Document:

Exhibit 10.1

[(CONFIDENTIAL  TREATMENT OF CERTAIN DESIGNATED  PORTIONS OF THIS AGREEMENT HAVE
BEEN REQUESTED BY REGISTRANT.  SUCH CONFIDENTIAL  PORTIONS HAVE BEEN OMITTED, AS
INDICATED BY AN (*) IN THE TEXT, AND SUBMITTED TO THE COMMISSION).]

                            CONTRACT AND ALL EXHIBITS

                                     HEREIN

                                     BETWEEN

               RIVERSIDE CEMENT COMPANY AND ORO GRANDE CONTRACTORS

        THIS CONTRACT  made the 27th day of September,  2005, by and between Oro
Grande Contractors,  a Joint Venture between Zachry Construction Corporation and
AMEC E&C Services,  Inc. with its principal office at 527 Logwood,  San Antonio,
Texas 78221,  hereinafter called  "CONTRACTOR",  and Riverside Cement Company, a
California general  partnership with its principal office at 1341 W. Mockingbird
Lane, Dallas, Texas 75247, hereinafter called "OWNER":

        WITNESSETH, that CONTRACTOR and OWNER, for the consideration hereinafter
named, agree as follows:

ARTICLE 1. SCOPE OF THE WORK

1.1     OWNER hereby  engages  CONTRACTOR to perform the following as more fully
defined  in the Scope of Work,  attached  as Exhibit  "A"  hereto,  referred  to
hereafter as the "Work".  In  completing  the Work required  herein,  CONTRACTOR
shall:

        (a)     Furnish all of the  materials  as are  necessary to complete the
                Work described herein, except as otherwise provided herein;

        (b)     do everything  required by this Contract  (including the General
                Conditions  as defined in Article 6 and  Special  Conditions  as
                defined in Article 11), the Drawings and Specifications, and any
                other documents,  drawings and specifications  and/or agreements
                which now or in the future become a part of the entire  Contract
                of the  parties  hereto  in  respect  to the  Work  contemplated
                herein.

        Hereinafter,   this   Contract,   which   includes   the   Drawings  and
Specifications,  and all Exhibits,  Attachments,  and Schedules hereto, shall be
collectively referred to as the "Contract" or "Contract Documents". The specific
Work to be performed by CONTRACTOR, as more fully set out in Exhibit A, Scope of
Work, is as follows:

<PAGE>

        (1)     CONTRACTOR  shall  furnish  all  project  management   services,
        construction  management,   engineering,  design,  drawings,  materials,
        equipment,  tools,  installation labor,  supervision,  and insurance (as
        more  fully set forth in the Scope of Work  attached  hereto as  Exhibit
        "A"), to provide OWNER with a Mechanically  Complete new 6600 short tons
        per day (STPD)  clinker  production  line at OWNER'S  Oro Grande  Cement
        Plant, Oro Grande, California (hereinafter called "Plant Site").

        (2)     CONTRACTOR   shall  furnish   Parent   Guarantees   from  Zachry
        Construction  Corporation  and AMEC plc in the form  attached  hereto as
        Exhibit B-1.

1.2     OWNER shall furnish or otherwise be responsible for the following:

        (1)     OEM  Equipment  and OEM  Services  as set  forth in the  Project
        Progress Schedule, including OEM engineered drawings;
        (2)     Environmental  permits and fees;
        (3)     Geotechnical investigation report and topographical surveys;
        (4)     Electrical   power  (480  volt),   non-potable   water  for  the
        CONTRACTOR'S   main   construction    offices;
        (5)     Temporary construction power necessary to completely perform the
        Work within close proximity to the Jobsite.  OWNER shall pay for cost of
        such services.  The CONTRACTOR  will be responsible  for extending these
        services  to its  Jobsite.  Water and  sanitary  for other  construction
        trailers and CONTRACTOR'S employees will be provided by CONTRACTOR;
        (6)     Appoint an OWNER'S Representative who shall be authorized to act
        on behalf of Owner;
        (7)     Provide  full and  unrestricted  access  to the  Plant  Site for
        construction of the Work;
        (8)     Abide by, and require  others under OWNER'S  control to abide by
        all reasonable  Jobsite safety rules promulgated by CONTRACTOR;
        (9)     Pay all real property taxes assessed  against the Plant Site and
        the  Work;
        (10)    Advise of the existence of any known  contamination,  and supply
        data which shall evidence that the Jobsite is clean and free of above or
        underground  obstructions,  fissures,  faults or other similarly  hidden
        features or  obstructions  which might  interfere with the completion of
        the Work;
        (11)    Report   to   CONTRACTOR   any  known   pre-existing   hazardous
        conditions,  and to the extent correction is necessary and advisable for
        the Work to be  completed,  to correct such known  conditions;  provided
        that this shall not shift from CONTRACTOR to OWNER the duty of safety at
        the Jobsite,  which shall remain the sole  responsibility of CONTRACTOR;
        (12)    All Owner Services in Section 6.10;
        (13)    Timely  performance  of all  Owner  obligations  in the  Project
        Progress  Schedule;
        (14)    *
        (15)    OWNER will participate,  and require others under its control to
        participate  in the Z-PEPP(TM)  Program;  and
        (16)    Timely   delivery   as  per   Project   Progress   Schedule   of
        Owner-Supplied Equipment and design information and OEM Equipment to the
        Jobsite in a manner that will not delay CONTRACTOR in the performance of
        its obligations as set forth in the approved Project Progress Schedule;

                                  Page 2 of 32
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        Provided,  however,  in the event of  OWNER's  failure  to  comply  with
        subsections  (1), (2),  (3), (4), (5), (13) or (16) above,  CONTRACTOR's
        sole  remedy  shall be the right to a Change  Order  pursuant to Section
        6.13.

ARTICLE 2. TIME OF COMPLETION

        A Limited Notice to Proceed  ("Limited Notice to Proceed" or "LNTP") was
executed by and between the Parties on May 4, 2005. The Parties intend that this
Contract will supersede the LNTP and that any Work performed in accordance  with
the LNTP shall be subject to the terms of this Contract.

        CONTRACTOR will perform the Work in accordance with the Project Progress
Schedule and shall be completed on or before October 5, 2007, as may be adjusted
pursuant  to this  Contract.  OWNER and  CONTRACTOR  agree that these  dates are
subject  to timely  execution  of this  Contract,  on time  delivery  of the OEM
Equipment,  and any  extensions  of time provided for elsewhere in this Contract
and OWNER meeting its obligations hereunder.

ARTICLE 3. THE CONTRACT PRICE

        OWNER shall pay CONTRACTOR for the performance of this Contract, subject
to any additions and deductions provided for herein, the Lump sum Contract Price
("Lump Sum Contract Price") as follows:

        LUMP SUM CONTRACT PRICE             *

ARTICLE 4. PROGRESS PAYMENTS

        Payments made  pursuant to the Agreement for Limited  Notice to Proceed,
dated May 4, 2005 between OWNER and CONTRACTOR  shall suffice as advance payment
and be applied to this Contract.  All succeeding progress payments shall be made
in  accordance  with the  terms set forth in the  following  paragraphs  of this
Article.

        Prior to Contract signing,  CONTRACTOR shall submit a Schedule of Values
for  Progress  Payments  against  which,  once it has been  accepted by OWNER in
writing,  progress  payments  shall be paid. The Schedule of Values for Progress
Payments shall include  engineering,  equipment,  and construction  totaling the
Lump Sum  Contract  Price.  On or before  the tenth  (10th)  Day of each  month,
CONTRACTOR shall submit an itemized invoice for payment pursuant to the Schedule
of Values for Progress Payments which is subject to verification and approval by
OWNER.   CONTRACTOR  shall  substantiate   engineering   services,   procurement
commitments  and  equipment  and  materials-in-progress   with  such  additional
documentation as shall reasonably be requested by OWNER. CONTRARCTOR will retain
and make available for tax purposes supporting detail information related to the
invoice as  requested  by OWNER,  including  details of  engineering  and design
services  performed by the CONTRACTOR or its  subcontractor.  If required by the
California  Board of Equalization  Sales and Use Tax audit of OWNER,  CONTRACTOR
will provide OWNER with the  necessary  documentation  supporting  the amount of
Sales and Use Taxes paid by CONTRACTOR.

                                  Page 3 of 32
<PAGE>

        OWNER  shall  make  payments  on  account  of this  Contract,  except as
otherwise provided herein, as follows:  On or before the tenth (10th) Day of the
following  month after  receipt of the invoice,  OWNER shall pay the  undisputed
amount of the invoice,  as per the Project  Progress  Schedule.  Provided,  that
OWNER  shall be  entitled  to  withhold  from the final  payment or  immediately
preceding  payments,  as necessary,  a sum, not to exceed  $3,000,000.  If OWNER
foresees that the final  payment will not equal this amount,  OWNER may withhold
from the immediately  preceding invoice or invoices,  as necessary to accumulate
this sum.  OWNER may retain  this sum for a period of time not to exceed  ninety
(90) Days after Mechanical Completion,  and may deduct from such sum any amounts
necessary  to  obtain  release  of  liens on the Work or  complete  other  items
required to be completed by CONTRACTOR  hereunder but which remain unreleased or
uncompleted after reasonable  notice to CONTRACTOR.  After expiration of such 90
Day period, OWNER will refund to CONTRACTOR any amounts remaining from such sum.

        Within ten (10) Days after OWNER receives  CONTRACTOR's  invoice,  OWNER
shall notify  CONTRACTOR  concerning any invoiced  amount that is in dispute and
the  contractual  basis  for such  dispute.  OWNER'S  payment  and  CONTRACTOR's
acceptance  of any payment  shall not be deemed to constitute a waiver by either
party of amounts that are then in dispute.  CONTRACTOR and OWNER shall use their
reasonable  efforts to resolve all disputed amounts as expeditiously as possible
in accordance with the provisions of Article 8.

        If an invoice is not  delivered by  CONTRACTOR  on or before the 10th of
the month,  payment may be withheld for an additional  thirty (30) Days for that
portion  of  the  invoice  which  is  not  in  compliance   with  the  invoicing
requirements  in this Article 4. OWNER shall in no event make payments in excess
of the  contract  value of  labor,  materials,  equipment,  services,  etc.,  in
progress, furnished or completed to date. CONTRACTOR agrees that monies received
for the  performance  of this  Contract  shall be used  primarily  for labor and
materials  entering  into Work under this  Contract and said monies shall not be
diverted to satisfy obligations of CONTRACTOR on other contracts.

        Upon receipt of the partial  payments,  CONTRACTOR  shall  furnish OWNER
with  such   partial   releases   and  waivers  of  lien  from  itself  and  its
subcontractors  and significant  suppliers as OWNER may reasonably  request from
time to time on labor and/or material and/or other claims.

        All invoices shall  reference  OWNER'S  Contract  Number and Item Number
____________ and be mailed to:

                               Riverside Cement Company
                               3500 Porsche Way, Suite 150
                               P.O. Box 51479
                               Ontario, Ca.  91761-0079
                               Attention: William O. Brown

        Payments made to CONTRACTOR by OWNER  hereunder  shall be made by an ACH
electronic payment in the following format, in order of preference:  CCD+ or CTX
or CTP format,  to the account of  CONTRACTOR  as specified  on the invoice.  If
undisputed  payments are not made as required by the Contract terms,  CONTRACTOR
may invoice  interest at the prime rate of  interest as  published  from time to
time in the Wall Street Journal plus one percent (1%) until paid.

                                  Page 4 of 32
<PAGE>

ARTICLE 5.  SUBSTANTIAL COMPLETION AND MECHANICAL COMPLETION

5.1     Certificate of Substantial Completion.  Once all of the requirements for
Substantial  Completion have been satisfied CONTRACTOR shall so certify to OWNER
by submitting a Certificate of Substantial  Completion to OWNER, a copy of which
is  attached  hereto as an Exhibit to Section 4 of Exhibit A.  Within  seven (7)
Days following  receipt of such  Certificate of  Substantial  Completion,  OWNER
shall notify  CONTRACTOR by execution of this Certificate  whether OWNER concurs
that  CONTRACTOR  has met the  requirements  for  Substantial  Completion.  Such
certification  shall  not be  deemed  to  waive  any  rights  of  OWNER  against
CONTRACTOR   under  this  Contract.   Concurrent  with  such   certification  of
acceptance,  which  shall  be  evidenced  by  execution  of the  Certificate  of
Substantial  Completion by OWNER,  Substantial Completion will have occurred and
OWNER shall assume care,  custody,  and control of and shall  thereafter  assume
sole  responsibility  for risk of loss for that  portion  of the Work.  If OWNER
determines that CONTRACTOR has not met Substantial Completion,  then OWNER shall
deliver a written  notice to  CONTRACTOR  describing  in  reasonable  detail the
deficiencies  noted and corrective action  recommended.  Substantial  Completion
shall  not be deemed to have  occurred,  and  CONTRACTOR  shall be  required  to
perform the  remaining  requirements  for  Substantial  Completion  and submit a
revised  Certificate  of  Substantial  Completion.  Any dispute  regarding  such
certification  shall be resolved in  accordance  with the procedure set forth in
Article  8.  If,  following  the  initial  or  any  subsequent   Certificate  of
Substantial  Completion,  OWNER has not delivered to CONTRACTOR an acceptance or
rejection of such certificate as required herein, Substantial Completion will be
deemed to have occurred and the date of CONTRACTOR's most recent  Certificate of
Substantial  Completion shall be deemed the date that Substantial Completion was
actually achieved.

5.2     Certificate of Mechanical Completion.  Once CONTRACTOR has performed all
of the  requirements for Mechanical  Completion,  CONTRACTOR shall so certify to
OWNER by submitting a Certificate  of Mechanical  Completion to OWNER, a copy of
which is attached  hereto as an Exhibit to Section 4 of Exhibit A. Within  seven
(7) Days following receipt of such Certificate of Mechanical  Completion,  OWNER
shall notify  CONTRACTOR by execution of this Certificate  whether OWNER concurs
that  CONTRACTOR  has met  the  requirements  for  Mechanical  Completion.  Such
certification  shall  not be  deemed  to  waive  any  rights  of  OWNER  against
CONTRACTOR   under  this  Contract.   Concurrent  with  such   certification  of
acceptance,  which  shall  be  evidenced  by  execution  of the  Certificate  of
Mechanical  Completion by OWNER,  Mechanical  Completion  will have occurred and
OWNER shall assume care,  custody,  and control of and shall  thereafter  assume
sole  responsibility  for risk of loss for the Work.  If OWNER  determines  that
CONTRACTOR has not met Mechanical Completion, then OWNER shall deliver a written
notice to CONTRACTOR  describing in reasonable detail the deficiencies noted and
correction action recommended. Mechanical Completion shall not be deemed to have
occurred and CONTRACTOR shall be required to perform the remaining  requirements
for  Mechanical  Completion  and  submit a  revised  Certificate  of  Mechanical
Completion.  Any  dispute  regarding  such  certification  shall be  resolved in
accordance with the procedure set forth in Article 8. If,  following the initial
or any  re-issuance of the Certificate of Mechanical  Completion,  OWNER has not
delivered to CONTRACTOR an acceptance or rejection of such certification  within
seven (7) Days as required herein,  Mechanical Completion will be deemed to have
occurred and the date of  CONTRACTOR's  most recent  Certificate  of  Mechanical
Completion  shall be deemed the date that  Mechanical  Completion  was  actually
achieved.

                                  Page 5 of 32
<PAGE>

        OWNER shall execute the Certificate of Mechanical  Completion,  provided
that each of the following conditions has been fulfilled:

        (a)     Said Work has been completed in all respects in accordance  with
        the Contract Documents;
        (b)     CONTRACTOR has performed all its obligations under this Contract
        (except  warranty and other  obligations  which, by their terms, are not
        then due); and
        (c)     CONTRACTOR  has submitted  reasonable  evidence in the form of a
        final release and waiver of lien from itself and its  subcontractors  to
        OWNER that  CONTRACTOR  and its  subcontractors  have paid all payrolls,
        material bills, and other indebtedness connected with said Work.

ARTICLE 6. GENERAL CONDITIONS

        The general conditions of this Contract are as follows:

6.1     Performance of Work.  All Work to be performed by CONTRACTOR  under this
        --------------------
Contract shall be executed in conformity  with the Drawings and  Specifications,
and  CONTRACTOR  shall do no Work  without  OWNER'S  approval  of  Drawings  and
Specifications, in accordance with Section 6.4.

        CONTRACTOR shall provide and pay for all materials, labor, water, tools,
equipment,  light,  transportation,  and  other  facilities  necessary  for  the
execution  and  completion  of Work as set out in Exhibit A, Scope of Work.  All
materials and equipment  incorporated into the Work shall be new, and CONTRACTOR
represents that all Work under the Contract shall be of a finished nature.

        CONTRACTOR  agrees to  prosecute  its Work as is  necessary to cause the
Work to be completed in accordance with the schedule described in Section 4.1 of
Exhibit A, Project Progress Schedule, attached hereto, subject to adjustments as
provided herein.

        CONTRACTOR  shall be fully  responsible for all necessary  expediting of
its orders for  materials  and  equipment,  regardless  of where placed to avoid
delays in its Work.  Defective  materials or materials  damaged in the course of
installation or test shall be replaced or repaired in a manner conforming to the
Contract Documents. All necessary cutting shall be neatly and carefully done and
repaired in an approved and workmanlike manner. No cutting into the constructive
parts of the buildings and structures  shall be done without  approval of OWNERS
Representative.  All sheets  shall be saw cut. No torch burned metal sheets will
be accepted.

        CONTRACTOR  shall be fully  responsible  to install all OEM Equipment in
the manner  recommended by the  manufacturer of such equipment,  and to maintain
such  OEM  Equipment  as  recommended  by  the  manufacturer  until  Substantial
Completion.  In the event  CONTRACTOR  does not have necessary  installation  or
maintenance  documentation for a particular piece of OEM Equipment,  it shall be
CONTRACTOR's  responsibility  to  inform  the  OEM  or  OWNER  of its  need  for
additional  information or  specifications  in advance of such  installation  or
maintenance.

                                  Page 6 of 32
<PAGE>

6.2     Prosecution  of the Work.  CONTRACTOR  agrees to  prosecute  its Work in
        -------------------------
accordance with the Contract and Exhibit A, Scope of Work.

