given Partnership
project.  The Partnership, however, will award any materials contract to
the company submitting the lowest bid, provided that if Metalclad is one
of the bidders submitting the lowest bid, then the Partnership will
award the materials contract to Metalclad.  In the event Metalclad is
selected as material supplier, it will enter into an agreement to supply
materials containing the terms set forth in its bid and incorporating
such other terms as may be customary in contracts of this type.

          4.5.3 Lease of Premises.  The Partnership shall, if and to the
extent it deems necessary and upon the mutual agreement of the Partners,
lease from any Partner such additional space as it may need from time to
time on terms which are substantially the equivalent to those that the
Partnership could have obtained for substantially similar premises from
unrelated parties.

     4.6 Fees and Reimbursement of Expenses; Organizational Fees and
Expenses.

          4.6.1 Fees and Reimbursement.  The Partners shall be paid the
following fees by the Partnership:

                 (a) Subject to the requirement described in Section
4.6.2 hereof, Curtom shall receive, as compensation for its services
hereunder, an amount equal to its costs incurred in meeting its
obligations under the Partnership Agreement (with no mark-up), including
the normal and customary wages of Curtom employees (other than Brenda
Curry), as set forth in Exhibit B attached hereto, for time actually
devoted to Partnership business as set forth in the cost of obtaining
any necessary bonding, and any out-of-pocket costs incurred on behalf of
the Partnership (other than its initial capital contribution).

                 (b) Subject to the requirements described in Section
4.6.2 hereof, in consideration of the services it will perform on behalf
of the Partnership in connection with the provision and supervision of
the labor to be used on any project, Metalclad shall receive as
compensation such amount as the Partners may agree.  Such compensation
shall be in lieu of any other compensation otherwise payable to
Metalclad for such services, including the cost to Metalclad of the
wages of its employees performing such services.  Metalclad will also
receive a fee during the time that one or more of its employees is
designated to prepare the Partnership's job bids and bills of materials
and for the time other Metalclad employees actually devote to
Partnership business (other than with respect to the activities
described in the first sentence of this subsection 4.6.1 (b)).  Such
compensation shall be equal to the employee's normal and customary wages
at Metalclad, as set forth in Exhibit A attached hereto (with no
mark-up), which are allocable to the time such persons devoted to the
Partnership's affairs.  Metalclad shall be reimbursed all of its other
out-of-pocket costs incurred on behalf of the Partnership on a no
mark-up basis (other than its initial capital account).

          4.6.2 Reimbursement Procedures.  No Partner will be reimbursed
for fees or out-of-pocket costs incurred on behalf of the Partnership in
excess of $500 unless such costs are approved in advance by all of the
Partners.  Each Partner shall submit to the Partnership receipts or
other evidence substantiating all out-of-pocket costs incurred on behalf
of the Partnership.  Each Partner shall also submit to the Partnership
written records of all work performed by its employees, agents and
designees, on behalf of the Partnership, the costs for which are
reimbursable by the Partnership pursuant to this Section 4.6.  Such
records shall set forth the name of the person performing work on behalf
of the Partnership, the nature of the work performed and the hours
worked.  The total hourly amount of reimbursement will be determined by
reference to the fee schedules attached hereto as Exhibits A and B, as
supplemented or modified from time to time by mutual agreement of the
Partners.  The Partnership shall have no obligation to make any payment
pursuant to this Section 4.6 to any Partner unless and until the work
records described in this subsection 4.6.3 are submitted to the
Partnership.

          4.6.3 Organizational Fees and Costs.  The fees and costs
associated with the organization and formation of the Partnership
(including legal and accounting fees and costs) shall be an obligation
of the Partnership.  The Partners shall each be reimbursed by the
Partnership for all out-of-pocket costs incurred in connection with the
organization and formation of the Partnership in accordance with the
procedures described in Section 4.6.3 hereof.

