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AMENDMENT NUMBER 2       Dated and Effective October 31, 2000       TO       AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT  AMONG  WESTERN
POWER & EQUIPMENT CORP., A DELAWARE CORPORATION, AND  WESTERN POWER & EQUIPMENT CORP., AN OREGON CORPORATION       AND       DEUTSCHE FINANCIAL SERVICES CORPORATION  AS ADMINISTRATIVE AGENT AND A LENDER  and  THE OTHER
LENDERS

In consideration of the mutual agreements herein and other sufficient consideration, the receipt of which is hereby acknowledged, WESTERN POWER & EQUIPMENT
CORP., a Delaware corporation, WESTERN POWER & EQUIPMENT CORP., an Oregon corporation (separately and collectively, "Borrower"), DEUTSCHE FINANCIAL SERVICES CORPORATION, as Administrative Agent for
itself and the other Lenders ("Administrative Agent"), and the other Lenders, hereby enter into this Amendment Number 2 dated and effective as of October 31, 2000 (this "Amendment") to the Amended and
Restated Loan and Security Agreement between them effective as of June 30, 1999, as amended by Amendment Number 1 thereto dated as of June 5, 2000 (as it may be amended, restated, extended, renewed
and/or otherwise modified from time to time, the "Loan Agreement"), as follows:

1.  Definitions.Capitalized terms used and not otherwise defined herein have the meanings given them in the Loan
Agreement.

2.  Waiver of Defaults.Borrower hereby acknowledges that (i) a Default has occurred under Sections 9.3.1(a) and 9.3.1(d)
of the Loan Agreement, due to a breach by Borrower of the covenants contained in Section 9.3.1(a) and 9.3.1(d) of the Loan Agreement pertaining to required Minimum Tangible Net Worth and required
Minimum Ratio of EBITDA to interest expense for Borrower's fiscal quarter ending April 30, 2000, and (ii) a Default has occurred under Sections 9.3.1(a), 9.3.1(b), 9.3.1(c) and 9.3.1(d) of the Loan
Agreement, due to a breach by Borrower of the covenants contained in Section 9.3.1(a), 9.3.1(b), 9.3.1(c) and 9.3.1(d) of the Loan Agreement pertaining to required Minimum Tangible Net Worth, required
ratio of Debt to Tangible Net Worth, ratio of Debt to EBITDA, and required Minimum Ratio of EBITDA to interest expense for Borrower's fiscal quarter ending the fiscal quarter ending July 31, 2000.
Subject to the terms and conditions contained herein, Lender hereby waives the Defaults described in the preceding sentence;provided, however, that such
waiver shall not constitute or be deemed to be a waiver of any subsequent Defaults under such Sections, or of any other existing or
future Defaults under the Loan Agreement or the other Loan Documents at any time. Upon any further Defaults, including, without limitation, any Default arising as a result of Borrower's financial
performance for the reporting periods ending January 1, 2001 or July 1, 20001, all rights and remedies of Lender with respect to such Defaults, whether pursuant to the Loan Agreement, the other
Loan Documents, or available at law or equity, shall be available to Lender, including without limitation the right to terminate the Commitments, accelerate the Loan Obligations, and foreclose on any
or all Collateral. Borrower and Lender each agree that the waivers granted herein do not apply to the breach of any other term, provision, covenant, representation or warranty of the Loan Agreement or
the other Loan Documents or the breach of the covenants described above for any periods other than the periods specifically described above.

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3.  Amendments to Loan Agreement.The Loan Agreement is hereby amended as follows:

3.1.  New Definitions.The following definitions are hereby inserted in alphabetical order into Section
2 of the Loan Agreement:



3.2.  Aggregate Loan Commitment Commitment.Section 3.1 of the Loan Agreement is hereby amended by
inserting the words "as it may be reduced as provided in this Section 3.1 below" after the words "Seventy Million Dollars ($70,000,000.00)" in the first sentence. Section 3.1 of the Loan Agreement is
hereby further amended by inserting the following at the end of Section 3.1: "The Aggregate Loan Commitment will automatically be permanently reduced on the following dates by the amounts opposite
such dates in the following table:

Date of Reduction in
Aggregate Loan Commitment

Amount of Reduction in Aggregate Loan Commitment

Amount of Aggregate Loan Commitment After Giving
Effect to ReductionDecember 31, 2000

$
13,000,000.00

$
57,000,000.00March 31, 2001

$
7,000,000.00

$
50,000,000.00July 31, 2001

$
10,000,000.00

$
40,000,000.00December 28, 2001

$
10,000,000.00

$
30,000,000.00


In
the event that the outstanding balance owed by Borrower hereunder is in excess of the reduced Commitment, on such date, then Borrower shall immediately pay to Administrative Agent such excess."

