AMENDED AND RESTATED LOAN AGREEMENT

      THIS AGREEMENT is executed  effective the 15th day of April, 2003, between
EXCALIBUR   HOLDINGS,   INC.,  a  Texas  corporation   ("Borrower"),   EXCALIBUR
INDUSTRIES, INC.a Delaware corporation ("Industries"), EXCALIBUR STEEL, INC., an
Oklahoma  corporation   ("Steel"),   EXCALIBUR  AEROSPACE,   INC.,  an  Oklahoma
corporation  ("Aerospace")  EXCALIBUR  SERVICES,  INC., an Oklahoma  corporation
("Services"),  SHUMATE  MACHINE WORKS,  INC., a Texas  corporation  ("Shumate"),
MATTHEW FLEMMING, an individual  ("Flemming"),  WILLIAM H. STUART, an individual
("Stuart") and STILLWATER  NATIONAL BANK AND TRUST COMPANY,  a national  banking
association (the "Lender").  Industries,  Steel, Aerospace,  Services,  Shumate,
Fleming and Stuart are sometimes  referred to hereafter,  both  individually and
collectively, as "Guarantor" or "Guarantors."

                                                  R E C I T A L S:

      WHEREAS, the Borrower is currently indebted to the Lender by virtue of
prior loans and advances as evidenced by the following notes:

           Lender                    Original
          Note No.       Date         Amount       Principal        Interest
         ---------    ----------    ----------   -------------     ----------
           5195800    06/27/2002     2,500,000   $2,500,000.00      56,951.54

           5198300    06/27/2002     2,500,000   $2,222,353.04      52,081.69

The above described indebtedness is referred to hereafter as the "Prior Debt."

      WHEREAS,  the Prior Debt and  agreements  thereto are evidenced by various
loan agreements,  promissory notes,  security  agreements,  guaranties and other
instruments  and  agreements,  all  of  which,  collectively,  are  referred  to
hereafter as the "Prior Loan Documents."

      WHEREAS,  there  presently  exist certain  defaults under the terms of the
Prior Loan Documents;

      WHEREAS,  the Borrower is attempting to raise additional capital through a
private  placement  offering  which  includes  preferred  stock paying an annual
dividend;

      WHEREAS,  the Prior Loan Documents  prohibit the  declaration of dividends
without the Lender's consent;

      WHEREAS,  the Lender is willing to waive the existing defaults and consent
to the payment of certain  dividends subject to the terms and conditions of this
Agreement;

      NOW,  THEREFORE,  in  consideration of the mutual  agreements  between the
parties and the funds to be advanced to the Borrower, it is agreed as follows:


<PAGE>


1.    LENDING  AGREEMENT.  Subject to the terms and conditions  hereinafter  set
      forth,  Lender  agrees to lend to  Borrower,  and the  Borrower  agrees to
      borrow  from  the  Lender,  a sum  not  to  exceed  FIVE  MILLION  DOLLARS
      ($5,000,000).

2.    BORROWER'S  NOTES.  The  indebtedness  shall be evidenced by the following
      credit facilities:

      2.1   Term Note I.  Promissory Note of even date herewith in the principal
            face  amount  of  THREE  MILLION  FIVE  HUNDRED   THOUSAND   DOLLARS
            ($3,500,000.00) ("Term Note I"), which will be in form and substance
            and payable on the terms  approved by Lender.  Interest only will be
            paid monthly on the 15th day of each month  commencing May 15, 2003,
            and ending on August 15, 2003. Thereafter, the Borrower will make 31
            equal  monthly  payments  on the 15th day of each month in an amount
            sufficient to fully  amortize  principal and interest on Term Note I
            over 72 months. Term Note I shall mature and become due on April 15,
            2006, at which time, the Borrower will make a balloon payment of the
            entire  outstanding  principal  balance  together  with all  accrued
            interest and other charges, if any.

