Document:

EX-10.1

EXHIBIT 10.1

SETTLEMENT AGREEMENT AND FULL POLICY RELEASE

This Settlement Agreement and Full Policy Release (hereinafter referred to as “the Agreement”)
is entered into between Allstate Insurance Company, as successor-in-interest to Northbrook Excess &
Surplus Insurance Company, formerly Northbrook Insurance Company (“Allstate”), and Metalclad
Insulation Corporation (“Metalclad”), a wholly owned subsidiary of Entrx Corporation, and Entrx
Corporation, formerly known as Metalclad Corporation (“Entrx”), as of the date of execution of this
Agreement by all signatories hereto, and in accordance with the terms and conditions set forth
below.

RECITALS

WHEREAS, for purposes of this Agreement, the following terms have the following meanings:

1. “Allstate” means Allstate Insurance Company, as successor-in-interest to Northbrook Excess
& Surplus Insurance Company, formerly Northbrook Insurance Company, and all of its corporate
parents, subsidiaries, affiliated companies, predecessor and successor companies and all of their
present, past and future officers, directors, employees, stockholders, representatives, agents and
attorneys.

2. “Policy” means that certain Umbrella Liability Policy, Policy 63 006 531 issued by
Northbrook Excess & Surplus Insurance Company to the named insured, Metalclad Insulation
Corporation, for the policy period March 15, 1980 to March 15, 1981.

3. Metalclad” means Metalclad Insulation Corporation and its current and former subsidiaries,
divisions, affiliated companies, parent companies, and predecessor and successor companies,
including but not limited to all those listed as named insureds or additional named insureds under
the Policy for which Metalclad is the successor or which were a “DBA” of Metalclad or one of its
predecessors or successors and also includes present, past and future officers, directors,
employees, stockholders, representatives, agents, attorneys, assigns, predecessors-in-interest,
successors-in-interest and any and all other persons and entities acting by, through, under or in
concert with any of them.

4. “Entrx” means Entrx Corporation, formerly known as Bower Industries, Inc. and later as
Metalclad Corporation, and its predecessor and successor companies, subsidiaries, other than
Metalclad, divisions, affiliated companies, including but not limited to all those listed as named
insureds or additional named insureds under the Policy for which Entrx is the parent or successor,
other than Metalclad, and also includes present, past and future officers, directors, employees,
stockholders, representatives, agents, attorneys, assigns, predecessors-in-interest,
successors-in-interest and any and all other persons and entities acting by, through, under or in
concert with any of them.

5. “Claims” means any and all past, present and future claims, proofs of claim, demands,
orders, directives, actions, suits, lawsuits, causes of action, cross-claims, third-party actions,
allegations, assertions, penalties, assessments, arbitration or mediation demands, adversary
proceedings, administrative proceedings or statutory or regulatory obligations, of whatever nature,
whether at law or in equity, and whether sounding in tort, contract, equity, nuisance, trespass,
negligence, strict liability or any other statutory, administrative or common law cause of action
of any sort, including but not limited to Asbestos Claims, as defined herein.

6. “Asbestos Claims” means those Claims brought or asserted against Metalclad or Entrx for
alleged bodily injury, property damage, personal injury or natural resource damages: (i) arising
out of any actual or alleged exposure to asbestos or asbestos-containing products or materials
manufactured, installed, sold, supplied, and/or distributed by Metalclad, or by anyone else; (ii)
arising out of any actual or alleged exposure to asbestos occurring during installation,
rip-out/removal operations or other claims allegedly or actually occurring while Metalclad, or
anyone else was performing operations at sites other than its premises; or (iii) arising out of any
actual or alleged exposure to asbestos or asbestos containing products or materials occurring at
any premises owned by or rented to Metalclad.

7. “Effective Date” means the date by which both Metalclad and Allstate have executed this
Agreement.

8. “Person” means any natural person, class or group of natural persons, corporation,
partnership, association, trust, or any other entity or organization, including, without
limitation, any federal, provincial, state, county, city or municipal governmental or
quasi-governmental body or political subdivision, department, agency or instrumentality thereof.

WHEREAS, Allstate Insurance Company issued the Policy to Metalclad;

WHEREAS, the Policy provides limits of liability in the amount of five million dollars
($5,000,000) in the aggregate and per occurrence;

WHEREAS, Metalclad has tendered to Allstate Asbestos Claims brought against Metalclad and in
some instances against Entrx, as the parent of Metalclad, alleging under a variety of legal
theories that Metalclad was legally liable and responsible for injuries allegedly sustained by the
Claimants because of exposure to and inhalation of asbestos fibers;

WHEREAS, Metalclad, in its tender to Allstate, has requested that Allstate defend and
indemnify Metalclad in connection with the Asbestos Claims;

WHEREAS, Allstate in response to Metalclad’s request for defense and indemnification for the
Asbestos Claims has denied the claim and raised a variety of coverage defenses, including but not
limited to the proper exhaustion of underlying coverage and the contention that some, if not all,
of the Asbestos Claims are excluded under the terms, conditions and exclusions of the Policy;

WHEREAS, Allstate and Metalclad acknowledge the existence of disputed questions of insurance
coverage arising from Metalclad’s tender of the Asbestos Claims discussed above;

WHEREAS, Allstate and Metalclad now desire to resolve all issues and to compromise, settle and
release any and all Claims for insurance coverage whatsoever by Metalclad against Allstate under
the Policy on the terms set forth below; and

WHEREAS, Entrx, in consideration of the payments made by Allstate to Metalclad as more fully
described herein, is also willing to release any and all rights, if any, it may have under the
Policy,

NOW, THEREFORE, in consideration of and in reliance upon the aforesaid recitals and the mutual
agreements contained herein, it is agreed by and between Allstate, Metalclad and Entrx as set forth
below.