6.3     Construction  Drawings.  CONTRACTOR  shall furnish promptly to OWNER all
        -----------------------
drawings and  schedules  required in connection  with its Work,  but approval of
such drawings and schedules shall not relieve  CONTRACTOR of its  responsibility
of complying with the requirements of the Drawings and  Specifications of OWNER.
CONTRACTOR  shall take all field  measurements  necessary for its Work and shall
assume responsibility for their accuracy.

6.4     Approval of Drawings.  Detail, design and schematic drawings of the Work
        ---------------------
shall be submitted  electronically (via AMEC website) by CONTRACTOR to the OWNER
for approval  thereof.  CONTRACTOR,  upon  request  from OWNER,  shall submit to
OWNER,  for  review  only,  all  relevant  design  calculations.  One (1) set of
drawings  is to be  marked  by OWNER  as  "Approved",  "Approved  as  Noted"  or
"Disapproved as Noted" and returned to CONTRACTOR. Provided CONTRACTOR and OWNER
agree with  changes  made by OWNER in  drawings  marked  "Approval  as Noted" or
"Disapproved  as Noted" said  drawings  shall be  corrected  by  CONTRACTOR  and
provided  to OWNER.  If OWNER and  CONTRACTOR  agree that any of the  changes or
modifications are outside the Scope of Work or Project Progress Schedule, and if
changes or modifications  are made after OWNER's written approval (which is only
deemed to be provided if CONTRACTOR  has complied with all  procedures set forth
in this Contract regarding change orders),  such changes or modifications  could
adjust  the Lump Sum  Contract  Price  (either up or down)  and/or  the  Project
Progress Schedule as provided in Section 6.13, Changes. CONTRACTOR shall utilize
the most reasonably expeditious means of mail or electronic transmittal delivery
to assure timely submittal of drawings to OWNER. The failure of OWNER to approve
or  disapprove  drawings  within seven (7) Days after  receipt  thereof shall be
construed as approval  thereof by OWNER.  Upon approval of such  drawings,  they
shall  become part of the  Contract  deliverables.  Approved  drawings  shall be
issued by CONTRACTOR and one (1) set of electronic drawings will be furnished to
OWNER.  Approval of drawings hereunder by OWNER shall not constitute a waiver or
release of any kind, and shall not relieve  CONTRACTOR of its  responsibility to
comply fully and completely with the Scope of Work, warranties,  representations
and all other commitments or responsibilities set forth in this Contract.

        CONTRACTOR  shall furnish to Owner one (1) electronic (via AMEC website)
certified drawing of machinery or equipment  procured by CONTRACTOR as described
herein,  including  all  applicable  electrical  wiring  diagrams  or to invoice
address shown above if not available electronically.

        CONTRACTOR  shall  furnish  to Owner an  electronic  version  (via  AMEC
Website) of  installation,  operation and maintenance  manuals and an electronic
version of recommended spare parts list or to invoice address shown above if not
available electronically.

6.5     As-Built  Drawings.  Within sixty (60) Days after Mechanical  Completion
        -------------------
(as  hereinafter  defined)  CONTRACTOR  shall  furnish  to  the  OWNER  one  (1)
electronic  version of drawings depicting the Work as actually  completed;  such
drawings shall show the "as-built"  details of the Work, limited to MFDs, P&IDs,
electrical connection and underground.

                                  Page 7 of 32
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6.6     Specifications and Drawings.
        ----------------------------

6.6.1.  Data Furnished by CONTRACTOR. The CONTRACTOR shall furnish an electronic
        -----------------------------
version of drawings and pertinent instructions required for the installation and
operation of equipment  supplied  hereunder in accordance with the provisions of
this  Contract.  A nominal  charge will be made to cover the cost of  additional
copies. All copies of drawings, plans, specifications and instructions developed
by  CONTRACTOR   for  the  Contract  which  are  not  owned  by  or  subject  to
confidentiality  restrictions  by a third  party  shall  become the  property of
OWNER. OWNER agrees that any reuse of such drawings,  plans,  specifications and
instructions  without prior written verification or adaptation by CONTRACTOR for
the specific purpose intended will be at OWNER's sole risk and without liability
or legal exposure to CONTRACTOR.  All such drawings,  plans,  specifications and
instructions  shall at OWNER'S  request be  delivered  to OWNER upon  Mechanical
Completion of the Work, but CONTRACTOR may retain and use copies thereof and any
technology embodied therein. Any data or drawings required by the Contract to be
given to the OWNER  identified as  confidential  or proprietary to a third party
shall  remain the property of such third  party,  to be used only in  connection
with the construction,  operation and maintenance of the equipment and shall not
be  disclosed  to  third   parties   without  the  prior   written   consent  of
CONTRACTOR/OWNER. Provided, however, that any party which OWNER or its successor
wishes to hire to maintain, enhance, or add to the Work may be permitted to view
and copy  solely for such  purposes  any data or  documents  delivered  to OWNER
pursuant to this  Contract,  to the extent  necessary  or helpful to perform the
duties for which such  third  party was  retained.  Provided,  further,  that no
confidentiality  restrictions  shall apply to information which becomes publicly
available through no fault of the OWNER, is independently developed by OWNER, or
was in the possession of OWNER or provided to OWNER through some other source.

6.6.2.  Data Furnished by OWNER.  The OWNER shall furnish  CONTRACTOR  with such
        -----------------------
information as is specified in this Contract to be the  responsibility of OWNER,
and CONTRACTOR shall be entitled to rely on the accuracy and completeness of all
such  information in the performance of its Work hereunder.  OWNER shall furnish
the  CONTRACTOR  an  electronic  copy,  if  available,  or  hard  copy  of  such
information required hereunder; additional copies will be furnished upon request
by CONTRACTOR. Information regarding the Jobsite, the business and operations of
OWNER,  and any other  information  provided by the OWNER which is not  publicly
known and not developed independently by CONTRACTOR shall remain the proprietary
and confidential property of OWNER and shall not be disclosed to any third party
without the advance  written  consent of OWNER.  Operational  data regarding the
completed plant,  including  estimated  production costs to produce clinker from
the completed plant, and other sensitive  financial and operational  information
regarding  OWNER'S operation of the plant shall remain the property of OWNER and
shall not be  disclosed by the  CONTRACTOR  or its  subcontractors  to any party
without the advance written  consent of OWNER.  In the event any  specification,
direction,  design or innovation provided by OWNER can be protected under patent
or other  intellectual  property laws, such  intellectual  property  provided by
OWNER shall  remain the sole and  exclusive  property of OWNER and no license of
any intellectual property of OWNER is deemed given by OWNER.

                                  Page 8 of 32
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6.7     Storage of Equipment and Materials.  CONTRACTOR  shall receive,  unload,
        ----------------------------------
store,  and take proper care of all  materials  and  equipment  involved in this
Contract. All equipment and materials to be stored or used at OWNER'S Plant Site
must be stored so as not to interfere  with the  construction  of the balance of
the Plant  Site.  Attention  must be given to the  storage  of  materials  as no
watermarked, dirty, or marred materials shall be accepted in the installation.

6.8     Safety.  CONTRACTOR shall provide for safety precautions and programs in
        -------
connection  with its  activities  at the Jobsite and, in  connection  therewith,
shall  comply  with the  requirements  of MSHA,  Occupational  Safety and Health
Administration  (OSHA),  OWNER's  Safety  Procedures,  and any  and  all  state,
federal,  and local  regulations  relating to the performance of the Work at the
Jobsite.

        CONTRACTOR shall submit to OWNER a copy of its Safety  Procedures Manual
for OWNER'S approval.

        All of  CONTRACTOR'S  employees  will be  required  upon  entering  onto
OWNER'S Plant Site to wear hard hats, safety glasses, safety shoes and any other
protective  equipment  either required by law or otherwise  deemed necessary for
the safety of OWNER'S employees as well as CONTRACTOR'S employees.

        CONTRACTOR shall comply with MSHA  regulations.  Citations  arising as a
result of CONTRACTOR or its  Subcontractors  not following MSHA regulations will
be for CONTRACTOR to pay or defend.

        CONTRACTOR  shall  provide  safety  training  as  required  by MSHA  for
CONTRACTOR'S  employees  who  work on the  Plant  Site.  This  training  must be
completed  and written  confirmation  of such must be  furnished to OWNER before
Work  can  commence.  Training  will be  provided  by  CONTRACTOR  obtaining  an
MSHA-certified  instructor  permit and  providing  training  as required by MSHA
under CFR Part 6 or Subpart 13.

6.9     Ingress and Egress from OWNER'S  Premises.  At all times during the term
        ------------------------------------------
of this Contract, all of CONTRACTOR'S employees shall ingress and egress OWNER'S
Jobsite using the entrance/construction gate and parking area agreed to by OWNER
for  CONTRACTOR'S  workers adjacent to the Plant Site. OWNER shall, at all times
necessary for  CONTRACTOR'S  performance  under the  Contract,  provide free and
clear  access  to  the  Jobsite  to  CONTRACTOR,   its  agents,   employees  and
subcontractors.

6.10    OWNER'S Services. OWNER shall at its expense provide CONTRACTOR with the
        -----------------
following:

        (a)     Information locating all above ground or underground  utilities,
        obstructions  and services  (electrical,  water,  gas, etc.) as known to
        OWNER;
        (b)     An Owner's  Representative  designated  in writing  who shall be
        authorized to act on OWNER'S  behalf with respect to the  Contract;
        (c)     All  the  required  fuel,  flushing  oil,  utilities,   and  raw
        materials   required   for  Dry  Run   Testing;

                                  Page 9 of 32
<PAGE>

        (d)     Accurate  topographical  plans and  subsurface  data;
        (e)     "First Fill" lubricant material;
        (f)     Phone lines for CONTRACTOR to tie into for temporary facilities;
        (g)     Free and clear  access  across the  Jobsite;
        (h)     All  necessary  operating  and design data for OEM/BOP and OWNER
        supplied  equipment;
        (i)     A prompt  review and,  if  acceptable,  approval  of  CONTRACTOR
        Drawings and  Specifications  in  accordance  with this Contract and any
        other assistance that CONTRACTOR may reasonably require for carrying out
        the Work hereunder including prompt review and, if acceptable,  approval
        of all equipment  and  fabricated  items and vendor and  vendor-supplied
        equipment  in  accordance  with this  Contract,  and  prompt  and timely
        performance  of  all  OWNER  required   obligations;
        (j)     Commercially   reasonable  efforts  to  help  CONTRACTOR  obtain
        concrete,  if  CONTRACTOR  so requests,  in the event it has  difficulty
        obtaining  same due to local market  conditions;  with no  obligation to
        OWNER relating to the provision or failure to provide such concrete; and
        (k)     All of the items OWNER shall furnish in accordance  with
        Article 1.

6.11    CONTRACTOR'S  Representative.  The CONTRACTOR  shall employ a qualified,
        -----------------------------
competent  representative  who shall be in  attendance  at the site  during  the
progress of the Work and shall represent the CONTRACTOR.

6.12    Concealed Conditions.  Should concealed conditions be encountered in the
        ---------------------
performance  of the Work below the surface of the ground or should  concealed or
unknown conditions be at variance with the conditions indicated by the documents
provided by OWNER to CONTRACTOR  and referenced in the Basis of Price section of
the Scope of Work in Exhibit  A, then the Lump Sum  Contract  Price and  Project
Progress  Schedule  may be  equitably  adjusted by Change  Order as  hereinafter
defined in accordance with Section 6.13,  Changes.  Such varying  conditions may
include without  limitation  previously  unknown  subsurface and latent physical
conditions  at the  Jobsite,  archeological  finds  of  historical  or  cultural
significance,  protected or endangered  species of plants and animals,  or other
conditions  that  may  preclude  CONTRACTOR  from  proceeding  with the Work for
reasons of health,  safety,  or legal  restriction.  Without  waiving its rights
hereunder,  CONTRACTOR  agrees  to  notify  OWNER of such  conditions  promptly,
whereupon OWNER will promptly  investigate the same and issue appropriate orders
or instructions to CONTRACTOR.

6.13    Changes.  The right is reserved by OWNER to make changes in,  deviations
        --------
from, additions to, and omissions from the Work herein contracted,  and the Lump
Sum Contract Price and Project Progress Schedule shall be adjusted  accordingly.
Before proceeding with any change, deviation,  addition or omission,  CONTRACTOR
will first obtain written  authorization from OWNER, to be signed exclusively by
William O. Brown,  or such person as OWNER or he may  designate in writing.  Any
and all changes to the Scope of Work and the Lump Sum Contract  Price must first
be agreed to in writing by OWNER and CONTRACTOR.

                                  Page 10 of 32
<PAGE>

        6.13.1  CONTRACTOR shall be entitled to adjustments,  in accordance with
        Section  6.13.2,  in the Lump Sum  Contract  Price and Project  Progress
        Schedule for the following events:

        (a)     Any part of the Work is  delayed by any act or failure to act by
        OWNER or third  parties  performing  Work for OWNER to the  extent  such
        action is the  responsibility  of OWNER as set forth in this Contract or
        by Force Majeure as provided in Section 6.17;
        (b)     CONTRACTOR'S   costs  are   increased  due  to  changes  in  any
        applicable laws,  codes or other  governmental  regulations,  or OWNER'S
        Safety  Procedures,  subsequent to the execution of this Contract,  or a
        substantial  change in the method of  imposition or  enforcement  of any
        applicable  laws, codes or regulations,  or any special  requirements of
        any governmental authority;
        (c)     CONTRACTOR'S   costs  are  increased  due  to  encountering  any
        concealed or unknown  conditions in  accordance  with Section 6.12 above
        unless  such  conditions  are  specified  by  this  Contract  to be  the
        responsibility of CONTRACTOR;
        (d)     CONTRACTOR'S  costs are  increased due to any variance in design
        conditions or other  information not otherwise  required or specified by
        this Contract, if any, provided by OWNER's  Representative;
        (e)     OWNER's  request for or approval of  performance of services not
        otherwise  required by this Contract in excess of CONTRACTOR's  standard
        work  day or  work  week  or  such  shorter  times  as are  provided  by
        applicable  collective bargaining agreements or on a holiday customarily
        observed by  CONTRACTOR  (including  an allowance for loss of efficiency
        due to overtime  work or shift  work);  or
        (f)     any and all other events which  entitle  CONTRACTOR  to a Change
        Order pursuant to this Contract.

        6.13.2  In connection  with any change,  addition or event  specified in
        this Section 6.13,  CONTRACTOR shall promptly submit in writing to OWNER
        pursuant to a mutually agreed upon procedure,  such proposed adjustments
        to the Lump Sum Contract Price  (including for G&A and fee * as a result
        of the change or  addition),  Project  Progress  Schedule,  and affected
        Contractor obligations, if any; and OWNER and CONTRACTOR shall negotiate
        in good faith regarding the amount of such adjustments and shall attempt
        in good faith to agree in writing as to such  adjustments.  The  parties
        agree that, so far as reasonably  possible,  no additional Work shall be
        performed  until either the amount of or nature of the  adjustment  with
        respect  thereto has been  mutually  agreed upon.  In no case,  however,
        shall  CONTRACTOR  perform any such  additional or different  Work until
        OWNER has authorized CONTRACTOR by Change Order to proceed therewith.

        In the event that OWNER and CONTRACTOR cannot agree on the adjustment to
        the Lump Sum Contract  Price,  Project  Progress  Schedule,  or affected
        Contractor  obligations  for a  Change  Order  to  which  CONTRACTOR  is
        entitled  pursuant to Section 6.13,  upon OWNER's  written  direction to
        CONTRACTOR,  CONTRACTOR  shall proceed with the  additional or different
        Work provided in the Change Order and OWNER shall pay to CONTRACTOR  all
        undisputed amounts and fifty percent (50%) of the disputed amounts while
        CONTRACTOR  is  continuing  performance  until the  dispute  is  finally
        resolved.

                                  Page 11 of 32
<PAGE>

        In the event CONTRACTOR  contends that it is entitled to a Change Order,
        but OWNER  disagrees,  CONTRACTOR is under no obligation to proceed with
        such disputed Work. If however, OWNER issues CONTRACTOR a written Change
        Order for such Work,  CONTRACTOR  shall proceed with the disputed  Work,
        provided  in the  Change  Order and OWNER  shall pay to  CONTRACTOR  all
        undisputed amounts and fifty percent (50%) of the disputed amounts while
        CONTRACTOR  is  continuing  performance  until the  dispute  is  finally
        resolved.

        If any dispute is not resolved within thirty (30) Days of the submission
        in  writing  by  CONTRACTOR  to OWNER of such  proposed  adjustments  or
        entitlement  to a Change  Order,  CONTRACTOR  or OWNER may  submit  such
        dispute for  resolution  in  accordance  with Article 8,  Resolution  of
        Disputes. In the event the Work is delayed pending such resolution,  the
        Arbitrators  shall schedule the Arbitration to be completed with a final
        verdict not more than 90 Days after submission by either party.

        6.13.3  CONTRACTOR  shall use all  commercially  reasonable  efforts  to
        reschedule and reallocate the Work in a manner that minimizes the impact
        of any Change Order on the overall cost and schedule of the Project.

6.14    Protection of Work. It is mutually  agreed that  CONTRACTOR  will assume
        -------------------
responsibility  for  protection of materials and equipment  left on the Jobsite.
CONTRACTOR  shall use  reasonable  efforts  to  continuously  maintain  adequate
protection of all its Work from damage, such protection to include a watchperson
or  watchpersons  when  necessary,  and shall use reasonable  efforts to protect
OWNER'S  property  from injury or loss arising in  connection  with or resulting
from  CONTRACTOR'S  Work or materials or labor  necessary to perform the Work in
this  Contract.  CONTRACTOR  shall make good any such damage,  injury,  or loss,
except such as may be caused by the  negligent  act or omissions or  intentional
misconduct or gross negligence of agents or employees of OWNER.  CONTRACTOR will
be liable  for the  first  $10,000  of loss per  occurrence  to the Work  and/or
materials and equipment for which  CONTRACTOR is responsible  until  Substantial
Completion.  Except to the extent  CONTRACTOR is responsible  for loss or damage
pursuant to this  Section  6.14,  OWNER shall retain any and all risk of loss or
damage to the Work  (which  will be deemed for  purposes  of this  provision  to
include any goods CONTRACTOR or its  subcontractors  or suppliers may provide to
be installed). For loss or damage caused by all other causes and for any amounts
in excess of this per occurrence deductible,  OWNER agrees to look solely to the
proceeds of the  OWNER-furnished  insurance  described in Article 7 for recovery
for loss, and not seek recovery against CONTRACTOR or any subcontractor for such
loss.  CONTRACTOR  shall  take  all  necessary  precautions  for the  safety  of
CONTRACTOR'S  employees on the Work, and it shall designate a responsible member
of its  organization  on the  Work,  whose  duty  shall  be  the  prevention  of
accidents.  The name and position of any person so designated  shall be reported
to OWNER by  CONTRACTOR.  CONTRACTOR  shall  provide,  at its expense,  whatever
storage  sheds,  workshops  and offices  necessary  for the  performance  of the
Contract,  and shall remove the same upon the completion of the Work. CONTRACTOR
shall clean up and remove from the Jobsite as directed by OWNER, all rubbish and
debris.  In no manner  limiting  the  foregoing,  CONTRACTOR  shall  remove  all
construction  debris  from the  Jobsite at such times as will keep the Work area
safe and uncluttered and at any time promptly upon request of OWNER.

