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HEWETT-KIER CONSTRUCTION, INC. <br /> NOTES TO FINANCIAL STATEMENTS <br /> FOR THE YEAR ENDED DECEMBER 31, 1998 <br /> NOTE 7. COMMITMENTS AND CONTINGENCIES <br /> Consulting and Non-Compete Agreements <br /> Effective December 31, 1996 Robert Kier sold his interest in the Company to James <br /> Hewett. In connection with this transfer, the Company entered into multi-year consulting <br /> and non-compete agreements with Mr. Kier. Remaining annual amounts payable for <br /> performance and/or compliance under these agreements are as follows: <br /> Consulting Non-Compete <br /> December31, 1999 $ 45,000 $ 45,000 <br /> 2000 22,500 45,000 <br /> 2001 -0- 45.000 <br /> $ 67.500 <br /> Litigation <br /> The Company is from time to time subject to claims and suits arising in the ordinary course <br /> of operations. At the time and to the extent liability is determined probable, litigation claims <br /> are recorded in the accompanying financial statements. In addition to recorded claims, the <br /> Company is subject to possible liability for attorneys' fees claimed (approximately <br /> $100,000) and unclaimed in connection with pending lawsuits. Furthermore, in a case <br /> involving a defaulted subcontractor, a claim has been made against the Company for <br /> wrongful contract termination in the amount of$230,000. <br /> The outcome of these matters is not currently determinable; however, it is anticipated that <br /> the Court will award minimal attorneys' fees with respect to those matters pending and that <br /> the subcontractor's claim will be settled favorably. Accordingly, in the opinion of <br /> management and counsel, the ultimate resolution of pending legal proceedings will not <br /> have a material adverse effect on the Company's financial position, results of operations or <br /> liquidity. <br /> 9 <br /> o Nn eaK STRfNGIN • MUSKAT - STEIN & COMPANY <br />