1. PAYMENT OF THE SETTLEMENT AMOUNT

Within ten (10) days of the date of full execution of this Agreement, Allstate shall, by wire
transfer in accordance with instructions provided by Metalclad, pay to Metalclad the total sum of
$2,500,000 (TWO MILLION FIVE HUNDRED THOUSAND DOLLARS and 00/00) (hereinafter “the Settlement
Payment”). Allstate’s payment of $2,500,000 to Metalclad shall constitute a full and complete
settlement of all Claims, including Asbestos Claims which have been or which could be made against
Metalclad and/or Entrx or asserted by Metalclad and/or Entrx against Allstate under the Policy.

2. RELEASE OF ALL CLAIMS

a. In consideration of the Settlement Payment to Metalclad set forth in paragraph 1 and of the
agreements made herein by Allstate, Metalclad hereby releases and forever discharges Allstate from
any and all liability whatsoever for any and all claims, actions, demands, liabilities,
obligations, rights or causes of actions of every kind and nature, known and unknown, past, present
and future, including, but not limited to, consequential and punitive damages, loss of profit,
compensation, emotional distress, breach of legal or contractual duties, property damage, bodily
injury, personal injury, natural resource damages, losses, costs, expenses, attorneys’ fees,
rescission, reformation and declaratory relief, which claims, actions, demands, liabilities,
obligations, rights or causes of action arise out of, relate to or are in any way connected with
the Claims that are, or are alleged to be, covered under the Policy, including but not limited to
the Asbestos Claims.

b. For and in consideration of Metalclad’s and Entrx’s promises made herein and for other good
and valuable consideration, the adequacy of which is expressly acknowledged, Allstate hereby fully
and forever releases Metalclad from any and all obligations, rights and Claims, known and unknown,
anticipated or unanticipated, past, present or future for, or with respect to, the released Claims
and the Policy, including without limitation, any obligations, rights or claims for or with respect
to premiums, retrospective premiums, deductibles, self-insured retentions or retained limits, and
loss adjustment expenses.

c. In further consideration of the Settlement Payment to Metalclad set forth in paragraph 1
and of the agreements made herein by Allstate, Entrx hereby releases and forever discharges
Allstate from any and all liability whatsoever for any and all claims, actions, demands,
liabilities, obligations, rights or causes of actions of every kind and nature, known and unknown,
past, present and future, including, but not limited to, consequential and punitive damages, loss
of profit, compensation, emotional distress, breach of legal or contractual duties, property
damage, bodily injury, personal injury, natural resource damages, losses, costs, expenses,
attorneys’ fees, rescission, reformation and declaratory relief, which claims, actions, demands,
liabilities, obligations, rights or causes of action arise out of, relate to or are in any way
connected with the Claims that are, or are alleged to be, covered under the Policy, including but
not limited to the Asbestos Claims.

d. For and in consideration of Metalclad’s and Entrx’s promises made herein and for other good
and valuable consideration, the adequacy of which is expressly acknowledged, Allstate hereby fully
and forever releases Entrx from any and all obligations, rights and Claims, known and unknown,
anticipated or unanticipated, past, present or future for, or with respect to, the released Claims
and the Policy, including without limitation, any obligations, rights or claims for or with respect
to premiums, retrospective premiums, deductibles, self-insured retentions or retained limits, and
loss adjustment expenses.

e. Metalclad further acknowledges and agrees that, in consideration of the Settlement Payment
set forth in paragraph 1, and of the agreements made herein by Allstate, Metalclad hereby releases
and forever discharges Allstate from any and all Claims, including Asbestos Claims, that relate in
any way to the Policy, but that are also based in whole or in part on any alleged breach of the
duty of good faith and fair dealing, unfair claims practices or violation of any statute,
regulation or code; provided, however, that the foregoing Release shall not apply to, impair or
affect the parties’ rights and obligations set forth in this Agreement.

f. Entrx further acknowledges and agrees that, in consideration of the Settlement Payment set
forth in paragraph 1, and of the agreements made herein by Allstate, Entrx hereby releases and
forever discharges Allstate from any and all Claims, including Asbestos Claims, that relate in any
way to the Policy, but that are also based in whole or in part on any alleged breach of the duty of
good faith and fair dealing, unfair claims practices or violation of any statute, regulation or
code; provided, however, that the foregoing Release shall not apply to, impair or affect the
parties’ rights and obligations set forth in this Agreement.

g. With respect to the Releases set forth in paragraphs 2(a), 2(b), 2(c), 2(d), 2(e) and 2(f)
of this Agreement, Metalclad, Entrx and Allstate expressly assume the risk that there might exist
facts, acts, omissions, matters, causes or things that may have occurred which are presently
unknown or unsuspected by Metalclad, Entrx or Allstate. Metalclad, Entrx and Allstate hereby waive
the application of terms and provisions of any statute, rule or doctrine of common law that either
(1) narrowly construes releases that by their terms release claims based in whole or in part upon,
arise from, or relate to unknown or unsuspected acts, omissions, matters, causes or things; or (2)
restricts or prohibits the releasing of such claims.