                                  Page 12 of 32
<PAGE>

6.15    Access to and Inspection of Work.  CONTRACTOR shall  supervise,  inspect
        ---------------------------------
and be  responsible  for the  Work  and  shall  perform  the  Work  strictly  in
compliance with the Drawings and Specifications and all other provisions of this
Contract.   OWNER  and  any  mortgagee  of  OWNER,  if  any,  their  agents  and
representatives  shall, at all reasonable times, and after prior notification to
CONTRACTOR,  have the right of entry and free  access to inspect  all Work done,
labor performed and materials  furnished in and about the Jobsite,  compliant to
all CONTRACTOR and State or Federal Safety Requirements.

6.16    Correction of Work. At  CONTRACTOR'S  sole cost and expense,  CONTRACTOR
        -------------------
shall promptly correct, repair or replace (the parties to mutually agree whether
to correct,  repair or  replace)  any  defective  materials  and/or  workmanship
supplied  by  CONTRACTOR  to conform  to the  Contract  requirements.  Provided,
however,  if  inspection  reveals  that  any  correction  of Work  performed  by
CONTRACTOR was not due to defective  materials  and/or  workmanship  supplied by
CONTRACTOR,  such Work shall be treated as a Change in  accordance  with Section
6.13 above.

        Should  CONTRACTOR  refuse  or  neglect  to  proceed  at once  with  the
correction of rejected or defective materials and/or workmanship after receiving
notice to do so within the Warranty  Period,  it is agreed that OWNER shall have
the right and power to have the defects  remedied at the expense of  CONTRACTOR,
and  CONTRACTOR  agrees  to pay to OWNER  within  thirty  (30)  Days any and all
expense paid or directly  incurred by OWNER in remedying  such defects  together
with  interest  thereon at the prime rate of interest as published  from time to
time in the Wall Street  Journal  plus one percent  (1%) until paid.  CONTRACTOR
warrants  all  Work  performed  hereunder  against  defective  materials  and/or
workmanship, for a period of one (1) year from the date of Mechanical Completion
(the "Warranty Period").

6.17    Delays and  Extension of Time.  If  CONTRACTOR is delayed at any time in
        ------------------------------
the progress of the Work,  unless otherwise  permitted by this Contract,  by (i)
any act or  neglect  of OWNER,  or any  employee  of OWNER,  or by such act of a
separate  contractor  or agent  employed  by OWNER,  or (ii) Force  Majeure  (as
defined in Article 14), then the Project Progress  Schedule shall be extended as
provided in Section  6.13. In addition to such  extension of time,  there may be
other  adjustments in accordance with Section 6.13.  CONTRACTOR shall give OWNER
notice of any delay affecting the Work as soon as possible but in no event later
than five (5) Days after receipt of knowledge of such delay. Notwithstanding the
foregoing,  CONTRACTOR  shall  not be  entitled  to any  extension  of  time  or
increased  payments because of any delays occasioned by inclement or unfavorable
weather  normally  experienced  in the  geographic  area of the  Plant  Site (as
reported  by the  National  Weather  Service or a similar  agency) or any delays
occasioned  by  labor  disputes  of  employees  of  CONTRACTOR  or  any  of  its
subcontractors at the Jobsite.  OWNER shall not be liable to CONTRACTOR  because
of any such delays caused by labor disputes. If one or more Force Majeure events
causes  CONTRACTOR  to incur  costs in  excess  of  $200,000  in the  aggregate,
CONTRACTOR  shall be entitled to a Change Order pursuant to Section 6.13 for its
reasonable  out-of-pocket  costs actually and necessarily  incurred in excess of
$200,000 as a result of such Force Majeure event(s),  including  demobilization,
remobilization,  insurance,  standby and escalation costs. Such Change Order may
provide  that  CONTRACTOR  may add such costs to invoices  provided  pursuant to
Article  4  and  CONTRACTOR  shall  provide  such  supporting   information  and
documentation as OWNER may reasonably request.  OWNER shall pay such invoices as
provided in Article 4. In the event of a Force Majeure delay that  continues for
a period of more than sixty (60) Days, and OWNER and CONTRACTOR fail to agree to
such a Change Order before  expiration of such 60 Day period,  CONTRACTOR  shall
have the right to terminate  this  Contract upon at least thirty (30) Days prior
written notice to OWNER and OWNER shall have no liability to CONTRACTOR for lost
profits or any other costs related to items which are not actually  delivered to
OWNER prior to CONTRACTOR'S cancellation.

                                  Page 13 of 32
<PAGE>

6.18    Suspension  of  Work.   OWNER  shall  have  the  right  to  suspend  the
        ---------------------
performance of the Work at anytime by giving twenty-four (24) hours prior notice
in writing of such action plus such  reasonable  time as may be required for the
suspension of the Work so as to beneficially conserve what Work has been done or
is actually in progress  for future use. No prior  notice in writing is required
if  suspension  is  necessary  as  a  result  of  CONTRACTOR   violating  safety
procedures.

        Suspension of the Work shall be made without  prejudice to the claims of
either party in respect of any antecedent breach of the terms of this Contract.

        CONTRACTOR  shall,  during the period of suspension,  use all reasonable
efforts  to  utilize  its  personnel  in such a manner as to  minimize  the cost
associated  with the  suspension.  Upon  receipt  of any  notice of  suspension,
CONTRACTOR shall, unless the notice requires otherwise:

        (a)     Immediately  discontinue  the  performance  of the  Work  to the
        extent  specified in the notice;
        (b)     Take no further action relative to  subcontractors  or suppliers
        with respect to suspended Work other than to the extent  required in the
        notice;
        (c)     Promptly make every reasonable  effort to obtain suspension upon
        terms  satisfactory  to the  OWNER  of  all  subcontracts  and  purchase
        agreements to the extent they relate to portions of the Work  suspended;
        and
        (d)     Upon receipt of notice to resume the suspended Work, promptly as
        practicable  resume the  suspended  Work to the extent  required  in the
        notice.

        As compensation to CONTRACTOR for any  suspension,  CONTRACTOR  shall be
reimbursed  for all  reasonable  costs  associated  with  the  mobilization  and
demobilization of CONTRACTOR and its  subcontractors and all reasonable costs in
bringing the Work to an orderly state of suspension, as well as all cancellation
costs and any expenses  reasonably  incurred,  including  escalation  costs. Any
suspension or Work stoppage due to CONTRACTOR's or CONTRACTOR's  subcontractors'
or agents' safety  violations  shall be at  CONTRACTOR'S  expense.  In addition,
standby costs incurred by CONTRACTOR during the period of suspension (except for
safety violations) incurred in keeping its organization committed to the Work in
a standby status shall be paid by OWNER on a reimbursable  basis.  These and any
further  adjustments to the Lump Sum Contract Price or Project Progress Schedule
shall be made in  accordance  with  Section  6.13,  Changes.  In the  event of a
suspension that continues for a period of more than sixty (60) Days,  CONTRACTOR
shall have the right to terminate this Contract in accordance with Section 6.20.

        In the event any  undisputed  amount  required to be paid or advanced to
CONTRACTOR by OWNER under this Contract is not paid or advanced to CONTRACTOR by
OWNER as required,  CONTRACTOR, by giving seven (7) Days written notice, may, at
its option, suspend the Work in whole or in part and/or terminate this Contract.
Subject to its rights under Section 6.20,  Right to Terminate  Contract,  if the
Work is suspended and not terminated, CONTRACTOR shall resume performance of the
suspended  Work as promptly  as  practicable  after OWNER makes full  payment or
advancement  to  CONTRACTOR  of such  unpaid  amount.  During  such  suspension,
CONTRACTOR  shall be entitled to compensation  pursuant to the provision of this
Section.  In the event of termination,  CONTRACTOR  shall be entitled to damages
resulting  from such  termination,  as  otherwise  limited or  required  by this
Contract.

                                  Page 14 of 32
<PAGE>

6.19    OWNER'S Right to Do Work. If CONTRACTOR  should neglect to prosecute any
        -------------------------
substantive  portion of the Work properly,  OWNER, after five business (5) days'
written  notice  to  CONTRACTOR  and  CONTRACTOR  fails  to  promptly   initiate
corrective action,  may, without prejudice to any other remedy it may have, make
good such deficiencies and may deduct the cost thereof from the payments then or
thereafter due CONTRACTOR, and if such expenditures,  together with said losses,
damages  and extra  expenses,  exceed the  amount  otherwise  due to  CONTRACTOR
hereunder,  CONTRACTOR  agrees to pay to OWNER within  thirty (30) Days the full
amount of such  excess,  together  with  interest  thereon  at the prime rate of
interest  as  published  from time to time in the Wall Street  Journal  plus one
percent (1%) until paid.

6.20    Right  to  Terminate  Contract  If  either  Party  shall be  adjudged  a
        ------------------------------
bankrupt,  or if a Party should make a general assignment for the benefit of its
creditors, or if a receiver should be appointed on account of its insolvency, or
if it should  persistently or repeatedly  refuse or should fail, except in cases
for which  extension  of time is provided,  to supply  enough  properly  skilled
workmen or proper materials,  or if it should fail to make prompt payment to the
other Party,  subcontractors or for material or labor, or persistently disregard
laws,  regulations or  ordinances,  or otherwise be guilty of a violation of any
substantive  provision of this Contract,  then the non-defaulting  Party, in the
event that the defaulting Party does not promptly  initiate  corrective  action,
may,  without  prejudice  to any other  right or remedy  and  after  giving  the
defaulting Party and its surety, if any, ten (10) Days written notice, terminate
this  Contract,  and OWNER may  finish the Work by  whatever  method it may deem
expedient. In case of such cancellation,  the rights of the non-defaulting Party
shall be the same as if the defaulting Party had failed to perform this Contract
in whole or in part.

6.21    Taxes. Subject to Article 7, CONTRACTOR agrees to and does hereby accept
        ------
full and  exclusive  liability  for the payment of, and agrees to indemnify  and
hold  harmless  OWNER  from  claims,  damage,  loss and  expenses  arising  from
CONTRACTOR'S  failure  to  pay  for  unemployment  insurance  and/or  retirement
benefit, pensions or annuities now or hereafter imposed by the Government of the
United States and/or by the Government of any state of the United States,  which
are  measured  by the wages,  salaries  or other  remunerations  paid to persons
employed by CONTRACTOR on Work performed under the terms of this Contract.

        CONTRACTOR  assumes the liability of paying California Sales and Use Tax
to its suppliers or the appropriate  taxing authorities for all its purchases of
permanent materials and fixtures, consumable supplies, small tools, construction
machinery,  equipment  rental used to perform the  Contract and taxes on profits
(if any).  CONTRACTOR's Lump Sum Price includes  California Sales and Use Tax on
the CONTRACTOR's  purchases of (a) self-constructed  fixtures, (b) machinery and
equipment, and (c) permanent materials furnished under the Contract, if any.

                                 Page 15 of 32
<PAGE>

        Any  additions  or  reductions  of charges to the OWNER will be lump sum
Change Orders and will be treated,  for sales and use tax purposes,  in the same
manner as under the original Contract.

        All ad  valorem  taxes  levied  by any  jurisdiction  in San  Bernardino
County,  California  on  or  charged  against  the  real  or  personal  property
constituting   the  materials  to  be   incorporated   into  the  Work  are  the
responsibility  of OWNER.  All ad valorem  taxes  levied on or  charged  against
personal  property  consumable  supplies,   tools,  construction  machinery  and
equipment   used  to  perform  the  Contract   owned  by   CONTRACTOR,   or  its
subcontractors,  are the  responsibility  of CONTRACTOR  or its  subcontractors,
respectively.

6.22    Subcontractor. CONTRACTOR shall not assign nor subcontract this Contract
        --------------
or any part thereof or any interest  therein without first obtaining the written
consent of OWNER. Such approval shall not be unreasonably  withheld.  CONTRACTOR
shall  be  fully  responsible  to  OWNER  for  the  acts  and  omissions  of its
subcontractors and of persons either directly or indirectly  employed by them as
it is for the acts and omissions of persons directly employed by it.

6.23    Federal Labor Compliance.  Neither  CONTRACTOR nor OWNER will unlawfully
        -------------------------
discriminate  against any employee or applicant for  employment  because of age,
race, color, religion, sex, or national origin and shall comply with all Federal
and California Laws.

        CONTRACTOR  will comply with all provisions of Executive  Order 11246 of
September 24, 1965,  and of the rules,  regulations  and relevant  orders of the
Secretary of Labor.

6.24    Scheduling. A detailed Project Progress Schedule indicating the state of
        -----------
Work is attached hereto as Section 4.1 of Exhibit A and hereby incorporated into
this Contract.  Such Project Progress Schedule may be modified by the CONTRACTOR
from time to time to reflect changes in the Work or the conditions affecting the
Work.  CONTRACTOR  shall notify OWNER of such changes  within five Days from the
time changes are known to  CONTRACTOR.  If these changes  affect the cost or are
likely to change the date of  Mechanical  Completion  the  change  must be first
approved in writing by OWNER's Representative and otherwise strictly comply with
the provisions for changes set forth in Section 6.13 above.

6.25    Report of Progress of the Work. CONTRACTOR agrees to furnish on the 10th
        -------------------------------
Day  of  each  month  a  progress   report  of   engineering,   procurement  and
construction.  This report shall state the actual Work  completed as of the last
Sunday of the previous month.

6.26    OWNER'S Right To Inspect During Manufacture.  OWNER shall have the right
        --------------------------------------------
of ingress into any  factory,  shop,  warehouse or other  facility to inspect or
cause to be inspected  during  manufacture of any of the machinery or equipment,
at  reasonable  times  and  after  prior  notification  to  CONTRACTOR.  No such
inspection  shall relieve the CONTRACTOR of any obligation set forth herein.  It
is understood that this paragraph does not impose any obligation upon OWNER.

                                  Page 16 of 32
<PAGE>

6.27    Warranty. CONTRACTOR warrants to OWNER that all the Work as set forth in
        ---------
this  Contract will be free from defects in material and  workmanship,  has been
properly  installed  pursuant  to  this  Contract  and  applicable  manufacturer
specifications,  and will otherwise comply with the specifications  described in
this  Contract.  This  Warranty  shall  extend  for one (1)  year  from  date of
Mechanical Completion. In addition, CONTRACTOR warrants to OWNER that:

        6.27.1  The Work when completed will be free from defects in design that
would fall below the standard of care required of professional engineers;

        6.27.2  The Work when completed will be free from defects in workmanship
and materials that would fall below a good and workmanlike standard;

        6.27.3  Subject  to  Section  6.13,   the  Work  will  be  designed  and
constructed in compliance  with all applicable  laws,  regulations  and codes in
effect as of the effective date of the Contract;

        6.27.4  All machinery,  equipment,  facilities,  foundations (other than
any existing  foundations at the Plant Site) and  structures  will be fabricated
and  constructed in accordance  with  CONTRACTOR's  designs using new materials,
unless otherwise agreed expressly in writing by OWNER, of good quality and using
construction  and  fabrication  practices  which  are in  accordance  with  good
industry practice.

        6.27.5  The  Operation  and  Maintenance  Manuals to be delivered by the
CONTRACTOR  in its  Scope  of Work  under  the  Contract  will  give  sufficient
information and instructions to OWNER for the repair,  maintenance and operation
of CONTRACTOR's Work,  including any information and instructions that have been
provided to CONTRACTOR by the OEM (the "Operation and Maintenance Manuals").

        6.27.6  All equipment and supplies are installed in full compliance with
applicable OEM, OWNER, and Contract specifications.

6.28    Liability For Breach Of Warranty;  Limit of Liability. If any failure to
        ------------------------------------------------------
comply with CONTRACTOR'S  aforesaid warranty appears within the Warranty Period,
OWNER shall notify  CONTRACTOR of such failure,  and CONTRACTOR shall remedy any
such failure by  correcting,  repairing,  or replacing  (the parties to mutually
agree whether to correct,  repair or replace) such machinery,  equipment  and/or
services  within such time as shall be designated by OWNER.  EXCEPT AS STATED IN
THIS  CONTRACT  AND  EXCEPT  AS TO  TITLE,  THERE  ARE NO  OTHER  GUARANTEES  OR
WARRANTIES, INCLUDING OF HABITABILITY,  MERCHANTABILITY, FITNESS, PERFORMANCE OR
OTHERWISE,  WHETHER ORAL, EXPRESS, IMPLIED,  STATUTORY OR ARISING FROM COURSE OF
DEALING  OR  TRADE  USAGE.   CONTRACTOR'S  obligations  for  warranty  shall  be
enforceable  provided  that OWNER  maintains  and operates the  equipment  under
normal conditions with competent personnel and in accordance with the Operations
and Maintenance Manuals provided by CONTRACTOR. CONTRACTOR does not warrant Work
from ordinary wear, corrosion,  erosion,  chemical or abrasive action, excessive
heat,  improper  lubricating oil or application outside the design limitation of
the Work.  The  obligations  contained  in  Sections  6.27 and 6.28  govern  and
supersede  any other terms in this  Contract  which  address  warranties  or the
quality  of the Work  after  Mechanical  Completion  and are  CONTRACTOR'S  sole
warranty and guarantee  obligations and OWNER'S exclusive  remedies with respect
to defects in the Work after  Mechanical  Completion.  All of the warranties and
other  obligations  of  CONTRACTOR  under  Sections  6.27 and 6.28 relate to the
Warranty Period and CONTRACTOR shall not be obligated to correct,  or to pay for
the cost of correcting,  defects or deficiencies for which  CONTRACTOR  receives
notice after the expiration of the Warranty Period.