      2.2   Term Note II. Promissory Note of even date herewith in the principal
            face amount of FIVE HUNDRED  THOUSAND DOLLARS  ($500,000.00)  ("Term
            Note II"),  which will be in form and  substance  and payable on the
            terms approved by Lender.  Interest only will be paid monthly on the
            15th day of each month  commencing May 15, 2003, and ending on March
            15, 2004. Term Note II shall mature and become due on the earlier of
            receipt by the Borrower of proceeds from the Private  Offering in an
            amount equal to or greater  than  $1,000,000  or April 15, 2004.  At
            maturity,  the Borrower  will pay the entire  outstanding  principal
            balance  together with all accrued  interest and other  charges,  if
            any.

      2.3   Revolving  Line of Credit.  The Lender will  provide the  Borrower a
            revolving line of credit as follows:

            2.3.1 Note.  Promissory  Note of even date herewith in the principal
                  face  amount  of  ONE  MILLION  DOLLARS  ($1,000,000.00)  (the
                  "Revolving  Note"),  which will be in form and  substance  and
                  payable on the terms  approved by Lender.  It is  specifically
                  agreed that the  aggregate of advances made during the term of
                  the Revolving Note may exceed the face amount thereof, but the
                  unpaid  principal  balance due on the Revolving  Note will not
                  exceed the lesser of (i) the Borrowing  Base; or (ii) the face
                  amount of the Revolving Note.


                                      -2-
<PAGE>


            2.3.2 Advances. Advances under the Revolving Note will be limited to
                  the Borrowing  Base. The Borrowing Base shall be determined on
                  a  monthly  basis  upon the  submission  of a signed  "Monthly
                  Borrowing Base  Certificate" in form acceptable to the Lender.
                  Each Monthly Borrowing Base Certificate will be supported by a
                  current   accounts    receivable   aging,   and   such   other
                  documentation  that may  reasonably  required by the Lender to
                  determine  the  Borrowing  Base.  After  determination  of the
                  Borrowing  Base  for any  given  month,  Borrower  may  obtain
                  advances by submitting an "Advance Request" in form acceptable
                  to the Lender.

            2.3.3 Maturity.  Notwithstanding anything herein to the contrary the
                  Revolving Note will mature and become fully due and payable on
                  April 15, 2004.

      2.4   Interest.  Interest  on each of Term  Note I,  Term  Note II and the
            Revolving  Note will be paid at the interest rate equal to the Prime
            Rate plus two percent (2 %) per annum, adjusted on each day on which
            a change in the Prime Rate  occurs  (the  "Interest  Rate").  "Prime
            Rate" means the prime rate as published in the "Money Rates Section"
            of the Wall Street Journal, which rate is not necessarily the lowest
            rate of  interest  charged by the Lender.  All  interest on the Term
            Note will be  calculated  for the actual number of days elapsed at a
            per diem charge based on a year consisting of 360 days.

      2.5   Notation of Advances. The Lender shall have the right (acting at its
            sole  discretion  with or without the consent of the Borrower)  from
            time make  notations  of advances by it to the Borrower and payments
            to it by the Borrower on any liability ledger records  maintained by
            or for the Lender as to  indebtedness  of Borrower,  and such ledger
            shall be  presumed  correct  until the  contrary is  established  by
            Borrower.  Upon  demand  by the  Lender  at any time or from time to
            time,  the  Borrower  will  confirm and admit by signed  writing the
            exact  amount  of  indebtedness  for  principal  and  interest  then
            outstanding   under  this  Agreement.   Any  billing   statement  or
            accounting  rendered by or for the Lender  shall be  conclusive  and
            fully  binding  on  Borrower  unless  specific   written  notice  of
            exception is given to the Lender by Borrower within thirty (30) days
            thereafter.

      2.6   Authority  to  Request  Advances.  The  Lender may make loans in any
            amount  and in any  manner  requested  orally or in  writing  by any
            officer  or  agent  of  the  Borrower  or by any  person  reasonably
            believed  by the Lender to be an  officer or agent of the  Borrower.
            Loan proceeds may be disbursed by deposit in any deposit  account of
            the Borrower, by an instrument payable to Borrower.