h. Metalclad and Entrx hereby acknowledge and agree that the releases and discharges given
herein by Metalclad and Entrx to Allstate extend to any and all kinds of Asbestos Claims which
potentially may be covered under the Policy.

i. It is the express intent and understanding of Metalclad and Allstate, as part of the
consideration given pursuant to this Agreement and effective upon Metalclad’s receipt of the
Settlement Payment as set forth in Paragraph 1, that the Policy shall be deemed to be null and void
as of the date of full execution of this Agreement and that Allstate is released and discharged as
provided herein from any and all past, present or future claims for, or obligation of defense and
indemnity owed, whether actual or alleged, known or unknown, accrued or unaccrued, existing or
potential, suspected or unsuspected, which Metalclad or any other person may have or assert, or may
hereafter have or assert against Allstate in connection with, relating to or arising out of the
Policy, including, but not limited to, any claims for personal injury, bodily injury, property
damage, natural resource damages, occupational disease, workers compensation, advertising
liability, economic loss, loss of use, breach of the duty of good faith and fair dealing or unfair
claims practices. In addition, Metalclad hereby withdraws any and all requests, demands or tenders
for indemnity or defense previously submitted to Allstate under the Policy and further surrenders,
relinquishes and releases any further right to tender or present any claims whatsoever to Allstate
under the Policy. Furthermore, by virtue of the foregoing release, Allstate shall have no duty to
defend or indemnify Metalclad under the Policy, or any other person who is or may claim to be a
named insured or an additional insured under the Policy, with respect to any matter; nor shall
Allstate have any duty or obligation to Metalclad or to any person who claims to be the named
insured or additional insured under the Policy.

j. It is also the express intent and understanding of Entrx and Allstate, as part of the
consideration given pursuant to this Agreement and effective upon Metalclad’s receipt of the
Settlement Payment as set forth in Paragraph 1, that the Policy shall be deemed to be null and void
as of the date of full execution of this Agreement and that Allstate is released and discharged as
provided herein from any and all past, present or future claims for, or obligation of defense and
indemnity owed, whether actual or alleged, known or unknown, accrued or unaccrued, existing or
potential, suspected or unsuspected, which Metalclad, Entrx, or any other person may have or
assert, or may hereafter have or assert against Allstate in connection with, relating to or arising
out of the Policy, including, but not limited to, any claims for personal injury, bodily injury,
property damage, natural resource damages, occupational disease, workers compensation, advertising
liability, economic loss, loss of use, breach of the duty of good faith and fair dealing or unfair
claims practices. In addition, Entrx hereby withdraws any and all requests, demands, or tenders for
indemnity or defense previously submitted to Allstate under the Policy, acknowledges that Metalclad
pursuant to the terms of this Agreement is withdrawing any and all requests, demands or tenders for
indemnity or defense previously submitted to Allstate under the Policy and Entrx further
surrenders, relinquishes and releases any further right to tender or present any claims whatsoever
to Allstate under the Policy. Furthermore, by virtue of the foregoing release, Allstate shall have
no duty to defend or indemnify Entrx under the Policy, or any other person who is or may claim to
be a named insured or an additional insured under the Policy, with respect to any matter; nor shall
Allstate have any duty or obligation to Entrx or to any person who claims to be the named insured
or additional insured under the Policy.

3. HOLD HARMLESS AND INDEMNIFICATION

a. Metalclad hereby acknowledges and agrees that, upon Metalclad’s receipt of the Settlement
Payment described in paragraph 1 of the Agreement, Metalclad agrees to hold Allstate harmless
relative to future claims by any entity or individual against Allstate pertaining to Claims that
are, or are alleged to be, covered under the Policy, including Asbestos Claims, and further agrees
to indemnify Allstate for any sums sought by any other individual or entity in connection with
claims by these individuals or entities for contribution or indemnification from Metalclad
regarding such Claims, including the Asbestos Claims. This Agreement extends to any Claims made by
any other insurers of Metalclad or Entrx, alleged third-party beneficiaries under the Policy, any
persons or entities claiming derivative rights under the Policy, any persons or entities attempting
to garnish proceeds of the Policy, or any persons or entities attempting to challenge the
reasonableness or adequacy of the settlement. Metalclad agrees to defend Allstate with respect to
the claims referred to in this paragraph, with counsel of Metalclad’s choice, subject to Allstate’s
approval, which approval shall not be unreasonably withheld or denied. In this event, Metalclad
agrees that it will not take a position regarding interpretation of the Policy without Allstate’s
prior written consent, which consent will not unreasonably be withheld.

b. Additionally, in the event Metalclad fails to hold harmless and indemnify Allstate as
described in Paragraph 3(a) above, Entrx hereby acknowledges and agrees that in place of Metalclad,
Entrx will hold Allstate harmless relative to future claims by any entity or individual against
Allstate pertaining to Claims that are, or are alleged to be, covered under the Policy, including
Asbestos Claims, and further agree to indemnify Allstate for any sums sought by any other
individual or entity in connection with claims by these individuals or entities for contribution or
indemnification from Metalclad regarding such Claims, including the Asbestos Claims. This Agreement
extends to any Claims made by any other insurers of Metalclad or Entrx, alleged third-party
beneficiaries under the Policy, any persons or entities claiming derivative rights under the
Policy, any persons or entities attempting to garnish proceeds of the Policy, or any persons or
entities attempting to challenge the reasonableness or adequacy of the settlement. Entrx agrees to
defend Allstate with respect to the Claims referred to in this paragraph, with counsel of Entrx’s
choice, subject to Allstate’s approval, which approval shall not be unreasonably withheld or
denied. In this event, Entrx agrees that it will not take a position regarding interpretation of
the Policy without Allstate’s prior written consent, which consent will not be unreasonably
withheld.

