MODIFICATION AGREEMENT

         THIS MODIFICATION  AGREEMENT (the "Agreement") is made and entered into
this 7th day of July,  2000, by and between FIRST KEYSTONE FEDERAL SAVINGS BANK,
chartered  under the Laws of the United States of America,  having its principal
office at 22 West State  Street,  Media,  Pennsylvania,  19063 (the  "Bank") and
TRANSNATIONAL  INDUSTRIES,  INC.  and  SPITZ,  INC.  (hereinafter  collectively,
jointly and severally  referred to as the  "Borrower"),  with an address of P.O.
Box 198, Route 1, Chadds Ford, Pennsylvania 19317.

                                   Background

         A. Bank  extended to Borrower two credit  facilities  on June 12, 1997.
Specifically,  the Bank  extended  to  Borrower a term  credit  facility  in the
principal sum of Eight Hundred Twenty Thousand  ($820,000.00)  Dollars evidenced
by that certain Promissory Note (the "Term Note") made by Borrower and delivered
to Bank June 12,  1997 (the "Term  Loan").  The Term Loan is not  intended to be
modified.  The Bank also extended to Borrower a revolving  line of credit not to
exceed the aggregate sum of Eight Hundred  Thousand  ($800,000.00)  Dollars (the
"Line of  Credit")  to be  advanced  pursuant  to the  terms of a Line of Credit
Agreement  between Bank and Borrower  dated June 12, 1997. The  indebtedness  to
Bank under the Line of Credit is  evidenced  by that certain Line of Credit Note
executed by Borrower  and  delivered  to Bank June 12, 1997 (the "Line of Credit
Note"). The Term Loan and the Line of Credit are secured by, among other things,
all of the  accounts,  inventory,  receivables  and  equipment of Borrower  (the
"Collateral") pursuant to that certain Security Agreement,  Pledge Agreement and
UCC-1 Financing Statements between Bank and Borrower dated June 12, 1997.

         B. Borrower has requested  Bank to reduce the rate of interest  charged
on the Line of Credit  from time to time as set forth in the Line of Credit Note
from the Wall Street Prime Rate plus two (2.0%) percent per annum to Wall Street
Prime Rate plus  one-half  (0.50%)  percent per annum,  subject,  however to the
interest rate adjustment provisions as set forth in the Line of Credit Note.

         C. Borrower has also  requested that the Line of Credit be increased to
One Million One Hundred Thousand ($1,1000,000.00) Dollars.

         D. As of the date hereof the outstanding  principal balance of the Line
of Credit Note is six hundred ninety-five thousand dollars ($695,000).

         E. Bank has no obligation to reduce the rate of interest charged on the
Line of Credit or to increase  the maximum  available  credit  under the Line of
Credit.  Bank is willing to reduce the rate and increase  the maximum  available
credit  under the Line of Credit on the terms and  conditions  set forth in this
Modification  Agreement  and in the  Renewal  Line of  Credit  Note of even date
herewith (the "Renewal Note").



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                                    Agreement

         NOW THEREFORE,  in  consideration  of the sum of One ($1.00) Dollar and
other good and valuable consideration,  the receipt and sufficiency of which are
hereby  acknowledged,  and  intending to be legally  bound  hereby,  the parties
hereto hereby covenant and agree as follows:

         1.       The Background recitals are incorporated herein by reference.

         2.       Paragraph  1.1 of the Line of Credit Agreement dated June 12,
1997,  is deleted in its  entirety and the  following  inserted in its place and
stead:

         "1.1  Bank  will  lend  to  Spitz,  Inc.  (hereinafter  referred  to as
         "Spitz"),  and Spitz may borrow  from Bank,  the  aggregate  sum of One
         Million One Hundred  Thousand  ($1,100,000.00)  Dollars,  (the  "Loan")
         pursuant to the terms of this Agreement. The indebtedness to Bank under
         the Loan is the joint and several obligation and liability of Spitz and
         Transnational Industries,  Inc. (hereinafter collectively,  jointly and
         severally  referred to as the  "Borrower")  evidenced  by that  certain
         Renewal Line of Credit Note  executed by Borrower and delivered to Bank
         July 7,  2000 (the  "Note"),  in the full  amount of the Loan,  due and
         payable in accordance with the terms thereof. Bank extended to Borrower
         a certain  other credit  facility in the principal sum of Eight Hundred
         Twenty  Thousand   ($820,000.00)  Dollars  evidenced  by  that  certain
         Promissory  Note (the "Term  Note") made by Borrower  and  delivered to
         Bank on June 12, 1997 (the "Term Loan")."