      2.7   Prepayment. The Borrower may prepay Term Note I, Term Note II or the
            Revolving  Note  at any  time,  without  premium  or  penalty.  Each
            prepayment  will be applied by the  Lender  first to the  payment of
            unpaid fees and expenses,  then to accrued interest on the Revolving
            Note  and  then to the  payment  of  principal.  If at any  time the
            aggregate  outstanding  principal  balance  of the  debt  under  the
            Revolving  Note exceeds the then amount of the Borrowing  Base,  the
            Borrower shall  immediately,  without  notice or demand,  prepay the
            Revolving Note in an amount equal to the excess.


                                      -3-
<PAGE>


      2.8   Use of  Proceeds.  The  Borrower  will use the proceeds of all loans
            under this  Agreement  solely for  lawful and  authorized  corporate
            purposes in furtherance of the business  presently  conducted by the
            Borrower.

      2.9   Lending  Restrictions.  Notwithstanding  any other provision of this
            Agreement or the other Loan  Documents,  any advance herein provided
            for  will not be  required  to be made by the  Lender:  (a) if after
            making such  advance,  the Lender  would,  as determined in the sole
            discretion of the Lender,  exercised in good faith,  be in violation
            of any regulatory  requirements  imposed by any branch of government
            of the United  States of America  or any state  thereof;  (b) if any
            event of Default has occurred and has not been cured by the Borrower
            or waived by the Lender;  (c) if,  since the Closing  Date and up to
            the date of the advance  request,  any  litigation  or  governmental
            proceeding has been instituted  against the Borrower,  the Guarantor
            or any of the Collateral,  which, if decided adversely, will, in the
            reasonable  opinion of the  Lender,  adversely  affect to a material
            extent,  the  financial  condition  or  continued  operation  of the
            Borrower;  or (d) if,  since the Closing  Date and up to the date of
            the  advance  request,  any  loss,  destruction,  liens,  claims  or
            encumbrances  against  any of the  Collateral  (other  than those in
            favor of the Lender) have occurred,  been made or filed and have not
            been removed or settled to the satisfaction of the Lender.

      2.10  Prior Notes. The Prior Notes are hereby  extinguished and replace by
            Term Note I, term  Note II and the  Revolving  Note and Term Note I,
            Term Note II and the Revolving Note constitute the only indebtedness
            currently owed to Lender.

3.    RECOURSE.  The indebtedness  will be full recourse to the Borrower and the
      Guarantors.

4.    BORROWING BASE.  "Borrowing  Base" means, as of any given date, the sum of
      the following: (1) eighty percent (80%),or at the Lender's sole discretion
      any lesser percentage  designated upon sixty (60) days notice, of Eligible
      Trade Accounts  Receivable of Debtor;  plus (2) fifty percent (50%) of the
      value of the  inventory  of  Debtor,  up to a maximum of One  Million  and
      No/100 Dollars ($1,000,000.00) and subject to the following:

      4.1   "Trade  Accounts  Receivable"  means,  as of  any  given  date,  all
            accounts receivable of Debtor and the corporate Guarantors for goods
            sold and delivered and services rendered by Debtor and the corporate
            Guarantors  in  the  ordinary  course  of  the  business   presently
            conducted by each of them and representing amounts then invoiced and
            due and owing.  A Trade  Account  Receivable  shall be an  "Eligible
            Trade  Account  Receivable",  and shall be included in the Borrowing
            Base,  only if and so long as it meets each and all of the following
            requirements:

            4.1.1 It is a valid,  genuine  and legally  enforceable  obligation,
                  subject  to no  defense,  set  off  or  counter-claim,  of the
                  account debtor or other obligor named herein or in the records
                  of Borrower or the corporate  Guarantors  pertaining  thereto,
                  and that neither the Borrower nor any corporate  Guarantor has


                                      -4-
<PAGE>


                  received  from  the  account   debtor  or  other  obligor  any
                  notification  repudiating  such  obligation or asserting  that
                  such  obligation  is  subject  to  any  defense,  set  off  or
                  counterclaim; and

            4.1.2 It is owned by the Borrower or any of the corporate Guarantors
                  free  and  clear  of  all   interests,   liens,   attachments,
                  encumbrances  and  security   interests  except  the  security
                  interest granted to the Lender pursuant to this Agreement; and