c. Notwithstanding the foregoing, Metalclad’s and Entrx’s agreements to defend, hold harmless
and indemnify Allstate as stated in Paragraphs 3(a) and 3(b) only extend up to and do not exceed a
combined total aggregate amount equal to the $2,500,000 Settlement Payment made by Allstate under
paragraph 1 of this Agreement, whether paid for by Metalclad alone, Entrx alone or partially by
Metalclad and partially by Entrx.

d. Further, notwithstanding the foregoing, Allstate, Metalclad and Entrx acknowledge and agree
the obligations of Metalclad and Entrx to defend, hold harmless and indemnify Allstate as stated in
Paragraphs 3(a) and 3(b), do not include personal liability of any present, past and future
officers, directors, employees, or stockholders of Metalclad and Entrx — excepting Entrx’s capacity
as a stockholder of Metalclad — representatives, agents, attorneys or other persons and entities
acting by, through, under or in concert with any of them.

4. WAIVER OF CERTAIN CLAIMS AND METALCLAD WARRANTY.

a. Allstate agrees that it will not seek any recovery, by way of subrogation, contribution,
indemnity or otherwise, against any other insurer of Metalclad or Entrx with respect to the
Settlement Payment paid pursuant to Paragraph 1 hereunder unless a Claim is asserted against
Allstate by any other party or Person, including any other insurer, which results from, arises out
of, or relates directly or indirectly to: (a) the Settlement Payment made or to be made by Allstate
under this Agreement; (b) any other payments made or which may be made to Metalclad or Entrx by any
other party or Person, including any other insurer, in connection with Metalclad’s or Entrx’s
insurance coverage, or (c) actual, alleged or potential liabilities which are owed or may be owed
to Metalclad or Entrx, by any other party or Person, including without limitation any of
Metalclad’s or Entrx’s other insurers, relating, in whole or in part, to any Claims including
Asbestos Claims released under the terms of this Agreement.

b. The Parties agree and acknowledge that this Agreement has been entered into in good faith,
as a result of arms length negotiations, with advice of counsel, and that this Agreement represents
a fair, reasonable, proportionate and good faith compromise of disputed claims, disputed
liabilities and disputed issues. The Parties agree that they will each cooperate with each other
and will not oppose in any way any motion made jointly or made by any of the Parties for an order
determining that this Agreement constitutes a fair, reasonable, proportionate and good faith
settlement.

c. In the event that Claims are made against Allstate and Metalclad indemnifies Allstate under
Paragraph 3, Allstate acknowledges and agrees that Metalclad is entitled to assert any contractual,
equitable or implied rights Allstate has or may have against other Metalclad or Entrx insurers,
including but not limited to Allstate’s contribution, indemnification, subrogation, or “other
insurance” rights, provided that Metalclad first advises Allstate of the circumstances and of its
intention to pursue these rights. Metalclad acknowledges and agrees that it will only pursue these
rights to the extent of, and in the amount of, such indemnified Claims.

d. In the event that Claims are made against Allstate and Entrx indemnifies Allstate under
Paragraph 3, Allstate acknowledges and agrees that Entrx is entitled to assert any contractual,
equitable or implied rights Allstate has or may have against other Metalclad or Entrx insurers,
including but not limited to Allstate’s contribution, indemnification, subrogation, or “other
insurance” rights, provided that Entrx first advises Allstate of the circumstances and of its
intention to pursue these rights. Entrx acknowledges and agrees that it will only pursue these
rights to the extent of, and in the amount of, such indemnified Claims.

5. EXHAUSTION OF POLICY LIMITS

Metalclad, Entrx and Allstate mutually agree and acknowledge that the Settlement Payment, in
addition to constituting a full and complete settlement of all present, past and future Claims
covered, or alleged to be covered, under the Policy, known or unknown, of any type or nature,
alleging any theory of recovery or relief, including the Asbestos Claims, and a rescission of the
Policy upon the date of full execution of this Agreement, also constitutes exhaustion of all limits
of liability under the Policy. Metalclad and Entrx expressly acknowledge and agree that the payment
by Allstate of the Settlement Payment as called for under this Agreement is in exchange for a full,
final and complete policyholder release of all general liability coverage under the Policy and no
further claims or requests for coverage under all coverages of the Policy will be made by Metalclad
or Entrx upon Allstate.