                                  Page 17 of 32
<PAGE>

CONTRACTOR  shall  obtain  from  all  vendors  from  which  CONTRACTOR  procures
materials  and  equipment,  warranties  with  respect to such  equipment  as are
reasonably  available.  Such warranties shall obligate the respective vendors to
repair or replace  nonconforming or defective materials and equipment.  All such
warranties  shall be  assigned  to OWNER  upon  expiration  of the  CONTRACTOR's
Warranty  Period.  During the  CONTRACTOR'S  Warranty  Period,  CONTRACTOR shall
assume all  responsibility  at its expense for  administering and enforcing such
vendor  warranties and OWNER may rely upon and deal with CONTRACTOR with respect
to such warranties.  The warranties  specified in Section 6.27 above shall apply
to all portions of the Work provided by  subsidiaries  and vendors of CONTRACTOR
in addition to such portions provided by CONTRACTOR.  Unless otherwise  mutually
agreed by the  parties,  the  refractory  warranty  period will be that which is
provided by the manufacturer.

6.29    Patents.  Unless otherwise agreed in writing,  and subject to Article 7,
        --------
CONTRACTOR  shall defend at its expense,  indemnify  Indemnitees  (as defined in
Section 7.1.1), and pay cost and damages awarded in any suit brought against any
Indemnitee  based on the use or sale of  machinery,  equipment  and/or  services
furnished  hereunder  constituting  infringement  of a validly  existing  United
States  or  foreign  patent,  copyright,   trademark,   trade  secret  or  other
intellectual  property  right.  OWNER may,  at its  option,  participate  in the
defense,  compromise, or settlement of such claim provided that OWNER shall bear
the  cost  and  expenses  related  to such  participation.  In the  alternative,
CONTRACTOR,  at CONTRACTOR'S sole option, may fulfill its obligations under this
Section 6.29 by procuring for OWNER, as  appropriate,  the right to make, use or
sell  the  invention  or  matter  protected  by  the  aforementioned   infringed
intellectual  property right,  or by assisting OWNER in designing  modifications
necessary  to  eliminate   any  claim  of   infringement.   Any  cost  for  such
modifications shall be CONTRACTOR'S responsibility.

OWNER shall defend at its expense, indemnify the Indemnified Parties (as defined
in Section 7.1.6), and pay cost and damages awarded in any suit based on alleged
infringement of a patent, copyright or trademark brought against any Indemnified
Party  and  based on the use or sale of  machinery,  equipment  and/or  services
falling outside the CONTRACTOR's Scope of Work,  including,  without limitation,
the OEM.

6.30    Intentionally Omitted.
        ----------------------

                                  Page 18 of 32
<PAGE>

6.31    CONTRACTOR'S Liability.
        -----------------------

        6.31.1  CONTRACTOR'S  AGGREGATE MAXIMUM LIABILITY (EXCLUSIVE OF PROCEEDS
OF INSURANCE PROVIDED BY OWNER PURSUANT TO ARTICLE 7) FOR LOSS OR DAMAGE ARISING
UNDER, RESULTING FROM OR CONNECTED WITH THIS CONTRACT OR FROM THE PERFORMANCE OR
BREACH OF ANY OBLIGATION IMPOSED  HEREUNDER,  WHETHER SUCH LIABILITY ARISES FROM
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE),  DELAYED COMPLETION,  WARRANTY,
INDEMNITY,  STRICT LIABILITY OR OTHERWISE, UNLESS OTHERWISE LIMITED BY THE TERMS
HEREOF,  SHALL BE LIMITED TO TEN  PERCENT  (10%) OF THE TOTAL LUMP SUM  CONTRACT
PRICE,  WHETHER SUCH SUM IS EXPENDED IN REPAIR,  REPLACEMENT,  OTHER  CORRECTIVE
ACTION,  LIQUIDATED  DAMAGES,  IF ANY, OR DELAY DAMAGES,  REFUND OF THE CONTRACT
PRICE OR ANY SUCH REMEDY AS MAY BE PROVIDED.

        6.31.2  Except as it may be more narrowly limited by any other provision
of this Contract,  the liability of CONTRACTOR,  its subcontractors,  vendors or
agents, or their employees,  officers,  directors and shareholders (collectively
referred  to in this  section as  "CONTRACTOR")  to OWNER,  OWNER'S  affiliates,
insurers, or their employees, officers, directors and shareholders, or any third
parties  referred to below in Section 6.31.3  (collectively  referred to in this
section as  "OWNER")  for loss of or damage to  property  (other  than the Work)
shall be limited to: 1) the extent such loss or damage is caused by CONTRACTOR'S
negligence;  and 2) the lesser of: (i) the deductible under OWNER'S insurance or
(ii) $250,000 in the aggregate.

        6.31.3  OWNER  represents that it is (i) the sole owner of the Work, the
land   constituting   the  site  of  the  OWNER'S  plant  and  facilities  where
CONTRACTOR'S  Work will be  performed,  and any  inventory  or other  personalty
stored thereon  (collectively  "Property"),  or (ii) authorized to bind and does
bind (or will bind prior to the  occurrence  of any loss or damage  thereto) all
persons or entities  currently  having,  or acquiring in the future any legal or
equitable  interest  in or right to occupy  the  Property,  to the  indemnities,
releases and limitations of liability set forth in this Contract. If OWNER fails
to bind to this limitation any third party having, or hereafter  acquiring,  any
interest in the Property, OWNER agrees to indemnify,  defend and hold CONTRACTOR
harmless  from and  against  such  liability  to the extent  that it would cause
CONTRACTOR'S  total liability to exceed the limit of liability stated in Section
6.31.

        6.31.4  This  limitation  of  liability  and  indemnity  applies  to all
liability  arising from the CONTRACTOR'S  activities and obligations  related to
the Contract,  and any separate agreement with a third party to perform services
for OWNER'S  benefit on OWNER'S  Property,  as defined above,  including but not
limited to, duty  arising in contract,  warranty,  indemnity,  statute,  tort or
other theory of liability  (WHETHER SUCH  OCCURRENCE  ARISES OUT OF CONTRACTOR'S
SOLE OR CONCURRENT NEGLIGENCE OR BREACH OF ANY STANDARD OF STRICT LIABILITY).

        6.31.5  CONTRACTOR'S  liabilities are limited as set forth herein and it
is  expressly  agreed  that this  Contract  sets  forth  the sole and  exclusive
remedies  available to OWNER.  To the fullest extent  permitted by law,  neither
CONTRACTOR,  its  subcontractors  or  affiliates  nor  OWNER  shall,  under  any
circumstances,  be  liable  to the  other  for  special,  indirect,  incidental,
punitive, exemplary, or consequential damages, including but not limited to loss
of use of Plant Site, Jobsite, Work, or other property, loss of savings, loss of
use of capital or goodwill, product or business interruption,  increased cost of
capital, financing or other carrying charges, rental charges, or increased costs
of  operations,  maintenance  of staffing  needs,  loss of profits,  anticipated
revenue,  interest, loss of use of equipment,  loss by reason of plant shutdown,
non-operation,  additional  usage  of fuel or  utilities,  or other  such  claim
arising from any cause  whatsoever,  whether or not foreseeable,  and WHETHER OR
NOT SUCH  LOSS OR  DAMAGE  IS  BASED  IN  CONTRACT,  WARRANTY,  TORT  (INCLUDING
NEGLIGENCE),  STRICT LIABILITY,  INDEMNITY, OR OTHERWISE,  and each party hereby
releases the other party, and their respective agents and employees of each from
any and all such liability.  Notwithstanding  the foregoing,  this Section shall
not be deemed to limit any indemnification  obligation due from one party to the
other  resulting from third party claims for bodily injury or death or for third
party claims for  consequential  damages relating to patent  infringement to the
extent provided for elsewhere in this Contract, nor shall this Section be deemed
to limit  CONTRACTOR's  right to payment of the Lump Sum  Contract  Price to the
extent due pursuant to the terms hereof, as such amount may be amended by Change
Order.

                                  Page 19 of 32
<PAGE>

        6.31.6  All  disclaimers,  limitations  and  exclusions  of liability to
which CONTRACTOR is entitled under this Contract, including without limiting the
generality of the foregoing,  limitations with respect to consequential damages,
liability and aggregate liability,  warranty and other damages shall survive the
termination  or completion of this Contract and shall inure to, and be available
as a defense by, the CONTRACTOR's affiliates,  subsidiaries,  subcontractors and
suppliers of any tier, and their respective officers,  directors,  shareholders,
agents and employees,  and CONTRACTOR  shall be deemed the agent of such persons
for the purpose of this section.

6.32    CONTRACTOR'S Insolvency.  If CONTRACTOR is adjudged a bankrupt, or makes
        ------------------------
a general  assignment  for the  benefit of its  creditors,  or if a receiver  of
CONTRACTOR'S assets is appointed because of CONTRACTOR'S insolvency or inability
to pay its debts, or if OWNER  otherwise has reasonable  grounds to believe that
CONTRACTOR'S  financial  stability  has become  impaired,  OWNER  shall have the
option of  terminating  this Contract by giving written notice of termination to
CONTRACTOR,  and such  termination  shall have the same effect as a  termination
under Section 6.20 of this Contract.

6.33    Failure  To Insist  Upon  Strict  Performance.  No  failure  by OWNER or
        ----------------------------------------------
CONTRACTOR  to  insist  upon  strict  performance  under  this  Contract  in any
particular  instance shall constitute a waiver of OWNER'S or CONTRACTOR's right,
as applicable, to insist upon strict performance in all other instances, whether
the same or different provisions of this Contract are involved.

6.34    Assignment.  This Contract and all  provisions  thereof shall be binding
        -----------
upon the respective  successors  and assigns of CONTRACTOR and OWNER,  provided,
however,  that  neither  party  shall  assign  this  Contract  or any  right  or
obligation thereunder without first obtaining the written consent thereto of the
other party. Such consent shall not be unreasonably withheld.

6.35    Entire  Agreement:  Modification  This  Contract  sets  forth the entire
        --------------------------------
agreement  and  understanding  between  the parties  hereto with  respect to the
subject  matter  hereof,  and no  attempted  amendment or  modification  of this
Contract  shall have any effect unless same is in writing and signed by the duly
authorized representatives of both parties hereto.

                                  Page 20 of 32
<PAGE>

6.36    Third Party Beneficiaries.  The provisions of this Contract are intended
        --------------------------
for the sole  benefit  of OWNER and  CONTRACTOR  and  there  are no third  party
beneficiaries hereof except as provided in Section 6.31.

6.37    Severability.  The  invalidity  or  unenforceability  of any  portion or
        -------------
provision of this Contract shall in no way affect the validity or enforceability
of any other portion or provision hereof.  Any invalid or unenforceable  portion
or provision  shall be deemed  severed from this Contract and the balance of the
Contract shall be construed and enforced as if the Contract did not contain such
invalid or  unenforceable  portion or provision.  If any such  provision of this
Contract is so declared  invalid,  the Parties shall promptly  negotiate in good
faith new provisions to eliminate  such  invalidity and to restore this Contract
as near as possible to its original intent and effect.

6.38    No  Fiduciary  Duty.  Nothing in this  Contract  shall be  construed  as
        --------------------
creating a fiduciary duty between CONTRACTOR and OWNER, and the existence of any
such fiduciary duty between the Parties is hereby expressly disclaimed.

ARTICLE 7. INDEMNITIES AND INSURANCE

7.1     Indemnities
        -----------

        7.1.1   To  the  fullest  extent  permitted  by  law,  CONTRACTOR  shall
indemnify,  defend (at OWNER'S request and through counsel reasonably acceptable
to OWNER)  and hold  harmless  OWNER  and its  affiliates  and  their  officers,
directors, employees and agents ("Indemnitee" in these Sections 7.1.1, 7.1.2 and
7.1.4) from and against  all third  party (a "third  party"  being a party not a
signatory to this Contract including  employees of OWNER and CONTRACTOR) claims,
demands, causes of action, damages, liabilities,  losses and expenses, including
attorneys' and consultants' fees and expenses  (collectively,  "Claims"), to the
extent  arising  out of or  resulting  from  CONTRACTOR'S  performance  of Work,
provided such Claims are  attributable  to bodily injury,  sickness or death, or
injury to or destruction of tangible property (except the Work).

        7.1.2   The foregoing indemnity shall not extend to Claims to the extent
they result from the negligence, fault or willful misconduct of an Indemnitee.

        7.1.3   With respect to Claims against any person or entity  indemnified
by the CONTRACTOR,  or subcontractor,  or anyone directly or indirectly employed
by any of them or for whose acts any of them may be liable, the  indemnification
obligation  shall not be limited by a  limitation  on amount or type of damages,
compensation or benefits payable under workers'  compensation  acts,  disability
benefit acts other employee benefit acts.

                                  Page 21 of 32
<PAGE>

        7.1.4   Neither CONTRACTOR nor its subcontractors  shall, as a result of
CONTRACTOR'S performance of the Work, place or release, or cause to be placed or
released, any Hazardous Materials (as defined in CERCLA) ("Hazardous Materials")
in, on or under the Jobsite, or into any adjacent or nearby watercourse, body of
water or wetlands,  except in strict  compliance  with all  applicable  laws and
permits.  CONTRACTOR shall be responsible for any Hazardous Materials that it or
its  subcontractors  or suppliers  bring to the Jobsite,  and for any  Hazardous
Materials in  CONTRACTOR's  care that were  provided to  CONTRACTOR  by OWNER or
OWNER's other  contractors  specifically for its use in performance of the Work,
which is deposited,  released or disposed of in, on or under the Jobsite or into
any adjacent or nearby  watercourse,  body of water, or wetlands on or after the
date  of  execution  of the  Contract  by any of  the  foregoing  persons  only,
including  if  necessary  any  cleanup  or  remediation  activities,  and  shall
indemnify  and hold  harmless  the  Indemnitees  from  and  against  any  Claims
(including  under CERCLA) arising out of or resulting from the deposit,  release
or disposal of any such Hazardous  Materials in, on or under the Jobsite or into
any  adjacent or nearby  watercourse,  body of water or wetlands on or after the
date of execution of the Contract by any of the CONTRACTOR,  its  subcontractors
or  suppliers  (excluding  Indemnitees)  only,  except to the  extent  caused by
negligence  or  willful  misconduct  on the part of the  applicable  Indemnitee.
Provided, however OWNER agrees that if it provides CONTRACTOR with any Hazardous
Materials  specifically  for  CONTRACTOR's  use in performance of the Work, such
Hazardous  Materials shall be identified on the packaging  thereof or OWNER will
identify  such  Hazardous  Materials in writing  when  provided,  including  any
applicable MSDS sheets.

        7.1.5   CONTRACTOR may temporarily  interrupt its Work and will promptly
inform  OWNER if it  reasonably  believes  there is undue  risk of  exposure  to
Hazardous Substances.  CONTRACTOR will cooperate with OWNER to determine when it
and others  under its control  may safely  resume  Work.  If  CONTRACTOR  is not
responsible  for,  and did not  cause the risk of  exposure  to,  the  Hazardous
Materials that caused the interruption in the Work,  CONTRACTOR will be entitled
to a Change  Order in  accordance  with Section  6.13,  of the Lump Sum Contract
Price and Project Progress  Schedule in connection with interruption of Work due
to Hazardous Substances.

        7.1.6   OWNER shall be fully  responsible  for all Hazardous  Substances
existing at the Jobsite as of the date of execution of the Contract. OWNER shall
indemnify, defend and hold harmless CONTRACTOR and its subcontractors, and their
officers, directors,  employees and agents ("Indemnified Party" for this Section
7.1.6), from and against any Claims resulting from an encounter with or exposure
to Hazardous  Materials or resulting from such Indemnified  Party's being deemed
an owner or operator of the Jobsite,  or a  generator,  storer,  transporter  or
treater  of  Hazardous  Materials  existing  at the  Jobsite  as-of  the date of
execution  of the  Contract,  for  purposes of any laws and permits  relating to
Hazardous  Materials or any  investigatory or remedial actions by any government
authorities having  jurisdiction over the Jobsite;  provided,  however that this
indemnity  shall  not  apply to the  extent of the sole  negligence  or  willful
misconduct  of an  Indemnified  Party  or  violation  of  applicable  of laws or
regulations by an Indemnified Party.  Without  limitation,  such indemnity shall
include  any  liability  of  the  Indemnified   Party  under  the  Comprehensive
Environmental  Response  Compensation  and  Liability  Act  (including  the SARA
amendments  thereto),  and any liability of the Indemnified Party resulting from
actions by any state or local agency.

                                  Page 22 of 32
<PAGE>

        7.1.7   If any claim of Lien,  stop notice,  equitable lien or any other
demand for payment or security, including claims or demand upon surety bonds for
any of the Work, is made or filed with OWNER, OWNER'S property or the Jobsite by
any person claiming that CONTRACTOR, subcontractor, or any other person claiming
under any of them  (other  than  OWNER) had failed to  perform  its  contractual
obligations or to make payment for any obligation  incurred for or in connection
with the Work,  then OWNER,  subject to OWNER  having paid  CONTRACTOR  for such
amounts,  shall have the right to retain from any payment then due or thereafter
to become due CONTRACTOR or to be reimbursed by CONTRACTOR an amount  sufficient
to remedy  any such  nonpayment  (including  reasonably  and  actually  incurred
attorneys' and consultants' fees) sustained or incurred in connection therewith.
Upon mutual  agreement  of the parties,  CONTRACTOR  may furnish a bond or other
security  to  indemnify  OWNER  against  lien  claims  of   subcontractors   and
materialmen in order to receive payment from OWNER.

7.2     Insurance Provided by CONTRACTOR
        --------------------------------

        7.2.1   CONTRACTOR shall provide,  pay for and maintain insurance of the
type and in the limits as set forth below.  Such  insurance  shall be maintained
from the  commencement  of Work by CONTRACTOR on the Jobsite until the latter of
Mechanical  Completion  or  the  completion  of all  post-Mechanical  Completion
warranty or related Work by CONTRACTOR or any subcontractor.

