EXCALIBUR TECHNOLOGIES
                2000 Corporate Ridge Suite 1095 McLean, VA 22102
                      Tel (703)790-2110 FAX (703)790-2111






September 7, 1995



James Buchanan
236 Meadowbrook Drive
Cranberry Township, PA  16066

Dear James,

It is my  pleasure  to offer you the  position  of Chief  Financial  Officer for
Excalibur  Technologies  Corporation.  As agreed  upon,  your start date will be
September 13, 1995 and your place of employment  will be 2000 Corporate Ridge in
McLean, Virginia.

Alon with this  letter,  I am  enclosing  two  copies  of  Excalibur's  standard
Confidentiality  Agreement.  Please sign and return both copies of the agreement
to me prior to  commencement of your  employment.  A fully executed copy will be
returned to you for your records.

Your compensation will be as follows:

Salary
      $150.000 annual salary, paid semi-monthly.

Revenue Attainment Bonus
      A potential  pro-rated  bonus of $15,000,  evaluated  and paid  quarterly,
      based on Excalibur meeting its FY96 corporate revenue budget each quarter,
      as approved or modified by the Board of Directors.

Profitability Bonus
      A potential pro-rated bonus of $15,000, evaluated and paid after the final
      financial  figures  for  FY96 are  known,  based  on  Excalibur  achieving
      profitability  for the second half of FY96,  as reported on the Net Profit
      line on Excalibur's financial statements,  but not including this bonus or
      similar bonuses paid to other executives of Excalibur.

Performance Bonus
      A potential  pro-rated  bonus of $7,500,  evaluated and paid at the end of
      FY96, based on a subjective  evaluation of your performance during FY96 by
      Excalibur's Board of Directors.


<PAGE>
James Buchanan
September 7, 1995
Page 2


Stock Options

       Upon  start of your  employment  you will be  granted  options  under the
       Excalibur Incentive Plan to purchase 30,000 shares of Excalibur stock.

       An additional  grant of 30,000 shares of Excalibur  stock will be granted
       upon the first anniversary of your employment.

       An additional  grant of 40,000 shares of Excalibur  stock will be granted
       upon your second  anniversary of employment  bringing the total shares of
       stock granted to 100,000.

       Such grants are made at the market price at the time of grant (average of
       closing  price of stock for the ten trading  days  preceding  the date of
       grant), and vest 12.5% every six months.

       The options are subject to the rules and  requirements  of the  Excalibur
       Incentive  Plan,  the IRS Code,  and any changes  made by a a third party
       which may effect the issuance of or  accounting  for these options by the
       Company.  This clause is valid as long as you are  employed by  Excalibur
       and are not released for cause.

Relocation Bonus
       At the time you relocate your personal residence to the McLean,  Virginia
       area,  you will be paid a relocation  bonus of $50,000  (before taxes are
       deducted).  If you resign from  Excalibur,  or are  terminated  for cause
       (definition of "cause"  attached),  anytime within the first two years of
       employment,  you agree to repay a pro-rated  amount of the net  after-tax
       Relocation Bonus you receive.

Discharge of Employee
       Should you be let from Excalibur for any reason other than cause you will
       receive an amount equal to 12 months  compensation  of your annual salary
       upon the date of your  discharge.  You will be paid the foregoing  amount
       periodically,  as  though  you  were  still on  Excalibur's  semi-monthly
       payroll.

       If you are  terminated  for  cause  you  will  not  receive  any  further
       compensation.   If  you  resign  you  will  not   receive   any   further
       compensation.

Expenses
       Out-of-pocket  and travel  expenses  will be approved  on a  case-by-case
       basis and must be  documented  and filed on  Excalibur's  expense  report
       forms. Mileage for business travel will be reimbursed at the IRS standard
       rate.

Other Benefits
       Your are eligible for coverage by the company's health insurance plan for
       full-time  employees  and will  receive 3 weeks paid  vacation  per year,
       which  accrues at ten (10) hours per month with a maximum  accrual of 120
       hours. After 90 days of employment you will be eligible to participate in
       Excalibur's 401(k) plan.

<PAGE>


James Buchanan
September 7, 1995
Page 3




This letter  outlines the basis for your  compensation  in the position of Chief
Financial  Officer for Excalibur  Technologies  Corporation for the remainder of
fiscal  year  1996.  Nothing in this  letter  should be  interpreted  to imply a
duration  of  employment.  You  will  be an  employee  at  will  with  Excalibur
Technologies Corporation.


If you have any questions  regarding any of the above,  pleas do not hesitate to
contact me.

Sincerely,


/s/Patrick C. Condo
Patrick C. Condo
President



Cc:   Personnel File



Please sign and return a copy of this letter  documenting your understanding and
acceptance of these terms and conditions.




James Buchanan: /s/James Buchanan                     Date: 9/13/95
                -----------------------                     -------------



<PAGE>


James Buchanan
September 7, 1995
Page 4





                                   ATTACHMENT


                               DEFINITION OF CAUSE




      CAUSE: "Cause" shall mean any or all of the following: (i) the willful and
continued failure by Employee to perform his duties (other than any such failure
resulting  from  Employee's  incapacity  due to  physical  or mental  illness or
injury)  after  demand  for   performance  is  delivered  by  the  Company  that
specifically  identifies the manner in which the Company  believes  Employee has
not  substantially  performed  his duties,  which failure is not cured within 30
days after written notice is given;  (ii) conduct by Employee  involving  fraud,
dishonesty,  moral turpitude, willful or grossly negligent misconduct, bad faith
or other  conduct  amounting to a breach of Employee's  fiduciary  duties to the
Company (provided,  however,  that in the cause of grossly negligent  misconduct
amounting to a breach of Employee's fiduciary duties to the company that, by its
nature,  is susceptible to cure by subsequent  acts of Employee,  Employee shall
have 30  days  after  demand  by the  Company  to cure  such  grossly  negligent
misconduct);  or (iii) a  failure  by  Employee  to  comply  with  any  material
provision of this Compensation  Letter which failure is not cured within 30 days
after  written  notice of such  noncompliance  has been given by the  Company to
Employee.  For purposes of this  definition of Cause, no act, or failure to act,
by Employee shall be considered "willful" unless done, or omitted to be done, by
him not in good faith and without  reasonable belief that his action or omission
was in the best interest of the Company.