6. REPRESENTATION AND WARRANTIES

a. Metalclad and Entrx each represent that it has not and will not in any manner assign,
transfer, convey or sell any rights, actions, causes of action or claims arising out of, related to
or connected with the Policy or the matters released herein, and that Metalclad and Entrx, to the
extent that it is the parent or successor to named insureds or additional named insureds under the
Policy, are the only entities entitled to recover for any damages under such right, actions, causes
of action or claims. Metalclad and Entrx represent and warrant that no subrogation of any cause of
action, chose in action or part hereof has taken place. Metalclad and Entrx further represent,
warrant and agree that neither will in any way voluntarily assist any person or entity in the
establishment of any right, action, cause of action or claim against Allstate in any way relating
to the matters which are the subject of this Agreement.

b. Metalclad hereby warrants and represents that it is a corporation duly organized and
validly existing in good standing under the laws of the State of California and has the requisite
corporate power and authority to enter into this Agreement and to perform the obligations
contemplated by this Agreement.

c. Entrx also hereby warrants and represents that it is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to enter into this Agreement and to perform the obligations
contemplated by this Agreement.

d. Metalclad and Entrx hereby warrant and represent that the execution and delivery of this
Agreement by Metalclad and the performance by Metalclad and Entrx of the obligations contemplated
by this Agreement have been approved by duly authorized representatives of Metalclad and Entrx and
by all other necessary corporate actions on the part of Metalclad and Entrx. This Agreement
constitutes the valid and binding agreement of Metalclad and Entrx.

e. Allstate, Metalclad and Entrx represent and warrant that the Agreement represents a good
faith settlement of disputed insurance coverage issues and further warrant that the Settlement
Payment is fair and reasonable consideration for release of the Claims as set forth herein. In
addition, Metalclad and Entrx hereby represent and warrant that the rights and interests released
under this Agreement are released in exchange for a reasonable equivalent value from Allstate and
that, upon payment of the Settlement Payment, Metalclad and Entrx shall be deemed unconditionally,
absolutely and irrevocably estopped and forever barred from challenging the reasonable equivalent
value of the settlement herein without further act or deed.

7. COOPERATION BETWEEN THE PARTIES

a. In the event that any action or proceeding of any type whatsoever is commenced or
prosecuted by any person other than Metalclad, Entrx or Allstate to invalidate, interpret or
prevent the validation, enforcement or carrying out of any or all of the provisions of this
Agreement, the parties mutually agree, represent, warrant and covenant to cooperate fully in
opposing such action or proceeding.

b. Metalclad and Entrx will undertake all reasonable actions to cooperate with Allstate in
connection with its claims against reinsurers for any sums paid pursuant to this Agreement,
including, but not limited to, responding to reasonable requests for information and documentation
relating to the Claims, including the Asbestos Claims.

8. RESERVATION OF AUDIT RIGHTS

Metalclad, Entrx and Allstate acknowledge and agree that Allstate shall have the right to
conduct an audit of the closed asbestos bodily injury claims against Metalclad, subject to
agreement between Metalclad and Allstate on a mutually convenient time and location for conducting
the requested audit of the underlying closed claims files pertaining to the claims addressed in
this Agreement. Metalclad and Entrx shall provide their best efforts to make the closed claims
files available to Allstate within sixty (60) days of the Effective Date of this Agreement.
Allstate agrees to conduct the audit no later than ninety (90) days from the Effective Date of this
Agreement, provided that Metalclad and Entrx have made the files available as provided herein.
Allstate’s audit of closed claims files shall not affect its rights or obligations or Metalclad’s
or Entrx’s rights or obligations under this Agreement.

9. COMPROMISE

This Agreement is the result of a compromise among the parties hereto and shall never at any
time or for any purpose be construed as an admission of liability and/or coverage for any claims
tendered by Metalclad or Entrx to Allstate, both of which are expressly denied by Allstate. This
Agreement is a compromise or settlement of disputed claims, is the product of arms-length
negotiations, is neither intended to nor shall be construed as an insurance policy interpretation,
and shall not be used in any court, dispute resolution proceeding, or otherwise, to create, prove
or interpret the obligations under any insurance policy issued by Allstate. Metalclad, Entrx and
Allstate mutually agree and acknowledge that this good faith resolution of Metalclad’s claim under
the Policy is not being undertaken to impair or avoid any liabilities Metalclad or Entrx may owe to
the applicable underlying Asbestos Claims claimants.

10. AGREEMENT

This Agreement has been negotiated at arms length by and between parties knowledgeable of the
terms and conditions set forth in the Agreement. The wording of this Agreement was reviewed by
legal counsel for Metalclad, Entrx and Allstate and that Metalclad, Entrx and Allstate had
sufficient opportunities to propose and negotiate changes in wording prior to its execution.
Metalclad and Entrx hereby warrant and represent that each is the lawful owner of the rights,
claims, claims of right or causes of action under the Policy as set forth and defined in this
Agreement. Neither Metalclad, Entrx nor Allstate will be entitled to have any wording of this
Agreement construed against the other party based on any contention as to which of the parties
drafted the language in question.

11. PARTIES TO AGREEMENT

This Agreement is intended to confer rights and benefits only on the signatories hereto and is
not intended to confer any right or benefit upon any other person or entity. No person or entity
other than the signatories hereto shall have any legally enforceable right under this Agreement.
All rights or action for any breach of this Agreement are hereby reserved to the signatories
hereto.

12. ENTIRE AGREEMENT

This Agreement constitutes the entire understanding between and among the parties with regard
to the matters herein set forth. The terms of this Agreement are contractual and not a mere
recital. Except as specifically set forth in this Agreement, there are no representations,
warranties, promises or inducements, whether oral or written, expressed or implied, that in any way
affect or condition the validity of this Agreement or alter its terms. This Agreement may be
amended only by subsequent written instrument that is executed by Metalclad, Entrx and Allstate.