            4.1.3 The Account  debtor or other  obligor is located in the United
                  States; and

            4.1.4 Not more than ninety (90) days have expired  since the date of
                  invoice;  or, if the Lender in its sole discretion  accepts as
                  eligible  a Trade  Account  Receivable  which is due on a date
                  stated in the  invoice,  not more than  thirty  (30) days have
                  expired since the date stated; and

            4.1.5 Neither the Borrower nor any of the corporate  Guarantors  has
                  received notice from the Lender that the credit of the account
                  debtor is not satisfactory to the Lender for any reason; and

            4.1.6 The account  debtor is not an entity in which the  Borrower or
                  any corporate Guarantors has a controlling interest; and

            4.1.7 Eligible  Trade  Accounts  Receivable  shall not  include  any
                  account  receivable of the same account debtor to the Borrower
                  or any corporate Guarantors in excess of fifteen percent (15%)
                  of the then  Eligible  Trade  Accounts  Receivable  calculated
                  after ineligible accounts; and

            4.1.8 The entire receivable of one account debtor becomes ineligible
                  if more than ten percent (10%) of the total due is over ninety
                  (90) days past due,  unless the ten percent  (10%) over ninety
                  (90)  days  is  attributable  to an  isolated  dispute  over a
                  specific invoice.

      4.2   The value of Inventory used in determining  the Borrowing Base shall
            equal the value of raw material  plus the value of finished  product
            and shall not include the value of any work in progress.

5.    COLLATERAL  SECURITY.  The  performance  of all covenants  and  agreements
      contained in this Loan  Agreement and in the other  documents  executed or
      delivered  as a part of this  transaction  and the payment of the Note and
      all renewals, amendments and modifications thereof shall be secured by the
      following:

      5.1   Security  Agreement.  The Borrower and the Guarantors  will grant to
            the Lender a security interest covering the following:


                                      -2-

<PAGE>


            5.1.1 Accounts.  All of the Borrower's and Guarantors'  accounts and
                  contracts  receivable  of any kind  whether  now  existing  or
                  hereafter arising (herein called the "Accounts");  all chattel
                  papers,  documents and  instruments  relating to the Accounts;
                  and  all  rights  now  or  hereafter  existing  in  and to all
                  security  agreements,  leases, and other contracts securing or
                  otherwise relating to any Accounts or any such chattel papers,
                  documents and instruments;

            5.1.2 Furniture,  Fixtures, and Equipment. All of the Borrower's and
                  Guarantors'  furniture,  fixtures and  equipment in all of its
                  forms  whether now owned or  hereafter  acquired  and wherever
                  located (herein called the "Equipment"); all parts thereof and
                  all  accessions  or  additions  thereto,  whether now owned or
                  hereafter acquired;

            5.1.3 General  Intangibles.  All of the Borrower's  and  Guarantors'
                  general  intangibles  of any  kind  whether  now  existing  or
                  hereafter  arising (herein called the "General  Intangibles");
                  all chattel papers,  documents and instruments relating to the
                  General Intangibles;  and all rights now or hereafter existing
                  in and to all security agreements,  leases, licenses, permits,
                  patents,  distribution  agreements  and contracts  securing or
                  otherwise  relating  to any  General  Intangibles  or any such
                  chattel  papers,  documents  and  instruments  and  all of the
                  Borrower's and  Guarantors'  lien rights against other persons
                  whether  statutory,  contractual or by common law with respect
                  to the leases, Inventory or other collateral described in this
                  Agreement;

            5.1.4 Inventory.  All of the Borrower's and Guarantors' inventory in
                  all of its forms  whether now owned or hereafter  acquired and
                  wherever  located  (herein  called the  "Inventory"),  and all
                  accessions or additions thereto and products thereof,  whether
                  now owned or hereafter acquired;