        7.2.2   Automobile  Liability  insurance covering all owned,  non-owned,
and hired  vehicles used by CONTRACTOR or the applicable  subcontractor  for all
operations  both on and off the  Jobsite,  with a limit of  $3,000,000  combined
single limit per accident for Bodily Injury and Property Damage.

        7.2.3   Workers' Compensation insurance for statutory benefits limits of
the applicable Labor Code(s) and Workers'  Compensation  law(s) and Coverage B -
Employer's  Liability with limits of $1,000,000  each accident for Bodily Injury
by  accident,  $1,000,000  each  employee  for  Bodily  Injury by  disease,  and
$1,000,000  policy limit for Bodily Injury by disease.  Such insurance  shall be
endorsed to include Longshore and Harbor Workers'  Compensation Act Coverage and
Jones Act Coverage if applicable,  and shall cover all operations of CONTRACTOR.
Such insurance shall be endorsed to include Other States Coverage and to include
a Waiver  of Our  Right  to  Recover  from  Others  Endorsement  in favor of the
Indemnitees.

                (a)     If  CONTRACTOR  or  the  applicable  subcontractor  is a
                        qualified Workers' Compensation  self-insurer,  prior to
                        its commencement of Work at the Jobsite CONTRACTOR shall
                        submit  to  OWNER  a copy  of  such  employer's  current
                        Certificate of Permission to Self- Insure.

                (b)     CONTRACTOR shall include,  and shall require each of its
                        subcontractors  to include,  the following  provision in
                        all  subcontracts  let by such party for  performance of
                        Work  when  the  party   performing   Work   under  such
                        subcontract  is a qualified,  approved  self-insurer  of
                        Workers' Compensation:

                                "The subcontractor  waives any right of recovery
                        the  subcontractor  may  have  or  acquire  against  the
                        Indemnitees,  CONTRACTOR, or subcontractors of all tiers
                        by reason of the  subcontractor's  having paid  Workers'
                        Compensation benefits as a self-insurer."

                                  Page 23 of 32
<PAGE>

        7.2.4   Commercial  General Liability  insurance covering all operations
of CONTRACTOR and its  subcontractors  at the Jobsite.  Such insurance  shall be
written on an  occurrence  form;  coverage  under the primary  policy  cannot be
provided  under a  "Claims-Made"  or "Modified  Occurrence"  policy  without the
prior,  express  written  consent  of  OWNER.  Such  insurance  shall be no less
comprehensive and no more restrictive than the coverage provided by the standard
Insurance  Services Office (ISO) form CG 00 01 10 93; shall include by its terms
or appropriate  endorsements  Bodily Injury,  Property Damage,  Personal Injury,
Blanket Contractual,  Independent Contractors, Products and Completed Operations
coverages;   shall  include  Products   Liability   coverage  for  any  products
manufactured,  assembled,  or otherwise  worked upon away from the Jobsite:  and
shall include coverage for "x" (explosion), "c" (collapse), or "u" (underground)
exposures. Such insurance shall have the following limits:

                $25,000,000 Each Occurrence;
                $25,000,000 General Aggregate; and
                $25,000,000 Products/Completed Operations Aggregate

        7.2.5   Professional Liability insurance by the CONTRACTOR or applicable
subcontractor,   if  CONTRACTOR  or  applicable   subcontractors   will  perform
professional  services  in  connection  with the  Work,  including  engineering,
architectural,  medical,  testing,  environmental assessment or remediation,  or
design-build services, with a limit of $2,000,000 per wrongful act, or negligent
error or omission, and an annual aggregate limit of $4,000,000.

        7.2.6   The insurance  coverages specified in Sections 7.2.2, 7.2.3, and
7.2.4 may be arranged under single policies for the full limits required or by a
combination of underlying policies with the balance provided by Excess Liability
insurance.  The Excess Liability insurance shall provide coverage  substantially
following the form of and as broad as that of the underlying primary policies,

        7.2.7   OWNER  and  its  affiliates  shall  be  included  as  Additional
Insureds under the insurance policy in Sections 7.2.2 (Auto) and 7.2.4 (CGL) and
such coverage  afforded the  Additional  Insured in those Sections only shall be
primary insurance, to the extent of the limits provided in such sections. If any
Additional  Insured has other insurance which is applicable to the loss, then to
the extent such  Additional  Insured is entitled to coverage under  CONTRACTOR's
insurance pursuant to this paragraph, such other insurance shall be on an excess
and/or contingent basis.

        7.2.8   All required coverages will be maintained  without  interruption
during the entire term of Contract plus the Commercial  General  Liability shall
remain in effect for an  additional  three (3) years in Products  and  Completed
Operations coverage following Mechanical Completion.

                                  Page 24 of 32
<PAGE>

        7.2.9   CONTRACTOR  will  require  its   subcontractors  to  obtain  and
maintain  automobile  liability,  Workers'  Compensation and Commercial  General
Liability  insurance,  as applicable,  in accordance with CONTRACTOR's  standard
practices.  CONTRACTOR will use all reasonable efforts to obtain for the benefit
of CONTRACTOR  and OWNER waivers of subrogation  and  additional  insured status
from its subcontractors.

7.3     Insurance Provided by OWNER
        ---------------------------

        7.3.1   OWNER shall purchase and continuously  maintain until Mechanical
Completion,  or termination of this Contract,  whichever occurs last,  Builder's
Risk insurance naming as Named Insureds OWNER,  CONTRACTOR,  and  subcontractors
and suppliers of all tiers and any other contractors of OWNER performing Work at
the Jobsite. Such insurance shall cover all equipment,  machinery, supplies, and
other property  intended to be permanently  incorporated in the Work at Jobsite,
for  which  title or risk of loss  shall  have  passed at the time of loss to an
insured.  Coverage  shall  apply to such  property  while it is  located  at the
Jobsite or located at temporary  off-site  storage or staging areas  approved by
OWNER,  or while in  land-based  transit to the Jobsite  within the  continental
United States.  Coverage  shall be written on an "All Risk" form,  including but
not limited to, fire, lightning, windstorm, hail, riot, riot attending a strike,
civil commotion,  aircraft,  vehicle,  smoke,  explosion,  vandalism,  malicious
mischief,  damage to glass,  theft,  flood and earthquake  (including  sinkhole)
coverages.  Such insurance shall include  coverage for expenses due to delays in
completion  as a result of the  insured  perils,  subject  to a thirty  (30) Day
deductible.  Limits  under  this  insurance  shall  not be less than 100% of the
replacement  value of the Work at Jobsite for  physical  damage to property  and
related  expenses,  provided that sub limits shall be established for losses due
to  earthquake  (including  sinkhole)  and  flood,  which  earthquake  and flood
sublimits  shall  be  no  less  than  the  minimum  sublimits  for  such  losses
established  pursuant  to  OWNER'S  agreements  with its  lenders.  The OWNER if
requested,  shall provide the CONTRACTOR  with a copy of the proposed  builder's
risk  insurance  policy  for  comments  and a copy of the final  policy  and all
endorsements  related  thereto not less than thirty (30) Days prior to the first
Work on the Jobsite by CONTRACTOR,

        7.3.2   The foregoing  insurance  shall include a deductible of not more
than $100,000 for each loss or such greater amount as is generally acceptable in
the industry for the size and scope of the Work. CONTRACTOR shall bear the first
$10,000 of the deductible amount (other than deductible amounts related to flood
or earthquake  coverage,  which OWNER shall be obliged to pay), with no increase
in the Lump Sum Contract Price.

        7.3.3   Exclusions from such insurance may include,  but are not limited
to, the following; (1) loss resulting from mysterious disappearance or caused by
any  wrongful  removal of any  property  of a named  insured  or any  additional
insured by the employee(s) of such named insured or additional insured, (2) loss
or damage to any automobiles,  (3) loss or damage to CONTRACTOR'S or any insured
subcontractor's  owned,  leased or rented property or  construction-type  tools,
equipment,  machinery,  or supplies used for construction but not intended to be
permanently  incorporated in the Work at Jobsite, and (4) loss or damage covered
by a manufacturer's warranty or guarantee.

                                  Page 25 of 32
<PAGE>

        7.3.4   Loss, if any, under this  insurance  shall be adjusted by OWNER,
with the cooperation of CONTRACTOR, and insurance proceed check(s) shall be made
payable  to OWNER,  to hold such funds as trustee on behalf of any party with an
insurable interest.

7.4     Requirements for All Insurance
        ------------------------------

        CONTRACTOR  shall cause the insurance to be obtained  under Section 7.2,
and OWNER shall cause the insurance it obtains under Section 7.3, to satisfy the
following provisions and requirements.

        7.4.1   Notwithstanding  limitations  of liability  under  Section 6.31,
OWNER  and  CONTRACTOR   waive  all  rights  against  (i)  each  other  and  the
subcontractors,  agents and  employees of each other,  and (ii)  subcontractors,
agents and  employees,  for damage  caused by fire or other  peril to the extent
covered  and paid by  property  insurance  obtained  by OWNER  pursuant  to this
Article 7 or by any other property insurance applicable to the Work, except such
rights as each may have to proceeds of such  insurance held by OWNER as trustee.
The  insurance  policies  obtained  by OWNER  pursuant  to Section  7.3 shall be
endorsed to include a waiver of  subrogation  in favor of Indemnitees as well as
CONTRACTOR  and its  subcontractors,  and the  insurance  policies  obtained  by
CONTRACTOR and its  subcontractors  pursuant to Section 7.2 shall be endorsed to
include a waiver of subrogation  in favor of  Indemnitees.  In addition,  to the
extent such  policy(ies) to be provided by OWNER have a deductible  greater than
$10,000,  OWNER shall waive all rights of recovery against CONTRACTOR for events
covered by Section 6.14 for any such deductible losses in excess of CONTRACTOR's
$10,000 deductible.

        7.4.2   All insurance  required by this Contract shall be from insurance
companies  authorized  to  transact  that  class of  insurance  in the  State of
California  or an approved not admitted  carrier and having a minimum  rating of
(or equivalent  to) A-VIIl by A.M. Best & Company or as otherwise  acceptable to
both  CONTRACTOR  and OWNER.  The  required  certificates  must be signed by the
authorized representative of the insurance company shown on the certificate with
proof  that  he/she  is  an  authorized  representative  thereof.  In  addition,
certified,  true and exact  copies of all  project-specific  insurance  policies
required by this Contract other than professional  liability  insurance shall be
provided  to either  party  within a  reasonable  period  of time  upon  written
request.

        7.4.3   The insurance  provided by OWNER hereunder shall provide primary
property damage coverage with respect to the Work.

        7.4.4   Thirty (30)  calendar  Days'  written  notice  shall be given to
OWNER and CONTRACTOR of any  cancellation,  intent not to renew, or reduction in
the  policies'  coverage  except  in  the  application  of the  aggregate  limit
provisions.

        7.4.5   Prior to commencing  any Work at the Jobsite,  CONTRACTOR  shall
furnish OWNER with a  certificate(s)  of insurance  giving evidence of insurance
required  by Section  7.2 and  evidence  of  additional  insurance  endorsements
required by Sections 7.2.7 and 7.4.1.

                                  Page 26 of 32
<PAGE>

        Additionally,  CONTRACTOR shall furnish a certificate(s) of insurance or
a policy binder(s) of insurance,  evidencing  replacement  coverage, to OWNER at
least 7 Days prior to expiration of any such policies, so that there shall be no
interruption in Work due to lack of proof of insurance coverage required by this
Contract.  If such  documentation is not available 7 Days prior to expiration of
any such policy(s),  CONTRACTOR shall provide OWNER with a notice,  stating with
specificity  the  status  of  such  renewal,  and  shall  provide  OWNER  with a
certificate(s)  of  insurance  or a policy  binder(s) of insurance as soon as is
reasonably  practicable.  OWNER  shall not be liable for any delays (or costs or
damages  resulting there from) resulting from  CONTRACTOR'S  failure (or that of
any  subcontractor  of any tier) to obtain the  insurance  required  of it under
Section 7.2, or to deliver the required certificates of insurance to OWNER.

        Certificates  of insurance  shall provide for at least thirty (30) Days'
prior  written  notice  to OWNER of  cancellation  (unless  cancellation  is for
nonpayment of premium,  in which case 10 Days' notice will suffice) or materials
alteration,  and shall delete the words  "endeavor  to" from the  obligation  to
notify the certificate holder (OWNER) of such cancellation or modification. Upon
advance written request of OWNER,  CONTRACTOR  shall permit OWNER to review,  at
CONTRACTOR'S  office, a copy of any policy of insurance required by Section 7.2,
from which may be redacted premium information.

        7.4.6   The insurance  coverages and limits required under this Contract
are designed to meet the minimum requirements of OWNER. They are not designed as
a  recommended  insurance  program for  CONTRACTOR  or its  subcontractors,  and
meeting  these  minimum  requirements  does not  relieve  such  persons of their
obligations under Section 7.1.

        7.4.7   The amounts and types of Commercial General Liability  insurance
shall conform to the minimum requirements set forth in this Article 7, utilizing
insurance  Services  Office (ISO) policies or the  equivalent  and  endorsements
where applicable.

        7.4.8   The acceptance of delivery of any  certificates  of insurance or
certified insurance policies required to be purchased and maintained pursuant to
this Contract does not  constitute  approval or agreement by the recipient  that
the insurance requirements have been met or that those certificates of insurance
policies are in compliance with this Contract.

        7.4.9   All of the insurance  required by this Article 7 shall be issued
as required by law and shall be endorsed,  where  necessary,  to comply with the
minimum  requirements  contained  herein.  Certificates  of insurance,  or other
reasonably  available  evidence of  insurance  coverage as  specified in Section
7.4.5  above,  must be provided at least 7 Days prior to  expiration  of current
policies so that there shall be no  interruption in Work due to lack of proof of
insurance coverage as required in this Contract.

        7.4.10  OWNER may elect at any time during the term of this  Contract to
require  CONTRACTOR  to procure and maintain  other or  additional  commercially
available insurance.  Notice of such election shall be given at least sixty (60)
Days prior to the effective date of the required  modifications,  Any additional
costs  incurred by these  parties in securing  insurance  shall be reimbursed by
OWNER as a part of the cost of the Work,  and the Lump Sum Contract  Price shall
be  revised by Change  Order to be  increased  by the amount of such  additional
reimbursement.

                                  Page 27 of 32
<PAGE>

ARTICLE 8. RESOLUTION OF DISPUTES

        If at any time any controversy  shall arise between OWNER and CONTRACTOR
with respect to any matter or thing involved in this Contract, or arising out of
or related to subject matter of this Contract, and which OWNER and CONTRACTOR do
not promptly  adjust and determine,  and upon  completion of the Work and before
the final  settlement  and  payment is made said  controversy  shall be resolved
first by a meeting  between the Project  Management  Committee of the respective
parties  involved.  Should  agreement still not be reached within ten (10) Days,
said  controversy  shall be  resolved by a meeting  between the chief  executive
officers of the  respective  parties  involved.  Should  agreement  still not be
reached within twenty-four (24) hours, the parties may agree to mediate. If they
do not agree to mediate,  or if mediation is unsuccessful,  the parties agree to
be subject to binding  arbitration in accordance with the most current Rules for
Construction Disputes of the American Arbitration Association (AAA). If the Work
or any part of the Work is being  delayed,  the  arbitration  must  result in an
interim  ruling  within  ninety (90) Days of  submission.  The award shall be in
writing and shall include  findings of fact and conclusions of law in support of
the award.  The award will be final and  binding and may be entered in any court
of competent jurisdiction.  All disputes and/or claims less than or equal to One
Hundred  Thousand  Dollars  ($100,000.00)  in  value  shall  be  before a single
arbitrator and disputes and/or claims in excess of that amount shall be before a
panel of three  arbitrators,  all appointed in accordance  with said Rules.  The
parties  shall split evenly the costs of all  arbitrators'  fees,  and all costs
assessed  by the AAA.  Each party  shall bear its own cost of  arbitration.  The
arbitration  shall take place in Dallas,  Texas and Texas law shall  apply.  The
arbitrator(s)  shall have no  authority to award relief that is precluded by the
terms of this Contract.  CONTRACTOR shall require its subcontractors to agree in
writing to submit to the jurisdiction of arbitration.

ARTICLE 9. INDEPENDENT CONTRACTOR

        CONTRACTOR  is engaged by OWNER under this  Contract to provide the Work
solely as an independent  contractor.  CONTRACTOR and CONTRACTOR'S employees and
subcontractors shall not have or be deemed to have employee status with OWNER or
any  affiliated  companies by virtue of this  Contract or  otherwise,  nor shall
CONTRACTOR  be or  become  entitled  to  participate  in  any  plans,  benefits,
arrangements or distributions which OWNER and any affiliated corporations now or
hereafter make available to their employees.

ARTICLE 10. NOTICE

        All  communications  and notices  provided  for or  required  under this
Contract shall be in writing and mailed by U.S.  Mail,  first class or certified
return  receipt  request,  or  delivered  in  person  or by  confirmed  telecopy
facsimile with original sent by mail, to the  respective  addresses of OWNER and
CONTRACTOR  set forth in this Contract.  Notices shall be properly  delivered to
the appropriate party at such party's address as set forth below or as set forth
in a notice hereafter sent in this manner:

                                  Page 28 of 32
<PAGE>

        OWNER:                            CONTRACTOR:
        Riverside Cement Company          Oro Grande Contractors
        3500 Porsche Way Suit 150         P.O. Box 240130 (78224-0130)
        P.O. Box 51479                    527 Logwood (78221-1738)
        Ontario, Ca. 91761-0079           San Antonio, Texas
        Attention: William O. Brown       Attention:Stephen H. Dedman

ARTICLE 11. SPECIAL CONDITIONS

The special conditions of this Contract are as follows:

        1.      OWNER  shall  furnish  a  "Daily   Drilling  Log"  form  to  the
CONTRACTOR  to summarize  the daily  activity of each drilling rig on this form.
The completed form in duplicate and  authenticated by signatures of CONTRACTOR'S
representative  and OWNER shall be given to OWNER at the end of each work day in
which drilling occurred.

        2.      Prior to commencing  Work,  CONTRACTOR  shall furnish OWNER with
written verification of a CONTRACTOR IDENTIFICATION NUMBER obtained from MSHA.