13. BANKRUPTCY OBLIGATIONS

Metalclad and Entrx represent and warrant that neither entity currently has plans to enter
bankruptcy, including but not limited to the filing of a Chapter 11 petition. In the event that
either Metalclad and/or Entrx may do so at some time in the future, the Parties agree:

a. This Agreement is not an executory contract within the meaning of 11 U.S.C. Section 365;
and Metalclad and/or Entrx agree not to seek to reject or set aside this Agreement in any manner or
forum based on any bankruptcy proceeding. Metalclad and/or Entrx shall use their best efforts to
seek an order of the Bankruptcy Court that this Agreement is not an executory contract subject to
rejection or, in the alternative, approving Metalclad’s and/or Entrx’s assumption of this
Agreement.

b. This Agreement, having been negotiated at arms-length in settlement of bona fide disputes
and supported by adequate consideration, is not a preference under Section 547 of the Bankruptcy
code, a fraudulent conveyance under Section 548 of the Bankruptcy Code, or avoidable under any
other applicable federal bankruptcy or non-bankruptcy law. Metalclad and/or Entrx agree not to seek
to avoid or set aside this Agreement in any manner or forum in connection with any bankruptcy
filing or otherwise.

c. The Parties shall cooperate to preserve the validity, finality and enforceability of this
Agreement. Metalclad and/or Entrx shall use their best efforts to oppose any and all efforts or
objections to challenge the Agreement under any provision of the Bankruptcy Code, including without
limitation, 11 U.S.C. Sections 365, 547 and 548.

d. In any bankruptcy action where Metalclad, Entrx, or both, as part of any plan of
reorganization seeks to discharge asbestos-related bodily injury or personal injury Claims,
Metalclad, Entrx, or both, shall use their reasonable best efforts to request that the Bankruptcy
Court and/or the District Court enter a permanent injunction pursuant to 11 U.S.C. Sections 105
and/or 524(g) that enjoins all persons from commencing or continuing any action, proceeding or
claim against Allstate, Metalclad or Entrx, as the case may be, individually or collectively and
directly or indirectly, to collect, recover, or receive payments, satisfaction, or recovery of any
kind under, relating to, or arising out of asbestos related bodily injury or personal injury Claims
in connection with the Policy. Metalclad and/or Entrx, as the debtor, shall use their reasonable
best efforts to: (i) include such a permanent injunction in any plan and confirmation order it
sponsors, and (ii) apply to the Bankruptcy Court and/or District court (and diligently prosecute an
application) for an order including such a permanent injunction in any plan and confirmation order
sponsored by any other party in the bankruptcy proceeding. In the event that any Person (e.g.
another insurer or an underlying claimant) makes a claim against Allstate related to
asbestos-related bodily injury or personal injury Claims after the bankruptcy petition is filed but
before any Section 105 or Section 524(g) injunction is issued, Metalclad and/or Entrx will seek an
order from the Bankruptcy Court enjoining such claim as to Allstate.

14. MISCELLANEOUS REPRESENTATIONS

By entering into this Agreement, neither Metalclad, Entrx nor Allstate has waived, nor shall
Metalclad, Entrx or Allstate be deemed to have waived, any rights, obligations or positions which
they have asserted or may in the future assert in connection with any matter or persons outside the
scope of this Agreement. The parties specifically disavow any intention to create rights in third
parties under or in relation to this Agreement. Metalclad’s or Entrx’s rights under policies of
insurance other than the Policy shall not be affected by this Agreement. The settlement reflected
in this Agreement shall be without precedential value, and it is not intended to be, nor shall it
be, construed as an interpretation of any insurance policy. It shall not be used in evidence, or in
any other manner, in any court or other dispute resolution proceeding, to create, prove or
interpret the obligations of Allstate under any insurance policy issued to Metalclad or to any
other person.

15. BINDING EFFECT

This Agreement shall be binding upon and shall inure to the benefit of the signatories and
their respective heirs, executors, administrators, trustors, trustees, beneficiaries, predecessors,
successors, affiliated and related entities, officers, directors, principals, agents, employees,
assigns, representatives and all persons, firms, associations and/or corporations connected with
them, including, without limitation, their insurers, sureties and/or attorneys.

16. AGREEMENT IS NOT A POLICY OF INSURANCE

This Agreement is not a policy of insurance, and the signatories do not intend that it will be
interpreted as such.

17. CONFIDENTIALITY

This Agreement and its terms are confidential and, except as provided herein, neither the
terms of this Agreement nor its negotiation, execution or implementation, or any communication
generated in connection therewith (collectively, “Confidential Settlement Material”) shall be
disclosed to any person. Any party may disclose Confidential Settlement Material: (i) in an action
for breach of, or otherwise to enforce the terms of, this Agreement; (ii) as required by law,
including but not limited to the compliance with, inter alia, Securities and Exchange Commission
(“SEC”) rules and regulations, including but not limited to those requiring disclosure of material
information; (iii) in the case of Allstate, to its reinsurer(s); (iv) to parent, subsidiary,
affiliated, or associated companies and to their shareholders and counsel; (v) to the auditors of
or counsel to the parties to this Agreement upon request; (vi) if any party is ordered to make
disclosure by a court or governmental agency of competent jurisdiction; (vii) by written agreement
of the parties, and/or (viii) in the case of Metalclad or Entrx to any person. Any disclosure
authorized under subparagraphs (i) and (iii) through (vii), above shall be made only after making
reasonable efforts to obtain from the party to whom disclosure is to be made an agreement that the
confidentiality of this Agreement and the Confidential Settlement Material shall be preserved and
protected in accordance with the terms of this Agreement. Any disclosure authorized under
subparagraph (viii) shall be made only after the party to whom disclosure is being made has been
advised of and agrees that the confidentiality of this Agreement and the Confidential Settlement
Material shall be preserved and protected in accordance with the terms of this Agreement. If any of
the parties are served with a subpoena or other document request calling for disclosure of the
terms of this Agreement or Confidential Settlement Material, including but not limited to
disclosure of negotiations, discussions, correspondence or other material relating to this
Agreement or relating to the negotiation of this Agreement, written notice of the receipt of such
subpoena or document request shall be given to the other party within ten business days following
receipt of such subpoena or document request. The party from whom disclosure is sought shall not
make disclosure before giving the other party to this Agreement a reasonable amount of time to
intervene, at their own expense, and oppose disclosure and/or a reasonable amount of time to seek a
protective order prior to disclosure, unless failure to make such disclosure would subject the
party to contempt or other sanctions.