            5.1.5 Other.  Without in any way limiting or modifying the foregoing
                  in any respect,  all of the Borrower's and Guarantors'  goods,
                  chattels,  business  records,   contracts,   contract  rights,
                  advertising  agreements,  tax  refunds,  documents  of  title,
                  fixtures,    insurance   policies   and   proceeds,   patents,
                  trademarks,  service marks, logos, trade names, copyrights and
                  applications  therefor,  licenses,  licensing  fees,  permits,
                  approvals, consents, certificates, stock, surveys, engineering
                  reports, tools, landscaping, machinery, furniture, furnishing,
                  business machines,  appliances,  vehicles,  trailers,  rolling
                  stock, deposits, security deposits, money, securities, claims,
                  demands,  causes of action,  refunds,  rebates, income and all
                  other tangible and intangible real, personal or mixed property
                  whether now owned or hereafter acquired;

                                      -3-

<PAGE>


            5.1.6 Additional Property. Any additional Property from time to time
                  delivered  to or  deposited  with  Secured  Party as  security
                  pursuant to the terms of this Agreement; and

            5.1.7 Proceeds. All proceeds,  products,  additions to, replacements
                  of,  substitutions  for and accessions of any and all Property
                  described above.

      5.2   Guaranty  Agreements.  The Guarantors  shall provide  unconditional,
            unlimited  guaranties  to guarantee the  Indebtedness  and all other
            extensions  of credit from the Lender to the  Borrower or any of the
            Guarantors.

      5.3   Lockbox  Agreement.  The Lender and  Borrower  agree that (i) Lender
            will establish a lockbox  account (the "Lockbox") for the receipt of
            payments on account and accounts  receivable of the Borrower and the
            Guarantors; (ii) the Borrower and the Guarantors will cooperate with
            Lender  to assure  that all  account  debtors  of the  Borrower  are
            notified  to make  payments  on  account to the  Lockbox;  and (iii)
            without  limiting  the  requirement  that all account  debtors  make
            payment  only to the  Lockbox,  any  payments  received  directly by
            Borrower or the Guarantors  will be deposited  before 11:00 a.m. the
            following  business day into the Lockbox.  The Lockbox will be swept
            by the Lender on a daily basis and the funds therein will be applied
            to the principal  balance on the Revolving Note,  provided  however,
            that,  on or about the 15th day of each month,  the funds swept from
            the lockbox will be applied first to pay the outstanding interest on
            the Revolving Note and then to principal balance.

6.    CONDITIONS  OF  LENDING.  The  obligation  of the Lender to  perform  this
      Agreement and to make the initial or any future  advances under any of the
      notes  executed  pursuant  to the  Agreement  is subject to the  continued
      performance by the Borrower of the following conditions precedent:

      6.1   Loan  Documents;  Collateral.  The  Loan  Documents  and  all  other
            instruments   and   documents   incidental   to   the   transactions
            contemplated  hereby  shall  have been duly  executed,  acknowledged
            (where  appropriate) and delivered to the Lender by the Borrower and
            the  Guarantors,  all in  form  and  substance  satisfactory  to the
            Lender.

      6.2   Prohibitive  Orders.  No order,  writ or  injunction of any court or
            administrative  agency is in effect or is being  sought  prohibiting
            the  transactions  contemplated  by this Agreement or the other Loan
            Documents.

      6.3   Authority.   The  Lender  shall  have  received  a  Certificate   of
            Incorporation, Certificate of Good Standing, a certified copy of the
            Bylaws  and  certified  copies of  corporate  resolutions  and other
            documents  reasonably required to authorize the execution,  delivery
            and  performance of the Loan Documents by the Borrower,  all in form
            and substance satisfactory to the Lender.

                                      -4-

<PAGE>


      6.4   No Default.  The  representations  and  warranties set forth in this
            Agreement  shall  be true and  correct  on and as of the date of the
            initial advance and each additional  advance with the same effect as
            if such  representations  and  warranties had been made on and as of
            such  date and  there  shall  have  occurred  and be  continuing  no
            Default.