          4.6.4 Treatment of Fees and Reimbursements.  All fees,
commissions or reimbursements paid to any Partner pursuant to this
Section 4.6 shall be made without regard to Partnership Profits or
Losses and shall not be treated or deemed to be a distribution of
profits or proceeds of the Partnership.  All such payments shall be
treated as an expense of the Partnership for all purposes, including,
without limitation, for determining Partnership Profits and Losses, and
Net Cash Available.

     4.7 Time Devoted to the Partnership.  The Partners shall each
devote such time to the operation and business of the Partnership as is
reasonably necessary to accomplish the purpose of the Partnership as set
forth in this Agreement.

     4.8 Other Business Activities.  The Partners understand and
acknowledge that the individual Partners engage in the same business as
the Partnership and that, accordingly, business opportunities presented
to the Partnership may likewise from time to time be presented to the
individual Partners.  The Partners hereby agree that the creation of the
Partnership and the assumption by each of the Partners of their
respective duties hereunder shall be without prejudice to their rights
or that of their Affiliates (as such term is defined in Section 5.1.2
hereof) to have and engage in such competing business, to pursue,
subject to the following sentence, business opportunities presented to
the individual Partners or to the Partnership, and to receive and enjoy
profits or compensation therefrom, including, without limitation, the
right of each Partner to bid for, or otherwise participate in,
insulation and asbestos abatement projects separately from and
independent of the Partnership.  Notwithstanding anything to the
contrary contained in the foregoing, the Partners shall be prohibited
from bidding or competing for, or otherwise participating in, any
projects in connection with which the Partnership has submitted, or
reasonably expects to submit, a bid.  Each Partner hereby waives any
right he may have to share or participate in or require an accounting of
other current or future interests or activities of the other Partners or
of their affiliates in connection with any interests, ventures or
activities described in this Section 4.8.

     4.9 Qualification as an MBE.  In the conduct of its activities, the
Partnership may, if it deems it in its best interest, seek to qualify as
a "minority business enterprise" ("MBE"), as that term is defined in the
relevant federal and state statutes and regulations, and, to the extent
feasible, as a "small business concern", as that term is defined in the
rules and regulations of the Small Business administration, and on that
basis, participate in federal and state sponsored MBE programs, and
programs for small business concerns, either as a general contractor or
a subcontractor.  In connection therewith, the Partners shall at all
times use reasonable good faith efforts to qualify, and to maintain the
qualification of, the Partnership as an MBE at all times during the term
of this Agreement.  In connection therewith, including, without
limitation, with respect to any project in which the Partnership may
seek to bid or otherwise participate, any representations made by the
Partners, their agents or representatives to any prospective or actual
governmental client at the federal, state or local level will be made in
compliance with all applicable federal procurement law.

     4.10 Indemnification by Partnership.

          4.10.1 Indemnification of Partners.

                  (a) The Partnership shall indemnify, defend and hold
harmless each of the Partners fro any loss or damage arising out of or
related to any act or omission performed or omitted by it, its
employees, agents or affiliates, in accordance with, and in a manner
within the scope of the authority granted to it by this Agreement,
including, without limitation, all attorneys' fees and other expenses in
connection with defending such claims; provided, however, that such acts
or omissions do not constitute gross negligence, willful misconduct or
fraud.

                   (b) The satisfaction of any indemnification pursuant
to this subsection 4.10.1 shall be paid from, and limited, the amount of
the Partnership assets (including all applicable insurance carried by
the Partnership), and none of the Partners shall have any personal
liability on account thereof.

          4.10.2 Indemnification by Partners.  Each Partner shall
indemnify, defend and hold harmless the Partnership, and the other
Partners, their employees, agents and affiliates from any loss or damage
arising out of or relating to its or his gross negligence, willful
misconduct or fraud.

     4.11 Representatives.  To facilitate the handling of all matters
and questions in connection with the management of the Partnership, each
of the Partners appoints the following persons to act for it in all such
matters, each with full and complete authority to act on behalf of such
Partner in relation of any matters or things involving the business of
the Partnership:

          Partner            Representative
          -------            --------------
          Curtom             Brenda Curry
          Metalclad          Glenn Meyer

          Each Partner may remove or replace its representative and
designate one of more replacement or supplementary representatives from
time to time upon notice to the other Partners in the manner set forth
at Section 8.2 hereof; provided, however, that Brenda Curry shall not be
removed or replaced as Curtom's representative without Metalclad's
consent.