Nothing contained in this paragraph shall be interpreted to restrict the right of either party
to bring an action to enforce the terms of this Agreement or to make sworn statements as to the
fact of this Agreement and/or releases provided herein.

18. WARRANTY OF AUTHORIZED SIGNATORIES

Each of the signatories hereto warrants and represents that he or she is competent and
authorized to enter into this Agreement on behalf of the party for whom he or she purports to sign.

19. ATTORNEYS’ FEES

The parties hereto acknowledge and agree that each of them will bear their own attorneys’
fees, costs and expenses arising out of and/or connected with the dispute which is the subject of
this Agreement and the negotiation, drafting and execution of this Agreement, and all matters
arising out of or connected therewith.

20. SEVERABILITY

If any provision or part of any provision of this Agreement is for any reason held to be
invalid, unenforceable or contrary to any public policy, law, statute and/or ordinance, then the
remainder of this Agreement shall not be affected thereby and shall remain valid and fully
enforceable.

21. COUNTERPARTS

This Agreement may be executed in counterparts, and all so executed shall constitute an
agreement which shall be binding upon all parties hereto, notwithstanding that the signatories of
the parties’ designated representatives do not appear on the same page.

22. BENEFIT OF COUNSEL

The advice of legal counsel has been obtained by the parties hereto prior to entering into
this Agreement.

23. NOTICES

Any and all communications or notices in connection with this Agreement shall be in writing
and sent by facsimile or by first-class mail, postage prepaid. Such notices shall be sent to the
individuals noted below, or to such other individuals as hereafter designated in writing:

	 	 	 
	 
	 	 
	 
	 	 
	ENTRX/METALCLAD:

	 	ALLSTATE INSURANCE CO:
	 
	 	 
	Michel Y. Horton

	 	Laura Lee Martinelli
	 
	 	 
	Stanley H. Shure

	 	Allstate Insurance Company
	 
	 	 
	Morgan, Lewis & Bockius LLP

	 	Specialty Operations
	 
	 	 
	300 South Grand Avenue

	 	51 West Higgins Road
	 
	 	 
	Twenty-Second Floor

	 	South Barrington, IL 60010
	 
	 	 
	Los Angeles, CA 90071-3132

	 	Tel: (847) 551-3958
	 
	 	 
	Tel: (213) 612-2500

	 	Fax: (847) 551-2878
	 
	 	 
	Fax: (213) 612-2501

	 	

In the event a Party wishes to change the identity, address, or both, of the individuals to
whom notices shall be provided, notice of such changes shall be in writing and sent by facsimile or
by first class mail, postage prepaid to the other Parties to this agreement.

IN WITNESS WHEREOF, the undersigned, by their respective duly authorized representatives,
affix their signatures hereto.

	 	 	 
	
 
	 	ENTRX CORPORATION
	 
	 	 
	Dated: June 18, 2004

	 	By: /s/ Wayne Mills
	 
	 	 
	
 
	 	Wayne Mills, President and CEO
	 
	 	 
	
 
	 	METALCLAD INSULATION CORPORATION
	 
	 	 
	Dated: June 18, 2004

	 	By: /s/ John Macias
	 
	 	 
	
 
	 	John Macias, President
	 
	 	 
	
 
	 	ALLSTATE INSURANCE COMPANY,

AS SUCCESSOR IN INTEREST TO NORTHBROOK EXCESS &

INSURANCE COMPANY, FORMERLY

NORTHBROOK INSURANCE COMPANY
	 
	 	 
	Dated: June 22, 2004

	 	By: /s/ Laura Lee Martinelli

Direct Claim AnalystTest

CERTIFICATE OF DESIGNATION

of

SERIES A CONVERTIBLE PREFERRED STOCK

for

PROBE MANUFACTURING INDUSTRIES, INC.

PROBE MANUFACTURING INDUSTRIES, INC., a California corporation (the “Company”), pursuant to the appropriate provisions of California Corporations Code, does hereby make this Certificate of Designation and does hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Company by the Articles of Incorporation of the Company, the Board of Directors, without any shareholder action, which action was not required to be taken, duly adopted the following resolutions, which resolutions remain in full force and effect as of the date hereof:

RESOLVED, that, pursuant to Article Three, Section 2 of the Articles of Incorporation of the Company, the Board of Directors hereby authorizes the issuance of, and fixes the designation and preferences and relative, participating, optional, and other special rights, and qualifications, limitations and restrictions, of a series of Preferred Stock consisting of Four Hundred Forty (440) shares, no par value, to be designated “Series A Convertible Preferred Stock” (the “Series A Stock”).

