Document:

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                                                                    Exhibit 10.2

                               OPERATING AGREEMENT

                           UAG MENTOR ACQUISITION, LLC

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      This OPERATING AGREEMENT is entered into as of July 1, 2003 by and between
UNITED AUTO GROUP, INC. and YAG MENTOR INVESTORS, LLC.

                                    ARTICLE 1

                                   DEFINITIONS

1.1   DEFINITIONS.

            The capitalized terms used in this Operating Agreement and the
exhibits hereto shall have the following meanings (unless otherwise expressly
provided herein):

            (a)   "Affiliate" of a specified Person shall mean (i) a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, (ii) any
officer, director, partner, member or legal representative of such specified
Person, (iii) any Person for which such specified Person acts as an officer,
director, partner or member and (iv) in the case of a specified Person who is a
natural person, his or her spouse, descendants, parents, siblings, estate, any
Affiliate of such person and any trust for the benefit of his or her spouse,
descendants, parents and/or siblings. For purposes of this definition, neither
YAG nor any Person by reason of controlling, being controlled by, or under
common control with YAG, shall in any event be an Affiliate of UAG.

            (b)   "Board of Directors" shall mean the "Board of Directors" as
appointed and elected by the Members pursuant to Section 5.1.6 and Section 5.2
hereof.

            (c)   "Capital Account" as of any given date shall mean the capital
account maintained for each Member as adjusted up to the date in question
pursuant to Article 7.

            (d)   "Capital Contribution" shall mean any contribution to the
capital of the Company in cash or property by a Member whenever made.

            (e)   "Certificate of Formation" shall mean the Certificate of
Formation of UAG Mentor Acquisition, LLC as filed with the Secretary of State of
Delaware, as the same may be amended from time to time.

            (f)   "Code" shall mean the Internal Revenue Code of 1986 or
corresponding provisions of subsequent superseding federal revenue laws.

            (g)   "Company" shall refer to UAG Mentor Acquisition, LLC, a
Delaware limited liability company.

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            (h)   "Dealership" shall mean the Honda of North America, Inc.
authorized automobile dealership operated at 8505 Mentor Avenue, Mentor, Ohio.

            (i)   "Delaware Act" shall mean the Delaware Limited Liability
Company Act, Sections 18-101 to 18-1107 of Title 6 of the Delaware Code.

            (j)   "Director" shall mean a member of the Board of Directors of
the Company.

            (k)   "Distribution Cash" shall mean all cash, revenues and funds
received by the Company less the sum of the following to the extent paid or set
aside by the Company:

                  (i)   All principal and interest payments on indebtedness of
      the Company incurred in accordance with this Operating Agreement;

                  (ii)  All cash expenditures incurred in connection with the
      normal operation of the Company's business; and

                  (iii) The establishment of such reserves and working capital
      as a majority of the members of the Board of Directors deem reasonably
      necessary to the proper operation of the Company's business.

            (l)   "Effective Date" means July 1, 2003.

            (m)   "Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association, foreign trust or foreign business
organization.

            (n)   "Fiscal Year" shall mean the Company's fiscal year, which
shall be the calendar year.

            (o)   "GAAP" shall mean generally accepted accounting principles
which are in effect in the United States from time to time.

            (p)   "Honda" shall mean Honda of North America, Inc.

            (q)   "Joint Venture Formation Agreement" shall mean that certain
Joint Venture Formation Agreement dated as of January 31, 1998 between United
Auto Group, Inc., UAG Citrus, Inc., Young Automotive Group, LLC, Alan V. Young,
William A. Young, Dan E. Young and Conway M. Anderson, III.

            (r)   "Majority Interest" shall mean a Percentage Interest in excess
of fifty percent.

            (s)   "Management Agreement" shall mean that certain management
Agreement

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of even date herewith between the Company and UAG Young Automotive, LLC, a
Delaware limited liability company.

            (t)   "Member" shall mean each of the parties who executes a
counterpart of this Operating Agreement as a Member.

            (u)   "Member Nonrecourse Debt" shall mean any "partner nonrecourse
liability" or "partner nonrecourse debt" under Section 1.704-2(b)(4) of the
Treasury Regulations. Subject to the foregoing, it shall mean any Company
liability to the extent the liability is nonrecourse for purposes of Section
1.1001-2 of the Treasury Regulations, and a Member (or related person within the
meaning of Section 1.752-4(b) of the Treasury Regulations) bears the economic
risk of loss under Section 1.752-2 of the Treasury Regulations because, for
example, the Member or a related Person is the creditor or a guarantor.

            (v)   "Member Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Member Nonrecourse Debt, equal to the Membership Minimum
Gain that would result if such Member Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.

            (w)   "Member Nonrecourse Deductions" shall mean Company deductions,
losses, and Section 705(a)(2)(B) expenditures, as the case may be (as computed
for "book" purposes), that are treated as deductions, losses, and expenditures
attributable to Member Nonrecourse Debt under Section 1.704-2(i)(2) of the
Treasury Regulations.

            (x)   "Membership Interest" shall mean a Member's entire interest in
the Company, including the Member's entire economic interest in the Company and
the right to participate in the management of the business and affairs of the
Company, including the right to vote on, consent to, or otherwise participate in
any decision or action of or by the Members granted pursuant to this Operating
Agreement and the Delaware Act.

            (y)   "Membership Minimum Gain" shall mean, with respect to any
taxable year of the Company, the "partnership minimum gain" of the Company
computed strictly in accordance with the principles of Sections 1.704-2(b)(2)
and 1.704-2(d) of the Treasury Regulations.

            (z)   "Net Profits" and "Net Losses" shall mean the income, gain,
loss and deductions of the Company in the aggregate or separately stated, as
appropriate, determined in accordance with generally accepted accounting
principles consistently applied under the accrual method of accounting at the
close of each fiscal year on the Company's information tax return filed for
federal income tax purposes, and shall also include income described in Code
Section 705(a)(1)(B) and expenditures described in Code Section 705(a)(2)(B);
provided that any gain, income, deductions or losses specially allocated under
Section 8.3 prior to the general allocation of Net Profits and Net Losses shall
be excluded from the computation thereof. For purposes of computing Net Profits
and Net Losses, the "book" value of an asset shall be

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substituted for its adjusted tax basis if the two differ, but otherwise Net
Profits and Net Losses shall be determined in accordance with Federal income tax
principles.

            (aa)  "Nonrecourse Deductions" shall mean in any Fiscal Year, an
amount of deductions that are characterized as "nonrecourse deductions" under
Section 1.704-2(b)(1) of the Treasury Regulations.

            (bb)  "Nonrecourse Liabilities" shall mean liabilities of the
Company treated as "nonrecourse liabilities" under Section 1.704-2(b)(3) of the
Treasury Regulations and in Section 1.752-1(a)(2) of the Treasury Regulations.

            (cc)  "Officer" shall mean an officer of the Company elected
pursuant to Section 5.3 of this Agreement.

            (dd)  "Operating Agreement" shall mean this Operating Agreement and
the exhibits hereto as originally executed and as amended from time to time.

            (ee)  "Percentage Interest" shall mean the percentage of the total
Membership Interests owned by a Member as set forth in Section 2.6 hereof and
shall, except as otherwise provided in this Operating Agreement, determine
proportionate voting power.

            (ff)  "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of the
"Person" when the context so permits.

            (gg)  "Post-Acquisition Date Earnings" for any period shall mean the
net earnings (or losses) before federal, state and local income taxes of the
Company for such period computed in accordance with GAAP, using the FIFO method
for inventory and after adjusting such net earnings (or losses) to exclude (i)
any management fee or overhead expense allocation charged or allocated by UAG or
any Affiliate other than the management fee prescribed in the Management
Agreement, and (ii) any depreciation or amortization arising out of or relating
to the acquisition of the Dealership, including without limitation, amortization
of goodwill relating to such acquisition and depreciation or amortization
relating to any change in depreciable or amortizable bases or useful lives of
assets of the Company (as compared to the bases and lives of assets when held by
the prior owner).

            (hh)  "Purchase Date" shall mean August 1, 2008.

            (ii)  "Reserves" shall mean, for any fiscal period, funds set aside
or amounts allocated during such period to reserves that shall be maintained in
amounts required by third parties doing business with the Company or otherwise
deemed appropriate by the Board of Directors for working capital and to pay
taxes, insurance, debt service, or other costs or expenses incurred in
connection with the ownership and operation of the Dealership.

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            (jj)  "Retained Earnings" shall mean the Post-Acquisition Date
Earnings (without excluding clause (ii) of the definition) of the Company for
the period commencing on the date hereof and ending on the Purchase Date, less
any dividends or distributions of such earnings made during such period.

            (kk)  "Treasury Regulations" shall include proposed, temporary and
final regulations promulgated under the Code in effect as of the date of filing
the Certificate of Formation and the corresponding sections of any regulations
subsequently issued that amend or supersede those regulations.

            (ll)  "UAG" shall mean United Auto Group, Inc., a Delaware
corporation.

            (mm)  "YAG" shall mean YAG Mentor Investors, LLC, an Indiana limited
liability company.

                                    ARTICLE 2
                              FORMATION OF COMPANY

2.1   FORMATION.

            The Members organized a Delaware limited liability company by
causing the Certificate of Formation to be filed with the Delaware Secretary of
State on August 22, 2000 and by executing this Operating Agreement in accordance
with and pursuant to the Delaware Act.

2.2   NAME.

            The name of the Company is UAG Mentor Acquisition, LLC.

2.3   PRINCIPAL OFFICE.

            The principal office of the Company shall be 8505 Mentor Avenue,
Mentor, Ohio. The Company may locate its places of business at any other place
or places as the Members may, from time to time, deem advisable.

2.4   REGISTERED OFFICE AND REGISTERED AGENT.

            The Company's initial registered office shall be at the office of
its registered agent at 1209 Orange Street, Wilmington, Delaware and the name of
its initial registered agent at such address shall be The Corporation Trust
Company. The registered office and registered agent may be changed from time to
time by filing the address of the new registered office and/or the name of the
new registered agent with the Delaware Secretary of State pursuant to the
Delaware Act.

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2.5   TERM.

            The Company shall continue in existence until it is terminated under
this Operating Agreement or by the provisions of the Delaware Act.

2.6   PERCENTAGE INTERESTS.

            Commencing on the Effective Date, the Percentage Interests of the
Members shall be set forth in Schedule A attached hereto. Schedule A shall be
amended as soon as practicable after an event resulting in a change to the
Percentage Interests of the Members.

                                    ARTICLE 3
                               BUSINESS OF COMPANY

3.1   PERMITTED BUSINESSES.

            The business of the Company shall be to own and operate the
Dealership. The Company shall engage in no other business without the unanimous
consent of the Members. The Company may exercise all other powers necessary to
or reasonably connected with such business that may be legally exercised by
limited liability companies under the Delaware Act, and may engage in all
activities necessary, customary, convenient, or incident to any of the
foregoing.

                                    ARTICLE 4
                         NAMES AND ADDRESSES OF MEMBERS

            The names and addresses of the Members are as follows:

<TABLE>
<CAPTION>
Name                                        Address
----                                        -------
<S>                                         <C>
United Auto Group, Inc.                     2555 Telegraph Road
                                            Bloomfield Hills, Michigan 48302
                                            Attn: General Counsel

YAG Mentor Investors, LLC
                                            C/o Young Investments, Inc.
                                            7399 Shadeland Avenue #166
                                            Indianapolis, IN 46250
</TABLE>

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                                    ARTICLE 5
                   MEMBERS; BOARD OF DIRECTORS; OFFICERS; ETC.

      5.1   MEMBERS.

            5.1.1 RIGHTS OF MEMBERS. The Members shall have all the rights and
powers specifically set forth in this Agreement and, to the extent not
inconsistent with this Agreement, the Delaware Act.

            5.1.2 LIMITED LIABILITY. Except as otherwise provided by mandatory
provisions of applicable state law, no Member shall be personally liable for any
of the debts, liabilities, contracts or other obligations of the Company or for
any of the losses of the Company.

            5.1.3 TRANSACTIONS WITH COMPANY. (a) The Board of Directors may
permit the Company to enter into one or more agreements or engage in one or more
transactions with a Member or its Affiliates to render services to the Company,
provide funds or credit support to the Company or sell, transfer or convey
property or assets to the Company. Any such agreement or transaction pursuant to
which services are rendered to the Company, funds or credit support are provided
to the Company or property or assets are sold, transferred or conveyed to the
Company by a Member or its Affiliates must satisfy one of the following
requirements:

                  (i)   such agreement or transaction must be approved by one of
                  the Directors not nominated by such Member; or

                  (ii)  the price and other material terms of such agreement or
                  transaction, when considered together with the price and other
                  material terms of all similar transactions between the Company
                  and such Member or its Affiliates during the previous 12-month
                  period, must not be materially less favorable to the Company
                  than those generally being provided to or available from
                  unrelated third parties, taking into account the totality of
                  the circumstances surrounding such agreements or transactions
                  (including such factors as reliability, quality,
                  creditworthiness, convenience and ancillary services);
                  provided, however, that UAG and its Affiliates shall not enter
                  into any transaction or agreement pursuant to this Item (ii)
                  which (A) requires payment to UAG or such Affiliate of a "UAG
                  Corporate Identity Program Fee" (as applicable to other United
                  Auto Group, Inc. dealerships), a "UAG Management Fee" (other
                  than as provided in the Management Agreement) or any other fee
                  for management services or overhead or (B) is described in
                  subsections (d) or (e) of this Section 5.1.3.

      (b)   Except as set forth in the Joint Venture Formation Agreement, no
Member shall have any obligation to provide funds, credit support, goods or
services to the Company or permit the Company to use any facilities or assets of
such Member, in either case except as

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may be provided in contracts entered into from time to time specifically dealing
with the provision of funds, credit support, goods or services or the use of
such facilities or assets, nor shall there be any obligation on the part of any
Member to enter into such contracts, except as otherwise set forth herein.

      (c)   The Company shall enter into the Management Agreement, which shall
not be amended, modified or terminated except by unanimous vote of the Board of
Directors of the Company consistent with the provisions of Section 5.2 hereof.

      (d)   The Company shall not lend funds, goods or services to any Member or
its Affiliate, unless such agreement or transaction has been approved by one of
the Directors not nominated by such Member.

      (e)   The Company shall not pay or enter into an agreement to pay any
allocation of Cleveland area management expenses incurred by UAG or its
Affiliates (which shall not include any allocation of national or other regional
expenses applicable to dealerships outside the Cleveland area) unless such
payment or agreement has been approved by one of the Directors not nominated by
UAG or its Affiliates, which approval shall not be unreasonably withheld.

            5.1.4 OTHER ACTIVITIES OF MEMBERS AND CONFLICTS OF INTEREST. The
Members, the Directors, the Officers and their respective Affiliates may engage
in or possess an interest in other business ventures of every nature and
description for their own account, independently and with others, whether or not
such other enterprises shall be in competition with any activities of the
Company (except as set forth in the Joint Venture Formation Agreement or any
other contract entered into by such Member, Director, or Officer); and neither
the Company, the Members, the Directors nor the Officers shall have any rights
by virtue of this Agreement in and to such independent ventures or to the income
or profits derived therefrom.

            5.1.5 AUTHORITY OF MEMBERS TO BIND THE COMPANY. As provided in
Section 5.2 hereof, the property, business and affairs of the Company shall be
managed by its Members acting by and through the Board of Directors of the
Company. Accordingly, only the Board of Directors and (to the extent permitted
by this Agreement and the resolutions of the Board of Directors) Officers of the
Company shall have the authority to bind the Company.

            5.1.6 ELECTION OF DIRECTORS AND ANNUAL MEETING. Subject to Section
5.2.1 hereof, the Members shall elect the Directors of the Company at an annual
meeting to be held for such purposes and for the transaction of such other
business as may properly come before the meeting. The annual meeting shall be
held at such place, either within or without the State of Delaware, on such date
and at such time as the Board of Directors may by resolution provide. The
Company shall reimburse a representative of each Member for reasonable expenses
incurred in attending a meeting. The Board of Directors may specify by
resolution prior to any special meeting of Members held within the year that
such meeting shall be in lieu of the annual meeting.