     4.12 Licenses, Bonds and Permits.  The Partnership will obtain, in
its own name, all licenses and permits (including contractor's licenses,
and licenses and permits necessary to perform asbestos abatement work),
and bonds necessary to the conduct of its business.

                               ARTICLE V
          SALE, TRANSFER OR MORTGAGE OF PARTNERSHIP INTERESTS

     5.1 Generally.

          5.1.1 Restriction.  Except as expressly permitted herein, no
Partner shall sell, assign, transfer, mortgage, pledge, charge or
otherwise encumber or contract to do or permit any of the foregoing,
whether voluntarily or by operation of law with respect to all or any
part of his interest in the assets, profits, and losses of the
Partnership (collectively, each Partner's "Partnership Interest"), or
with respect to an ownership interest in any Partner, without the prior
written consent of the other Partners.  Any attempt to do so without
such consent shall be void.  The giving of such consent in one or more
instances shall not limit or waive the need for such consent in any
other or subsequent instances.

          5.1.2 Exceptions.  Notwithstanding any provision of Section
5.1.1 to the contrary, but subject to Section 6.1 hereof, the following
transfers of Partnership Interests of or in a particular Partner shall
not be subject to the provisions of this Article V:

                 (a) Any transfer of all or any portion of a Partner's
Partnership Interest to an Affiliate of the Partner; and

                 (b) Any transfer of stock or beneficial interest in
Curtom by Brenda Curry to the husband or children of Brenda Curry or to
one or more Trusts controlled by Brenda Curry; provided, however, that
at no time shall Brenda Curry own directly less than fifty-one percent
(51%) of the outstanding voting stock of Curtom.

     For purposes of this Agreement, (i) "Affiliate" means a person
directly or indirectly controlling, controlled by, or under common
control of a Partner, and (ii) "control" means with respect to a person
that is a corporation, the right to exercise directly or indirectly,
more than fifty percent (50%) of the voting rights attributable to the
shares of the controlled corporation, and, with respect to a person that
is not a corporation, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of
the controlled person.

     5.2 Adjustments on Sale of a Partnership Interest.  Any Partner
transferring his Partnership Interest shall transfer such Partnership
Interest free and clear of an liens, encumbrances or other interests of
any third party and shall execute or cause to be executed any and all
documents required to fully transfer such interest to the acquiring
Partner.  Any monetary default by the selling Partner shall be satisfied
out of the proceeds from such sale at the closing of such transaction.
Following the date of such closing, the selling Partner shall have no
further rights to any distributions made by the Partnership, and all
such rights shall vest in the transferee.  Subject to the provisions of
Section 5.3 hereof, as of the effective date of any transfer by a
Partner of his entire Partnership Interest which is not prohibited
hereunder, the Partner's rights and obligations hereunder shall
terminate, except as to items accrued as of such date.

     5.3 Substitution of Partners.  In the event that any Partner shall
consummate a transfer of his Partnership Interest pursuant to the
provisions of this Article V, the resulting transferee (the
"Transferee") shall be considered only an assignee of such Partnership
Interest, and as such shall only be entitled to receive the return of
contributions to the capital of the Partnership and to share in the
other distributions in which the transferring Partner (the "Transferor")
would otherwise be entitled to share, diminished by the share of losses
and obligations, if any, for which such Transferor would be liable, and
the Transferor shall remain a Partner of the Partnership.  A transferee
shall have no right to transfer said Partnership Interest or any part or
interest thereof or therein or to acquire any information or accounting
of Partnership transactions or to inspect the books and accounts of the
Partnership and shall not be deemed a party hereto or a Partner unless
and until accepted as a Substituted Partner pursuant to the provisions
of this Section 5.3.  A Transferee may become a "Substituted Partner",
with all rights and liabilities of a Partner under this Agreement, if
and only if (i) the Transferor and the Transferee execute such other
instruments as the remaining Partners and its counsel may deem necessary
or desirable to effect the admission of the Transferee as a Partner,
including, without limitation, an appropriate amendment to this
Agreement, (ii) the Transferee shall execute and agree to be bound by
this Agreement, and to assume the obligations hereunder for the
Transferor, and (iii) the Transferee shall pay or obligate himself to
pay, as the remaining Partners may require, all reasonable expenses
connected with his or its admission.