3.3.  Prime Increment.The table in Section 3.6 of the Agreement is deleted and replaced with the
following:

Debt minus Subordinated
Debt to EBITDA

Prime Increment,
expressed as a percentage
(%)greater than or equal to 6.0:1.0

0.25
%less than 6.0:1.0 but greater than or equal to 5.0:1.0

0.00
%less than 5.0:1.0 but greater than or equal to 4.0:1.0

-0.25
%less than 4.0:1.0 but greater than or equal to 3.0:1.0

-0.50
%less than 3.0:1.0

-0.75
%


3.4.  Appraisal Fees.Section 3.7.1.2 of the Agreement is amended by adding the following sentence to
the end of such section as if originally set forth therein:



3.5.  Review Fees.Section 3.7.1.3 of the Agreement is amended by deleting the first sentence thereof
and substituting the following as if originally set forth therein:



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3.6.  Compensation.The following sentence is hereby added to the end of Section 3.16.2 of the
Agreement:



3.7.  Interest.A new Section 3.18 is hereby added to the Loan Agreement as follows:



Debt minus Subordinated Debt to EBITDA

LIBOR Increment,
expressed as a percentage
(%)greater than or equal to 6.0:1.0

3.00
%less than 6.0:1.0 but greater than or equal to 5.0:1.0

2.75
%less than 5.0:1.0 but greater than or equal to 4.0:1.

2.50
%less than 4.0:1.0 but greater than or equal to 3.0:1.0

2.25
%less than 3.0:1.0

2.00
%




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3.8.  Maturity Date/Termination.Each reference to August 18, 2000 in Section 4.1 of the Loan Agreement
is deleted and replaced with December 31, 2001.

3.9.  Financial Covenants.For all periods from and after October 31, 2000, Section 9.3.1(a), (b), (c)
and (d) are hereby deleted and replaced with the following:



3.10.  Use of Term "Event of Default".Each reference in the Loan Agreement to "Event of Default" is
deleted and replaced with the term "Default."

4.  Conditions Precedent to Effectiveness of this Amendment.This Amendment shall become effective as of October 31,
2000, but only if this Amendment has been executed by Borrower and Lender, and only if all of the documents listed onExhibit Ato this Amendment
have been delivered and, as applicable, executed, sealed, attested, acknowledged, certified, or authenticated, each in form and substance satisfactory to Lender, and all of the requirements described
in Exhibit A shall have been met on or before October 31, 2000.

5.  Representations and Warranties of Borrower.Borrower hereby represents and warrants to Administrative Agent and the
Lenders that (i) this Amendment has been duly authorized by Borrower's Board of Directors, (ii) no consents are necessary from any third parties for Borrower's execution, delivery and performance of
this Amendment, (iii) this Amendment constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms except as the enforcement thereof may be
limited by bankruptcy, insolvency or other laws related to creditors rights generally or by the application of equity principles, (iv) except as disclosed on the disclosure schedule attached hereto as Exhibit A, all of the representations and warranties contained in Section 8 of the Loan Agreement, as amended by this Amendment, are true and correct in
all material respects with the same force and effect as if made on and as of the effective date of this Amendment, (v) there is no Default which is continuing, and (vi) the Loan Agreement (as modified
by this Amendment) and the
other Loan Documents represent the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with their terms, except to the extent that the enforceability thereof

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against Borrower may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditor's rights generally or by equitable
principles of general application (whether considered in an action at law or in equity).

6.  Effect of Amendment.Except as specifically set forth in Section 2 above, the execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right, power or remedy of Lenders or Administrative Agent under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of
any provision of the Loan Agreement, any of the other Loan Documents or any existing Default, nor act as a release or subordination of the security interests or Liens of Lender or Administrative Agent
under the Loan Documents. Each reference in the Loan Agreement to "the Agreement", "hereunder", "hereof", "herein", or words of like import, shall be read as referring to the Loan Agreement as amended
hereby.

7.  Reaffirmation.Borrower hereby acknowledges and confirms that (i) the Loan Agreement, as amended hereby, is in full
force and effect, (iii) Borrower has no defenses to its obligations under the Loan Agreement and the other Loan Documents, (iv) the security interests and Liens of Administrative Agent created under
the Loan Documents continue in full force and effect, and have the same priority as before this Amendment, and (v) Borrower has no claim against Lenders arising from or in connection with the Loan
Agreement or the other Loan Documents.

8.  Governing Law.This Amendment has been delivered in St. Louis, Missouri, and shall be governed by and construed under
the law of the State of Missouri without giving effect to choice or conflicts of law principles thereunder.

9.  Section Titles.The section titles in this Amendment are for convenience of reference only and shall not be construed
so as to modify any provisions of this Amendment.

10.  Counterparts; Facsimile Transmissions.This Amendment may be executed in one or more counterparts and on separate
counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures to this Amendment may be given by facsimile or other
electronic transmission, and such signatures shall have the same binding effect as an original signature on an original document.

11.  Incorporation By Reference.Lender and Borrower hereby agree that all of the terms of the Loan Documents are
incorporated in and made a part of this Amendment by this reference.

12.  Statutory Notice.The following notice is given pursuant to Section 432.045 of the Missouri Revised Statutes;
nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT
ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

[the next page is the signature page]

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first above written.

| | WESTERN POWER & EQUIPMENT CORP.,
a Delaware corporation                                
| | ---------------------------------------------------------------------------------------
| | By:Print Name:Title:                                                                   
| | WESTERN POWER & EQUIPMENT CORP.,
an Oregon corporation                                 
| | By:Print Name:Title:                                                                   
| | DEUTSCHE FINANCIAL SERVICES CORPORATION, as Administrative Agent and as the sole Lender
| | By:Print Name:Title:                                                                   

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EXHIBIT A

DISCLOSURE SCHEDULE

None,
if nothing listed.

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EXHIBIT B

Documents and Requirements

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