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            5.1.7 SPECIAL MEETINGS. Special meetings of the Members may be
called at any time by the Board of Directors, the President or upon written
request of Members having a Majority Interest. Such written request shall
specify the time and purpose of the proposed meeting. Such meeting shall be held
at such place, either within or without the State of Delaware, as is stated in
the call and notice thereof. The Company shall reimburse a representative of
each Member for reasonable expenses incurred in attending a meeting.

            5.1.8 NOTICE OF MEETINGS. Written notice of each meeting of Members,
stating the time and place of the meeting, and the purpose of any special
meeting, shall be mailed to each Member entitled to vote at or to notice of such
meeting not less than five (5) nor more than sixty (60) days prior to such
meeting unless such Member waives notice of the meeting. If an agreement of
merger or consolidation or a sale, lease, exchange, or other disposition of all
or substantially all the property and assets of the Company is to be considered
at any annual or special meeting, the written notice shall state the purpose of
such meeting. Any Member may execute a waiver of notice, in person or by proxy,
either before or after any meeting, and shall be deemed to have waived notice if
he is present at such meeting in person or by proxy. Neither the business
transacted at, nor the purpose of, any meeting must be stated in the waiver of
notice of such meeting. Notice of any meeting may be given by the President, the
Secretary or the Member or Members calling such meeting. No notice need be given
of the time and place or reconvening of any adjourned meeting, if the time and
place to which the meeting is adjourned are announced at the adjourned meeting.

            5.1.9 LIST OF MEMBERS. The President of the Company shall prepare,
within a reasonable time before every meeting of Members, a complete list of the
Members entitled to vote at the meeting showing the address of each Member and
the Percentage Interest of each Member. Such list shall be open to the
examination of any Member, for any purpose germane to the meeting, during
ordinary business hours, for a reasonable time prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any Member who is present.

            5.1.10 QUORUM. A quorum for the transaction of business at any
annual or special meeting of Members shall exist when Members holding a Majority
Interest are represented either in person or by proxy at such meeting. If a
quorum is present, the affirmative vote of a majority of the Membership
Interests represented at the meeting and entitled to vote on the subject matter
shall be the act of the Members, unless a greater vote is required by law or by
this Agreement. When a quorum is once present to organize a meeting, the Members
present may continue to do business at the meeting or at any adjournment thereof
notwithstanding withdrawal of enough Members to leave less than a quorum. The
holders of a majority of the Membership Interests represented at a meeting,
whether or not a quorum is present, may adjourn such meeting from time to time.

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            5.1.11 ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at a meeting of the Members may be taken without a meeting if written
consent, setting forth the action so taken, is signed by Members who would be
entitled to vote not less than the minimum number of votes that would be
necessary to authorize or take the action, all Members are given written notice
of the action prior to the effectiveness of the consent and such consent shall
be filed with the minutes of the proceedings of the Members. Such consent shall
have the same force and effect as a vote of the Members at a duly called meeting
thereof.

      5.2   BOARD OF DIRECTORS. The property, business and affairs of the
Company shall be managed by or under the direction of the Board of Directors,
which may exercise all the powers of the Company, subject to any restrictions
imposed by law or by this Agreement.

            5.2.1 NUMBER OF DIRECTORS; ELECTION. The Board of Directors shall
consist of four natural persons each of whom must be a director, officer,
employee or member of a Member. Each Director shall be elected as provided in
this Section 5.2.1 and shall serve in such capacity until his successor has been
elected and qualified or until such person's death, resignation or removal. The
initial Board of Directors shall consist of the persons listed on Schedule B.
The Members and the Company shall take all action within their respective power,
including, but not limited to, the voting of their Membership Interests (to the
extent that any such Person holds Membership Interests entitled to vote
thereon), required to cause the Board of Directors to at all times consist of:
(i) one member of YAG designated by YAG as long as YAG is a Member and owns at
least 10% of the outstanding Membership Interests (taking into account as
Membership Interests owned by YAG any Membership Interests owned by any
Affiliate of YAG, and (ii) the remaining Directors (which shall be three) shall
be directors, officers or employees of UAG designated by UAG. In the event that
any Director (a "Withdrawing Director") designated in the manner set forth in
the preceding sentence is unable to serve, or once having commenced to serve, is
removed or withdraws from the Board of Directors, such Withdrawing Director's
replacement (the "Substitute Director") shall be designated in accordance with
the preceding sentence. The Company and each of the Members agree to take all
action within its or his power, including (A) the voting of Membership Interests
to cause the election of such Substitute Director as soon as practicable
following his designation and (B) the instructing of the Directors it had
previously designated to serve on the Board, as the first order of business at
the first meeting thereof after such Substitute Director has been so designated,
to vote to seat such designated Substitute Director as a Director in place of
the Withdrawing Director. In the event any Person entitled to designate a
Director or Directors pursuant to this Agreement fails to designate a Director,
such position on the Board of Directors shall remain vacant. If the Director
position designated by YAG becomes vacant, the Board of Directors shall conduct
no business until the earlier of (x) the time the position is filled by YAG or
(y) five (5) days after the position becomes vacant; unless such vacancy is
created by the resignation of YAG's designee and (1) the Board of Directors
determines in good faith that the conduct of particular business at the time is
necessary and in the best interests of the Company, (2) such action does not
involve a transaction or agreement between the Company and a Member or its
Affiliate, and (3) such action would not under this Agreement (if such vacancy
did not exist) require the affirmative vote of the Director

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nominated by YAG or the unanimous vote of the Board of Directors, in which case
the Board of Directors may take such action after notifying YAG of the vacancy
and the action the Board of Directors intends to take.

            5.2.2 MEETINGS. The annual meeting of the Board of Directors for the
purpose of electing officers and transacting such other business as may be
brought before the meeting shall be held each year immediately following the
annual meeting of Members. The Board of Directors may by resolution provide for
the time and place of other regular meetings and no notice of such regular
meetings need be given. Special meetings of the Board of Directors may be called
by the Chairman of the Board or by any two Directors. Written notice of the time
and place of such meetings shall be given to each director by first class mail
at least four (4) days before the meeting or by telephone, telegraph, cablegram
or in person at least one (1) day before the meeting. Any Director may execute a
waiver of notice, either before or after any meeting, and shall be deemed to
have waived notice if he is present at such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
stated in the notice or waiver of notice of such meeting. Any meeting may be
held at any place within or without the State of Delaware. The Company shall
reimburse each Director for reasonable expenses incurred in attending a meeting.

            5.2.3 QUORUM. A majority of the number of Directors last fixed by
the Members shall constitute a quorum for the transaction of business at any
meeting. When a quorum is present, the vote of a majority of the Directors
present shall be the act of the Board of Directors, unless a greater vote is
required by law or by this Agreement.

            5.2.4 ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or any committee thereof may be
taken without a meeting if written consent, setting forth the action so taken,
is signed by the Directors or committee members who would be entitled to vote
not less than the minimum number of votes that would be necessary to authorize
or take the action, all Directors are given written notice of the action prior
to the effectiveness of the consent and such consent shall be filed with the
minutes of proceedings of the Board of Directors or committee. Such consent
shall have the same force and effect as the approval of the Board of Directors
or committee, as the case may be.

            5.2.5 COMMITTEES. The Board of Directors, by resolution adopted by a
majority of all of the Directors, may designate such committees as it deems
necessary or desirable, each composed of one (1) or more of the Directors. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Company;
provided that no committee shall have the authority of the Board of Directors in
reference to (i) an amendment to this Agreement, (ii) the adoption of an
agreement of merger or consolidation, (iii) the sale, lease or exchange or other
disposition of all or substantially all of the property and assets of the
Company, (iv) a voluntary dissolution of the Company or a revocation thereof, or
(v) the power or authority to declare a distribution, to authorize the

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admission of Members, or to adopt a certificate of ownership and merger. No
committee may conduct any business which could not be conducted under this
Agreement by a majority of all of the Directors, and no committee which does not
include the Director designated by YAG may conduct any business which requires
the consent of the YAG-designated Director under this Agreement (and any such
committee must have the consent of the YAG-designated Director to conduct such
business).

            5.2.6 REMOVAL. A Member who has designated a Director pursuant to
Section 5.2.1 hereof can remove and replace such Director at any time for any
reason.

            5.2.7 TELEPHONIC MEETINGS. Members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors or any committee by means of telephone conference or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 5.2.7. shall constitute presence in person at such meeting.

      5.3   OFFICERS. The Officers of the Company shall be elected by the Board
of Directors and shall consist of a Chairman of the Board of Directors, a
President, a Secretary, a Treasurer and such other Officers or assistant
Officers, including Vice Presidents, as may be elected by the Board of
Directors. Each Officer shall hold office for the term for which such Officer
has been elected or appointed or until such Officer's successor has been elected
or appointed and has qualified, or until such Officer's earlier resignation,
removal from office, or death. Any two or more offices may be held by the same
person. The Board of Directors may designate a Vice President as an Executive
Vice President and may designate the order in which other Vice Presidents may
act. The initial Officers are set forth in Schedule C.

            5.3.1 CHAIRMAN OF THE BOARD. The Chairman of the Board shall give
general supervision and direction to the affairs of the Company, subject to the
direction of the Board of Directors. The Chairman of the Board shall preside at
all meetings of the Board of Directors and the Members

            5.3.2 PRESIDENT. Subject to the limitations imposed by this
Agreement, any employment agreement, the Management Agreement, or any
determination of the Board of Directors, the President, subject to the general
control of the Board of Directors, shall be the Chief Operating Officer of the
Company and, as such, shall be responsible for the management and direction of
the day-to-day business and affairs of the Company and shall have full authority
to execute all documents and take all actions that the Company may legally take.
The President shall exercise such other powers and perform such other duties as
may be assigned to him by this Agreement or the Board of Directors, including
the duties and any powers stated in any employment agreement. Notwithstanding
anything to the contrary, without specific written authorization by the Board of
Directors, the President (and each of the other Officers) shall have no power or
authority to take or cause the Company to take any action, or engage or

                                       12
<PAGE>

cause the company to engage in any activity, that is outside the ordinary course
of business of the Company.

            5.3.3 VICE PRESIDENTS. In the absence of the President, any Vice
President appointed by the Board of Directors shall, except as hereinafter
provided, have all of the powers and duties conferred upon the President. Each
such designated Vice President shall have the same power as the President to
sign certificates and contracts of the Company. Any Vice President shall perform
such other duties and may exercise such other powers as may from time to time be
assigned to him by this Agreement, the Board of Directors or the President.

            5.3.4 SECRETARY. The Secretary shall record or cause to be recorded
in books provided for that purpose the minutes of the meetings or actions of the
Board of Directors or the Officers, shall see that all notices are duly given in
accordance with the provisions of this Agreement and as required by law, shall
be custodian of all records (other than financial), shall see that the books,
reports, statements, certificates and all other documents and records required
by law are properly kept and filed, and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may, from time to
time, be assigned to him by this Agreement, the Board of Directors or the
President.

            5.3.5 TREASURER. The Treasurer shall keep or cause to be kept the
books of account of the Company and shall render statements of the financial
affairs of the Company in such form and as often as required by this Agreement,
the Board of Directors or the President. The Treasurer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the Company. The Treasurer shall perform all other duties commonly incident to
his office and shall perform such other duties and have such other powers as
this Agreement, the Board of Directors or the President shall designate from
time to time.

            5.3.6 POWERS OF ATTORNEY. The Board of Directors may grant powers of
attorney or other authority as appropriate to establish and evidence the
authority of the Officers.

            5.3.7 OTHER DUTIES. Each Officer, employee and agent of the Company
shall have such other duties and authority as may be conferred upon such
Officer, employee or agent by the Board of Directors by resolution or otherwise
or delegated to such Officer, employee or agent by the Chairman of the Board or
the President. Each Officer, employee and agent shall conduct the affairs of the
Company in the best interests of the Company and the mutual best interests of
the Members, including, the safekeeping and use of all Company funds and assets.

            5.3.8 REMOVAL; VACANCIES. Any Officer may be removed at any time by
the Board of Directors, and such vacancy may be filled by the Board of
Directors. A vacancy in any office caused by death, resignation, removal,
disqualification or otherwise of an Officer may be filled by the Board of
Directors for the unexpired portion of the term of that office by a majority
vote of the Directors.

                                       13
<PAGE>

            5.3.9 COMPENSATION. Unless the Directors unanimously agree
otherwise, no officer or director of UAG, or any of its Affiliates, shall
directly or indirectly be paid compensation by the Company except pursuant to a
Management Agreement between the Company and UAG Young Automotive Group, LLC. No
Officer shall be prevented from receiving such salary by reason of the fact that
such Officer is also a Director of the Company.

      5.4   EXCULPATION. No Directors or Officers of the Company or former
Director or Officer of the Company shall have any liability of any nature
whatsoever to the Company, any Members or any other Directors or Officers by
reason of breach of duty, fiduciary or otherwise, other than with respect to:
(i) intentional misconduct or a knowing violation of law; (ii) any transaction
pursuant to which the Director or Officer or former Director or Officer received
a personal benefit in violation or breach of any provision of this Agreement;
and (iii) a distribution made in violation of this Agreement or the Delaware
Act.

      5.5   INDEMNIFICATION. The Company shall indemnify and hold harmless, to
the fullest extent permitted by the Act, all Directors and Officers of the
Company, and all persons who were Directors or Officers of the Company at the
time of the relevant conduct, from and against any and all claims and demands
whatsoever arising in connection with the Company; provided, however, that the
Company shall have no power to indemnify any Director or Officer, or former
Director or Officer, (i) for intentional misconduct or a knowing violation of
law, (ii) for any transaction pursuant to which the Director or Officer or
former Director or Officer received a personal benefit in violation or breach of
any provision of this Agreement, or (iii) with respect to a distribution made in
violation of this agreement or the Delaware Act. The Company shall pay for or
reimburse the reasonable expenses incurred by a Director or Officer or former
Director or Officer who is entitled to indemnification pursuant to this Section
4.6 if:

            (a)   the Director or Officer or former Director or Officer
                  furnishes the Company a written affirmation of his good faith
                  belief that he has met the standard of conduct set forth
                  above; and

            (b)   the Director or Officer or former Director or Officer
                  furnishes the Company a written undertaking, executed
                  personally or on his behalf to repay any advances if it is
                  ultimately determined that he is not entitled to
                  indemnification.

      The written undertaking required by paragraph (b) above must be an
unlimited general obligation of the Director or Officer or former Director or
Officer but need not be secured and may be accepted without reference to
financial ability to make repayment.

      5.6   LIABILITY FOR CERTAIN ACTS. No Member has guaranteed nor shall any
Member have any obligation with respect to the return of a Member's Capital
Contributions or profits from the operation of the Company. Notwithstanding the
provisions of the Delaware Act or any contrary rule of law or equity, no Member
shall be liable to the Company or to any

                                       14
<PAGE>

Member for any loss or damage sustained by the Company or any Member except loss
or damage resulting from intentional misconduct or knowing violation of law or a
transaction for which such Member knowingly received a personal benefit in
violation or breach of the provisions of this Agreement. Each Member shall be
entitled to rely on information, opinions, reports or statements, including
financial statements or other financial data, which has been prepared or
presented in accordance with the provisions of the Delaware Act.

                                    ARTICLE 6
                        RIGHTS AND OBLIGATIONS OF MEMBERS

      6.1   LIMITATION OF LIABILITY. Each Member's liability shall be limited as
set forth in this Operating Agreement, the Delaware Act and other applicable
law.

      6.2   COMPANY DEBT LIABILITY. Except as provided in Section 6.5 below or
as otherwise required by law, a Member will not be personally liable for any
debts or losses of the Company beyond the Member's respective Capital
Contributions not yet returned and any obligation of the Member under Section 7
below to make Capital Contributions.

