Participation Agreement (2002)Full Document 

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                                                               EXECUTION VERSION

                             PARTICIPATION AGREEMENT

         THIS PARTICIPATION  AGREEMENT (this "Agreement") is made as of the 19th
day of  September,  2002 (the  "Effective  Date") by and  among  ALLIED  CAPITAL
CORPORATION,  a Maryland corporation  (together with all successors and assigns,
the "Lead");  HEADWATERS INCORPORATED,  a Delaware corporation (the "Borrower");
and the persons set forth on Schedule 1 hereto (together with all successors and
assigns, individually a "Participant" and collectively the "Participants").

                                    RECITALS:

         A. The Borrower, Industrial Services Group, Inc. and other parties have
entered  into an  Agreement  and Plan of Merger dated July 15, 2002 (as amended,
the "Merger  Agreement")  pursuant to which  Participants are to receive certain
consideration.

         B. In  accordance  with the terms of a Loan  Agreement  dated as of the
date  hereof  (the  "Loan  Agreement"),  the Lead has  agreed to  advance to the
Borrower the aggregate principal amount of Twenty Million Dollars ($20,000,000),
which is evidenced  by, and is to be repaid  according to the terms of, a senior
subordinated note (the "Senior  Subordinated  Note") for the purpose of paying a
portion of the consideration pursuant to the Merger Agreement.

         C. The  Participants  desire to receive a portion of the  consideration
due under the Merger Agreement by participating in the Senior  Subordinated Note
to be held by the Lead, upon the terms and conditions set forth herein.

         D.  Participants and Lead agree that Borrower shall have the benefit of
certain  provisions of this  Agreement as set forth more fully herein,  and such
benefits  shall be part of and their  continuation a condition to any assignment
of the Participants'  interests under the Loan Agreement and this  Participation
Agreement.

         NOW, THEREFORE,  in consideration of the foregoing Recitals, the mutual
covenants  herein  contained,  and other good and  valuable  consideration,  the
receipt and  sufficiency  of which is hereby  acknowledged,  the parties  hereto
hereby agree as follows:

                             ARTICLE I: DEFINITIONS

         1.01 Defined Terms Generally.  Any capitalized term used herein and not
defined herein shall have the meaning given to it in the Loan Agreement.

                   ARTICLE II: TERMS OF PARTICIPATION INTEREST

         2.01  Participation.  At the  Effective  Time (as defined in the Merger
Agreement) the  Participants  hereby agree to  participate  with the Lead in the
Senior  Subordinated Note to the extent of Ten Million Dollars  ($10,000,000) of
the original principal amount of the Senior  Subordinated Note and shall receive



and have legal and  equitable  ownership  of all  collections  relating  thereto
(collectively,   the  "Participation   Interest")   (constituting  an  undivided
aggregate percentage interest equal to 50% of the Senior Subordinated Note). The
remaining Ten Million Dollars  ($10,000,000) of the original principal amount of
the Senior Subordinated Note and all collections relating thereto (collectively,
the "Retained Interest") (constituting an undivided percentage interest equal to
50% of the Senior  Subordinated  Note) shall be retained by the Lead for its own
account.  The  parties  agree that the Lead at  Closing  shall be  obligated  to
advance  only the  Retained  Interest to Borrower,  and that the  remaining  $10
million principal amount shall have been deemed to have been advanced by Lead as
a result of Participants  entering into the Merger  Agreement.  The Participants
will  also  share,  on a pro  rata  basis,  in  any  points,  structuring,  loan
originating  or other  up-front  fees of any nature,  paid by the Borrower  with
respect to the Senior  Subordinated  Note.  Participants and Lead agree that the
Participants  shall not receive,  and Borrower has no  obligation  to pay to the
Participants  or to any other party,  any Repayment  Charges due pursuant to the
terms of the Loan Agreement with respect to the Participation Interest.

         2.02  Terms  of  Participation  Interest  and  Retained  Interest.  The
Participation  Interest and the  Retained  Interest  each shall accrue  interest
(before  and  after  default),  mature,  and be  repayable  upon the  terms  and
conditions  stated in the Senior  Subordinated  Note.  No preference or priority
shall  be made  between  the  Participants  and the Lead  for  purposes  of this
Agreement and the Senior  Subordinated  Note and the performance and enforcement
thereof,  including without  limitation as to collections and distributions with
respect to the Senior Subordinated Note and in connection with any bankruptcy or
similar proceedings involving the Borrower.

         2.03  Participation  Certificate.  Immediately  following the Effective
Time,  the Lead will  promptly  deliver to each  Participant  a  certificate  of
ownership  substantially  in the form of Exhibit "A" attached hereto showing the
aggregate   principal   balance  of  the  Senior   Subordinated   Note  and  the
Participation  Interest of such  Participant.  Any subsequent  adjustment to the
Participation  Interest (other than as a result of payments  received on account
of the Participation Interest) shall result in the delivery of a new certificate
of  ownership.  Each such  certificate  shall be  cumulative,  and upon  receipt

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