RESOLVED, that each share of the Series A Stock shall rank equally in all aspects and shall be subject to the following terms and provisions:

1.

Preference on Liquidation.   In the event of any voluntary or involuntary liquidation, distribution of assets (other than the payment of dividends), dissolution or winding-up of the Company, Series A Stock shall have preferential rights to the Company’s common stock (the “Common Stock”) whereby Series A Stock shall get two times (2x) return on its capital.  Once Series A Stock has recouped its two times (2x) return on capital then Series A Stock shall participate, on a pro rata basis, based on the number of shares of the Company’s common stock (the “Common Stock”) into which the Series A Stock are convertible at the time of the liquidation, distribution of assets, dissolution or winding-up.

2.

Voting Rights.  The Series A Stock shall have voting rights and voting will be on an as converted basis, with class votes for the election of directors, any transaction in which control of the Company is transferred in which the per share price consideration received by Purchaser is less than three (3) times the Purchase Price, the sale of the Company of all or substantially all of its assets, liquidation or winding up of the Company and any amendment to the Company’s by-laws or articles of incorporation in a manner adverse to Series A Stock.

3.

Conversion.  The holders of the Series A Stock shall have the following rights with respect to the conversion of the Series A Stock into shares of Common Stock (the “Conversion Rights”):

(a)

Conversion.  Subject to and in compliance with the provisions of this Section 3, any shares of Series A Stock may, at any time, at the option of the holder, be converted into fully paid and non-assessable shares of Common Stock (a “Conversion”).  Each share of Series A Stock shall be converted into a number of shares of Common Stock that equals one-tenth of a percent (0.1%) of the Company’s outstanding common stock immediately following the Conversion Date. 

(b) Mechanics of the Conversion.  Upon a Conversion, the holder of Series A Stock shall surrender the applicable certificate or certificates therefore, duly endorsed, at the office of the Company or any transfer agent for the Series A Stock, and shall give written notice to the Company, of the Conversion and the number of shares of Series A Stock being converted.  Thereupon, the Company shall promptly issue and deliver to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled.  A Conversion shall be deemed to have been made at the close of the first business day after the date both notice has been given and the applicable share certificate or certificates have been delivered to the Company, provided, however, if the foregoing occurs on a business day, before the close of business, the Conversion shall be deemed to have occurred at the close of business on that day (the “Conversion Date”).  The person entitled to receive the shares of Common Stock issuable upon a Conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

(c)

Adjustment for Reclassification, Exchange and Substitution.  If at any time or from time to time after the Common Stock issuable upon the conversion of the Series A Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a transaction provided for elsewhere in this Section 2), in any such event each holder of Series A Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

(d)

Reorganizations, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time after the date of issuance of the Series A Stock, there is a capital reorganization of the Common Stock (other than a transaction provided for elsewhere in this Section 2), as a part of such capital reorganization, provision shall be made so that the holders of the Series A Stock shall thereafter be entitled to receive upon conversion of the Series A Stock the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof.  

(e)  

Notices of Record Date.  Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any sale of the Company, capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A Stock at least twenty (20) days prior to the record date specified therein a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (A) the date on which any such sale of the Company, reorganization, reclassification, recapitalization, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such sale of the Company, reorganization, reclassification, recapitalization, dissolution, liquidation or winding up.

(f)

Fractional Shares.  Any fractional share of Common Stock resulting from the conversion of the Series A Stock shall be rounded up to the nearest whole share.  

(g)

Reservation of Stock Issuable Upon Conversion.  The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Stock.  If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(h)

Notices.  Any notice required by the provisions of this Section 2 shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company.

(i)

No Impairment.  The Company will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 2 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holder of the Series A Stock against impairment.

4.

Redemption.

(a)

At any time, the Company may, in its sole discretion, redeem some or all of the outstanding shares of Series A Stock at a “Redemption Price” equal to the greater of (i) $12,500 per share or (ii) the current market value of the common stock on an as converted basis.  

(b)

To redeem Series A Stock, the Company, at least five (5) days prior to the date on which it desires to redeem such stock (the “Redemption Date”), shall send the applicable holder of Series A Stock a notice of the redemption, provided, however, that failure to give such notice or any defect therein or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any shares of Series A Stock.  Such notice shall state:  (i) the Redemption Date; (ii) the Redemption Price; and (iii) the number of shares of Series A Stock to be redeemed.  

(c)

Upon surrender, in accordance with said notice, of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require), such shares shall be redeemed by the Company at the Redemption Price.  In case fewer than all the shares represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares without cost to the holder thereof.

(d)

All shares of Series A Stock redeemed pursuant to this Section 4 shall be restored to the status of authorized and unissued shares of Series A Stock, without designation as to Series and may thereafter be reissued as shares of any series of preferred stock other than shares of Series A Stock.

[Signatures on following page]

1 of 5

PROBECertificate of Designation for Series A Preferred Stock, v. 1

This Certificate of Designation has been executed and adopted on behalf of the Company as of May 20, 2004.

PROBE MANUFACTURING INDUSTRIES, INC.

By:  

        Kam Mahdi, Chief Executive Officer

2 of 5

PROBE Certificate of Designation for Series A Preferred Stock, v. 1

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