      6.3   APPROVAL OF SALE OF DEALERSHIP OR ASSETS. Prior to the Purchase
Date, the Members shall have the right, by the unanimous vote of the Members to
approve (a) the sale, exchange, termination or other disposition of the business
of the Company, the Dealership or any assets owned by the Company not in the
ordinary course of business; or (b) the merger or consolidation of the Company
with another Entity. After the Purchase Date, the Members shall have the right,
by the affirmative vote of Members holding a Majority Interest, to approve (a)
the sale, exchange, termination or other disposition of the business of the
Company, the Dealership or any assets owned by the Company not in the ordinary
course of business; or (b) the merger or consolidation of the Company with
another Entity. Notwithstanding anything herein to the contrary, if the Company
has net losses for any consecutive 24-month period (excluding non-recurring
income or expenses) then the Members shall have the right, by the affirmative
vote of Members holding a Majority Interest to (i) cause the Company to sell the
Company or substantially all of its assets to a third party or (ii) to cause the
Company to terminate its franchise; provided, however, that prior to any such
sale or termination of franchise the Company shall notify YAG in writing of its
intention to enter into such sale or termination of franchise (the "Sale
Notice") and YAG or any of its Affiliates shall have the right to elect to
purchase UAG's Membership Interests for an amount equal to UAG's Percentage
Interest of the positive Retained Earnings for the Company, if any, plus the
amount of UAG's Capital Contribution not yet distributed to UAG (less UAG's
Percentage Interest of any negative Retained Earnings) which purchase shall be
subject to Honda approval. If YAG or any of its Affiliates does not notify the
Company of its intention to purchase such interests within 10 days of receipt of
the notice then such right shall be waived.

      6.4   PRIORITY AND RETURN OF CAPITAL. No Member shall have priority over
any other Member, either for the return of Capital Contributions or for Net
Profits, Net Losses, or dis-

                                       15
<PAGE>

tributions; provided that this Section shall not apply to loans (as
distinguished from Capital Contributions) that a Member has made to the Company.

      6.5   LIABILITY OF A MEMBER TO THE COMPANY. As between the Members, a
Member who receives a distribution made by the Company which is either in
violation of this Operating Agreement or in violation of the Delaware Act is
liable to the Company for the amount of such distribution.

                                    ARTICLE 7
                          CONTRIBUTIONS TO THE COMPANY
                              AND CAPITAL ACCOUNTS

      7.1   INITIAL CAPITAL CONTRIBUTIONS BY MEMBERS. The Members hereby
acknowledge that as of the Effective Date the Capital Accounts balances of the
Members as expressed in percentages shall be as follows: 70% UAG and 30% YAG.

      7.2   ADDITIONAL CONTRIBUTIONS. In the event that a majority of the
Directors determine that additional capital contributions are required, then the
Company may call for such additional capital contributions by notifying the
Members in writing of the timing and amount of such call and the total
contribution to be made from such Member (the "Call Notice"). Any call for
additional capital contributions must be reasonable in view of the current and
reasonably foreseeable future needs of the Company and no call for additional
capital contributions shall be made unless the Company has obtained floor plan
financing on its vehicle inventory to the maximum extent commercially
reasonable. Prior to the Purchase Date, UAG shall contribute 75% of any
additional capital call and YAG shall contribute 25% of any additional capital
call (and the Percentage Interests of UAG and YAG shall be unchanged if both
Members satisfy the additional capital call); provided, however, that YAG shall
be entitled to elect not to make its portion of any additional capital
contribution by notifying the Company and UAG no later than five (5) days after
receipt of the Call Notice. If YAG elects not to make its portion of any
additional capital contribution and the entire amount of the additional capital
contribution is made by UAG, then YAG's Percentage Interest shall be reduced as
of the date of such contribution by UAG to the Percentage equal to 120% of the
percentage that the total capital contributed by YAG through such date bears to
the total capital contributed by the Members through and including such date.

      7.3   CAPITAL ACCOUNTS. A separate Capital Account will be maintained for
each Member.

            (a)   Each Member's Capital Account shall be increased by:

                  (i)   The amount of cash contributed by the Member to the
      Company;

                  (ii)  The fair market value of property or other assets
      contributed by

                                       16
<PAGE>

      Member to the Company (net of liabilities secured by such contributed
      property that the Company is considered to assume or take subject to under
      Code Section 752);

                  (iii) Allocations to the Member of Net Profits and any items
      in the nature of income or gain that are specially allocated to the Member
      pursuant to Section 8.3 hereof; and

                  (iv)  Allocations to the Member of income exempt from tax
      described in Code Section 705(a)(1)(B).

            (b)   Each Member's Capital Account will be decreased by:

                  (i)   The amount of cash distributed to the Member by the
      Company;

                  (ii)  The fair market value of property or other assets
      distributed to the Member by the Company (net of liabilities secured by
      such distributed property that such Member is considered to assume or take
      subject to under Code Section 752);

                  (iii) Allocations to the Member of Net Losses and expenditures
      described in Code Section 705(a)(2)(B) pertaining to expenditures that are
      not deductible for tax purposes; and

                  (iv)  Allocations to the Member of any items in the nature of
      loss or deduction that are specially allocated to the Member pursuant to
      Section 8.3 hereof.

            (c)   In the event of a permitted sale or exchange of a Membership
Interest in the Company, the Capital Account of the transferor shall become the
Capital Account of the transferee to the extent it relates to the transferred
Membership Interest in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv).

            (d)   The manner in which Capital Accounts are to be maintained
pursuant to this Section 8.3 is intended to comply with the requirements of Code
Section 704(b) and the Treasury Regulations promulgated thereunder. If in the
opinion of the Company's independent auditors the manner in which Capital
Accounts are to be maintained pursuant to the preceding provisions of this
Section 7.3 should be modified to comply with Code Section 704(b) and the
Treasury Regulations thereunder, then notwithstanding anything to the contrary
contained in the preceding provisions of this Section 7.3, the method in which
Capital Accounts are maintained shall be so modified; provided, however, that
any change in the manner of maintaining Capital Accounts shall not materially
alter the economic agreement between or among the Members.

            (e)   Except as otherwise required in the Delaware Act (and subject
to Sections 7.1 and 7.2 above), no Member shall have any liability to restore
all or any portion of a deficit balance in such Member's Capital Account.

                                       17

<PAGE>

      7.4   WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS TO CAPITAL. A
Member shall not receive out of the Company's property any part of its Capital
Contribution until all liabilities of the Company, except liabilities to Members
on account of their Capital Contributions, have been paid or there remains
property of the Company sufficient to pay them. A Member, irrespective of the
nature of its Capital Contribution, has only the right to demand and receive
cash in return for its Capital Contribution.

                                    ARTICLE 8
          ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS

      8.1   ALLOCATIONS OF NET PROFITS AND NET LOSSES. After taking into account
any special allocations of items pursuant to Section 8.3, the Net Profits and
Net Losses of the Company for each Fiscal Year shall be allocated as follows:

            (a)   Net Losses shall be allocated among the Members: (i) first, in
proportion to, and to the extent of, the excess, if any, of the Net Profits
allocated among the Members pursuant to Section 8.1(b) over distributions to the
Members pursuant to Section 8.2; (ii) second, in proportion to, and to the
extent of, their respective Capital Account balances; and (iii) thereafter, in
proportion to their respective Percentage Interests.

            (b)   Net Profits shall be allocated among the Members: (i) first,
in proportion to, and to the extent of the Net Losses allocated among the
members pursuant to Section 8.1(a)(iii) and not previously offset by allocations
under this subsection; (ii) second, in proportion to, and to the extent of, the
Net Losses allocated among the Members pursuant to Section 8.1(a)(ii) and not
previously offset by allocations under this subsection; (iii) third, in
proportion to, and to the extent of, the Net Losses allocated among the Members
pursuant to Section 8.1(a)(i) and not previously offset by allocations under
this subsection; and (iv) thereafter, in proportion to their respective
Percentage Interests.

      8.2   DISTRIBUTIONS.

            (a)   Except to the extent that and for so long as the Board of
Directors reasonably determines that any such distribution would significantly
compromise the Company's ability to pay its current financial obligations as
they become due and that the Company is unable to borrow funds on commercially
reasonable terms to make such distribution, the Company shall distribute,
quarterly to the Members (in proportion to their respective Percentage
Interests) an amount (the "Tax Amount") equal to the product of (i) the highest
combined effective Federal, State and local income tax rates imposed on the
ordinary income of any Member multiplied by (ii) the Company's estimated taxable
income, if any, for Federal, State and local income tax purposes allocable to
the Members for such quarter (provided, however, that the Company shall be
deemed to have complied with this provision as long as the total amount of
distributions with respect to such quarter, other than distributions in

                                       18

<PAGE>

satisfaction of the obligation to distribute the Tax Amount for the prior
quarter, are equal to or greater than the Tax Amount). If any distribution of
the Tax Amount for a quarter is not made or is decreased pursuant to the
exception in the initial clause of this subsection, then the Company shall make
the distribution or part thereof otherwise required by this subsection as soon
as the Board of Directors reasonably determines that such exception is no longer
applicable.

            (b)   Subject to Section 11.3(b)(4)(ii) hereof, Distribution Cash
      held by the Company from time to time shall be distributed at least
      quarterly with the approval of a majority of the Directors, to the Members
      in proportion to their respective Percentage Interests as of the date of
      such distribution.

      8.3   SPECIAL ALLOCATIONS. The special allocations set forth below shall
supersede the allocations of Net Profits and Net Losses under Section 8.1.

            (a)   Nonrecourse Deductions for any Company taxable year shall be
allocated to the Members in accordance with their Percentage Interests.

            (b)   Member Nonrecourse Deductions for any Company taxable year
shall be allocated between the Members as required in Section 1.704-2(i)(1) of
the Treasury Regulations in accordance with the manner in which the Member or
Members bear the burden of an economic loss corresponding to the Member
Nonrecourse Deductions.

            (c)   In the event that there is a net decrease in Member Minimum
Gain during a Company taxable year, the minimum gain chargeback described in
Sections 1.704-2(f) and (g) of the Treasury Regulations shall apply.

            (d)   If during a Company taxable year there is a net decrease in
Member Nonrecourse Debt Minimum Gain, any Member with a share of that member
Nonrecourse Debt Minimum Gain (determined under Section 1.704-2(i)(5) of the
Treasury Regulations) as of the beginning of such year shall be allocated items
of income and gain for the year (and, if necessary, for succeeding years) equal
to that Member's share of the net decrease in the partner nonrecourse debt
minimum gain in accordance with Section 1.704-2(i)(4).

            (e)   Any Member who unexpectedly receives an adjustment,
allocation, or distribution described in subparagraphs (4), (5) or (6) of
Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations, which adjustment,
allocation or distribution creates or increases a deficit balance in that
Member's Capital Account, shall be allocated items of "book" income and gain in
an amount and manner sufficient to eliminate the deficit balance in that
Member's Capital Account so created or increased as quickly as possible in
accordance with Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and its
requirements for a "qualified income offset."

            (f)   If any fee for services or interest on indebtedness payable by
the Company

                                       19

<PAGE>

is determined to be a nondeductible distribution from a partnership to a partner
for federal income tax purposes, there shall be allocated to the recipient of
the fee or interest payment an amount of gross income equal to such
distribution. For example, but not by way of limitation: (i) if any Distribution
Cash payable to a Member as compensation for its services is treated as a
partnership distribution for federal income tax purposes, then the Member shall
receive a special allocation of gross income equivalent to such Distribution
Cash and such gross income shall be excluded in the determination of Net
Profits; and (ii) if any interest payment on a loan made by a Member to the
Company is treated as a partnership distribution for federal income tax
purposes, then the Member receiving the interest payment shall receive a
corresponding gross income allocation and such gross income shall be excluded in
the determination of Net Profits.

      8.4   TAX ALLOCATION PRINCIPLES. (a) To the extent permitted by Section
1.704-1(b)(4)(i) of the Treasury Regulations, all items of income, gain, loss,
and deduction for Federal and state income tax purposes shall be allocated in
accordance with the corresponding "book" items; however, all items of income,
gain, loss and deduction with respect to property with respect to which there is
a difference between "book" value and adjusted tax basis shall be allocated in
accordance with the principles of Section 704(c) of the Code and Section
1.704-1(b)(4)(i) of the Treasury Regulations.

            (b)   In the event that the Company has taxable income that is
characterized as ordinary income under the recapture provisions of the Code,
each Member's distributive share of taxable gain or loss from the sale of
Company assets (to the extent possible) shall include a proportionate share of
this recapture income equal to that Member's share of prior cumulative
depreciation deductions with respect to the assets which gave rise to the
recapture income.

            (c)   The Members agree that each Member's interest in Company
profits for determining the Members' shares of the nonrecourse liabilities of
the Company, as used in Section 1.752-3(a) of the Treasury Regulations, shall be
equal to the Members' Percentage Interests.

            (d)   Distributions (other than liquidating distributions under
11.3(b)(4)(ii) hereof) shall be taken into account prior to the allocation of
Net Profits or Net Losses and any other items under Sections 8.1 and 8.3.
Allocations of any items pursuant to Section 8.3 shall be made before any
allocation of Net Profits and Net Losses as of the close of each Fiscal Year, in
the following priority: (i) Section 8.3(c); (ii) Section 8.3(d); (iii) Section
8.3(e); (iv) Section 8.3(a); (v) Section 8.3(b); and (vi) Section 8.3(f).
Liquidating distributions under Section 11.3(d)(ii) shall be made following all
other distributions and allocations under Sections 8.1 and 8.3. Whenever any
provision depends on the Capital Account of any Member, that Capital Account
shall be determined after applying all preceding provisions under this Section
8.4(d).

      8.5   LIMITATION UPON DISTRIBUTIONS. No distribution shall be declared and
paid in violation of the Delaware Act.

                                       20

<PAGE>

      8.6   INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall be
entitled to interest on its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for in this Operating
Agreement. Unless unanimously agreed by the Members or to comply with Section
8.2(a), the Company shall not use borrowed funds to return a Member's initial
Capital Contribution.

      8.7   LOANS TO COMPANY. Subject to Section 5.1.3, nothing in this
Operating Agreement shall prevent any Member from making secured or unsecured
loans to the Company by agreement with the Company. Any such loan shall bear a
reasonable rate of interest.

      8.8   ACCOUNTING PERIOD. The Company's accounting period shall be the
calendar year.

      8.9   BOOKS AND RECORDS. At the expense of the Company, the Officers,
under the supervision and direction of the Board of Directors, shall maintain
records and accounts of all operations and expenditures of the Company. In
addition, the Company shall keep at its principal place of business the
following records:

            (a)   A current list of the full name and last known business,
residence or mailing address of each Member, both past and present;

            (b)   A copy of the Certificate of Formation of the Company and all
amendments thereto, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;

            (c)   Copies of the Company's federal, state and local income tax
returns and reports, if any, for the three most recent years;

            (d)   Copies of the Company's currently effective written Operating
Agreement and exhibits thereto, copies of any writings permitted or required
with respect to a Member's obligation to contribute cash, property, or services,
and copies of any financial statements of the Company for the three most recent
years;

            (e)   Minutes of every meeting; and

            (f)   Any written consents obtained from Members for actions taken
by Members without a meeting.

      8.10  RETURNS AND OTHER ELECTIONS. The Company shall cause to be prepared
and timely filed all tax returns required to be filed by the Company pursuant to
the Code and all other returns deemed necessary and required in each
jurisdiction in which the Company does business. Copies of those returns, or
pertinent information from the returns, shall be furnished to the Members within
a reasonable time after the end of the Company's Fiscal Year.

                                       21

<PAGE>

      8.11  TAX MATTERS PERSON. (a) UAG shall be the Company's "tax matters
partner," as provided in the Treasury Regulations under Code Section 6231 (the
"Tax Matters Person"), and shall perform such duties as are required or
appropriate thereunder. Each Member by its execution of this Operating Agreement
consents to the designation of the Tax Matters Person and agrees to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices, such documents as may be necessary or appropriate to evidence
such consent. UAG may be removed, and its successors appointed, by the
affirmative vote of Members holding a majority interest from time to time.

            (b)   The Company shall indemnify and reimburse the Tax Matters
Person for all expenses, including legal and accounting fees, claims,
liabilities, losses and damages incurred in connection with its duties as the
Tax Matters Person. The taking of any action and the incurring of any expense by
the Tax Matters Person in connection with any such proceeding, except to the
extent required by law, is a matter in the sole discretion of the Tax Matters
Person.