      6.5   Opinion of  Counsel.  The Lender  shall have  received an opinion of
            counsel for the Borrower and the Guarantors stating that:

            6.5.1 Organization   and  Existence.   The  Borrower  and  corporate
                  Guarantors are  corporations  duly formed and validly existing
                  under the laws of their respective  states of organization and
                  failure to qualify as a domesticated  corporation in any state
                  in which the Borrower or Guarantors conducts business will not
                  impair the business of the Borrower or Guarantors;

            6.5.2 Power and Authority.  The Borrower and the Guarantors have the
                  power and have been duly  authorized  to execute,  deliver and
                  perform this Agreement and the other Loan Documents;

            6.5.3 Validity.  The Loan  Documents,  when executed and  delivered,
                  will be valid and legally binding indebtedness of the Borrower
                  and the Guarantors;

            6.5.4 No  Violations.  Compliance by the Borrower and the Guarantors
                  with the Loan Documents  will not violate any law,  including,
                  without  limitation,  applicable usury laws,  securities laws,
                  orders of public authorities, the Certificate of Incorporation
                  or  Bylaws  of  the  Borrower  or   Guarantors  or  any  other
                  agreements  or  instruments  binding  on the  Borrower  or the
                  Guarantors; and

            6.5.5 Collateral.  The Loan Documents are entitled to the benefit of
                  the  collateral   security  therein  described  and  the  Loan
                  Documents are enforceable in accordance with their  respective
                  terms  against the  collateral  security to which they relate,
                  except as limited by  applicable  bankruptcy,  insolvency  and
                  debtor relief laws.

            6.6   Representations   and  Warranties.   Each  representation  and
                  warranty set forth in this Agreement shall be true and correct
                  as of the date of borrowing,  except for changes subsequent to
                  the date of this Agreement  caused by  transactions  permitted
                  under the terms of this Agreement; and

            6.7   No Default.  There shall not exist any Event of Default  under
                  this  Agreement or any event which,  with the giving of notice
                  or the  lapse  of time  (or  both)  would  become  an Event of
                  Default thereunder; and

            6.8   Deliveries.   The  Borrower  and  the  Guarantors  shall  have
                  delivered to the Lender:

                                      -5-

<PAGE>


      6.8.1 Term Note I. Term Note I duly executed by the Borrower;

      6.8.2 Term Note II. Term Note II duly executed by the Borrower;

      6.8.3 Revolving Note. The Revolving Note duly executed by Borrower;

      6.8.4 Security  Agreement.  A  Security  Agreement  duly  executed  by the
            Borrower and the Guarantors,  in form and substance  satisfactory to
            the Lender,  granting the Lender a security  interest in all present
            and future  equipment,  inventory,  and accounts  receivable  of the
            Debtor and the Guarantors;

      6.8.5 Resolutions.  Copies of resolutions of the board of directors of the
            Borrower  and  each  of the  corporate  Guarantors  authorizing  the
            execution, delivery and performance of this Agreement, the Revolving
            Note and the Security  Agreement by the Borrower and the  guaranties
            by each of the corporate Guarantors;

      6.8.6 Articles and Certificate. A copy of the articles of incorporation of
            the Borrower and each corporate  Guarantor and a certificate of good
            standing as to the Borrower and each corporate  Guarantor  issued by
            the secretary of state of the appropriate state;

      6.8.7 Schedules. All collateral schedules, financing statements,  security
            interest,   subordination   agreements,   releases  and  termination
            statements  which the  Lender may  request  to assure the  creation,
            perfection  and  priority of the security  interests  created by the
            Security Agreement.

      6.8.8 Lock Box Agreement. Lock Box Agreement duly executed by the Borrower
            and the Guarantors in form and substance satisfactory to the Lender,
            defining  how  payments  of accounts  receivable  are to be paid and
            accounted for.

      6.8.9 Appraisal.  An appraisal of the Borrower's and Guarantors' equipment
            which is satisfactory to the Lender.

      6.8.10Guaranties.  Guaranty Agreements in form and substance  satisfactory
            to the Lender executed by each of the Guarantors; and

      6.8.11UCC Financing  Statements.  UCC Financing Statements  describing the
            collateral  securing  the  repayment  of the  Indebtedness  and  UCC
            Financing  Statements  for the  Borrower  and each of the  corporate
            Guarantors.