                               ARTICLE VI
                              DISSOLUTION

     6.1 Causes of Dissolution.  The Partnership shall be dissolved and
its affairs wound up upon the first to occur of the following events
(which act is herein sometimes referred to as a "termination" or
"dissolution"), and each of the Partners hereby waives all rights to
cause a dissolution or termination of the Partnership except as
specifically provided below.  No Partner may withdraw from the
Partnership without the approval of all Partners.  The Partners hereby
agree that neither the withdrawal of any of the Partners as permitted
herein, nor the admission of a Substituted Partner pursuant to Section
5.4, nor the death of any Partner, shall cause the Partnership to be
dissolved and terminated.  The Partnership shall be dissolved only upon
the first to occur of the following events:

          6.1.1 Mutual Agreement.  All of the Partners mutually agree to
terminate the Partnership.

          6.1.2 Sale of Curtom.  The sale or other deposition by Brenda
Curry of all or any portion of her interest in Curtom, except as
permitted pursuant to Section 5.1.2 hereof.

          6.1.3 Term of the Partnership Agreement.  The Partnership by
its terms as set forth herein at Section 1.5, is terminated.

          6.1.4 Death of Brenda Curry.  The death or permanent
disability of Brenda Curry.  For purposes of this Section 6.1.4, the
term "Permanent Disability" shall mean an illness, accident, mental or
physical incapacity, or other incapacity or any other reason whereby
Brenda Curry is unable reasonably to perform her duties as an employee,
officer, or director of Curtom as performed immediately prior to such
disability, for a continuous period of six (6) months following the
onset of such disability, or if a guardian or conservator is appointed
for Brenda Curry (and such appointment continues for not less than
thirty (30) days).  A determination by Metalclad as to whether Brenda
Curry is Permanently Disabled shall be conclusive and binding on Brenda
Curry in the absence of a showing of actual bad faith and malice or
fraud on the part of Metalclad.

          6.1.5 Failure to Qualify as MBE.  At the election of any
Partner, the inability of the Partnership to qualify or the failure of
the partnership to continue to qualify, at any time or from time to
time, as an MBE for any reason whatsoever, were it to attempt to qualify
as and participate in programs for MBE, without regard to the
Partnership's election or failure to elect to participate in MBE
programs pursuant to Section 4.9 hereof, or the attempt or the failure
to attempt to so qualify or to so maintain such qualification.

          6.1.6 Voluntary Bankruptcy, etc.  The filing by any Partner of
a voluntary petition or an answer seeking liquidation, reorganization,
arrangement, readjustment of debts or any other relief under the United
States Bankruptcy Code, or under any other federal or state insolvency
act or law now or hereafter existing; any action by any Partner
indicating consent to, approval of or acquiescence in any such petition
of proceeding; the application by any Partner for, or the appointment by
such Partner's consent of, a custodian (as such term is defined in the
United States Bankruptcy Code) for any Partner or for all or a
substantial part of his property; the making by any Partner of a general
assignment for the benefit of creditors; the admission by any Partner in
writing of an inability to pay his debs as they mature; or

          6.1.7 Involuntary Bankruptcy, etc.  The filing of an
involuntary petition against any Partner seeking liquidation,
reorganization, arrangement, readjustment of debts or any other relief
against such Partner under the United States Bankruptcy Code, or under
any other state or federal insolvency act or law now or hereafter
existing; an attachment or execution is levied with respect to any
substantial part of any Partner's assets; or the involuntary appointment
of a custodian (as such term is defined in the United States Bankruptcy
Code) for any Partner or for all or a substantial part of his property;
and the continuance of any of such evens for thirty (30) days
undismissed, unbonded, unstayed and undischarged.