            (c)   The Tax Matters Person shall promptly take such action as may
be necessary to cause each other Member to become a "notice partner" within the
meaning of Code Section 6231(a)(8). The Tax Matters Person shall give to the
other Members prompt written notice upon receipt of information that the
Internal Revenue Service or any other taxing authority intends to examine any
Company tax return or the books and records of the Company. The Tax Matters
Person shall promptly furnish to the other Members copies of all notices or
other written communications received by the Tax Matters Person from the
Internal Revenue Service (except such notices or communications as are sent
directly to the other Members by the Internal Revenue Service). The Tax Matters
Person shall not have the authority, unless such action has been approved by
Members holding a Majority Interest:

                  (i)   To extend the statute of limitations for assessing or
      computing any tax liability against the Company (or the amount or
      character of any Company tax item);

                  (ii)  To settle any audit with the IRS concerning the
      adjustment or readjustment of any Company tax item;

                  (iii) To file a request for an administrative adjustment with
      the IRS at any time or file a petition for judicial review with respect to
      any IRS adjustment;

                  (iv)  To initiate or settle any judicial review or action
      concerning the amount or character of any Company item;

                  (v)   To intervene in any action brought by any other Member
      for judicial review of a final adjustment of any Company tax item; or

                                       22

<PAGE>

                  (vi)  To take any other action that would have the effect of
      finally resolving a matter affecting the rights of the Company and its
      Members.

                                    ARTICLE 9
                                 TRANSFERABILITY

      9.1   GENERAL. Subject to Section 9.2, UAG shall have the right at any
time after the Purchase Date to sell, assign, pledge, hypothecate, transfer,
exchange or otherwise dispose of, with or without consideration (collectively,
"Transfer"), all or any part of its Membership Interests to any Person Prior to
the Purchase Date, no Member shall voluntarily transfer all or any part of its
Membership Interests without the prior written consent of all the Members. Any
permitted transferee of a Membership Interest pursuant to this Section 9.1 shall
be admitted as a Member of the Company immediately upon compliance with this
Article 9.

      9.2   ACQUISITION OF YAG'S OWNERSHIP INTEREST. On the Purchase Date, UAG
or any of its Affiliates shall acquire the YAG Membership Interests for a
purchase price equal to:

            (i)   the YAG Percentage Interest (as of the Purchase Date) of
            positive Retained Earnings, if any, as of the Purchase Date, plus
            the sum of $1,806,492.77 (One Million Eight Hundred Six Thousand
            Four Hundred Ninety-two and 77/00 Dollars) and the amount of
            additional Capital Contribution made by YAG after the Effective Date
            not yet distributed to YAG as of the Purchase Date, and if Retained
            Earnings for the Ownership Period are negative, minus the YAG
            Ownership Percentage of the negative Retained Earnings as of the
            Purchase Date, (provided that the amount determined under this
            clause (i) shall in no event be less than zero), plus

            (ii)  eight (8) times the Agreed Amount (as defined below).

The "Agreed Amount" shall mean the product of the YAG Percentage Interest (as of
the Purchase Date) multiplied by the average Post-Acquisition Date Earnings
(excluding non-recurring income or expenses) of the Company for the two 12-month
periods immediately preceding the Purchase Date. The obligation of UAG to
acquire the YAG Membership Interests shall be conditional on YAG transferring
the YAG Membership Interests to UAG free and clear of any liens, claims,
encumbrances or charges of any kind and upon Honda approval, which approval UAG
shall use its best efforts to obtain prior to the Purchase Date. In the event
that Honda has not approved the transaction by the Purchase Date, UAG shall pay
the purchase price to YAG on the Purchase Date, and UAG and YAG shall enter into
the same types of escrow, management, indemnity, tax consequences indemnity and
other agreements with respect to the YAG Percentage Interest which have
previously been entered into by Affiliates of UAG and YAG with respect to
transfers of interests pending manufacturer approval.

                                       23

<PAGE>

                                   ARTICLE 10
                               ADDITIONAL MEMBERS

      10.1  ADMISSION TO MEMBERSHIP. Except as expressly provided in Section 9.1
hereof with respect to any permitted transferee of a Member's Membership
Interests or any portion thereof, no Person shall be admitted as a Member in the
Company (by issuance of additional Membership Interests by the Company or
otherwise) without the prior written consent of all Members prior to the
Purchase Date or Members holding a Majority Interest after the Purchase Date.

      10.2  FINANCIAL ADJUSTMENTS. No new Members shall be entitled to any
retroactive allocation of Net Profits, Net Losses or any tax credits of the
Company. The Members may, at their option and at the time a new Member is
admitted, close the Company books (as though the Company's taxable year had
ended) or make pro rata allocations of Net Profits and Net Losses to (as the
case may be) a new Member for that portion of the Company's taxable year in
which a Member was admitted in accordance with the provisions of Code Section
706(d) and the Treasury Regulations promulgated thereunder.

                                   ARTICLE 11
                           DISSOLUTION AND TERMINATION

      11.1  DISSOLUTION.

            (a)   Notwithstanding anything in the Delaware Act to the contrary,
the Company shall be dissolved only by the unanimous written agreement of all
Members. To the maximum extent permitted by law, each Member agrees not to make
application for a decree of judicial dissolution under the Delaware Act or
otherwise.

            (b)   If a Member suffers, incurs or occasions a bankruptcy, then
the Member's trustee, executor, administrator, guardian, conservator or other
legal representative may exercise all of the Member's rights as a Member for the
purpose of settling its estate or administering its property.

            (c)   No Member shall have the right to, or shall, resign from the
Company as a Member prior to the dissolution and winding up of the Company,
except as permitted by this Agreement; provided, however, a Member shall have
the power to resign from the Company at any time in violation of this Agreement
and shall be liable to the Company and the other Members for any damages
resulting from such resignation in violation of this Agreement. In no event
shall the Company or any member have the right, through specific performance or
otherwise, to prevent a Member from resigning in violation of this Agreement.

      11.2  EFFECT OF DISSOLUTION. Upon dissolution, the Company shall cease to
carry on its business, except as permitted by the Delaware Act. Upon
dissolution, the Board of Directors

                                       24

<PAGE>

shall file a statement of commencement of winding up pursuant to the Delaware
Act and may elect to publish the notice permitted by the Delaware Act.

      11.3  WINDING UP LIQUIDATING AND DISTRIBUTION OF ASSETS. (a) Upon
dissolution, an accounting shall be made by the Company's independent
accountants of the accounts of the Company and of the Company's assets,
liabilities and operations, from the date of the last previous accounting until
the date of dissolution. The Board of Directors and Officers shall immediately
proceed to wind up the affairs of the Company.

            (b)   If the Company is dissolved and its affairs are to be wound
up, the Board of Directors shall:

                  (1)   cause the sale and liquidation of all the Company's
            assets as promptly as practicable (except to the extent the Board of
            Directors may determine to distribute any assets to the Members in
            kind);

                  (2)   allocate any profit or loss resulting from such sale to
            the Members in accordance with Article 7 hereof;

                  (3)   discharge all liabilities of the Company, including
            liabilities to Members who are creditors, to the extent otherwise
            permitted by law, other than liabilities to Members for
            distributions, and establish such reserves as may be reasonably
            necessary to provide for contingent liabilities of the Company;

                  (4)   distribute the remaining assets in the following order:

                        (i)   if any assets of the Company are to be distributed
                        in kind, the net fair market value of such assets as of
                        the date of dissolution shall be determined by
                        independent appraisal or by agreement of the Members.
                        Such assets shall be deemed to have been sold as of the
                        date of dissolution for their fair market value, and the
                        Capital Accounts of the Members shall be adjusted
                        pursuant to the provisions of this Agreement to reflect
                        such deemed sale.

                        (ii)  the positive balance (if any) of each Member's
                        Capital Account (as determined after taking into account
                        all Capital Account adjustments for the Company's
                        taxable year during which the liquidation occurs) shall
                        be distributed to the Members, either in cash or in
                        kind, as determined by the Board of Directors, in
                        proportion to such positive balances, with any assets
                        distributed in kind being valued for this purpose at
                        their net fair market value. Any such distributions to
                        the Members in respect of their Capital Accounts shall
                        be made in accordance with the time requirements set
                        forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury
                        Regulations.

                                       25

<PAGE>

            (c)   The Board of Directors and Officers shall comply with all
applicable requirements of applicable law pertaining to the winding up of the
affairs of the Company and the final distribution or its assets.

      11.4  CERTIFICATE OF TERMINATION. When all debts, liabilities and
obligations have been paid, discharged or barred or adequate provisions have
been made therefor and all of the remaining property and assets have been
distributed to the Members, a Certificate of Termination may be executed and
filed with the Secretary of State of Delaware in accordance with the Delaware
Act.

                                   ARTICLE 12
                            MISCELLANEOUS PROVISIONS

      12.1  NOTICES. Any notice, demand, or communication required or permitted
to be given by any provision of this Operating Agreement shall be deemed to have
been sufficiently given or served for all purposes if delivered personally to
the party or to an executive officer of the party to whom the same is directed
or, if sent by registered or certified mail, postage and charges prepaid,
addressed to the Member's and/or Company's address, as appropriate, which is set
forth in this Operating Agreement. Except as otherwise provided in this
Operating Agreement, any such notice shall be deemed to be given three business
days after the date on which the same was deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed and sent as
aforesaid or one business day after the date on which the same was delivered to
a naturally recognized overnight delivery service (such as Federal Express) or
on the date which the same was delivered by hand.

      12.2  CHOICE OF LAW. This Operating Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware, and
specifically the Delaware Act.

      12.3  WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives
during the term of the Company any right that it may have to maintain any action
for partition with respect to the property of the Company.

      12.4  AMENDMENTS. Neither this Operating Agreement nor the Certificate of
Formation may be amended except by the unanimous written agreement of all of the
Members.

      12.5  EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments relating to the
organization or business of the Company reasonably necessary to comply with any
laws, rules or regulations.

      12.6  CONSTRUCTION. Whenever the singular number is used in this Operating
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa.

                                       26

<PAGE>

      12.7  HEADINGS. The headings in this Operating Agreement are for
convenience only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Operating Agreement or any of its
provisions.

      12.8  WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, that would have
originally constituted a violation, from having the effect of an original
violation.

      12.9  RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Operating Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance or otherwise.

      12.10 SEVERABILITY. If any provision of this Operating Agreement or its
application to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and its
application shall not be affected and shall be enforceable to the fullest extent
permitted by law.

      12.11 BINDING EFFECT. Each and all of the covenants, terms, provisions and
agreements contained in this Operating Agreement shall be binding upon and inure
to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors
and assigns.

      12.12 CREDITORS. None of the provisions of this Operating Agreement shall
be for the benefit of or enforceable by any creditors of the Company.

      12.13 COUNTERPARTS. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

      12.14 INVESTMENT REPRESENTATIONS. The parties to this Operating Agreement
agree as follows with respect to investment representation.

            (a)   The undersigned Members understand:

                  (i)   that the Membership Interests have not been registered
      under the Securities Act of 1933, 15 U.S.C. Section 15b, et seq. or any
      state securities laws (the "Securities Acts") because either these
      Membership Interests are not securities as defined by the Securities Acts,
      or because they are exempt from the registration requirements of the
      Securities Acts;

                  (ii)  that the Company has relied upon the fact that the
      Membership

                                       27

<PAGE>

      Interests are to be held by each Member for investment and active
      ownership; and

                  (iii) that exemption from registration under the Securities
      Acts would not be available if the Membership Interests were acquired by a
      Member with a view to distribution.

            (b)   Accordingly, each Member hereby confirms to the Company that
the Member is acquiring the Membership Interests for the Member's own account,
for investment and active ownership and not with a view to the resale or
distribution.

                  (i)   Each Member agrees not to transfer, sell or offer for
      sale any portion of the Membership Interests unless there is an effective
      registration or other qualification relating thereto under the Securities
      Act of 1933 and under any applicable state securities laws or unless the
      holder of Membership Interests delivers to the Company an opinion of
      counsel, satisfactory to the Company, that the registration or other
      qualification under the Securities Acts is not required in connection with
      such transfer, offer or sale. Any registration of Membership Interests
      shall not modify or affect any provisions in this Operating Agreement
      relating to the transferability of Membership Interests including, without
      limitation, the transferability restrictions contained in Article 9.

                  (ii)  Each Member understands that the Company is under no
      obligation to register the Membership Interests or to assist the Member in
      complying with any exemption from registration under the Securities Acts
      if the Member should at a later date wish to dispose of the Membership
      Interests.

            (c)   Before acquiring the Membership Interests, each Member has
investigated the Company and its business and the Company has made available to
each Member all information necessary for the Member to make an informed
decision to acquire the Membership Interests. Each Member considers itself to be
a person possessing experience and sophistication as an investor adequate for
the evaluation of the merits and risks of the Member's investment in the
Membership Interests. Each Member has a net worth sufficient to bear the
economic risk of losing its entire investment. Each Member has adequate means
for providing for its current cash needs and contingencies and has no need for
liquidity in this investment.

      12.15 ATTORNEYS' FEES. In the event there is a dispute between the parties
involving the existence of a breach of this Operating Agreement, the appropriate
measure of damages for any breach of this Operating Agreement or the proper
application of this Operating Agreement, each party shall be responsible for the
payment of its attorneys' fees and related costs incurred in connection with the
dispute.

      12.16 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of the Company.

                                       28

<PAGE>

      12.17 CERTIFICATE OF NON-FOREIGN STATUS. In order to comply with Section
1445 of the Code and the applicable Treasury Regulations thereunder, in the
event of the disposition by the Company of a United States real property
interest as defined in the Code and Treasury Regulations, each Member shall
provide to the Company an affidavit stating, under penalties of perjury, (i) the
Member's address, (ii) the Member's United States taxpayer identification
number, and (iii) that the Member is not a foreign person as that term is
defined in the Code and Treasury Regulations. Failure by any Member to provide
such affidavit by the date of such disposition shall authorize the Board of
Directors to withhold ten percent (10%) of each such member's distributive share
of the amount realized by the Company on the disposition until the Company
receives such affidavit.

      12.18 DETERMINATION OF MATTERS NOT ADDRESSED IN THIS AGREEMENT. The Board
of Directors shall decide any questions arising with respect to the Company and
this Agreement which are not specifically or expressly provided for in this
Agreement.

      12.19 TIME. Time is of the essence of this Agreement and to any payments,
allocations and distributions specified herein.

                            [SIGNATURES ON NEXT PAGE]

Signature page Mentor-Young Operating Agreement

                                 MEMBERS:

                                 UNITED AUTO GROUP, INC.

                                 By:  /s/ Maggie Feher
                                      ----------------
                                 Its: Assistant Secretary

                                 YAG MENTOR INVESTORS, LLC

                                 By:  /s/ Jan R. Chenoweth
                                      --------------------
                                 Its: Treasurer, Young Investments, Inc., Member

                                       29

<PAGE>

                                   SCHEDULE A

                              PERCENTAGE INTERESTS

<TABLE>
<CAPTION>
         Member                         Percentage Interest
-------------------------               -------------------
<S>                                     <C>
United Auto Group, Inc.                         70%

YAG Mentor Investors, LLC                       30%
</TABLE>

                                       31

<PAGE>

                                   SCHEDULE B

                           INITIAL BOARD OF DIRECTORS

UAG Designees:

Robert H. Kurnick, Jr.
James R. Davidson
Roger S. Penske, Jr.

YAG Designee:

Alan V. Young

                                       32

<PAGE>

                                   SCHEDULE C

                                    OFFICERS

Roger S. Penske, Jr.                  Chairman of the Board

Michael D'Amato                       President

R. Whitfield Ramonat                  Vice President

Thomas Schmitt                        Secretary/Treasurer

Robert H. Kurnick, Jr.                Assistant Secretary

Maggie Feher                          Assistant Secretary

James R. Davidson                     Assistant Treasurer

                                       33<PAGE>

                                                                   EXHIBIT 10.36

                            ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement (this "AGREEMENT") is entered into as of
August 8, 2003 ("EXECUTION DATE") by and among RMF Industrial Contracting, Inc.,
a Michigan corporation, and Delta Maintenance, Inc., a Louisiana corporation
(each a "SELLER" and collectively, the "SELLERS") and Nooter Construction
Company, a Missouri corporation, ("BUYER"). Philip Services Corporation, a
Delaware corporation, is a party to this Agreement solely for the purposes of
Sections 5.3, 5.4 and 5.5.