         3. Paragraph 1.2 of the Line of Credit  Agreement  dated June 12, 1997,
is deleted in its entirety and the following inserted in its place and stead:

         "1.2 MAXIMUM REVOLVING CREDIT LIMIT.  Provided there exists no Event of
         Default  hereunder  (as  hereinafter  defined),  principal  advances of
         available  funds  under the Loan shall be  advanced to Spitz at Spitz's
         written  request  from  time to time  until  July  6,  2005,  provided,
         however,  the aggregate  amount advanced,  less  repayments,  shall not
         exceed the sum of One  Million One  Hundred  Thousand  ($1,1000,000.00)
         Dollars at any one time outstanding (the "Maximum Credit Limit").  Bank
         shall not be obligated  to fund all or any part of a requested  advance
         under  the  Loan if such  advance  would  cause  the  aggregate  amount
         advanced,  less  repayments,   to  exceed  the  Maximum  Credit  Limit.
         Notwithstanding  anything  herein to the  contrary,  Bank  shall not be
         obligated to fund, and Spitz shall not be permitted to receive,  all or
         any part of any advance  requested  under the Loan which  advance would
         cause the aggregate  amount  advanced under the Loan and the Term Loan,
         less repayments,  to exceed the sum of; (i) eighty (80%) percent of the
         Borrower's "Qualified Accounts Receivable" (as hereinafter defined) and
         (ii)  fifty  (50%)  percent of  Borrower's  "Qualified  Inventory"  (as
         hereinafter defined) and (iii) Five Hundred Two Thousand  ($502,000.00)
         Dollars representing the orderly

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<PAGE>



         liquidation  value of the  Borrower's  machinery and  equipment,  which
         figure may, from time to time, be reduced,  but not  increased,  by the
         Bank based upon any reduction in the orderly  liquidation  value of the
         Borrower's  machinery and equipment (such a determination  to be at the
         Bank's sole and absolute  discretion).  "Qualified Accounts Receivable"
         shall mean  accounts  receivable  earned by  Borrower  in the  ordinary
         course of business  for  services  rendered and goods sold to customers
         for which there are no claims of offset or defense,  and which,  in the
         opinion of Bank,  are not of  doubtful  collectability,  and which have
         been  outstanding  for  one  hundred  twenty  (120)  days or  less,  as
         reflected  on  the  most  recent,   certified   statement  of  accounts
         receivable delivered to Bank.  "Qualified Inventory" shall be valued at
         the lesser of the cost or present market value determined in accordance
         with generally accepted accounting  principles,  consistently  applied,
         and shall mean all inventory which is in good  merchantable  condition,
         is not obsolete or discontinued,  which would properly be classified as
         "raw materials", "work in process", or "finished goods inventory" under
         generally accepted accounting principles, and which has been fully paid
         for from Borrower's own funds and for which no security interest exists
         except the security interest to be granted in favor of Lender as herein
         contemplated.  An account  receivable or item of inventory  which is at
         any  time a  Qualified  Account  Receivable  or an  item  of  Qualified
         Inventory,  but which  subsequently  fails to meet any of the foregoing
         requirements,  shall cease to be a Qualified  Account  Receivable or an
         item of  Qualified  Inventory  as the case may be,  for so long as such
         failure continues."

         4.  Paragraph  6.1 (g) of the Line of Credit  Agreement  dated June 12,
1997,  is deleted in its  entirety and the  following  inserted in its place and
stead:

         "(g) In the Bank's sole but reasonable  discretion,  a material adverse
         change  occurring in the financial  condition of Borrower when compared
         to the  financial  condition of the Borrower set forth in the financial
         statements  included within the Borrower's Annual Report on Form 10-KSB
         for the fiscal year ended January 31, 1999."

         5.  The  Security   Agreement  dated  June  12,  1997,  (the  "Security
Agreement") is amended as follows:

         The term "Line of Credit  Note" as used in the  Security  Agreement  is
         defined to mean,  identify  and  designate  that certain Line of Credit
         Note  in  the  original   principal  sum  of  Eight  Hundred   Thousand
         ($800,000.00)  Dollars made by Borrower  and  delivered to Bank on June
         12, 1997, as renewed by and  continued in that certain  Renewal Line of
         Credit Note in the  original  principal  sum of One Million One Hundred
         Thousand ($1,100,000.00) Dollars made by Borrower and delivered to Bank
         July 7, 2000, and any extensions and/or renewals thereof.


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<PAGE>



         6. The Pledge  Agreement dated June 12, 1997, (the "Pledge  Agreement")
is amended as follows:

         The term  "Line of  Credit  Note" as used in the  Pledge  Agreement  is
         defined to mean,  identify  and  designate  that certain Line of Credit
         Note  in  the  original   principal  sum  of  Eight  Hundred   Thousand
         ($800,000.00)  Dollars made by Borrower  and  delivered to Bank on June
         12, 1997, as renewed by and  continued in that certain  Renewal Line of
         Credit Note in the  original  principal  sum of One Million One Hundred
         Thousand ($1,100,000.00) Dollars made by Borrower and delivered to Bank
         July 7, 2000, and any extensions and/or renewals thereof.