7.    REPRESENTATIONS  AND  WARRANTIES.  To induce the Lender to enter into this
      Agreement  and to make  advances  to the  Borrower  pursuant  hereto,  the
      Borrower and the Guarantors jointly and severally represent and warrant to
      the Lender that:


                                      -6-
<PAGE>


      7.1   Existence and Power.  The Borrower and corporate  Guarantors are and
            will continue to be corporations duly formed and validly existing in
            good  standing  under  the  laws  of  their  respective   states  of
            organization and are authorized and qualified to do business in each
            state where, because of the nature of the activities or assets, such
            qualification  is required,  except those states where failure to so
            qualify will not have a material  adverse  effect;  the Borrower and
            the corporate  Guarantors have adequate  power,  authority and legal
            right to own, operate and hold the Collateral;  the Borrower and the
            corporate Guarantors are or will be at the time of acquisition, duly
            authorized,  qualified  and  licensed  under  all  applicable  laws,
            regulations,  ordinances or orders of public authorities to carry on
            their business in the operation and ownership of the Collateral; the
            Borrower and the corporate Guarantors have adequate authority, power
            and legal  right to enter  into,  execute,  deliver  and perform the
            terms of the Loan  Documents,  to borrow money and to give  security
            for  borrowings  as  contemplated  by  the  Loan  Documents  and  to
            consummate the transactions  contemplated  thereby, and in doing so,
            neither the Borrower nor the corporate  Guarantors  will violate any
            law or the  provisions  of any  articles,  charter  or bylaws or any
            other  agreement  or  instrument  binding  upon  the  Borrower,  the
            corporate  Guarantors or the Collateral.  The Loan  Documents,  upon
            their  execution  and delivery,  will  constitute  valid,  legal and
            binding Indebtedness of the Borrower and the Guarantors, enforceable
            in  accordance   with  their  terms,   subject  only  to  applicable
            bankruptcy,  insolvency  or similar  laws  generally  affecting  the
            enforcement  of  creditor's  rights.  The Borrower  owns one hundred
            percent (100%) of the issued and  outstanding  capital stock of each
            of the corporate Guarantors.

      7.2   No Usury.  The  transaction  evidenced  by this  Agreement  does not
            violate  any usury  law or other  law  relating  to the  payment  of
            interest on loans.

      7.3   Regulatory Compliance.  The authorization,  execution,  delivery and
            performance  of this  Agreement,  Term  Note I,  Term  Note II,  the
            Revolving  Note,  the Security  Agreement and the Guaranties are not
            and will not be subject to the jurisdiction, approval or consent of,
            or to any requirement of registration  with or notification  to, any
            federal, state or local regulatory body or administrative agency;

      7.4   Financial  Statements.  Financial statements furnished to the Lender
            by  the  Borrower  and  each  of the  Guarantors  were  prepared  in
            accordance   with   generally   accepted    accounting    principles
            consistently  applied,  except as expressly  therein set forth. They
            present  fairly the financial  condition of the Borrower and each of
            the Guarantors as of the dates thereof.  The annual reports disclose
            fully all  liabilities  of the Borrower  whether or not  contingent,
            with respect to any pension plan.  Since the date of the most recent
            financial  statement,  there has been no material  adverse change in
            the financial condition of the Borrower or any of the Guarantors;

      7.5   Liabilities.  Neither the Borrower nor any of the  Guarantor has any
            material liabilities,  direct or contingent,  except those to Lender
            and those disclosed to the Lender;


                                      -7-

<PAGE>

      7.6   Full  Disclosure.  Neither this Agreement,  the other Loan Documents
            nor any  statement or  documents  referred to herein or delivered to
            the Lender by the  Borrower,  the  Guarantors  or any other party on
            their  behalf  contains  any  untrue  statement  or omits to state a
            material fact necessary to make the statements herein or therein not
            misleading;

      7.7   Litigation.  Except as  disclosed  in writing to the Lender,  to the
            knowledge of the Borrower  and the  Guarantors,  there is no action,
            suit proceeding or investigation  pending, or threatened against the
            Borrower or the Guarantors  which,  if adversely  determined,  would
            adversely  affect  the  Borrower  or the  Guarantors  or impair  the
            ability  of the  Borrower  or  the  Guarantors  to  carry  on  their
            businesses  substantially as now conducted or contemplated or result
            in any substantial liability not adequately covered by insurance;