                                    RECITALS:

         WHEREAS, Sellers desire to sell and Buyer desires to buy substantially
all of Sellers' operating assets as hereinafter described; and

         WHEREAS, Sellers are debtors-in-possession in a case under Chapter 11
of Title 11 of the United States Code (the "BANKRUPTCY CODE") pending in the
Southern District of Texas, Houston, Texas (the "BANKRUPTCY COURT") along with
other debtors-in-possession under jointly administered Case No. 03-37718 (the
"BANKRUPTCY CASE"); and

         WHEREAS, each Seller has been soliciting bids for its assets, including
the Assets to be sold pursuant to this Agreement and has determined that the
offer of Buyer for the Assets set forth below is the highest and best offer
received for the Assets and constitutes a fair and adequate purchase price.

                              TERMS AND CONDITIONS:

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties, the
parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         For purposes of this Agreement, the following terms shall have the
following respective meanings:

         1.1      "AFFILIATE" or "AFFILIATES" shall mean with respect to a
specified Person, another Person that, either directly or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with the Person specified.

         1.2      "ASSETS" shall mean, collectively, the assets of each Seller
listed on Schedule 1.2 to this Agreement and the following other assets of each
Seller:

                  1.2.1    All of Seller's interest, if any, in the leasehold
         and building improvements related to RMF Industrial Contracting, Inc.'s
         leased premises located at 915 Matzinger Road, Toledo, Ohio (the
         "LEASED PROPERTY");

<PAGE>

                  1.2.2    All rights existing under those certain leases,
         orders, supply agreements and other contracts and agreements of Seller
         (the "CONTRACTS") that are expressly identified as being assumed by
         Buyer on Schedule 1.2.2, excluding any such Contracts that have
         terminated or expired before the Effective Date in accordance with
         their terms or in the ordinary course of Business, and including any
         Contract approved by Buyer in writing that is entered into by a Seller
         in the ordinary course of Business after the Execution Date and before
         the Effective Date (the "ASSUMED CONTRACTS");

                  1.2.3    All inventories, supplies, replacement parts, spare
         parts and other inventories owned by either Seller, if any;

                  1.2.4    All machinery, vehicles, tools, tooling, parts and
         equipment (including transportation equipment) owned by either Seller,
         whether or not listed on Schedule 1.2;

                  1.2.5    All furniture, furnishings, fixtures, personal
         property, telephone systems, miscellaneous office supplies, office
         equipment, computer hardware, production supplies, and other
         miscellaneous supplies owned by either Seller, whether or not listed on
         Schedule 1.2 and located at the Leased Property;

                  1.2.6    All registered, unregistered, registrations for and
         applications for registration of common law trademarks, service marks,
         logos, trade names, trade dress and other trademark rights, including
         the names "RMF", "RMF Industrial Contracting", "Delta Maintenance" and
         all derivations thereof; all registered, registrations for and
         applications for registration of copyrights, together with all of
         Seller's rights to use all of the foregoing and all other rights in, to
         and under the foregoing in all countries; all trade secrets, ideas,
         research and development, know-how, inventions, formulas, and
         processes; and all art work, advertising and promotional materials
         (historical and current) and all other printed or written materials
         relating to any of the foregoing in each instance to the extent used in
         the Business (the "INTELLECTUAL PROPERTY");

                  1.2.7    All computer software listed on Schedule 1.2.7;

                  1.2.8    All goodwill of the Business, if any;

                  1.2.9    All books and records owned by each of the Sellers
         which are used, held for use or were previously used in the Business,
         including but not limited to records, tangible data, documents, files,
         customer and supplier lists (including supplier cost information),
         specifications, design drawings, plans, operations or maintenance
         manuals, personnel records with respect to employees hired by Buyer
         (except for records which may not be transferred, shared or revealed
         pursuant to applicable Laws), invoices, credit records, sales
         literature and current price lists;

                  1.2.10   Prepaid expenses, prepaid deposits, and security
         deposits of each of the Sellers relating to the Business listed on
         Schedule 1.2.10 and all insurance proceeds related to any Assets
         damaged, destroyed or stolen during the period following the Execution
         Date and up to and including the Effective Date;

                                      - 2 -
<PAGE>

                  1.2.11   At Buyer's option, to be exercised by written notice
         to Seller prior to Closing, any or all confidentiality, non-competition
         or nondisclosure agreements executed by third parties in favor of
         Seller, in each case, relating to the sale of the Business to the
         extent that such agreements are freely assignable.

         1.3      "ASSUMED LIABILITIES" shall mean only those obligations of
each of the Sellers (i) arising post-Closing under the Assumed Contracts, (ii)
all Cure Costs, and (iii) the Payables.

         1.4      "BUSINESS" shall mean the businesses of RMF Industrial
Contracting, Inc. and Delta Maintenance, Inc., as currently conducted.

         1.5      "BUSINESS DAY" shall mean any date, other than Saturday or
Sunday, on which major banks are open for business in New York, New York.

         1.6      "CLOSING" shall mean the consummation of the purchase and sale
of Assets and the assignment and assumption of the Assumed Contracts as of the
Effective Date.

         1.7      "COMMITTEE" shall mean the Official Committee of Unsecured
Creditors appointed in the Bankruptcy Case.

         1.8      "CONFIDENTIAL INFORMATION" means all information, belonging or
relating to the Business which is not generally known to the public, including
without limitation business or trade secrets, price lists, methods, formulas,
know-how, customer lists, manufacturing processes, job costs, marketing plans,
research and development and financial information.

         1.9      "CURE COSTS" shall mean amounts due and payable on account of
defaults listed on Schedule 1.9, which must be paid in order to effectuate the
assumption by each of the Sellers and assignment to Buyer of the Assumed
Contracts listed on Schedule 1.2.2 to this Agreement, in accordance with Section
365 of the Bankruptcy Code and the Sale Order. The amount of all Cure Costs paid
by Buyer shall be deducted from the Purchase Price. The Seller shall update
Schedule 1.9 on or before the third day before the Closing Date to reflect
changes in the Cure Costs, if any.

         1.10     "EFFECTIVE DATE" shall have the meaning set forth in Section
2.3.

         1.11     "EMPLOYEE" or "EMPLOYEES" shall mean any full time and/or part
time employee who performs services during substantially all of his/her working
time for the Business.

         1.12     "ENVIRONMENTAL CLAIMS" shall mean any and all actions, suits,
demands, demand letters, claims, liens, notices of non-compliance or violation,
notices of liability or potential liability, natural resource damage claims,
investigations, proceedings, consent orders or consent agreements made by a
Governmental Entity relating in any way to Environmental Laws or Hazardous
Materials or any third party claim arising from any alleged injury or threat of
injury to health, safety or the environment relating in any way to Environmental
Laws or any Hazardous Materials.

                                     - 3 -
<PAGE>

         1.13     "ENVIRONMENTAL LAWS" shall mean any Laws in effect as of the
Closing Date relating to the generation, production, use, storage, treatment,
handling, transportation or disposal of Hazardous Materials, or the protection
of human health or the environment.

         1.14     "ENVIRONMENTAL REPORTS" shall mean those documents listed on
Schedule 1.14 to this Agreement.

         1.15     "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.

         1.16     "EXCLUDED ASSETS" shall mean (i) cash and cash equivalents
(other than prepaid deposits included as Assets), (ii) accounts receivable,
work-in-progress and unbilled accounts, (iii) prepaid insurance, (iv) any tax
refunds, (v) the right to the Purchase Price and other rights granted to each of
the Sellers under this Agreement or any other agreement with Buyer or its
Affiliates, (vi) all preference or avoidance claims and actions arising under
Sections 544, 547, 548, 549 and 550 of the Bankruptcy Code, (vii) derivative
suits and similar causes of action against the Board of Directors of either of
the Sellers, (viii) the articles or certificate of incorporation, bylaws, seal,
related organizational documents and minute books of each Seller, (ix)
recoveries on litigation of a Seller, (x) any executory contracts or unexpired
leases that are not Assumed Contracts, and (xi) any assets in each Seller's
possession that it does not own.

         1.17     "EXCLUDED LIABILITIES" shall mean all liabilities of each of
the Sellers other than those specified in the definition of Assumed Liabilities
set forth in this Agreement.

         1.18     "EXECUTION DATE" shall have the meaning set forth in the
opening paragraph of this Agreement.

         1.19     "GAAP" shall mean generally accepted accounting principles as
in effect from time to time in the United States, consistently applied.

         1.20     "GOVERNMENTAL ENTITY" shall mean any United States or
non-United States governmental, quasi-governmental or regulatory authority.

         1.21     "HAZARDOUS MATERIALS" shall mean any wastes, substances, or
materials (whether solids, liquids or gases) that are defined or listed by a
Governmental Entity as hazardous, toxic, pollutants or contaminants, including,
without limitation, substances defined as "hazardous wastes," "hazardous
substances," or "toxic substances" under any Environmental Laws. "Hazardous
Materials" includes, without limitation, polychlorinated biphenyls (PCBs),
asbestos, lead-based paints, and petroleum and petroleum products (including,
without limitation, crude oil or any fraction thereof).

         1.22     "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended (or the applicable provisions of any succeeding statute).

         1.23     "KNOWLEDGE OF SELLERS" shall mean the actual knowledge of the
Persons in their respective capacities as set forth on Schedule 1.23 of this
Agreement.

                                     - 4 -
<PAGE>

         1.24     "LAW" or "LAWS" shall mean all foreign, federal, state and
local statutes, laws, ordinances, regulations, rules, writs, injunctions,
judgments and decrees, as applicable to the specified Buyer or Seller.

         1.25     "PAYABLES" shall mean amounts due and payable pre-petition and
post-petition under the Assumed Contracts listed on Schedule 1.2.2 which are not
included on Schedule 1.9. The amount of all Payables paid by Buyer shall be
deducted from the Purchase Price. The Seller shall deliver Schedule 1.25 in form
and substance mutually agreeable to the Buyer and Sellers on or before the third
day before the Closing Date to reflect the Payables.

         1.26     "PERSON" or "PERSONS" shall mean any individual, company, body
corporate, association, partnership, limited liability company, firm, joint
venture, trust and governmental agency.

         1.27     "SALE ORDER" shall mean the final, non-appealable order of the
Bankruptcy Court, approving this Agreement and the transactions contemplated
hereby in accordance with Sections 363, 365, 1142 and 105 of the Bankruptcy
Code. The Sale Order must be in form and substance mutually acceptable to Buyer
and Sellers and materially and substantially in the form attached hereto as
Exhibit A.

         1.28     "TERRITORY" shall mean all parts of the world to which either
Seller has sold products or rendered services within the 12 months preceding the
date hereof.

                                   ARTICLE II

                               PURCHASE OF ASSETS

         2.1      Purchase; Purchase Price and Earnest Money.

                  2.1.1    Purchase. Subject to the approval of this transaction
         by the Bankruptcy Court pursuant to a Sale Order, and upon the terms
         and subject to the conditions contained in this Agreement, Sellers
         shall: (i) sell, assign, and deliver to Buyer, and Buyer shall purchase
         and accept, all of each Seller's right, title and interest in the
         Assets; and (ii) transfer and assign to Buyer, and Buyer shall accept
         the assignment of and assume, all of each Seller's right, title and
         interest in and to the Assumed Contracts. Buyer is not acquiring, and
         each Seller shall retain all right, title and interest in any of their
         respective Excluded Assets.

                  2.1.2    Purchase Price. The purchase price ("PURCHASE PRICE")
         shall be Five Million One Hundred Thousand Dollars ($5,100,000.00).

                  2.1.3    Prorations. Except as to Cure Costs and Payables,
         Sellers and Buyer agree that all items relating to the Assets and the
         Assumed Contracts other than the Basic Contracts and the Lump Sum
         Contracts (defined in Sections 9.1.2 and 9.1.3 respectively), including
         but not limited to, (i) rents, (ii) royalties, maintenance fees,
         charges and other amounts that in any case are payable periodically by
         either Seller or Buyer under any of the Assumed Contracts; (iii) sewer
         rents and charges for water, electricity and other

                                     - 5 -
<PAGE>

         utilities and fuel; and (iv) other similar items agreed upon by the
         parties, will be prorated as of the Effective Date on the basis of the
         actual number of days each party had possession or use during the
         period, except for those items where it is possible to prorate by
         actual usage. Such proration shall occur within 60 days following
         Closing, and Sellers shall reimburse Buyer within five Business Days of
         receipt of invoice from Buyer for prorated items related to any time
         period up to and including the Effective Date. Buyer shall be
         responsible for paying all prorated items when and as they become due.

                  2.1.4    Liabilities. At Closing, as additional consideration
         to Sellers for the sale and assignment of the Assets and Assumed
         Contracts, Buyer shall assume, and agree to pay, perform, fulfill and
         discharge, the Assumed Liabilities.

                  2.1.5    Payment of Purchase Price. At Closing, Buyer shall
         pay to Sellers the Purchase Price less the sum of (i) Cure Costs, (ii)
         Payables, (iii) the Earnest Money Deposit, (iv) One Hundred Thousand
         Dollars ($100,000.00) (the "HOLDBACK AMOUNT"), to be withheld by Buyer
         to secure the indemnity obligations of Sellers set forth in Article
         VIII, and (v) the Excess Billing (defined in Section 9.1.3). The
         foregoing sum shall be paid by wire transfer of immediately available
         funds to the United States account or accounts designated by Sellers no
         later than 2 p.m. Central Standard Time on the Closing Date.
         Concurrently, Buyer shall direct the Escrow Agent to pay to Sellers by
         wire transfer the Earnest Money Deposit.

                  2.1.6    Earnest Money. Concurrently with the execution of
         this Agreement, Buyer is delivering to Wells Fargo Bank of Texas, N.A.
         (the "ESCROW AGENT"), a deposit in the amount of Five Hundred Ten
         Thousand Dollars ($510,000.00) (which, along with all accrued interest
         thereon shall be the "EARNEST MONEY DEPOSIT"). The Escrow Agent shall
         hold the Earnest Money in an interest-bearing escrow account pursuant
         to the terms of the Escrow Agreement attached as Exhibit B. The Earnest
         Money Deposit shall be applied to the Purchase Price at Closing or, in
         the event Closing does not occur, the Earnest Money Deposit shall be
         distributed as set forth in this Agreement. The Escrow Agent's fees and
         charges shall be paid one half by Buyer and one half by Sellers.

         2.2      Sellers' Liabilities. It is understood and agreed that Buyer
shall not assume or become liable directly, indirectly, contingently or
otherwise for the payment of any debts, liabilities, losses, accounts payable,
bank indebtedness, mortgages, Employee Plans (defined in Section 3.9), Employee
Agreements (defined in Section 3.9) or other obligations of either Seller of any
nature whatsoever, whether related to the Assets or otherwise, and, whether the
same are known or unknown, now existing or hereafter arising, of whatever nature
or character, whether absolute or contingent, liquidated or disputed, except the
Assumed Liabilities. Buyer shall not have any successor liability related to
either Seller or the Assets.

         2.3      Closing. The Closing shall occur on August 29, 2003 or such
other earlier date as Buyer shall elect by not less than 5 days written notice
to Sellers (the "CLOSING DATE"), and shall be effective as of August 30, 2003
(the "EFFECTIVE DATE"). The Closing shall take place at the offices of Porter &
Hedges, L.L.P., 700 Louisiana Street, Suite 3400, Houston, Texas, or at such
other place as may be mutually agreed upon by the parties.