        3.      CONTRACTOR  shall  advise and OWNER must  approve the origins of
all equipment  and  fabricated  items  supplied  under this  Contract  provided,
however,  that  such  approval  will be given in a timely  basis and will not be
unreasonably withheld.

        4.      Vendors are identified in the  Owner-approved  Vendor Preference
List, and  CONTRACTOR may select any Vendor  included in this List for auxiliary
equipment.

ARTICLE 12. THE CONTRACT DOCUMENTS.

        12.1    This  Contract  includes  all  changes  and  addenda to date and
constitutes  the entire  understanding  of the parties and  supersedes any prior
proposals, understandings,  correspondence and/or agreements. CONTRACTOR may not
assign or attempt to assign any funds  accrued or to accrue under this  Contract
without  first  obtaining  the written  consent of OWNER and no such  assignment
shall be binding on OWNER unless and until accepted in writing by OWNER.  Waiver
of any breach hereof shall not constitute a waiver of any  subsequent  breach of
the same or any other provision hereof.

        12.2    In the  event of  conflicts  among  the  terms  of the  Contract
Documents,  interpretations shall be based upon the following Contract Documents
which are set forth in ranked order of precedence:

        (a)     Amendments,  addenda  or  other  modifications  to the  Contract
Documents  (including Change Orders) duly signed and issued after the signing of
this  Contract,  with those of a later date having  precedence  over those of an
earlier date;

        (b)     Articles 1 through 14 of this Contract;

                                  Page 29 of 32
<PAGE>

        (c)     Exhibit A to the Contract in the following order of precedence:
          o     2.4, Basis of Price
          o     2.3, Division of Responsibility
          o     1.0, Scope of Work
          o     2.1, Design Criteria
          o     2.2, Drawing and Specification List
          o     3.0, Estimated Cost of Project
          o     4.0, Project Execution Plan; and

        (d)     Exhibit B.

ARTICLE 13. GOVERNING LAW
-------------------------

        The Contract  Documents,  and the rights and  obligations of the parties
under or pursuant to the Contract  Documents,  shall be governed  and  construed
according to the laws of the State of Texas  without  regard to the conflicts of
laws provisions of that State.

ARTICLE 14. DEFINITIONS
-------------------------

"Change Order" means a change requested either by OWNER or by CONTRACTOR,  which
has been executed and approved by OWNER in writing as more  completely set forth
in Section 6.13 of the Contract.

"Claims" has the meaning set forth in Section 7.1.1.

"Contract" or "Contract Documents" has the meaning set forth in Section 1.1.

"CONTRACTOR"  means Oro  Grande  Contractors,  a Joint  Venture  between  Zachry
Construction Corporation and AMEC E&C Services, Inc.

"Day" or "Days" shall mean calendar days.

"Drawings  and  Specifications"  means  (i)  all  specifications,  calculations,
design,  plans,  drawings,  engineering and analyses,  and other documents which
determine,  establish,  define or otherwise  describe the scope,  quantity,  and
relationship of the components of the Project,  and (ii) all technical drawings,
operating  drawings,  specifications,  shop drawings,  diagrams,  illustrations,
schedules and  performance  charts,  calculations,  samples,  patterns,  models,
operation  and  maintenance  manuals,   piping  and  instrumentation   diagrams,
underground  structure  drawings,  conduit  and  grounding  drawings,   lighting
drawings, conduit and cable drawings, electric one-line's,  electric schematics,
connection  diagrams and  technical  information  of a like nature,  in the form
attached  to this  Contract or  incorporated  into this  Contract by  reference.
Specifications  and  instructions  provided  by  an  OEM  regarding  the  proper
installation,  startup or initial  operation of OEM equipment shall be deemed to
be a  part  of  the  Drawings  and  Specifications  to the  extent  provided  to
CONTRACTOR by the OEM or OWNER.

"Dry Run Tested" or "Dry Run Testing"  means testing of the Work under power but
without process controls and prior to introduction of process material.

"Final  Acceptance" shall have the meaning set forth in Article 5 hereof.  Final
Acceptance  is intended to occur only with  respect to the entirety of the Work,
and will not be deemed to occur  with  respect  to  portions  of the Work if the
balance of the Work is not complete.

                                  Page 30 of 32
<PAGE>

"Force  Majeure" shall mean an occurrence  that is unexpected and not reasonably
foreseeable on the effective  date of this  Contract,  and beyond the control of
the party affected, not otherwise dealt with by the provisions of this Contract,
which by exercise of  reasonable  diligence  could not be  prevented or provided
against,  such as acts of God,  unusual or extremely  severe  weather,  tornado,
flood,  fire,  earthquake,  strikes  (other  than  those of  CONTRACTOR  and its
Subcontractors at the Jobsite),  threats of or acts of terrorism,  riot or civil
unrest,  or other acts of workers of the other party which are not  permitted by
this Contract,  or delays in transportation for which no reasonable  alternative
is or was  available,  or delay in work of  subcontractors  caused  by events of
Force Majeure ("Force Majeure").

"Hazardous Materials" has the meaning set forth in Section 7.1.4.

"Indemnified Party" has the meaning set forth in Section 7.1.6.

"Indemnitee" has the meaning set forth in Section 7.1.1.

"Jobsite"  means the actual area  specified by OWNER at the Plant Site where the
Work is to be delivered and performed by the CONTRACTOR.

"Limited  Notice to Proceed" or "LNTP" means a written  notice given by OWNER to
CONTRACTOR directing CONTRACTOR to commence a limited portion of the Work.

"Lump Sum Contract Price" has the meaning set forth in Article 3.

"Mechanical  Completion"  means OWNER will issue the  Certificate  of Mechanical
Completion when all systems and equipment have been turned over and all critical
punch list work has been  completed.  At this point the project is defined to be
Mechanically Complete.

"Notice  to  Proceed"  means the  written  notice  given by OWNER to  CONTRACTOR
directing CONTRACTOR to commence performance of the entire Work.

"OEM"  means  only  Polysius.   With  respect  to  references  to  drawings  and
specifications  provided  by an OEM for use by  CONTRACTOR,  such  drawings  and
specifications  shall include any  documentation  provided by a manufacturer  or
distributor of equipment regarding the proper installation, startup, and initial
operation of such equipment.

"OEM Equipment" means the Equipment provided by Polysius.

"OEM Services" means services supplied by Polysius

"OWNER" means Riverside Cement Company, a California general partnership.

"OWNER's  Representative"  means the  OWNER's  executive,  who will  manage  the
Project on behalf of and  represent  the OWNER and who shall be William O. Brown
unless otherwise designated in writing by OWNER.

"OWNER-Supplied   Equipment"  means  equipment  provided  by  OWNER  or  OWNER's
suppliers.

"Plant  Site" means the Oro Grande  Cement  Plant,  as  described in
Article 1.

"Project Progress Schedule" means the schedule for completion of the Work, which
is set forth in Section 4.1 of Exhibit A.

"Schedule  of Values  for  Progress  Payments"  as set forth in  Section  3.2 of
Exhibit A.

                                  Page 31 of 32
<PAGE>

"Substantial  Completion"  -  Completion  of  Work on a piece  of  equipment  is
indicated with the hanging of green and manila tags. The green tag indicates the
field cables have been point-to-point wire checked and the insulation resistance
tested.  The manila tag indicates the mechanical  equipment has been  completely
assembled,  lubricated,  aligned,  rotated by hand, and is otherwise ready to be
placed in service.  Testing of the process  equipment begins with energizing and
verifying the local control  circuits.  The motors will then be bumped to verify
proper rotation,  coupled, and final alignment verified. Suitable equipment (not
including the Raw Mill, Coal Mill, Finish Mill, Kiln,  Clinker Cooler) will then
be run locally without load for two continuous  hours to verify proper operation
(dry run). With operation of the equipment verified and accepted by OWNER; care,
custody,  and control of the equipment is transferred to OWNER. OWNER will issue
a Certificate  of  Substantial  Completion for the area when all equipment in an
area has been similarly tested.

"Warranty Period" has the meaning set forth in Section 6.16.

"Work" or "Scope of Work" has the meaning set forth in Article 1.

IN WITNESS  WHEREOF the parties  have  executed  this  Contract the day and year
first above written,

Riverside Cement Company,                Oro Grande Contractors,
a California general partnership         a Joint Venture

                                         Zachry Construction Corporation

By:    /s/ MEL G. BREKHUS                By:    /s/ STEPHEN H. DEDMAN
       ---------------------------              --------------------------------
Name:  Mel G. Brekhus                    Name:  Stephen H. Dedman
Title: General Manager and               Title: Vice President
       Chief Executive Officer

                                         AMEC E&C Services, Inc.

                                         By:    /s/ TIM WATSON
                                                --------------------------------
                                         Name:  Tim Watson
                                         Title: Vice PresidentEX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

AGREEMENT, made and entered into as of the 28th day of September, 2005 by and between IKON
Office Solutions, Inc., an Ohio corporation with its principal office located at 70 Valley Stream
Parkway, Malvern, Pennsylvania 19355 (together with its successors and assigns permitted under this
Agreement, the “Company”), and Matthew J. Espe (the “Executive”);

W I T N E S S E T H:

WHEREAS, the Company desires to continue to employ the Executive and to enter into an
agreement embodying the terms of such continuing employment;

WHEREAS, the Executive desires to continue employment with the Company, subject to the terms
and provisions of this Employment Agreement;

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for
other good and valuable consideration, the receipt of which is mutually acknowledged, the Company
and the Executive (together, the “Parties”) agree as follows:

1. Definitions.

(a) “Affiliate” of a Person shall mean a Person who directly or indirectly controls, is
controlled by, or is under common control with, the Person specified.

(b) “Agreement” shall mean this Employment Agreement, which includes for all purposes any
exhibits hereto.

(c) “Base Salary” shall mean the salary provided for in Section 4 or any increased salary
granted to the Executive pursuant to Section 4.

(d) “Board” shall mean the Board of Directors of the Company.

(e) “Cause” shall mean:

(i) the Executive is convicted of a felony involving moral turpitude; or

(ii) the Executive engages in conduct that constitutes willful gross neglect or willful
gross misconduct in carrying out his duties under this Agreement, resulting, in either case,
in material economic harm to the Company, unless the Executive believed in good faith that
such conduct was in, or not opposed to, the best interests of the Company.

(f) “Change in Control” shall mean the occurrence of any of the following events:

(i) any “person,” as such term is currently used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, becomes a “beneficial owner,” as such term is currently
used in Rule 13d-3 promulgated under that act, of 20% or more of the Voting Stock of the
Company;

(ii) a majority of the Board consists of individuals other than Incumbent Directors,
which term means the members of the Board on the Effective Date; provided that any
individual becoming a director subsequent to such date whose election or nomination for
election was supported by a majority of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;

(iii) the Company adopts any plan of liquidation providing for the distribution of all
or substantially all of its assets;

(iv) 50% or more of the assets of the Company are disposed of pursuant to a merger,
consolidation or other transaction or series of transactions (unless the shareholders of the
Company immediately prior to such merger, consolidation or other transaction or series of
transactions beneficially own, directly or indirectly, in substantially the same proportion
as they owned the Voting Stock of the Company, more than 50% of the Voting Stock or other
ownership interests of the entity or entities, if any, that succeed to the business of the
Company); or

(v) the Company combines with another company and is the surviving corporation but,
immediately after the combination, the shareholders of the Company immediately prior to the
combination hold 50% or less of the Voting Stock of the combined company, (there being
excluded from the number of shares held by such shareholders, but not from the Voting Stock
of the combined company, any shares received by Affiliates of such other company in exchange
for stock of such other company).

(g) “Claim” shall mean any claim, demand, request, investigation, dispute, controversy,
threat, discovery request, or request for testimony or information.

(h) “Committee” shall mean the Human Resources Committee of the Board.

(i) “Common Stock” shall mean common stock of the Company.

(j) “Constructive Termination Without Cause” shall mean a termination by the Executive of his
employment hereunder on 30 days written notice given by him to the Company following the
occurrence, without his prior written consent, of any of the following events, unless the Company
shall have fully cured all grounds for such termination within 15 days after the Executive gives
notice thereof:

(i) any reduction in his then current Base Salary or in his target or maximum annual
bonus opportunity as a percentage of Base Salary;

(ii) any material failure to timely grant, or timely honor, any equity or long-term
incentive award;

(iii) any material breach of any of the Company’s obligations, representations or
warranties in this Agreement;

(iv) any failure to appoint, elect or reelect him to any of the positions described in
the Agreement; the removal of him from any such position; or any change in the reporting
structure so that he reports to someone other than the Board;

(v) any material diminution in his duties or the assignment to him of duties that
materially impair his ability to perform his duties;

(vi) following any Change in Control, any relocation of the Company’s principal office,
or of his own office as assigned to him by the Company, to a location more than 50 miles
from Malvern, Pennsylvania;

(vii) following any Change in Control, any failure by the Company to continue in effect
any compensation plan in which the Executive participated immediately prior to such Change
in Control and which is material to the Executive’s total compensation, including but not
limited to the Company’s stock option, incentive compensation, deferred compensation, stock
purchase, bonus and other plans or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or any failure by the Company to continue the
Executive’s participation therein (or in such substitute or alternative plan) on a basis no
less favorable to the Executive, both in terms of the amount of benefits provided and the
level of the Executive’s participation relative to other participants, as existed
immediately prior to such Change in Control;

(viii) following any Change in Control, any failure by the Company to continue to
provide the Executive with benefits substantially similar to those enjoyed by the Executive
under any of the Company’s pension, life insurance, medical, health and accident, or
disability plans in which the Executive was participating immediately prior to such Change
in Control, the taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any perquisite enjoyed by
the Executive at the time of such Change in Control, or the failure by the Company to
maintain a vacation policy with respect to the Executive that is at least as favorable as
the vacation policy (whether formal or informal) in place with respect to the Executive
immediately prior to such Change in Control; or

(ix) the failure of the Company to obtain the assumption in writing of its obligation
to perform this Agreement by any successor to all or substantially all of the assets of the
Company within 15 days after a merger, consolidation, sale or similar transaction.

If any of the changes described in Section 1(j)(vi) through 1(j)(viii) is preceded by a
Potential Change in Control, such change may give rise to a Constructive Termination Without Cause
under this Section, provided such change occurs within two years following the Potential Change in
Control and either (A) is made at the request or direction of or pursuant to negotiations with a
Person who has entered into an agreement with the Company the consummation of which will constitute
a Change in Control; or (B) is otherwise made in connection with or in anticipation of a Change in
Control which actually occurs.

(k) “Disability” shall mean the Executive’s inability, due to physical or mental incapacity,
to substantially perform his duties and responsibilities under this Agreement for a period of 180
consecutive days as determined by an approved medical doctor, selected by the Parties. If the
Parties cannot agree on a medical doctor, each Party shall select a medical doctor and the two
doctors shall select a third who shall be the approved medical doctor for this purpose.

(l) “Effective Date” shall mean October 1, 2005.

(m) “Long-Term Incentive Plan” shall mean any of the long-term incentive plans referred to in
Section 6(a).

(n) “Person” shall mean any individual, corporation, partnership, limited liability company,
joint venture, trust, estate, board, committee, agency, body, employee benefit plan, or other
person or entity.

(o) “Potential Change in Control” shall mean the occurrence of any of the following events:

(i) the Company enters into an agreement, the consummation of which will result in the
occurrence of a Change in Control;

(ii) the Company or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, will constitute a Change in Control; or

(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement,
a Potential Change in Control has occurred.

(p) “Proceeding” shall mean any threatened or actual action, suit or proceeding, whether
civil, criminal, administrative, investigative, appellate or other.

(q) “Pro-Rata” shall mean a fraction, the numerator of which is the number of days that the
Executive was employed in the applicable performance period (a fiscal year in the case of an annual
bonus and a performance cycle in the case of an award under the Long-Term Incentive Plan) and the
denominator of which shall be the number of days in the applicable performance period.“

(r) “Sign-On Deferrable Restricted Stock Award” shall mean the restricted stock award referred
to in Section 6(b) of Executive’s August 22, 2002 employment agreement, which is hereby superceded
in its entirety by this Agreement as set forth in Section 16(a) infra.

(s) “Term of Employment” shall mean the period specified in Section 2.

(t) “Termination Date” shall mean the date on which the Executive’s employment with the
Company terminates in accordance with this (or any subsequent) Agreement.

(u) “Voting Stock” shall mean issued and outstanding capital stock or other securities of any
class or classes having general voting power, under ordinary circumstances in the absence of
contingencies, to elect, in the case of a corporation, the directors of such corporation and, in
the case of any other entity, the corresponding governing Person(s).

2. Term of Employment. The Company hereby employs the Executive under this Agreement,
and the Executive hereby accepts such employment, for the Term of Employment. The Term of
Employment shall commence as of the Effective Date and shall end on September 30, 2009 (the
“Initial Term”); provided, however, that the Term of Employment shall thereafter be automatically
extended for additional one-year periods (“extension periods”) unless either Party shall give the
other written notice at least sixty (60) days prior to the expiration of the Initial Term or
extension period. Termination of Executive’s employment as a result of non-renewal by the Company
shall be treated as a termination subject to the provisions of Section 8(d) (Termination without
Cause) of this Agreement. Notice of non-renewal by Executive shall be treated as a termination
subject to the provisions of Section 8(g) (Voluntary Termination) of this Agreement.
Notwithstanding the foregoing, the Term of Employment may be terminated at any time prior to the
expiration of the Initial Term and/or any extension period in accordance with the provisions of
Section 8.

3. Positions, Duties and Responsibilities.

(a) During the Term of Employment, the Executive shall serve as the President and Chief
Executive Officer of the Company and shall be elected to serve as a member of the Board on the
Effective Date or as soon thereafter as possible, consistent with the Company’s Articles of
Incorporation and Code of Regulations; shall have the authority, duties and responsibilities
customarily exercised by an individual serving in those positions in a corporation of the size and
nature of the Company; shall perform such duties relating to the management and operations of the
Company, consistent with the foregoing, as may from time to time be assigned to him by the Board;
shall be assigned no duties or responsibilities that are materially inconsistent with, or that
materially impair his ability to discharge, the foregoing duties and responsibilities; and shall
report solely and directly to the Board. In addition, on or before the date of the Company’s first
annual shareholders meeting occurring after the Effective Date, the Executive shall be elected
Chairman of the Board.