         7. It is  expressly  agreed and  understood  that  except as  expressly
provided in this  Agreement,  the terms,  conditions and provisions set forth in
the  Security  Agreement,  Pledge  Agreement,  Term Note and  related  Term Loan
documents,  and Line of Credit Agreement,  Line of Credit Note, Renewal Note and
related  Line of  Credit  documents  shall  remain in full  force and  effect in
accordance  with their  respective  terms,  conditions and  provisions.  Without
limiting the  generality of the foregoing,  nothing in this  Agreement  shall be
construed to:

                  (i) impair the validity, perfection or priority of any lien or
         security interest securing the Term Loan and/or the Line of Credit;

                  (ii) waive or impair any  rights,  powers or  remedies of Bank
         under  the  Pledge  Agreement,   Security  Agreement,  Line  of  Credit
         Agreement,  Term Note, Renewal Note or related Term Loan and/or Line of
         Credit  documents  with  respect to any defaults  thereunder  which may
         occur;

                  (iii)  require Bank to  hereafter  amend or extend the term of
         the Term Note,  Renewal Note,  the Line of Credit  Agreement,  Security
         Agreement, Pledge Agreement or the time for payment of the Term Loan or
         the Line of Credit;

                  (iv) make any loan or other extension of credit to Borrower.

         In the event of any  inconsistency  between the terms of this Agreement
and the Line of Credit Agreement and/or the Security  Agreement,  this Agreement
shall  govern.  Borrower  acknowledges  that it has  consulted  with  counsel in
connection with the  negotiation and delivery of this Agreement.  This Agreement
shall be construed  without regard to any  presumption or rule requiring that it
be  construed  against  the party  causing  this  Agreement  or any part of this
Agreement to be drafted.

         8. Borrower  acknowledges and agrees that its relationship with Bank is
one of the lender and borrower only and is not a partnership or joint venture.


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<PAGE>



         9. Borrower  hereby  ratifies and affirms all of the terms,  conditions
and provisions of the Security  Agreement,  Pledge  Agreement,  UCC-1  Financing
Statements,  Term Note,  Line of Credit  Note,  Renewal  Note and Line of Credit
Agreement to the extent the same are not otherwise modified herein.

         10. Borrower hereby represents,  warrants and covenants that all of the
representations,  warranties and covenants set forth in the Security  Agreement,
Pledge Agreement,  UCC-1 Financing  Statements,  Term Note, Line of Credit Note,
Renewal  Note and Line of Credit  Agreement  are true and correct as of the date
hereof and hereby renews the same.

         11. The Renewal Note is executed  and  delivered  in  substitution  and
replacement of the Borrower's  obligations under and the indebtedness  evidenced
by the Line of Credit  Note.  The Renewal  Note stands in the place and stead of
the Line of Credit Note and is not an additional  indebtedness or a satisfaction
of the  indebtedness  evidenced by the Line of Credit Note. The indebtedness and
obligations  evidenced  by the  Line of  Credit  Note  are  continued,  renewed,
extended  and modified by the Renewal  Note and such  indebtedness  is and shall
continue  to be secured  by the  Security  Agreement,  Pledge  Agreement,  UCC-1
Financing   Statements  and  Line  of  Credit  Agreement   without  novation  or
interruption.

         12.  Borrower  hereby   acknowledges  and  agrees  that  no  setoff  or
counterclaim to Borrower's obligations evidenced by the Renewal Note exists, and
no agreement has been made with any person under which any deduction or discount
may be claimed, that the outstanding balance of principal and interest due under
the Line of  Credit  Note as of July 7, 2000 is  $695,000  , that to the best of
Borrower's knowledge, information and belief, no Event of Default (as defined in
the Renewal  Note) has occurred  which is  continuing  and no event has occurred
which with the passage of time or the giving of notice or both,  could become an
Event of Default under the Renewal Note.


         [THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]

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<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.

EXECUTED, SEALED AND
DELIVERED IN THE PRESENCE OF:

Witnesses Present:                    BORROWER:

                                      TRANSNATIONAL INDUSTRIES, INC.

/s/ Donn Guthrie (as to both)         By: /s/ Charles H. Holmes Jr.       (SEAL)
                                      -----------------------------



                                      ATTEST: /s/ Paul L Dailey           (SEAL)
                                      -----------------------------


Witnesses Present:                    BORROWER:

                                      SPITZ, INC.

/s/ Donn Guthrie (as to both)         By: /s/ Charles H. Holmes Jr.       (SEAL)
                                      -----------------------------



                                      ATTEST: /s/ Paul L Dailey           (SEAL)
                                      -----------------------------


                                      BANK:

                                      FIRST KEYSTONE FEDERAL SAVINGS BANK

                                      By: /s/ A. Charles Amentt
                                      -----------------------------



                                       ATTEST:
                                      -----------------------------


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