                                     - 6 -
<PAGE>

         2.4      "AS IS" TRANSACTION. BUYER HEREBY ACKNOWLEDGES AND AGREES
THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ARTICLE III OF THIS AGREEMENT,
EACH SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY MATTER RELATING TO THE ASSETS INCLUDING, WITHOUT
LIMITATION, INCOME TO BE DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH
THE ASSETS, THE PHYSICAL CONDITION OF ANY PERSONAL PROPERTY OR REAL ESTATE
COMPRISING THE ASSETS OR WHICH IS THE SUBJECT OF ANY LEASE OR CONTRACT TO BE
ASSUMED BY BUYER AT THE CLOSING, THE ENVIRONMENTAL CONDITION OR OTHER MATTER
RELATING TO THE PHYSICAL CONDITION OF ANY LAND OR IMPROVEMENTS COMPRISING THE
ASSETS OR WHICH ARE THE SUBJECT OF ANY LEASE TO BE ASSUMED BY BUYER AT THE
CLOSING, THE ZONING OR PERMITTED USE OF ANY REAL ESTATE ASSETS, THE VALUE OF THE
ASSETS (OR ANY PORTION THEREOF), THE TERMS, AMOUNT, VALIDITY OR ENFORCEABILITY
OF THE ASSUMED LIABILITIES, THE MERCHANTABILITY OR FITNESS OF THE PERSONAL
ASSETS OR ANY OTHER PORTION OF THE ASSETS FOR ANY PARTICULAR PURPOSE. WITHOUT IN
ANY WAY LIMITING THE FOREGOING, EACH OF THE SELLERS HEREBY DISCLAIMS ANY
WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE AS TO ANY PORTION OF THE ASSETS. ON THE CLOSING DATE, BUYER SHALL
DELIVER TO SELLERS A CERTIFICATE ACKNOWLEDGING THAT BUYER HAS CONDUCTED AN
INDEPENDENT INSPECTION AND INVESTIGATION OF THE PHYSICAL CONDITION OF THE ASSETS
AND ALL SUCH OTHER MATTERS RELATING TO OR AFFECTING THE ASSETS AS BUYER DEEMED
NECESSARY OR APPROPRIATE AND THAT IN PROCEEDING WITH ITS ACQUISITION OF THE
ASSETS, EXCEPT FOR ANY REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
ARTICLE III OF THIS AGREEMENT, BUYER IS DOING SO BASED SOLELY UPON SUCH
INDEPENDENT INSPECTIONS AND INVESTIGATIONS. ACCORDINGLY, BUYER SHALL ACCEPT THE
ASSETS AT THE CLOSING "AS IS," "WHERE IS" AND "WITH ALL FAULTS."

         2.5      Allocation of Purchase Price. At Closing, Buyer shall deliver
an allocation (the "Allocation") of the Purchase Price in accordance with
Section 1060 of the Internal Revenue Code. Buyer and Sellers shall (i) be bound
by the Allocation, (for tax purposes only, and not for any other purpose), (ii)
act in a manner consistent with the Allocation in the preparation of financial
statements and filing of all United States federal income tax returns
(including, without limitation, filing Form 8594 with their United States
federal income tax returns for the taxable year that includes the Effective
Date) and in the course of any tax audit, tax review or tax litigation relating
thereto, and (iii) take no position and cause their Affiliates to take no
position inconsistent with the Allocation for any tax purposes.

                                   ARTICLE III

                    REPRESENTATIONS AND WARRANTIES OF SELLERS

         Each Seller hereby represents and warrants to Buyer as of the Execution
Date and Closing Date as follows:

                                     - 7 -
<PAGE>

         3.1      Organization, Standing and Power. Each Seller is a corporation
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Subject to the applicable provisions of the
Bankruptcy Code, each Seller has the requisite corporate power and authority to
carry on its business as now being conducted.

         3.2      Authority. Each Seller has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby upon entry of the Sale Order. The execution and delivery of
this Agreement by each of the Sellers and the consummation by each of the
Sellers of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of each Seller, subject to the conditions
set forth in this Agreement. This Agreement has been duly executed and delivered
by each Seller and (assuming the valid authorization, execution and delivery of
this Agreement by Buyer) constitutes the valid and binding obligation of each
Seller and is enforceable against each Seller in accordance with its terms upon
entry of the Sale Order.

         3.3      Brokers. No broker, investment banker or other person engaged
by either Seller is entitled to any broker's, finder's or other similar fee or
commission payable by either Seller in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
either of the Sellers.

         3.4      No Conflict. Upon obtaining the Sale Order, the consummation
of the transactions contemplated by this Agreement and compliance with the
provisions hereof will not (i) conflict with or result in a breach of the terms,
conditions or provisions of any order of any court or other agency of
government, the charter or bylaws of either of the Sellers, or (ii) result in
the creation or imposition of any lien, charge or encumbrance of any kind
whatsoever on any of the Assets.

         3.5      Third Party Approvals. Except for (a) the Sale Order, and (b)
the consent of P2S, LLC, the execution, delivery and performance by Sellers of
this Agreement and the transactions contemplated hereby do not require any
consents, waivers, authorizations or approvals of, or filings with, any third
Persons or any Governmental Entity, which have not been obtained or are not
deemed to be overridden by Section 365 of the Bankruptcy Code.

         3.6      Title. At the Closing, and subject to entry of the Sale Order,
each Seller will, pursuant to the terms of the Sale Order, deliver to Buyer good
title to all of the Assets free and clear of all liens (including liens for
federal, state or local taxes), encumbrances (including, without limitation, any
leasehold interests, licenses or other rights, in favor of any person, to use
any portion of the Assets), claims security interests, of whatever kind or
nature, mortgages, pledges restrictions, charges, instruments, licenses,
encroachments, options, rights of recovery, judgments, orders and decrees of any
court or foreign or domestic governmental authority, of any kind or nature,
whether secured or unsecured, choate or inchoate, filed or unfiled, scheduled or
unscheduled, noticed or unnoticed, recorded or unrecorded, contingent or
non-contingent, material or non-material, known or unknown, and including all
claims based on any theory that Buyer is a successor, transferee or continuation
of Seller or the Business, in each case, other than the Assumed Liabilities
expressly assumed herein, whether arising prior to or subsequent to the date of
the filing of the Chapter 11 petition of Philip Services Corporation

                                     - 8 -
<PAGE>

         3.7      Due Notice. Sellers will serve notice of the hearing in the
Bankruptcy Court regarding approval of this sale transaction on all creditors
and other parties required by the Bankruptcy Code, Section 2 of the Initial
Order for Complex Chapter 11 Bankruptcy Case dated June 2, 2003 or as otherwise
ordered by the Bankruptcy Court.

         3.8      Environmental Matters. To the Knowledge of Sellers, except as
disclosed in the Environmental Reports, each Seller is in material compliance
with all applicable Environmental Laws, is not subject to any Environmental
Claims with respect to the Assets. Notwithstanding any other provision herein,
this Section 3.8 contains the exclusive representation of Sellers concerning any
matter arising under Environmental Laws.

         3.9      Labor and Employment Matters.

                  3.9.1    Schedule 3.9 of this Agreement contains a list of (i)
         each material plan, program, or other arrangement providing for
         severance, termination pay, performance awards, stock or stock-related
         awards, fringe benefits or other employee benefits, including, without
         limitation, each "employee benefit plan" within the meaning of Section
         3(3) of ERISA, which is maintained for the benefit of any Employee
         ("EMPLOYEE PLAN") and (ii) each management, employment, severance or
         consulting agreement or contract between each of the Sellers and any
         Employee ("EMPLOYEE AGREEMENT"). Each Seller has provided to Buyer
         copies of all documents, if any, embodying each Employee Plan,
         including all amendments thereto, and each Employee Agreement.

                  3.9.2    Each Seller has delivered to Buyer a list of the
         current Employees of each of the Sellers involved in the operation of
         the Business together with the positions they hold and their current
         rates of compensation.

                  3.9.3    Except as set forth on Schedule 3.9, neither Seller
         is a party to a collective bargaining agreement and neither Seller is
         currently, nor during the past six months has it been, involved in any
         discussion with any unit or group seeking to become the bargaining unit
         for any Employees with respect to the Business, and, except as set
         forth on Schedule 3.9 at no time since January 1, 2003, has any labor
         union been certified to represent any of such Employees nor has either
         Seller experienced a strike or similar material labor difficulty with
         respect to the Employees of either Seller involved in the operation of
         the Business.

3.10     Licenses and Permits.

                  3.10.1   Schedule 3.10.1 to this Agreement sets forth a list
         of environmental licenses and permits necessary for the Business as
         presently operated.

                  3.10.2   Schedule 3.10.2 to this Agreement sets forth a list
         of operating licenses and permits, and other governmental approvals,
         other than the environmental licenses and permits listed on Schedule
         3.10.1, used in the Business as presently operated.

         3.11     Absence of Certain Events. Since January 1, 2003 (i) each
Seller has conducted the Business only in the ordinary and usual course in the
context of the Bankruptcy Proceedings and in substantially the same manner as
previously conducted during the pendency of the

                                     - 9 -
<PAGE>

Bankruptcy Proceedings; and (ii) there has not been any event, circumstance or
condition that has had, or is reasonably likely to have, a material adverse
effect on the Assets.

         3.12     Compliance With Laws. To the Knowledge of Sellers, except as
set forth on Schedule 3.12, each Seller has at all times complied in all
material respects and is in compliance in all material respects with all
applicable laws, rules, regulations and ordinances affecting the Assets or the
Business. Neither Seller has violated, nor is either Seller in default with
respect to, any judgment, order, injunction, settlement agreement or decree of,
or any permit, license or other authority from, any court, agency or
instrumentality.

         3.13     Disclosure. To the Knowledge of Sellers, no representation or
warranty by the Sellers in this Agreement, nor any document, certificate or
schedule furnished at the execution of this Agreement or to be furnished in
connection with the Closing, contains or will contain any untrue statement of
fact or omits or will omit a fact necessary to make the statements contained
therein not misleading.

         3.14     Litigation. To the Knowledge of Sellers, except as set forth
on Schedule 3.14, there are no claims, suits, judgments, or pending or
threatened litigation that are reasonably likely to have a material adverse
effect on the Business or the Assets.

                                   ARTICLE IV

                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer represents and warrants to each of the Sellers as of the
Execution Date and the Closing Date:

         4.1      Organization, Standing and Power. Buyer is a corporation
organized, validly existing, and in good standing under the laws of the State of
Missouri and has the requisite corporate power and authority to carry on its
business as now being conducted.

         4.2      Authority. Buyer has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Buyer and
the consummation by Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and
(assuming the valid authorization, execution and delivery of this Agreement by
each of the Sellers) this Agreement constitutes the legal, valid and binding
obligation of Buyer and is enforceable against Buyer in accordance with its
terms.

         4.3      Brokers. No broker, investment banker or other person engaged
by Buyer is entitled to any broker's, finder's or other similar fee or
commission payable by the either of the Sellers in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.

         4.4      No Conflict. The consummation of the transactions contemplated
by this Agreement and compliance with the provisions hereof will not conflict
with or result in a breach of the terms, conditions or provisions of any order
of any court or other agency of government,

                                     - 10 -
<PAGE>

the charter or bylaws of Buyer, or any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Buyer or any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer.

         4.5      Third Party Approvals. Except for the Sale Order, no filing or
registration with, or authorization, consent or approval of, any third Persons
or Governmental Entity is required by or with respect to Buyer or any of its
subsidiaries in connection with the execution and delivery of this Agreement by
Buyer or is necessary for the consummation of the transactions contemplated by
this Agreement.

         4.6      Actions and Proceedings. There are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of Buyer, threatened
against or affecting Buyer or any of its subsidiaries or any of its or their
present or former officers, directors, employees, consultants, agents or
shareholders, as such, or any of its or their properties, assets or business
relating to the transactions contemplated by this Agreement or which could have
the effect of delaying or prohibiting the consummation of the transactions
contemplated by this Agreement. For purposes of this Agreement, "KNOWLEDGE OF
BUYER", means the actual knowledge of the officers and directors of Buyer.

         4.7      Financing. Buyer has sufficient funds to consummate the
transactions contemplated hereby and shall, on or prior to the Execution Date,
provide Sellers with correspondence from its bank evidencing the same.

                                    ARTICLE V

                              COVENANTS OF SELLERS

         5.1      Pre-Closing Covenants of Sellers. Each of the Sellers
covenants to Buyer that after the Execution Date and prior to the Effective
Date, except (i) as contemplated by this Agreement, (ii) or as required by,
arising out of, relating to or resulting from the Bankruptcy Case or otherwise
approved by the Bankruptcy Court.

                  5.1.1    Each Seller will operate in the ordinary course of
         business consistent with custom and practice of the Business from and
         after the filing date of the Bankruptcy Case to the extent limited by
         the proceedings of the Bankruptcy Case, and conduct, carry on and
         maintain and preserve the Business intact; use commercially reasonable
         efforts to maintain and preserve its relationships with and the
         goodwill of suppliers, customers and others having business relations
         with the Business; maintain the Assets, as well as books of account,
         records and files related to the conduct of the Business and its
         employees, all in the ordinary course of Business; and use its
         commercially reasonable efforts to keep available to Buyer the
         employees of the Business;

                  5.1.2    Each Seller will maintain itself as a duly licensed
         corporation in good standing under the laws of the jurisdiction of its
         incorporation.

                                     - 11 -
<PAGE>

                  5.1.3    Sellers shall submit this Agreement for the approval
         of the Bankruptcy Court, including approval of the assumption and
         assignment of the Assumed Contracts, no later than three Business Days
         after the Execution Date.

         5.2      Access to Sellers' Records. Each Seller shall afford to the
Buyer and its representatives reasonable access during normal business hours
throughout the period prior to the Closing Date, or until the parties have
terminated this Agreement in accordance with its terms, to each Seller's books,
records, plant, personnel (including attorneys and accountants) and to such
other information as the Buyer shall reasonably request pertaining to the Assets
or the Business. Buyer shall not be entitled to access any materials containing
privileged communications or information about employees, disclosure of which
may violate any law.

         5.3      Noncompetition. For five years after the Effective Date,
neither of the Sellers nor Philip Services Corporation or its Affiliates will
directly or indirectly (through a subsidiary, Affiliate or otherwise) in any
part of the Territory: (i) engage, as a shareholder, owner, partner, member,
joint venturer, or in a managerial capacity, in any business competitive with
the Business; provided, however, that Sellers, Philip Services Corporation and
their respective Affiliates, may own securities in companies whose securities
are publicly traded, so long as such securities constitute less than five
percent (5%) of the total outstanding voting securities of such publicly-traded
company (ii) design, develop, manufacture, assemble, process, distribute, market
or sell any products or services sold by either of the Sellers, or (iii)
influence or attempt to influence any employee of the Business that is hired by
Buyer in connection with the consummation of the transactions contemplated under
this Agreement to terminate their employment with Buyer or any Affiliate of
Buyer; provided, however, that this provision will not prevent either of the
Sellers, Philip Services Corporation or any of their respective Affiliates, from
employing any employee who responds to a general advertisement for employment on
his or her own initiative without any direct or indirect solicitation by or
encouragement from either of the Sellers, Philip Services Corporation or their
respective Affiliates.

         Sellers and Philip Services Corporation have reviewed the scope,
duration and geographical scope of the covenants made in this Section 5.3 and
agree that they are reasonable and necessary to protect Buyer and its
Affiliates. However, the parties agree that if this Section is found to be
unenforceable due to restrictions unreasonable in scope, duration or
geographical area, then the appropriate court may reform this Section so that
the restrictions in it are reasonable and enforceable.

         5.4      Confidential Information. Except as required by applicable
Law, from and after the date hereof, Sellers and Philip Services Corporation and
their respective Affiliates shall not disclose to any person nor make use of the
Confidential Information, without the prior written consent of Buyer.

         5.5      RMF Name. Sellers and Philip Services Corporation hereby agree
that from and after the Closing Date, they and their Affiliates will phase out
any and all use of the name "RMF" over a period of time not to exceed six months
from the Effective Date, and during such six month period, use the name only in
connection with contracts existing as of the Effective Date.

                                     - 12 -
<PAGE>

         5.6      Repair of Main Office. Sellers hereby agree to endeavor to
repair the fire damage to RMF Industrial Contracting, Inc.'s main office. In the
event that such repairs are not completed prior to the Closing Date, Buyer shall
be entitled to complete such repairs and recover any reasonably incurred
expenses related thereto by offsetting such costs against the Seller Accounts
Receivable; provided, however, that Sellers' obligation to reimburse Buyer for
its expenses hereunder shall not exceed $10,000.