(b) Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from
(i) serving, with prior notice to the Board, on the board of directors of another for-profit
corporation, non-profit trade association and/or non-profit charitable organization, provided,
however, that Executive may only serve on the board of directors of one other for-profit
corporation at any given time and may only serve on the board of directors of a reasonable number
of non-profit trade associations and/or non-profit charitable organizations at any one time; (ii)
engaging in charitable activities and community affairs; and (iii) managing his personal
investments and affairs; provided that such activities do not materially interfere with the
performance of the Executive’s duties and responsibilities hereunder

4. Base Salary. Commencing as of the Effective Date, the Executive shall be paid an
annualized Base Salary of $825,000, payable in accordance with the regular payroll practices of the
Company. The Base Salary shall be reviewed no less frequently than annually for increase in the
discretion of the Board.

5. Annual Incentive Awards. The Executive shall be eligible for an annual incentive
bonus award opportunity from the Company in respect of each fiscal year of the Company that ends
during the Term of Employment. His annual target award opportunity shall be no less than 75% of
his annualized Base Salary in effect on the start of the fiscal year and his maximum annual award
opportunity shall be no less than 150% of his annualized Base Salary in effect on the start of the
fiscal year. The Executive shall be paid his annual incentive awards at the same time that other
senior-level executives receive their incentive awards; provided that the Executive has not
terminated his employment for reasons other than Constructive Termination Without Cause, or the
Company has not terminated the Executive for Cause, prior to the dates on which such bonuses are
paid.

6. Long-Term Incentive Awards.

(a) Long-Term Incentive Plan. Subject to the terms of the Company’s Long-Term
Performance Plan:

(i) For each performance period commencing under the Company’s Long-Term Performance
Plan on or after the Effective Date, the Executive shall be entitled to participate in such
Plan (or any successor plan thereto) on the same basis as, and upon the terms and conditions
applicable to, other senior executives of the Company, but consistent with the Executive’s
pay and position.

(ii) The Executive shall be paid any amount due under the Long-Term Performance Plan on
the date that payouts are made under such Plan to other senior executives of the Company.

(b) On-Going Equity Incentives. During the Term of Employment, the Executive shall be
entitled to participate in the Company’s Long-Term Incentive Compensation Plan (or any successor
plan thereto) on the same basis as, and upon the terms and conditions applicable to, other senior
executives of the Company, but consistent with the Executive’s pay and position.

7. Other Benefits.

(a) Executive Compensation Plans. During the Term of Employment, the Executive shall
be entitled to participate in all compensation plans and programs that are, from time to time, made
generally available to senior executives of the Company, including, without limitation, the
Executive Deferred Compensation Plan. Nothing in this Agreement shall require the Company to
maintain or shall prevent the Company from amending or terminating any compensation plans or
programs from time to time as the Company, in its sole discretion, deems appropriate.

(b) Employee Benefits. During the Term of Employment, the Executive shall participate
in all employee benefit plans and programs made available generally to the Company’s senior
executives, including, without limitation, savings and other retirement plans or programs, medical,
dental, hospitalization, short-term and long-term disability and life insurance plans or programs,
accidental death and dismemberment protection, travel accident insurance, and any other employee
welfare or retirement benefit plans or programs that may be sponsored by the Company from time to
time, including any plans or programs that supplement the above-listed types of plans or programs,
whether funded or unfunded. The Executive shall be entitled to post-retirement welfare benefits on
the same basis as other similarly situated senior executives of the Company. Nothing in this
Agreement shall require the Company to maintain or shall prevent the Company from amending or
terminating any employee benefit plans or programs from time to time as the Company, in its sole
discretion, deems appropriate.

(c) Expenses. The Executive is authorized to incur reasonable expenses in carrying
out his duties and responsibilities hereunder and the Company shall promptly reimburse him for all
such expenses, subject to documentation in accordance with reasonable policies of the Company. The
Company shall promptly reimburse the Executive for all reasonable professional fees (including,
without limitation, attorneys’ fees and other charges of counsel) incurred by him in connection
with the negotiation and documentation of these employment arrangements, up to a maximum of
$10,000, grossed up for taxes. In the event of any dispute between the Company and the Executive
during or after termination of the Executive’s employment, the Company will pay all of the
Executive’s reasonable professional fees, costs and expenses of such dispute if the Executive
prevails.

(d) Benefits and Perquisites. During the Term of Employment, the Executive shall
participate in all benefits and perquisites available to senior executives or other employees of
the Company at the most favorable levels and terms and conditions for each such benefit and
perquisite.

(e) Vacation. The Executive shall be entitled to five weeks paid vacation per year.

8. Termination of Employment.

(a) Termination Due to Death. In the event that the Executive’s employment hereunder
is terminated due to his death, his estate or his beneficiaries (as the case may be) shall be
entitled to:

(i) Base Salary through the end of the month in which his death occurs;

(ii) a Pro-Rata annual incentive award for the fiscal year in which his death occurs,
based on the target bonus opportunity for the year of death, payable in a lump sum promptly
following his death, regardless of the Executive’s and Company’s performance during such
fiscal year;

(iii) the continued right to exercise each outstanding stock option for the lesser of
(A) 12 months or (B) the remainder of the original term, all such options to become fully
exercisable as of the date of his death;

(iv) any outstanding shares from any of his restricted stock awards shall vest as of
the date of his death.

(v) immediate vesting in the Company’s Retirement Savings Plan (or any successor 401(k)
plan), pension plan, supplemental retirement plan (including the supplemental executive
retirement plan (“SERP”) and deferred compensation plans, or the cash equivalent thereof,
provided that notwithstanding anything in the Employment Agreement to the contrary, the
amount of the Executive’s SERP benefit (f.k.a. Supplemental Pension benefit) shall be frozen
as of September 30, 2005 and the Executive shall cease to accrue a SERP benefit (f.k.a.
Supplemental Pension benefit) after such date;

(vi) Pro-Rata Long-Term Incentive Plan payouts, payable in a lump sum, if earned,
promptly following the end of the performance periods; and

(vii) the benefits described in Section 8(h)(i).

(b) Termination Due to Disability. In the event that the Executive’s employment
hereunder is terminated due to Disability, he shall be entitled to the following:

(i) Periodic disability payments in accordance with the Company’s Long-Term Disability
Plan (provided that the Executive is and continues to be disabled as defined under that
plan);

(ii) Base Salary through the end of the month in which the Termination Date occurs;

(iii) a Pro-Rata annual incentive award for the fiscal year in which his employment
terminates, based on his target bonus opportunity for the year of termination, payable in a
lump sum promptly following the Termination Date, regardless of the Executive’s and
Company’s performance during such fiscal year;

(iv) the continued right to exercise each outstanding stock option for the lesser of
(A) 12 months or (B) the remainder of the original term, all such options to become fully
exercisable as of the Termination Date;

(v) any outstanding shares from any of his restricted stock awards shall vest as of the
Termination Date.

(vi) Pro-Rata Long-Term Incentive Plan payouts, payable in a lump sum, if earned,
promptly following the end of the performance periods;

(vii) continued participation, for a period of two years from the Termination Date, in
all medical, dental, vision, hospitalization, disability and life insurance coverages and in
all other employee welfare benefit plans, programs and arrangements in which he was
participating on the date on which his employment terminates, on terms and conditions that
are no less favorable to him than those that applied on such date, and with COBRA benefits
commencing thereafter; provided that the Company’s obligation under this Section 8(b)(v)
shall be reduced to the extent that equivalent coverages and benefits (determined on a
coverage-by-coverage and benefit-by-benefit basis) are provided under the plans, programs or
arrangements of a subsequent employer;

(viii) immediate vesting in the Company’s Retirement Savings Plan (or any successor
401(k) plan), pension plan, supplemental retirement plan (including the SERP) and deferred
compensation plans, or the cash equivalent thereof, provided that notwithstanding anything
in the Employment Agreement to the contrary, the amount of the Executive’s SERP benefit
(f.k.a. Supplemental Pension benefit) shall be frozen as of September 30, 2005 and the
Executive shall cease to accrue a SERP benefit (f.k.a. Supplemental Pension benefit) after
such date; and

(ix) the benefits described in Section 8(h)(i).

No termination of the Executive’s employment for Disability shall be effective until the Company
first gives 15 days written notice of such termination to the Executive.

(c) Termination by the Company for Cause.

(i) No termination of the Executive’s employment hereunder by the Company for Cause
shall be effective unless the provisions of this Section 8(c)(i) shall have been complied
with. The Executive shall be given written notice by the Board of the intention to
terminate him for Cause, such notice to state in detail the particular circumstances that
constitute the grounds on which the proposed termination for Cause is based. The Executive
shall have 15 days after receiving such notice in which to cure such grounds, to the extent
such cure is possible. If he fails to cure such grounds, the Executive shall then be
entitled to a hearing before the Board. Such hearing shall be held within 20 days of his
receiving such notice, provided that he requests such hearing within 15 days of receiving
such notice. If, within five days following such hearing, the Board gives written notice to
the Executive confirming that, in the judgment of at least two-thirds of the members of the
Board, Cause for terminating his employment on the basis set forth in the original notice
exists, his employment hereunder shall thereupon be terminated for Cause, subject to de novo
review, at the Executive’s election, through arbitration in accordance with Section 14.

(ii) In the event that the Executive’s employment hereunder is terminated by the
Company for Cause in accordance with Section 8(c)(i), he shall be entitled to:

(A) the lesser of (I) 30 days or (II) the remainder of the original term to
exercise any stock option that is vested and exercisable on the Termination Date.
All stock options which are not vested and exercisable as of the Termination Date
will be forfeited, and all unvested restricted stock which is outstanding as of the
Termination Date, will be forfeited; and

(B) the benefits described in Section 8(h)(i).

(d) Termination Without Cause. In the event that the Executive’s employment hereunder
is terminated by the Company without Cause and Sections 8(a) (death), 8(b) (Disability) and 8(f)
(Change in Control) do not apply, and provided Executive has executed a full release substantially
in the form attached hereto as Exhibit A (the “Release”) then the Executive shall be entitled to:

(i) Base Salary through the thirty-month anniversary of the Termination Date, payable
as provided in Section 4;

(ii) a Pro-Rata annual incentive award for the fiscal year in which his employment
terminates, based on his target bonus opportunity for the year of termination, payable in a
lump sum promptly following the Termination Date, regardless of the Executive’s and
Company’s performance during such fiscal year;

(iii) an annual incentive award for a period of 30 months following the Termination
Date, based on the target bonus opportunity for the year of termination, payable on a
Pro-Rata basis in equal installments over the 30-month period for which Base Salary is
continued;

(iv) the continued right to exercise any outstanding stock option for the lesser of (A)
1 year or (B) the remainder of the original term, all such options to become fully
exercisable as of the Termination Date;

(v) any outstanding shares from his Sign-On Deferrable Restricted Stock Award and any
other restricted stock awards shall vest as of the Termination Date; provided, however, that
notwithstanding anything in the foregoing to the contrary, unless the 40,000 shares from his
Sign-On Deferrable Restricted Stock Award which are scheduled to vest on the Executive’s
65th birthday have otherwise vested, those shares will be forfeited as of the
Termination Date;

(vi) full payout, at target award levels, for each outstanding performance cycle period
under the Long-Term Performance Plan in which the Executive is participating as of the
Termination Date, with the payouts due in a lump sum promptly following the Termination
Date;

(vii) continued participation, through the second anniversary of the Termination Date,
in all medical, dental, vision, hospitalization, disability and life insurance coverages and
in all other employee welfare benefit plans, programs and arrangements in which he or his
family members were participating on such date, on terms and conditions that are no less
favorable to him than those that applied on such date and with COBRA benefits commencing
thereafter; provided that the Company’s obligation under this Section 8(d)(vi) shall be
reduced to the extent that equivalent coverages and benefits (determined on a
coverage-by-coverage and benefit-by-benefit basis) are provided under the plans, programs or
arrangements of a subsequent employer; and

(viii) immediate vesting in the Company’s Retirement Savings Plan (or any successor
401(k) plan), pension plan, supplemental retirement plan (including the SERP) and deferred
compensation plans, or the cash equivalent thereof; and

(ix) the benefits described in Section 8(h)(i).

The Executive will not receive any additional severance or payments other than that provided
under this Section 8(d) for any term remaining under the employment agreement.

(e) Constructive Termination Without Cause. In the event that (x) a Constructive
Termination Without Cause occurs and (y) Section 8(f) (Change in Control) does not apply, then the
Executive shall have the same entitlements as provided under Section 8(d) for a termination by the
Company without Cause, subject to Executive’s executing the Release..

(f) Termination Without Cause Following a Change in Control or Potential Change in
Control. In the event that (x) the Executive’s employment hereunder is terminated (A) through
a Constructive Termination Without Cause or (B) by the Company without Cause and (y) the
termination of employment occurs in connection with, or within two years following, a Change in
Control, and provided that Executive has executed the Release, then the Executive shall be entitled
to:

(i) Base Salary through the third anniversary of the Termination Date, payable as
provided in Section 4;

(ii) a Pro-Rata annual incentive award for the fiscal year in which his employment
terminates based on the target bonus opportunity for the year of termination, payable in a
lump sum promptly following the Termination Date, regardless of the Executive’s and
Company’s performance during such fiscal year;

(iii) an annual incentive award for a period of 36 months following the Termination
Date, based on the greater of (A) his maximum incentive bonus for the year of termination
and (B) his actual bonus for the year preceding termination, payable in equal installments
over the 36-month period for which Base Salary is continued.

(iv) the continued right to exercise any stock option, for the lesser of (A) 24 months
and (B) the remainder of its original term, all such options to become fully exercisable as
of the Termination Date;

(v) all restricted stock awards shall vest on the Termination Date (including the
40,000 restricted shares from the Sign-On Deferrable Restricted Share Award which are
scheduled to vest on the Executive’s 65th birthday);

(vi) full payout, at target levels, under each ongoing Long-Term Performance Plan in
which the Executive is participating as of the Termination Date, with the payouts due in a
lump sum promptly following the Termination Date;

(vii) an amount equal to the Company’s contributions to which the Executive would have
been entitled under the Company’s Retirement Savings Plan (or any successor thereto) if the
Executive had continued working for the Company and the Retirement Savings Plan continued in
force for 36 months following the Termination Date at the highest annual rate of Base Salary
achieved during the Executive’s period of actual employment with the Company, and making the
maximum amount of employee contributions, if any, as are required under such plan;

(viii) immediate vesting in the Company’s Retirement Savings Plan (or any successor
401(k) plan), pension plan, supplemental retirement plan (including the SERP) and deferred
compensation plans, or the cash equivalent thereof;

(ix) continued participation, through the third anniversary of the Termination Date, in
all medical, dental, vision, hospitalization, disability and life insurance coverages and in
all other employee welfare benefit plans, programs and arrangements in which he or his
family members were participating on such date, on terms and conditions that are no less
favorable to him than those that applied on such date and with COBRA benefits commencing
thereafter, provided that the Company’s obligation under this Section 8(f)(x) shall be
reduced to the extent that equivalent coverages and benefits (determined on a
coverage-by-coverage and benefit-by-benefit basis) are provided under the plans, programs or
arrangements of a subsequent employer; and

(x) the benefits described in Section 8(h)(i).

For purposes of this Section 8(f), if preceded by a Potential Change in Control, any of the
following events (if such event occurs within two years following such Potential Change in Control)
shall be deemed to be a Termination of Executive’s Employment without Cause following a Change in
Control: 1) the Executive’s employment is terminated without Cause and such termination is at the
request or direction of or pursuant to negotiations with a Person who has entered into an agreement
with the Company the consummation of which will constitute a Change in Control; 2) the Executive’s
employment is terminated through a Constructive Termination Without Cause and the circumstances or
events which constitute the basis for Executive’s claim of Constructive Termination occur at the
request or direction of, or pursuant to negotiations with, such Person, or 3) the Executive’s
employment is terminated without Cause and such termination is otherwise in connection with or in
anticipation of a Change in Control which actually occurs.

(g) Voluntary Termination. In the event that the Executive terminates his employment
with the Company on his own initiative, other than by death, for Disability, or by a Constructive
Termination Without Cause, then he shall have the same entitlements as provided in Section 8(c)(ii)
in the case of a termination by the Company for Cause. A voluntary termination under this Section
8(g) shall be effective upon written notice to the Company and shall not be deemed a breach of this
Agreement.

(h) Miscellaneous.

(i) On any termination of the Executive’s employment hereunder, he shall be entitled
to:

(A) Base Salary through the Termination Date;

(B) any amounts due him under Section 7;

(C) a lump-sum payment in respect of accrued but unused vacation days at his
Base Salary rate in effect as of the Termination Date;

(D) payment, promptly when due, of all amounts owed to him in connection with
the termination; and

(E) other benefits, if any, in accordance with applicable plans, programs and
arrangements of the Company. This provision will permit the Executive to elect to
take advantage of any provisions of, or changes to, the IKON benefit plans which are
applicable to IKON employees generally (including, without limitation, provisions
relating to the vesting/exercisability of stock options in the event of retirement
or disability), provided that Executive opts to have such general provisions applied
on his/her behalf instead of those set forth in this Agreement. In no event,
however, will this provision entitle Executive to duplicative or double benefits,
nor shall he be eligible to receive payments under any severance program of the
Company applicable to employees generally.

(ii) In the event that the Executive, or any member of his family, is precluded from
continuing full participation in any employee benefit plan, program or arrangement, then the
Executive shall be provided with the after-tax economic equivalent of any benefit or
coverage foregone. For this purpose, the economic equivalent of any benefit or coverage
foregone shall be deemed to be the total cost to the Executive of obtaining such benefit or
coverage himself on an individual basis. Payment of such after-tax economic equivalent
shall be made quarterly in advance, without discount.

(iii) In the event of any termination of the Executive’s employment hereunder, the
Executive shall be under no obligation to seek other employment or otherwise mitigate the
obligations of the Company under this Agreement.

(iv) Any amounts due under this Section 8 are considered to be reasonable by the
Company and are not in the nature of a penalty.