     6.2 Dissolution and Liquidation.

          6.2.1 Winding-Up.  Upon dissolution of the Partnership
pursuant to Section 6.1, the Partnership shall immediately commence to
wind up its affairs and the Partners shall proceed with reasonable
promptness to liquidate the business of the Partnership.

          6.2.2 Distributions in Liquidation.  The assets of the
Partnership shall be applied or distributed in liquidation in the
following order of priority:

                 (a) First, in payment of debts and obligations of the
Partnership owed to persons or entities not parties to this Agreement;

                 (b) Second, in payment of secured debts and obligations
of the Partnership to the Partners;

                 (c) Third, in payment of secured debts and obligations
of the Partnership to the Partners;

                 (d) Thereafter, in accordance with the Partners'
respective positive Capital Account balances.

          6.2.3 Non-Cash Assets.  Every reasonable effort shall be made
to dispose of the assets of the Partnership so that al liquidating
distributions may b made to the Partners in cash.  If at the time of
termination of the Partnership, the Partnership owns, and has not been
able to dispose of, any assets other than cash, such assets shall be
valued at their fair market value and distributed in kind in accordance
with Section 6.2.2 and applicable law.  In the event the Partners are
unable to agree with respect tot he valuation of the Partnership's
non-cash assets, such value shall be determined by appraisal in the
manner set forth in Exhibit C attached hereto.  If the Partnership
property has appreciated in value subsequent to the time of its
acquisition by the Partnership, the Capital Accounts of the Partners
shall be adjusted to reflect the manner in which the unrealized income
and gain inherent in such property (that has not been reflected in the
Capital Accounts previously) would be allocated among the Partners if
there were a taxable disposition of such property for such fair market
value as of the valuation date.

          6.2.4 Deficit Make-Up Requirement.  Notwithstanding any
provision of this Agreement to the contrary, if any Partner has a
deficit balance in his Capital Account following the liquidation of the
Partner's interest in the Partnership, as determined after taking into
account all Capital Account adjustments for the Partnership taxable year
during which such liquidation occurs (other than the adjustments made
pursuant to this Section 6.2.4), such Partner shall be unconditionally
obligated to restore the amount of such deficit balance to the
Partnership by the end of such taxable year or, if later, within 90 days
after the date of such liquidation.

                              ARTICLE VII
               BOOKS OF ACCOUNTS AND PARTNERSHIP RECORDS;
                         REPORTS; BANK ACCOUNTS

     7.1 Books of Accounts.  The fiscal year of the Partnership shall be
the calendar year.  The Partnership shall keep and maintain, or cause to
be kept and maintained, complete and accurate books and records and
accounts of the Partnership.  Such books shall be kept using the cash
method of accounting so as to permit the preparation of financial
reports and tax returns on a cash basis.  All books and records and
accounts of the Partnership together with executed copies of this
Agreement and any amendments hereto shall be kept at all times at the
principal offices of the Partnership.  Metalclad's accountants shall
provide such accounting services as the Partnership may require in order
to maintain the Partnership's financial books and records.

     7.2 Access to Partnership Records.  All Partners and their duly
authorized representatives shall have the right, at their sole coast and
expense, and not subject to reimbursement under Section 4.6 hereof, to
audit or examine all Partnership books, records and accounts at any and
all reasonable times and to make copies or extracts therefrom.

     7.3 Preparation of Tax Returns.  The Partnership shall cause to be
prepared and filed United States and State of California partnership
income tax returns, and such other tax returns as the Partnership may be
required by law to prepare and file.  Copies of all such returns shall
be delivered to each Partner promptly upon the filing thereof.

     7.4 Bank Accounts.  The Partnership shall establish and maintain
one or more accounts at such bank or banks as may be selected by the
mutual agreement of the Partners.  Such accounts shall be used for the
payment of disbursements properly chargeable to the Partnership, and all
Partnership receipts and income shall be deposited in such accounts.
Withdrawals from such accounts shall be made only upon the signatures of
the representatives of Curtom and Metalclad; provided, however, that
withdrawals of One Thousand Dollars ($1,000.00) or less may be made upon
the signature of a Partner acting alone.