                                   ARTICLE VI

                               COVENANTS OF BUYER

         6.1      Litigation and Other Support. Following the Effective Date,
Buyer shall make available to Sellers, at no charge to Sellers, Buyer's
personnel to the extent reasonably required by Sellers in connection with any
litigation, investigation or other judicial or administrative proceedings
attributable to the ownership or operation of the Business on or prior to the
Effective Date for a period of time not to exceed 10 man days in the aggregate.
The availability of Buyer's personnel for the foregoing purposes after 10 man
days shall be subject to the mutual agreement of the Buyer and the Sellers and
Sellers shall pay to Buyer $1,000 for each mutually agreed upon man day in
excess of 10 man days that Buyer's personnel is used in connection with any of
the foregoing. In addition, Sellers shall reimburse Buyer for all reasonably
incurred out-of-pocket costs and expenses.

         6.2      Access to Books and Records. To the extent either Seller has a
commercially reasonable need, Buyer shall provide such Seller with reasonable
access to those books and records relating to the Business, as conducted on or
prior to the Effective Date. Sellers shall reimburse Buyer for all reasonably
incurred out-of-pocket costs and expenses, but not including internal time
charges.

                                   ARTICLE VII

                         COVENANTS OF BUYER AND SELLERS

         7.1      Approvals of Third Parties; Efforts.

                  7.1.1    Upon the terms and subject to the conditions set
         forth in this Agreement, each of the parties agrees to use commercially
         reasonable efforts to take, or cause to be taken, all actions, and to
         do, or cause to be done, and to assist and cooperate with the other
         parties in doing, all things necessary, proper or advisable to
         consummate and make effective, in the most expeditious manner
         practicable, the transactions contemplated by this Agreement,
         including, without limitation: (i) the obtaining of all necessary
         consents, approvals or waivers from third parties; (ii) the execution
         and delivery of any additional instruments necessary to consummate the
         transactions contemplated by this Agreement.

                  7.1.2    Each of the Sellers shall use commercially reasonable
         efforts to cause or obtain the satisfaction of the conditions
         applicable to each Seller specified in Sections 10.1 and 10.2 below.

                                     - 13 -
<PAGE>

                  7.1.3    Buyer will use commercially reasonable efforts to
         cause or obtain the satisfaction of the conditions applicable to Buyer
         specified in Sections 10.1 and 10.3 below.

         7.2      Fees and Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby including, without limitation, the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses.

         7.3      Sales, Use and Transfer Taxes. The parties agree that pursuant
to Section 1146 of the Bankruptcy Code and the Sale Order, the transfer of the
Assets shall be exempt from any sales, use, transfer, documentary and similar
taxes; if, however, such taxes are imposed, they shall be paid by Sellers.

                                  ARTICLE VIII

                                 INDEMNIFICATION

         8.1      Indemnification by Sellers. Sellers hereby jointly and
severally agree to hold harmless and indemnify Buyer and its Affiliates from and
against any loss, liability, damage or expense (collectively "DAMAGES")
reasonably incurred by Buyer, arising directly or indirectly in connection with
(i) any breach of, or any failure to perform or comply with, any representation,
warranty, covenant or other obligation of Sellers in this Agreement (without
regard to any materiality exception contained therein); (ii) any claim or
obligation of Sellers to any party not being expressly assumed by Buyer which is
asserted against Buyer; or (iii) any claim or obligation arising out of the
actions or inactions of either of the Sellers.

         8.2      Indemnification by Buyer. Buyer hereby agrees to hold harmless
and indemnify each Seller and its Affiliates from and Damages reasonably
incurred by either of the Sellers, arising directly or indirectly in connection
with (i) any breach of, or any failure to perform or comply with, any
representation, warranty, covenant or other obligation of Buyer in this
Agreement (without regard to any materiality exception contained therein); or
(ii) any claim or obligation arising out of the actions or inactions of the
Buyer.

         8.3      Indemnification Procedures. Promptly after any indemnified
party has received notice of or has knowledge of any claim for indemnification
hereunder, or the commencement of any controversy by a person not a party to
this Agreement ("THIRD PERSON"), the indemnified party shall promptly give the
indemnifying party written notice of such claim or the commencement of such
controversy; provided, however, that failure to give such notice shall not
preclude a party from seeking indemnification unless such failure is materially
prejudicial to the indemnifying party's ability to adequately defend such claim
or controversy. Such notice shall state the nature and the basis of such claim
and a reasonable estimate of the amount thereof. The indemnifying party has the
right to control, defend and settle, at its own expense and by its own counsel,
any claim by a Third Person so long as the indemnifying party diligently pursues
the same in good faith. If the indemnifying party undertakes to defend or
settle, it must promptly notify the indemnified party of its intention to do so,
and the indemnified party must cooperate with the indemnifying party and its
counsel in the defense thereof and in any settlement thereof. Such cooperation
includes, but is not limited to, furnishing the indemnifying party with any

                                     - 14 -
<PAGE>

books, records or information reasonably requested by the indemnifying party
that are in the indemnified party's possession or control. The indemnified party
has the right to participate in (but not control) such matter through counsel of
its own choosing and at its own expense. The indemnified party shall not settle
or compromise any claim by any Third Person for which it is entitled to
indemnification hereunder, without the prior written consent of the indemnifying
party (which consent will not be unreasonably withheld or delayed) unless suit
shall have been instituted against it and the indemnifying party shall not have
taken control of such suit after notification thereof as provided in this
Article VIII. If the indemnifying party does not undertake to defend such matter
to which the indemnified party is entitled to indemnification hereunder, or
fails diligently to pursue such defense in good faith, the indemnified party may
undertake such defense through counsel of its choice, at the cost and expense of
the indemnifying party, and the indemnified party may settle such matter on a
commercially reasonable basis under the circumstances, and the indemnifying
party must reimburse the indemnified party for the amount paid in such
settlement and any other liabilities or expenses incurred by the indemnified
party in connection therewith. All settlements effected hereunder must effect a
complete release of the indemnified party with respect to the Third Person claim
unless the indemnified party otherwise agrees in writing.

         8.4      Damage Limits. The maximum aggregate liability of the Sellers
for all Damages arising under this Agreement will equal One Hundred Thousand
Dollars ($100,000). No indemnified party shall be entitled to indemnification
for Damages either covered by insurance proceeds from insurance owned and paid
for by the Sellers or otherwise reimbursed by and Third Person. Except with
respect to the failure of Buyer to remit any Seller's Accounts Receivable
(defined in Section 9.1.4) that it collects, the maximum aggregate liability of
the Buyer for all Damages arising under this Agreement will equal One Hundred
Thousand Dollars ($100,000).

         8.5      Payment. Any claim for Damages due Buyer shall first be
deducted from the Holdback Amount. Ninety (90) days following the Effective
Date, Buyer shall promptly pay to Sellers any amounts of the Holdback Amount,
together with interest thereon, not subject to claims for Damages. If any claim
theretofore asserted pursuant to this Article VIII shall have not been finally
determined to be without merit or the amount of such claim shall not have been
finally determined, a reasonable reserve for such claim shall be retained until
such claim(s) shall have been paid or finally determined to be without merit,
whereupon any remaining Holdback Amount, together with interest thereon, shall
be distributed to the Sellers.

         8.6      Survival. The indemnification obligations set forth in this
Article VIII shall survive for a period of 90 days following the Effective Date,
provided, however, that if a claim is properly made under this Article VIII,
prior to the applicable expiration date, such claim may be pursued to resolution
notwithstanding expiration of the indemnification period.

                                   ARTICLE IX
                        COLLECTION OF ACCOUNTS RECEIVABLE

         9.1      Accounts Receivable Collection. Following the Effective Date,
Sellers have requested that Buyer provide Sellers with assistance with respect
to the collection of accounts

                                     - 15 -
<PAGE>

receivable and other related matters otherwise resulting from the Business on
and prior to the Effective Date by providing the services described in this
Section 9.1.

                  9.1.1    Financial Statements. On or before September 15,
         2003, the Buyer shall deliver to Sellers the Business' financial
         statements as of the Effective Date, determined in accordance with GAAP
         and consistent with Sellers' books and records (the "FINANCIAL
         STATEMENTS"), Sellers shall have the right to audit the Financial
         Statements as set forth in Section 9.1.6.

                  9.1.2    Unbilled Receivables, Reimbursable and Cost-Plus
         Contracts. If services under reimbursable and cost-plus client
         contracts (the "BASIC CONTRACTS") are provided for a period of time
         beginning on or before the Effective Date and continuing after the
         Effective Date (hereinafter referred to as "SPANS THE EFFECTIVE DATE"),
         all revenue earned under the Basic Contracts shall be allocated to the
         Sellers based on the total costs paid by the Sellers under the Basic
         Contract (plus Payables related to such Basic Contract), on or prior to
         the Effective Date (Sellers' portion). The Buyer will prepare invoices
         for Sellers' portion of the revenue allocation, described in this
         Section 9.1.2 on behalf of Sellers. The Buyer shall send these invoices
         to the client with a cover letter instructing such client to remit
         amounts due to the Buyer's lockbox as designated in such letter. The
         Buyer shall endeavor to collect and reimburse Sellers for Sellers' pro
         rata portion of such revenue as it becomes payable and collected under
         the Basic Contract in connection with the Accounts Receivable
         collection terms set forth in this Agreement.

                  9.1.3    Lump Sum Contracts. In order to fairly allocate
         profit and/or loss with respect to lump sum or fixed fee contracts
         ("LUMP SUM CONTRACTS") that Span the Effective Date, the Buyer and
         Sellers shall jointly estimate the total costs of each Lump Sum
         Contract five days prior to the Effective Date, and shall estimate
         profit and loss based on a proration of the costs paid by Sellers for
         services provided under the Lump Sum Contract (plus Payables related to
         such Lump Sum Contract) on or prior to the Effective Date (Sellers'
         portion) and estimate costs to be paid by Buyer (excluding Payables
         related to such Lump Sum Contract) subsequent to the Effective Date
         (the Buyer's portion). The paid costs (plus the applicable Payables)
         for the services provided prior to the Effective Date plus the
         estimated profit or loss for the same period shall define the
         work-in-progress for each Lump Sum Contract. If Sellers have billed in
         excess of the work-in-progress for any Lump Sum Contract ("EXCESS
         BILLING"), the Excess Billing shall be deducted from the Purchase
         Price. On September 15, 2003, the Buyer and Sellers shall re-examine
         their jointly prepared estimate and make a final determination of the
         estimated profits and losses under the Lump Sum Contracts. If, upon
         such final determination, Sellers have billed in excess of the
         work-in-progress for the Lump Sum Contracts (the "FINAL EXCESS"), the
         Final Excess, less the Excess Billing deducted from the Purchase Price
         at Closing, shall be paid promptly by Sellers to Buyer. If the Final
         Excess is less than any Excess Billing deducted from the Purchase Price
         at Closing, such difference shall be paid promptly by Buyer to Sellers.
         If, upon such final determination, Sellers have billed less than the
         work-in-progress for the Lump Sum Contracts, then that amount, plus any
         Excess Billing deducted from the Purchase Price at Closing, will be
         payable by the Buyer to the Sellers within 2 business days after funds

                                     - 16 -
<PAGE>

         become available from collection of subsequent invoices for the
         involved Lump Sum Contract.

                  9.1.4    Buyer's Collection of Accounts Receivable. For 120
         days after the Effective Date (the "COLLECTION PERIOD"), the Buyer
         shall perform accounts receivable collection services for Sellers as
         described in this Section 9.1, and in executing such collection
         services shall comply with the standards that Buyer uses in its
         collections of its accounts receivable in the ordinary course of
         business, and shall incur all commercially reasonable costs associated
         with such collection services. Buyer shall not incur any extraordinary
         costs in connection with the collection services described herein,
         unless Sellers have given prior written consent. Sellers shall
         reimburse Buyer for any approved extraordinary costs incurred by Buyer.
         Sellers acknowledge and agree that in no event is the Buyer
         guaranteeing that all or any portion of the accounts receivable that
         belong to Sellers ("SELLER ACCOUNTS RECEIVABLE") will be collected. The
         Buyer shall, and shall cause its Affiliates:

                           (i)      on each Friday during the Collection Period,
                                    to deliver cash collections related to the
                                    Seller Accounts Receivable (net of any lien
                                    releases, warranty costs, back charges,
                                    mechanics liens, amounts due under Section
                                    2.1.3, and any Buyer's Accounts Receivable
                                    not paid to Buyer as required under Section
                                    9.1.5) by wire transfer of immediately
                                    available funds, in accordance with Sellers'
                                    duly authorized payment instructions; and

                           (ii)     on each date that cash collections are wire
                                    transferred as described in the preceding
                                    paragraph, to transmit for same day or next
                                    business day delivery a report that itemizes
                                    the wire transferred cash collections by
                                    customer and invoice, and by offsetting
                                    costs.

         If after the Buyer contacts the customer, there are any Seller Accounts
Receivable cash collections that cannot be identified to specific customer
invoices, then the Buyer's and Sellers' senior financial representatives shall
mutually agree upon the appropriate application of such unidentified cash
collections. If the senior financial representatives cannot agree, then the
issue will be referred to the Chief Financial Officer of Buyer and the Chief
Financial Officer of Philip Services Corporation (on behalf of Sellers) for
resolution. During the Collection Period, the Buyer shall control the collection
methods, procedures and practices with respect to the Seller Accounts
Receivable; provided, however, that the Buyer shall not have authority to
discount, write-off, credit, or relieve in any manner any of the Seller Accounts
Receivable without the written consent of Sellers. During the Collection Period,
Sellers shall have the sole and exclusive discretion to authorize and approve
any discount, write-off, credit or reduction of any kind to the Seller Accounts
Receivable. The Buyer shall, and shall cause its Affiliates to promptly remit to
Sellers (or their designee) upon receipt (and in any event within seven (7) days
of receipt), all correspondence, documentation, and other records, which
describe any customer disputes related to the Seller Accounts Receivable.

                  9.1.5    Sellers' Collection of Accounts Receivable. In the
         event that either of the Sellers directly receives any cash collections
         of the Seller Accounts Receivable, such

                                     - 17 -
<PAGE>

         Seller shall promptly notify the Buyer of such receipt, and the Buyer
         shall have no further obligation whatsoever to collect such
         Seller-collected Seller Accounts Receivable. If either Seller receives
         at any time after the Effective Date payments of amounts that are due
         or otherwise belong to the Buyer (the "BUYER'S ACCOUNTS RECEIVABLE"),
         such Seller shall:

                           (i)      on each Friday during the Collection Period,
                                    to deliver cash collections related to the
                                    Buyer's Accounts Receivable by wire transfer
                                    of immediately available funds, in
                                    accordance with the Buyer's duly authorized
                                    payment instructions; and

                           (ii)     on each date that cash collections are wire
                                    transferred as described in the preceding
                                    paragraph, to transmit for same day or next
                                    business day delivery a report that itemizes
                                    the wire transferred cash collections by
                                    customer and invoice.

Sellers shall, and shall cause any of their subsidiaries or Affiliates to
promptly remit to the Buyer upon receipt (and in any event within seven (7) days
of receipt), all correspondence, documentation, and other records, related to
the Buyer's Accounts Receivable billed by the Buyer but received by either
Seller, if any. The Buyer shall have the right to audit the Buyer's Accounts
Receivable collection records supporting all wire transfer amounts made in
accordance with this Section 9.1.5.

                  9.1.6    Right to Audit. Sellers shall have upon two days
         prior written notice to Buyer the right to audit:

                           (i)      the Financial Statements for a period of
                                    thirty (30) days following Sellers' receipt
                                    of the Financial Statements;

                           (ii)     the account balances described in Sections
                                    9.1.2 and 9.1.3 until such balances are
                                    billed and/or collected; and

                           (iii)    the Seller Accounts Receivable collection
                                    records supporting all wire transfer amounts
                                    made in accordance with Section 9.1.5 for a
                                    period of thirty (30) days following the end
                                    of the Collection Period.

Any such audit shall occur at Buyer's offices during regular business hours. If
any disputed items occur as a result of an audit, then the senior financial
representatives of Buyer and Sellers shall promptly meet and endeavor to reach
agreement as to the accounts in dispute. If the senior financial representatives
cannot agree, then the issue will be referred to the Chief Financial Officer of
the Buyer and the Chief Financial Officer of Philip Services Corporation (on
behalf of Sellers) for resolution. The audit periods set forth herein are
subject to the assumption that Buyer provides Sellers and their representatives
access to all the books, records, workpapers, correspondence, and other records
supporting the Financial Statements and accounts, and to the Buyer's personnel
and accountants for the purpose of conducting an audit. To the extent such
access is unreasonably delayed or limited, the audit periods shall be extended
to allow Sellers and their respective representatives such access for the full
period.