9. Change in Control.

(a) Vesting. In the event that a Change in Control occurs after the Effective Date,
then each outstanding stock option shall become fully exercisable as of the date of such Change in
Control and each outstanding restricted stock award shall likewise become fully vested. In
addition, the Executive’s full age 65 SERP benefit shall be fully accrued and vested. The
Executive shall receive all Change in Control benefits provided to senior executives under the
Company’s compensation plans or individual agreements to the extent that the benefits, terms and
conditions under such plans or agreements are more favorable to the Executive than, and not
duplicative of, the benefits provided under this Agreement. In the event that holders of Common
Stock receive cash, securities or other property in respect to their Common Stock in connection
with a Change in Control transaction, the Company shall use its best reasonable efforts to enable
the Executive (if he so elects) to exercise any stock option at a time and in a fashion that will
entitle him to receive in exchange for any shares thus acquired the same consideration as is
received in such Change in Control transaction by other holders of Common Stock.

(b) Golden Parachute Tax. In the event that any payment or benefit made or provided
to or for the benefit of the Executive in connection with this Agreement, the Executive’s
employment with the Company, or the termination thereof (a “Payment”) is determined to be subject
to any excise tax (“Excise Tax”) imposed by Section 4999 of the Code (or any successor to such
Section), the Company shall pay to the Executive, prior to the time any Excise Tax is payable with
respect to such Payment (through withholding or otherwise), an additional amount which, after the
imposition of all income, employment, excise and other taxes, penalties and interest thereon, is
equal to the sum of (i) the Excise Tax on such Payment plus (ii) any penalty and interest
assessments associated with such Excise Tax. The determination of whether any Payment is subject
to an Excise Tax and, if so, the amount to be paid by the Company to the Executive and the time of
payment shall be made by an independent auditor (the “Auditor”) selected jointly by the Parties and
paid by the Company. Unless the Executive agrees otherwise in writing, the Auditor shall be a
nationally recognized United States public accounting firm that has not, during the two years
preceding the date of its selection, acted in any way on behalf of the Company or any of its
Affiliates. If the Parties cannot agree on the firm to serve as the Auditor, then the Parties
shall each select one accounting firm and those two firms shall jointly select the accounting firm
to serve as the Auditor.

10. Indemnification; D&O Insurance.

(a) Indemnification. The Company agrees that (i) if the Executive is made a party, or
is threatened to be made a party, to any Proceeding by reason of the fact that he is or was a
director, officer, employee, agent, manager, consultant or representative of the Company or is or
was serving at the request of the Company or any of its Affiliates as a director, officer, member,
employee, agent, manager, consultant or representative of another Person or (ii) if any Claim is
made, or threatened to be made, that arises out of or relates to this Agreement or the Executive’s
service hereunder or in any of the foregoing capacities, then the Executive shall promptly be
indemnified and held harmless by the Company for any Claims brought by a third party against the
Executive to the fullest extent legally permitted or authorized by the Company’s Articles of
Incorporation, Code of Regulations or Board resolutions or by the laws of the State of Ohio,
against any and all costs, expenses, liabilities and losses (including, without limitation,
attorneys’ fees, judgments, interest, expenses of investigation, penalties, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) incurred or suffered by the
Executive in connection therewith, and such indemnification shall continue as to the Executive even
if he has ceased to be a director, member, employee, agent, manager, consultant or representative
of the Company or other Person and shall inure to the benefit of the Executive’s heirs, executors
and administrators. The Company shall advance to the Executive all costs and expenses incurred by
him in connection with any such Proceeding or Claim within 20 days after receiving written notice
requesting such an advance. Such notice shall include, to the extent required by applicable law,
an undertaking by the Executive to repay the amount advanced if he is ultimately determined not to
be entitled to indemnification against such costs and expenses.

(b) D&O Insurance. During the Term of Employment and for a period of six years
thereafter, the Company shall keep in place a directors’ and officers’ liability insurance policy
(or policies) providing comprehensive coverage to the Executive to the extent that the Company
provides such coverage for any other senior executive or director.

11. Covenants.

(a) Confidentiality. During the Term of Employment and thereafter, the Executive
shall not, without the prior written consent of the Company, divulge, disclose or make accessible
to any Person any confidential non-public document, record or information concerning the business
or affairs of the Company that he has acquired in the course of his employment hereunder, except
(x) to the Company or to any authorized (or apparently authorized) agent or representative of the
Company, (y) to authorized third parties in connection with performing his duties under this
Agreement, or (z) when required to do so by law or by a court, governmental agency, legislative
body, or other Person with apparent jurisdiction to order him to divulge, disclose or make
accessible such information; provided that these restrictions shall not apply to any document,
record or other information that (i) has previously been disclosed to the public, or is in the
public domain, other than as a result of the Executive’s breach of this Section 11(a), or (ii) is
known or generally available within any trade or industry of the Company.

(b) Non-Solicitation. During the 24-month period that commences on the Termination
Date and ends on the second anniversary of the Termination Date, the Executive shall not without
the prior consent of the Company:

(i) solicit, on his own behalf or on behalf of any other Person, any individual known
by the Executive to be an employee of the Company to instead become an employee of any
Person not affiliated with the Company; or

(ii) solicit, on his own behalf or on behalf of any other Person, any Person known by
the Executive to be customer of, or vendor to, the Company to cease to be a customer or
vendor of the Company and/or to become a customer of, or vendor to, any Person not
affiliated with the Company.

(c) Non-Competition. During the 24-month period that commences on the Termination
Date and ends on the first anniversary of the Termination Date, the Executive shall not, without
the prior consent of the Company, directly or indirectly own, manage, operate, join, control or
participate in the ownership, management, operation or control of, or be employed by or otherwise
connected in any substantial manner with any business which directly or indirectly competes to a
material extent with any line of business of the Company or its subsidiaries which was operated by
the Company or its subsidiaries at the Termination Date; provided that nothing in this paragraph
shall prohibit the Executive from acquiring up to 5% of any class of outstanding equity securities
of any corporation whose equity securities are regularly traded on a national securities exchange
or in the “over-the-counter market.”

The foregoing noncompetition restriction of this Section 11(c) shall not apply following a
Change of Control if (v) the Executive’s employment has been terminated by the Company without
Cause within two years following such Change in Control, (w) the Executive terminates his
employment as the result of a Constructive Termination within two years following such Change in
Control or (x) the Company elects, within two years following such Change in Control, not to extend
the term of employment.

The foregoing noncompetition restriction of this Section 11(c) shall not apply following a
Potential Change in Control if: 1) the Executive’s employment is terminated without Cause within
two years following such Potential Change in Control, and such termination is at the request or
direction of or pursuant to negotiations with a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control; 2) the Executive’s
employment is terminated through a Constructive Discharge without Cause within two years following
such Potential Change in Control, and the circumstances or events which constitute the basis for
Executive’s claim of Constructive Discharge occur at the request or direction of, or pursuant to
negotiations with, such Person, 3) the Company elects, within two years following such Potential
Change in Control, not to extend the term of employment, and such election was at the request or
direction of or pursuant to negotiations with such Person; or 4) the Executive’s employment is
terminated without Cause within two years following such Potential Change in Control and such
termination is otherwise in connection with or in anticipation of a Change in Control which
actually occurs.

12. Assignability, Binding Nature. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Company is not the continuing entity, or a sale
or liquidation of all or substantially all of the assets of the Company; provided that the assignee
or transferee is the successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained
in this Agreement, either contractually or as a matter of law. In the event of any sale of assets
or liquidation as described in the preceding sentence, the Company shall use its best efforts to
cause such assignee or transferee to expressly assume the liabilities, obligations and duties of
the Company hereunder and perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such assignment or succession taken place. No rights or
obligations of the Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred only by will or
operation of law, except as provided in Section 16(e).

13. Representations.

(a) The Company’s Representations. The Company represents and warrants that (i) it is
fully authorized by action of its Board (and of any other Person or body whose action is required)
to enter into this Agreement and to perform its obligations under it; (ii) the execution, delivery
and performance of this Agreement by the Company does not violate any applicable law, regulation,
order, judgment or decree or any agreement, plan or corporate governance document of the Company;
and (iii) upon the execution and delivery of this Agreement by the Parties, this Agreement shall be
the valid and binding obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’ rights generally.

(b) The Executive’s Representations. The Executive represents and warrants that, to
the best of his knowledge and belief, (i) delivery and performance of this Agreement by him does
not violate any applicable law, regulation, order, judgment or decree or any agreement to which the
Executive is a party or by which he is bound, and (ii) upon the execution and delivery of this
Agreement by the Parties, this Agreement shall be the valid and binding obligation of the
Executive, enforceable against him in accordance with its terms, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.

14. Resolution of Disputes. Any Claim arising out of or relating to this Agreement or
the Executive’s employment with the Company or the termination thereof shall be resolved by binding
confidential arbitration, to be held in Philadelphia, Pennsylvania, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Company
shall promptly pay all costs and expenses, including without limitation, attorneys’ fees, incurred
by the Executive or his beneficiaries in resolving any successful Claim. Pending the resolution of
any Claim (and provided that Executive is not in breach of his post-termination obligations under
this Agreement), the Executive (and his beneficiaries) shall be advanced any payments which are
allegedly due under the Agreement (with the timing of such payments to be made in accordance with
the terms of this Agreement). Any amounts advanced under this Section 14 will be subject to offset
by the Company from any award obtained by the Executive (and/or reimbursement by the Executive to
the Company in the event that his award (if any) is less than the amount advanced).

15. Notices. Any notice, consent, demand, request, or other communication given to a
Person in connection with this Agreement shall be in writing and shall be deemed to have been given
to such Person (a) when delivered personally to such Person or (b) provided that a written
acknowledgment of receipt is obtained, two days after being sent by prepaid certified or registered
mail, or by a nationally recognized overnight courier, to the address specified below for such
Person (or to such other address as such Person shall have specified by ten days advance notice
given in accordance with this Section 15), or (c) in the case of the Company only, on the first
business day after it is sent by facsimile to the facsimile number set forth for the Company (or to
such other facsimile number as the Company shall have specified by ten days advance notice given in
accordance with this Section 15), with a confirmatory copy sent by certified or registered mail or
by overnight courier to the Company in accordance with this Section 15.

	 	 	 	 	 
	If to the Company:
	 	IKON Office Solutions, Inc.

	 
	 	70 Valley Stream Parkway
	 
	 	Malvern, Pennsylvania 19355

	 
	 	Attn:  General Counsel

	 
	 	Facsimile #:  610-408-7264

	If to the Executive:
	 	Matthew J. Espe

	 
	 	48 Farrier Lane
	 
	 	Newtown Square, PA 19073-1407

	 
	 	(or the most recent address on file

	 
	 	with the Company)

	 
	 	(with a copy to the Executive at the

	 
	 	Company’s address)

	 
	 	The address most recently specified

	 
	 	by the Executive or beneficiary

	If to a beneficiary of the
	 	through notice given in accordance

	Executive:
	 	with this Section 15.

16. Miscellaneous.

(a) Entire Agreement. This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or oral, (including,
without limitation, the term sheet dated August 28, 2002, Executive’s previous employment agreement
dated August 28, 2002, including any amendments thereto, and the term sheet dated September 28,
2005) between the Parties with respect thereto.

(b) Severability. In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law so as to achieve the purposes of this Agreement.

(c) Amendment or Waiver. No provision in this Agreement may be amended unless such
amendment is set forth in a writing signed by the Parties. No waiver by either Party of any breach
of any condition or provision contained in this Agreement shall be deemed a waiver of any similar
or dissimilar condition or provision at the same or any prior or subsequent time. To be effective,
any waiver must be set forth in a writing signed by the waiving Party.

(d) Headings. The headings of the Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

(e) Beneficiaries/References. The Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit hereunder following the Executive’s death by giving the Company written
notice thereof. In the event of the Executive’s death or a judicial determination of his
incompetence, references in this Agreement to the Executive shall be deemed, where appropriate, to
refer to his beneficiary, estate or other legal representative.

(f) Survivorship. Except as otherwise set forth in this Agreement, the respective
rights and obligations of the Parties hereunder shall survive any termination of the Executive’s
employment.

(g) Governing Law/Jurisdiction. This Agreement shall be governed, construed,
performed and enforced in accordance with the laws of the State of Pennsylvania, without reference
to principles of conflict of laws.

(h) Counterparts. This Agreement may be executed in two or more counterparts.

(i) Employee Benefit Plans. In the event that the terms of any of the
Company’s employee benefit plans provide for the vesting or distribution of benefits on a
date earlier than the date set forth in this Agreement, such earlier date shall prevail.

(j) This Employment Agreement is not intended to be a nonqualified deferred compensation plan
as determined under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
Notwithstanding the foregoing, the Company reserves the right, in its sole discretion, to make any
changes necessary to ensure, to the extent reasonably possible, that Code section 409A has no
adverse effect on the Executive’s rights under the Employment Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set
forth above.

	 
	 

	The Company

By: /s/ THOMAS GIBSON

	 

	Thomas Gibson

On Behalf of the Board

	 

	The Executive

/s/ MATTHEW J. ESPE

	 

	Matthew J. Espe

	 

1

EXHIBIT A – RELEASE

1. Execution of, and compliance with, this Letter Agreement will not be considered an
admission by any Released Party of any liability whatsoever or as an admission of any violation of
your rights or the rights of any other person.

2. You agree that you will abide by the post-employment obligations set forth in Section 11 of
the Employment Agreement.

3. You agree to avail yourself, attend meetings, give testimony and otherwise cooperate fully
with the Company as reasonably requested by the Company (and to not provide any of these services
on behalf of any parties with any adverse interest to the Company without the prior approval of the
Company) regarding any litigation, arbitration, administrative proceedings, investigations or other
matters of a similar nature involving the Company. If you are subpoenaed or otherwise contacted by
any party regarding any such matter, you will immediately notify the General Counsel of the
Company. Any changes to your address should be communicated promptly to Company headquarters. The
Company shall provide reimbursement for reasonable expenses associated with this provision. As you
are aware, sometimes the timing of legal or administrative proceedings cannot be controlled;
however, we will make all reasonable efforts to minimize the potential for interference with future
employment considerations. Nothing in this paragraph should be construed as altering or limiting
the provisions of Section 11 of your Employment Agreement, which provisions will remain in full
force and effect.

4. You agree to keep, and represent that you have kept, the terms and existence of this Letter
Agreement completely confidential. You agree not to disclose, and represent that you have not
disclosed, any information concerning this Letter Agreement to anyone, including but not limited
to, any past, present or prospective employee, employer or customer of the Company without the
written consent of the Company, except that you may discuss this Letter Agreement with immediate
family members, financial and legal advisers, provided such individuals abide by the
confidentiality obligations contained herein.

5. You agree to refrain from any publication, oral or written, of a defamatory, disparaging or
otherwise derogatory nature pertaining to any Released Party.

6. You understand and agree that should you violate any term or condition of this Agreement,
including but not limited to paragraph 11 hereof, the Company may discontinue any further payments
or benefits to which you may be entitled under paragraphs [] through [] above, in addition to any
other remedies available to the Company at law or in equity.

7. Except for a claim based upon a breach of this Agreement, you hereby irrevocably and
unconditionally release, forever discharge, indemnify and hold harmless the Released parties (as
defined below) from any and all claims, suits, demands, actions or causes of action of any kind or
nature whatsoever, whether the underlying facts are known or unknown, which you have or may have
currently or in the future or may have had in the past against the Released Parties or any of them
for any action arising out of your employment with, investment in, or separation from the Company,
including any claims under your Employment Agreement. This release covers all claims of any kind
including, without limitation, any claims arising under federal, state, or local law, regulation or
ordinance, or any common law theory of recovery (the “Released Claims”). The Released Claims
specifically include, without limitation, claims of employment discrimination, wrongful discharge,
breach of fiduciary duty, and securities fraud. This release shall run to and be for the benefit
of the Company and each of its present or former subsidiaries, division, parents, successors,
assigns, predecessors, related entities or affiliates, and the officers, directors, employees or
agents of any of them (collectively, “Released Parties”). This release shall run to and be binding
upon you and your heirs and assigns. The release does not cover claims that may arise after the
execution of the Letter Agreement and the seven (7) day calendar period set forth in this Letter
Agreement. You acknowledge and agree that the release set forth in this paragraph is an essential
and material term of this Letter Agreement and that without such release, no agreement would have
been reached by the parties.

8. You understand and acknowledge that the Age Discrimination in Employment Act of 1967, as
amended, provides employees age 40 or older with the right to bring a claim against the Company if
an employee believes that he/she has been discriminated against on the basis of age. You
understand the rights afforded under the Act and agree that you irrevocably and unconditionally
release, forever discharge, indemnify and hold harmless from all claims or actions you have or may
have currently or in the future or may have had in the past against any Released Party based upon
any alleged violation of the Age Discrimination in Employment Act arising prior to the date this
Agreement is executed by you. You specifically waive the right to assert a claim for relief
available under this Act, including but not limited to, back pay, attorneys’ fees, damages,
reinstatement or injunctive relief.

9. The Company advises you to consult with an attorney prior to executing this Letter
Agreement and you represent that you have had the opportunity to do so. You also have been advised
that you have a period of up to twenty-one (21) days to consider this Letter Agreement and its
meaning and effect and the signed Letter Agreement must be returned to and received by the Company
on or before 5:00 p.m. on the business day following the end of this twenty-one (21) day period for
you to receive the consideration set forth in this Letter Agreement. You are free to accept this
offer at any time within this 21 day period but only if your decision to shorten this consideration
period is knowing and voluntary and was not induced in any way by Company. You and the Company
agree that the Letter Agreement shall not become effective or enforceable until seven (7) calendar
days after it is executed by you and that during that seven (7) calendar day period, you may revoke
this Letter Agreement. You agree to deliver any such revocation in writing to the General Counsel
of the Company within seven (7) calendar days of your execution of this Letter Agreement.

10. Both parties agree that if any provision of this Letter Agreement is declared to be
unenforceable by a law of competent jurisdiction, the remaining terms and conditions shall not be
affected and will remain in full force and effect.

11. This Letter Agreement reflects the entire agreement between the parties with respect to
your entitlement to benefits (including severance benefits) and/or compensation from the Company
beginning as of the Effective Date and continuing through and following the Separation Date. The
terms of this Letter Agreement may only be amended in a writing signed by both parties. For the
Company, any writing must be signed by me or a corporate officer of IKON.

12. This Letter Agreement shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Pennsylvania. All disputes under this Letter Agreement will be handled
pursuant to the dispute resolution procedures set forth in Section 14 of the Employment Agreement.

2

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