                              ARTICLE VIII
                             MISCELLANEOUS

     8.1 Complete Agreement; Amendment; Waiver.  This Agreement
constitutes the entire agreement between the Partners and supercedes all
agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject
matter hereof.  This Agreement may not be amended, altered or modified
except by a writing signed by all the Partners.  A Partner's failure to
insist on the strict performance of any covenant or duty required by the
Agreement, or to pursue any remedy under the Agreement, shall not
constitute a waiver of the breach or the remedy.

     8.2 Notices.  All notices, demands, requests, approvals, and the
like (collectively, "Notices") required or permitted hereunder shall be
in writing and shall be delivered by personal service or by certified or
registered mail postage prepaid, return receipt requested, to the
Partnership at its principal place of business and to the Partners at
the following addresses:

If to Metalclad:       Metalclad Environmental Contractors
                       P.O. Box 61024
                       2198 South Dupont Drive
                       Anaheim, California  92803-6124
                       Attn:  Mr. Glenn Meyer

If to Curtom:          Curtom Building & Development Corporation
                       9410 South Western Avenue
                       Los Angeles, California  90047
                       Attn:  Ms. Brenda Curry

     Any Partner may change its address for notice by complying with
this Section 8.2.  Notices shall be effective when delivered, if
delivered personally and, if mailed, upon deposit in the United States
mail.

     8.3 Attorneys' Fees.  In the event of any controversy, claim or
dispute between the Partners concerning any provision of this Agreement,
the Partner prevailing shall be entitled to recover from the
nonprevailing Partners all of his reasonable expenses, including
reasonable attorneys' and accountants' fees.

     8.4 Validity and Successors.  In the event that any provision of
this Agreement shall be held to be invalid or unenforceable, the same
shall not affect in any respect whatsoever the validity or
enforceability of the remainder of this Agreement.  Except as provided
herein to the contrary, this Agreement shall be binding upon and inure
to the benefit of the parties signatory hereto, their respective heirs,
executors, legal representatives and permitted successors and assigns.

     8.5 Governing Law.  This Agreement shall be governed by the laws of
the State of California.

     8.6 Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same agreement.

     8.7 Further Assurances.  Each Partner hereto agrees to do all acts
and things and to make and execute such written instruments as shall
from time to time be reasonably required to carry out the terms and
conditions of this Agreement.

     8.8 Headings.  The titles and headings of the various sections of
this Agreement are intended solely for convenience of reference and are
not intended to explain, modify, or place any construction on any
provisions of this Agreement.

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

                             CURTOM BUILDING & DEVELOPMENT CORPORATION

                             By
                                --------------------------------------
                                Brenda Curry, its
                                Chief Executive Officer

                             METALCLAD ENVIRONMENTAL CONTRACTORS

                             By
                                --------------------------------------
                                Glenn Meyer, its
                                President


                               EXHIBIT A

                  Metalclad Environmental Contractors

                              Fee Schedule


Employee/Designee
     Name                                               Hourly Rate
--------------                                          -----------

* 1.

  2.

  3.



*Person designated to act as estimator to prepare all bids and bills of
material in accordance with Section 4.5.1 of the Partnership Agreement.







                               EXHIBIT B

               Curtom Building & Development Corporation

                              Fee Schedule


Employee/Designee
     Name                                               Hourly Rate
--------------                                          -----------

  1.

  2.

  3.




                               EXHIBIT C

                          APPRAISAL PROCEDURES

     Within fifteen (15) days after the event requiring appraisal, all
of the Partners either:  (1) shall jointly appoint an appraiser for the
purpose of appraising the property the value of which is to be
determined, or (2) failing this joint action, shall each separately
designate an appraiser.  The failure of any Partner to appoint an
appraiser within the time allowed shall be deemed equivalent to
appointment of the appraiser appointed by the other parties.  No person
shall be appointed or designated an appraiser unless such person is a
professional appraiser qualified to appraise the property the value of
which is to be determined.