                                     - 18 -
<PAGE>

                                    ARTICLE X

                  CONDITIONS TO THE OBLIGATIONS OF THE PARTIES

         10.1     Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment on or prior to the Closing Date of
the following conditions:

                  10.1.1 No Order Preventing Transactions. No court or other
         governmental entity having jurisdiction over Sellers or Buyer, or any
         of their respective subsidiaries, shall have enacted, issued,
         promulgated, enforced or entered any law, rule, regulation, executive
         order, decree, injunction or other order (whether temporary,
         preliminary or permanent) which is then in effect and has the effect of
         making the transactions contemplated by this Agreement illegal.

                  10.1.2 Bankruptcy Court Approval. The Bankruptcy Court shall
have entered the Sale Order, and the Sale Order shall not have been stayed as of
the Closing Date.

         10.2     Conditions to Obligation of Sellers.

                  10.2.1 The obligation of Sellers to effect the transactions
         contemplated by this Agreement shall be subject to the fulfillment on
         or prior to the Closing Date of the condition that Buyer shall have
         performed in all material respects each of its covenants and agreements
         contained in this Agreement required to be performed on or prior to the
         Closing Date, including payment of the Purchase Price, and each of the
         representations and warranties of Buyer contained in this Agreement
         shall be true and correct in all material respects on and as of the
         Closing Date as if made on and as of such date.

         10.3     Conditions to Obligations By Buyer. The obligation of Buyer to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of the following additional
conditions:

                  10.3.1 Performance of Obligations; Representations and
         Warranties. Each of the Sellers shall have performed in all material
         respects each of its covenants and agreements contained in this
         Agreement required to be performed on or prior to the Closing Date, and
         each of the representations and warranties of Sellers contained in this
         Agreement shall be true and correct in all material respects on and as
         of the Closing Date as if made on and as of such date.

                  10.3.2 Transfer and Assumption Documents. Sellers shall convey
         title to Buyer to the Assets and Buyer shall assume the Assumed
         Liabilities by executing documents in substantially the form set forth
         on Exhibit C.

                  10.3.3 No Material Adverse Change. No specific condition,
         event, change or occurrence or any series of the foregoing shall have
         occurred since the Execution Date with respect to the Business or the
         Assets which, individually or in the aggregate, has had or is
         reasonably likely to have a material adverse effect on the Business or
         the Assets.

                                     - 19 -
<PAGE>

                  10.3.4 Confidentiality Agreements. Buyer shall have received
         copies of all confidentiality, non-competition and non disclosure
         agreements described in Section 1.2.11 of this Agreement.

                  10.3.5 Estoppel Letter From Landlord. Buyer shall have
         received an Estoppel Letter from the landlord in connection with RMF
         Industrial Contracting, Inc.'s leased premises located at 915 Matzinger
         Road, Toledo, Ohio in form and substance reasonably acceptable to
         Buyer.

                                   ARTICLE XI

                       TERMINATION, AMENDMENT, AND WAIVER

         11.1     Termination. This Agreement may be terminated in writing at
any time prior to the Closing Date:

                  11.1.1 By Buyer if,

                           11.1.1.1 the Closing does not occur on or before
                  August 29, 2003, unless the failure to consummate the Closing
                  by such date shall be due to the failure of the Buyer to have
                  fulfilled any of its obligations under this Agreement, or

                           11.1.1.2 the Sale Order has not been issued by the
                  Bankruptcy Court, other than due to Buyer's breach of this
                  Agreement.

In the event Buyer terminates this Agreement for any reason set forth in this
Section 11.1.1, Buyer shall be entitled to the return of its Earnest Money
Deposit.

                  11.1.2 By Sellers, if

                           11.1.2.1 the Closing does not occur on or before
                  August 29, 2003, unless the failure to consummate the Closing
                  by such date shall be due to the failure of the Sellers to
                  have fulfilled any of their obligations under this Agreement
                  ,or

                           11.1.2.2 the Sale Order has not been issued by the
                  Bankruptcy Court, other than due to Sellers' breach of this
                  Agreement;

                  11.1.3 By Buyer or Sellers if, before the Closing Date, the
         other party is in material breach of any representations, warranty,
         covenant or agreement contained herein and has not cured the same, such
         termination shall become effective ten (10) Business Days after notice
         has been provided by the objecting party as provided for in Section
         12.3 of this Agreement, provided that a cure has not been affected.

                  11.1.4 Notwithstanding anything to the contrary in this
         Section 11.1, the parties may by mutual written consent delivered in
         the manner provided for in Section 12.3 of

                                     - 20 -
<PAGE>

         this Agreement extend the Closing of this Agreement. Such mutual
         written consent must be received by all parties prior to the previous
         Closing Date.

         11.2     Liability if Agreement Terminated. Termination of this
Agreement shall not relieve any party of any liability for breaches of this
Agreement prior to the date of termination.

         11.3     Break-Up Fee. It is expressly acknowledged and agreed that
Sellers, and the bankruptcy estate of Sellers, are directly benefited by Buyer's
due execution, submission of and agreement to the terms of this Agreement. As a
protection to Buyer in connection with costs, time and effort expended, the
parties have agreed that it is reasonable to award Buyer a break-up fee in the
event that any party other than Buyer becomes lawfully entitled to purchase and
consummates the purchase, as a result of, or in connection with, competitive
bidding allowed by the Bankruptcy Court, of (i) solely the Assets or (ii) the
Assets in combination with other assets or properties held by Sellers or their
Affiliates in the bankruptcy estate. In such event Buyer shall be entitled to
receive (in addition to the return of the Earnest Money Deposit) a break-up fee,
to be paid in cash at the closing of sale of the Assets in an amount of Seventy
Five Thousand Dollars ($75,000.00) (the "BREAK-UP FEE"). It is not contemplated
that the Assets will be subject to further competitive bidding. However, if they
are, at any auction, Buyer is entitled to bid against other prospective bidders.
If Buyer is the successful bidder, Buyer shall be entitled to a credit against
the purchase price payable at Closing equal to the entire amount of the Break-Up
Fee.

                                   ARTICLE XII

                               GENERAL PROVISIONS

         12.1     Survival of Representations and Warranties. The
representations and warranties set forth in this Agreement or in any schedule,
exhibit or instrument delivered pursuant to this Agreement by Seller shall
survive for a period of ninety (90) days following the Effective Date.

         12.2     Expenses. Each party shall pay its own expenses incident to
this Agreement and the transactions hereby contemplated.

         12.3     Notices. Any notice, communication, request, reply or advice
hereunder (a "Notice") must be in writing and shall be delivered by reputable
overnight commercial courier service or hand delivery. Notice so given shall be
effective when delivered. Refusal of delivery shall be deemed to be receipt.
Notice given in any other manner shall be effective when received by the party
to whom it is given. For purposes of Notice, the addresses of the parties shall
be as follows:

                  If to Sellers:            Philip Services Corporation
                                            5151 San Felipe, Suite 1600
                                            Houston, Texas 77056
                                            Attn: General Counsel
                                            Phone: 713-985-5394
                                            Fax: 713-625-7088

                                     - 21 -
<PAGE>

                  and a copy to:            Porter & Hedges, L.L.P.
                                            700 Louisiana Street, 35th Floor
                                            Houston, Texas 77002
                                            Attn: T. William Porter
                                            Phone: 713-226-0600
                                            Fax: 713-228-1331

                  If to Buyer:              Nooter Construction Company
                                            1400 S. Third Street
                                            St. Louis, Missouri 63104
                                            Attn: John Dreher
                                            Phone: 314-421-7600
                                            Fax: 314-421-7745

                  and a copy to:            Lewis, Rice & Fingersh, L.C.
                                            500 N. Broadway, Suite 2000
                                            St. Louis, Missouri 63102
                                            Attn: Joe Weyhrich
                                            Phone: 314-444-7634
                                            Fax: 314-612-7634

         12.4     Section and Other Headings. Section or other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

         12.5     Schedules and Exhibits. Each schedule and exhibit attached
hereto shall be deemed to be a part of this Agreement to the same extent as if
set forth verbatim in the body of this Agreement.

         12.6     Enforcement. The laws of the State of Texas shall govern the
interpretation, validity, performance and enforcement of this Agreement, without
reference to any conflict of law or choice of law provisions therein. If any
provision of this Agreement should be held to be invalid or unenforceable, the
validity and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.

         12.7     Assignability; Parties; No Third Party Beneficiaries. This
Agreement and the rights, interests or obligations hereunder may not be assigned
by any of the parties hereto without the prior written consent of the other
parties hereto, except that Buyer may make such assignment (of all or portions)
to any of its Affiliates without prior written consent; provided, however, that
in the event Buyer assigns all or any of this Agreement to an Affiliate, Buyer
shall remain liable for its obligations hereunder. This Agreement shall be
binding upon and enforceable against, and shall inure solely to the benefit of,
the parties hereto and their respective permitted successors and assigns.
Nothing herein shall confer any rights or remedies to any person or entity which
is not a party hereto.

                                     - 22 -
<PAGE>

         12.8     Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

         12.9     Facsimile Signature. This Agreement may be executed and
accepted by facsimile signature and any such signature shall be of the same
force and effect as an original signature.

         12.10    Further Assurances. Both parties agree that either will
execute such further documentation or take such further actions as the other
party may reasonably request to effectuate the transfer of the Assets and
implement this Agreement.

         12.11    WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVE ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE RELATED IN ANY
WAY TO BUYER'S BID OR THIS AGREEMENT.

         12.12    Exclusive Jurisdiction. Without limiting any party's right to
appeal any order of the Bankruptcy Court, (a) the Bankruptcy Court shall retain
exclusive jurisdiction to enforce the terms of this Agreement and to decide any
claims or disputes that may arise or result from, or be connected with, this
Agreement, any breach or default hereunder, or the transactions contemplated
hereby, and (b) any and all claims, actions, causes of action, suits and
proceedings related to the foregoing shall be filed and maintained only in the
Bankruptcy Court, and the parties hereby consent to and submit to the
jurisdiction and venue of the Bankruptcy Court and shall receive notices at such
locations as indicated in Section 12.3 hereof.

                            [signature page follows]

                                     - 23 -
<PAGE>

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

                                     "Buyer"

                                     NOOTER CONSTRUCTION
                                     COMPANY, A MISSOURI CORPORATION

                                     By:    /s/ John A. Dreher
                                            -----------------------------------
                                     Name:  John A. Dreher
                                            -----------------------------------
                                     Title: President
                                            -----------------------------------

                                     "Sellers"

                                     RMF INDUSTRIAL CONTRACTING,
                                     INC., A MICHIGAN CORPORATION

                                     By:
                                            -----------------------------------
                                     Name:
                                            -----------------------------------
                                     Title:
                                            -----------------------------------

                                     DELTA MAINTENANCE, INC., A
                                     LOUISIANA CORPORATION

                                     By:
                                            -----------------------------------
                                     Name:
                                            -----------------------------------
                                     Title:
                                            -----------------------------------

Solely for the purposes of Sections 5.3, 5.4 and 5.5:

                                     PHILIP SERVICES CORPORATION, A
                                     DELAWARE CORPORATION

                                     By:
                                            -----------------------------------
                                     Name:
                                            -----------------------------------
                                     Title:
                                            -----------------------------------

                                     - 24 -
<PAGE>

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

                                     "Buyer"

                                     NOOTER CONSTRUCTION
                                     COMPANY, A MISSOURI CORPORATION

                                     By:
                                            -----------------------------------
                                     Name:
                                            -----------------------------------
                                     Title:
                                            -----------------------------------

                                     "Sellers"

                                     RMF INDUSTRIAL CONTRACTING,
                                     INC., A MICHIGAN CORPORATION

                                     By:    /s/ James M. Boggs
                                            -----------------------------------
                                     Name:  James M. Boggs
                                            -----------------------------------
                                     Title: President
                                            -----------------------------------

                                     DELTA MAINTENANCE, INC., A
                                     LOUISIANA CORPORATION

                                     By:    /s/ James M. Boggs
                                            -----------------------------------
                                     Name:  James M. Boggs
                                            -----------------------------------
                                     Title: President
                                            -----------------------------------

Solely for the purposes of Sections 5.3, 5.4 and 5.5:

                                     PHILIP SERVICES CORPORATION, A
                                     DELAWARE CORPORATION

                                     By:    /s/ James M. Boggs
                                            -----------------------------------
                                     Name:  James M. Boggs
                                            -----------------------------------
                                     Title: Senior Vice President
                                            -----------------------------------

                                     - 24 -
<PAGE>

                   FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

         This First Amendment to Asset Purchase Agreement ("FIRST AMENDMENT") is
made and entered into as of August 25, 2003 by and among RMF Industrial
Contracting, Inc., a Michigan corporation, and Delta Maintenance, Inc., a
Louisiana corporation (each a "SELLER" and collectively, the "SELLERS"), Nooter
Construction Company, a Missouri corporation ("BUYER") and Philips Services
Corporation ("PHILIPS") solely for the purposes of Sections 5.3, 5.4 and 5.5.

                                    RECITALS

         A.       Buyer, Seller and Philips have previously entered into an
Asset Purchase Agreement dated August 8, 2003 (the "ASSET PURCHASE AGREEMENT").

         B.       Buyer, Seller and Philips desire to amend such Asset Purchase
Agreement as described herein.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties agree as follows:

         1.       The following provision is hereby added as a new paragraph at
the end of Section 5.3 of the Asset Purchase Agreement:

         "Notwithstanding anything in this Section 5.3 to the contrary, the
provisions of this Section 5.3 shall not apply and shall in no way restrict or
prohibit Carl Icahn or any Affiliate of Carl Icahn (other than Philip Services
Corporation or any of its direct or indirect subsidiaries) from operating a
business in competition with the Buyer."

         2.       The following sentence is hereby added as a new paragraph at
the end of Section 6.2 of the Asset Purchase Agreement:

         "For purposes of this section 6.2, Seller shall include Carl Icahn or
any Affiliate of Carl Icahn who effectively acquires Philip Services Corporation
or any of its Affiliates in the event of a sale, merger, or reorganization under
the Bankruptcy Code or other combination."

         3.       The following provision is added as a new Section 11.4 to the
Asset Purchase Agreement:

         "Sellers and/or Buyer reserve the right to terminate the Asset Purchase
Agreement if Foothill Capital Corporation ("FOOTHILL"), as agent for the
prepetition secured creditors withdraws its consent pursuant to Section 363(f)
of the Bankruptcy Code in the event the net proceeds to be received by Foothill
at Closing are less than $2.0 million. If the Agreement is terminated under this
paragraph then the Buyer shall receive a termination fee of $75,000 plus the
Break-Up Fee plus the return of the Earnest Money Deposit from Sellers' estate
as an administrative priority expense."

<PAGE>

         4.       All other terms and provisions of the Asset Purchase Agreement
shall remain in full force and effect.

         IN WITNESS WHEREOF, the parties have signed this First Amendment as of
the date first above written.

                                     "Buyer"

                                     NOOTER CONSTRUCTION COMPANY, A
                                     MISSOURI CORPORATION

                                     By:    /s/ John A. Dreher
                                            ------------------------------------
                                     Name:  John A. Dreher
                                     Title: President

                                     "Sellers"

                                     RMF INDUSTRIAL CONTRACTING, INC., A
                                     MICHIGAN CORPORATION

                                     By:    /s/ James M. Boggs
                                            ------------------------------------
                                     Name:  James M. Boggs
                                     Title: President

                                     DELTA MAINTENANCE, INC., A LOUISIANA
                                     CORPORATION

                                     By:    /s/ James M. Boggs
                                            ------------------------------------
                                     Name:  James M. Boggs
                                     Title: President

Solely for the purposes of Sections 5.3, 5.4 and 5.5:

                                     PHILIP SERVICES CORPORATION, A
                                     DELAWARE CORPORATION

                                     By:    /s/ James M. Boggs
                                            ------------------------------------
                                     Name:  James M. Boggs
                                     Title: Senior Vice President

                                        2

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