     If, within thirty (30) days after the appointment of all
appraisers, a majority of the appraisers concur on the value of the
interest being appraised, that appraisal shall be binding and
conclusive.  If a majority of the appraisers do not concur within that
period, then the appraisers shall designate a disinterested and properly
qualified professional appraiser, who shall make an independent
determination of the value of the property being appraised.  The average
of the value established by the independent appraiser and that
established by the appraiser selected by the parties which is closest in
value to the value established by the independent appraiser shall be the
value of the property to be appraised, and such valuation shall be
binding and conclusive on the parties.  The Partnership shall bear the
expenses of the appraisal described herein.






                               AMENDMENT

To:       Brenda Curry - President - Curtom Building & Development
From:     Glenn W. Meyer - President - Metalclad Insulation Corporation
Date:     February 27, 1997
Re:       Curtom-Metalclad Partnership Agreement


This memorandum shall serve to confirm the modifications made to the
subject Agreement as it relates to Southern California Edison's "Managed
Business Relationship".  The original SCE contract was developed
utilizing the structure of the Curtom-Metalclad agreement as summarized:

1.  Metalclad would be reimbursed for all of its direct costs.  The SCE
contract was also supposed to cover the direct costs.

2.  Metalclad would be reimbursed for its overhead costs.  The SCE
contract established the overhead at 13% for labor and 10% for material.

3.  The profit of the project would be split between Curtom & Metalclad
with 51% going to Curtom and 49% going to Metalclad.  A profit
percentage of 6% of the direct costs was established in the SCE
contract.

4.  General liability insurance would be covered under the Metalclad
insurance policy and Metalclad would be reimbursed for those costs.  A
general liability cost of 2% was established for the SCE contract.

Approximately three (3) months into the contract it was learned that SCE
was not going to allow all of the direct costs to be charged in the
Agreement.  This situation significantly reduced the true profit
percentage from 6% to 3.92%.  It was also determined that the
Curtom-Metalclad partnership needed to develop cost effective methods to
reduce administrative costs.  Therefore, it was decided that Curtom
would receive 2% (3.92% x 51%) of the payment made by SCE to
Curtom-Metalclad as its 51% share of the overall profit of the SCE
Agreement.


APPROVED:


----------------------   --/--/--    ----------------------   --/--/--
Brenda Curry - President             Glenn Meyer - President
Curtom Building & Development        Metalclad Insulation Corp.







                               AMENDMENT

In consideration, the Parties to the November 1, 1988 Agreement hereby
change effective January 1, 2000 the ownership of the Metalclad
Environmental Contractors ownership to be changed to Metalclad
Insulation Corporation.  All partnership tax returns shall reflect this
change.


December 31, 1999
-----------------              -----------------------------------
Date                           Curtom Building & Development Corp



December 31, 1999
-----------------              -----------------------------------
Date                           Metalclad Environmental Contractors




December 31, 1999
-----------------              -----------------------------------
Date                           Metalclad Insulation Corporation







                               AMENDMENT

In consideration, the Parties to the November 1, 1988 Agreement hereby
change effective July 19, 2001 the following Amendments:

1.0 Section 6.1.5 of the Partnership Agreement is hereby removed and
stricken from the Agreement.

2.0 The Agreement is hereby extended until November 1, 2006.


July 19, 2001
-----------------              -----------------------------------
Date                           Curtom Building & Development Corp
                               Brenda Curry



July 19, 2001
-----------------              -----------------------------------
Date                           Metalclad Insulation Corporation
                               Robert D. Rizzo








                               EXHIBIT 21
      OF METALCLAD CORPORATION FORM 10-K FOR PERIOD ENDING 12-31-01


             LIST OF SUBSIDIARIES OF METALCLAD CORPORATION



Metalclad Insulation Corporation

Metalclad Environmental Contractors

Eco-Metalclad, Inc.

Ecosistemas del Potosi, S.A. de C.V.

Consultoria Ambiental Total, S.A. de C.V.

Confinamiento Tecnico de Residuos Industriales, S.A. de C.V.