      7.8   No  Default.  The making and  performance  by the  Borrower  and the
            Guarantors  of this  Agreement  will not  violate any  provision  or
            constitute a default under any indenture, agreement or instrument to
            which the  Borrower  or any of the  Guarantors  may be a party or by
            which the Borrower, the Guarantors or any of the Collateral is bound
            or affected;

      7.9   Ownership of Collateral.  The Borrower and/or the Guarantors have or
            will acquire good and marketable title to the Collateral;

      7.10  No Encumbrances.  All assets of the Borrower and Guarantors are free
            and clear of all liens, security interests and encumbrances,  except
            those  specifically  permitted by Lender.  All pledged assets of the
            corporate  Guarantors  are free and  clear  of all  liens,  security
            interests and encumbrances,  except interests,  if any, specifically
            approved  by the Lender in  writing,  including  the prior  security
            interest  in  certain  equipment  vested in Mr.  Tommy  Worth or his
            affiliates;

      7.11  Priority.  When the financing  statements delivered pursuant to this
            Agreement  are filed in the proper  office  where the  Borrowers  or
            Guarantors  are  incorporated,  the  Lender  will  have a valid  and
            perfected first security interest in the Collateral described in the
            Security   Agreement,   subject  to  no  prior  security   interest,
            assignment,   lien  or  encumbrance   except   interests,   if  any,
            specifically approved by the Lender in writing,  including the prior
            security  interest in certain equipment vested in Mr. Tommy Worth or
            his affiliates;

      7.12  Permits.  The Borrower and the Guarantors have, or will obtain,  all
            governmental  and  private  permits,   certificates,   consents  and
            franchises  which are material to the  business,  property,  assets,
            operations or condition, financial or otherwise, of the Borrower and
            the Guarantors, to carry on their businesses as now being conducted.
            All such  governmental and private permits,  certificates,  consents
            and franchises are, or will be, valid and  subsisting,  and there is
            no existing violation thereof;


                                      -8-
<PAGE>


      7.13  Taxes.  The  Borrower  and the  Guarantor  have  filed all  foreign,
            federal,  state and local tax returns which are required to be filed
            and have paid or made provisions for payment of all taxes which have
            or may become  due  pursuant  to said  returns  or  pursuant  to any
            assessment.  Neither the  Borrower  nor the  Guarantors  know of any
            basis for the assessment of any deficiency taxes;

      7.14  Location of Business  Records.  The Borrower and the Guarantors will
            give the Lender  written  notice of each location of the Borrower or
            the  Guarantors  at which  inventory and records of the Borrower and
            the  Guarantors  pertaining to Collateral  are kept.  Except as such
            notice is given,  all  records of the  Borrower  and the  Guarantors
            pertaining to the Collateral are and will continue to be kept at the
            Borrower's and Guarantors' addresses as they appear at the beginning
            of this  Agreement,  or at such other address as the Borrower or the
            Guarantors  designate  for such  purpose in a written  notice to the
            Lender.

      7.15  ERISA.  Each  qualified  retirement  plan  of  the  Borrower  or the
            Guarantors  presently  conforms  and  is  administered  in a  manner
            consistent with the Employee Retirement Income Security Act of 1974.

      7.16  Survival of Representations. All representations and warranties made
            by the Borrower and the Guarantors  herein will survive the delivery
            of the Loan Documents and the making of the loans evidenced thereby,
            and any investigation at any time made by or on behalf of the Lender
            will not diminish the Lender's right to rely thereon. All statements
            contained in any certificate or other instrument  delivered by or on
            behalf of the Borrower or the  Guarantors  under or pursuant to this
            Agreement or in connection with the transactions contemplated hereby
            will constitute  representations and warranties made by the Borrower
            and the Guarantors hereunder.

8.    AFFIRMATIVE  COVENANTS.  Until  payment in full of the  Indebtedness,  the
      Borrower and the Guarantors  jointly and severally agree that,  unless the
      Lender otherwise consents in writing, the Borrower and the Guarantors will
      perform or cause to be performed the following agreements:

      8.1   Performance of  Obligations.  The Borrower and the  Guarantors  will
            promptly and punctually perform all of the obligations hereunder and
            under the Loan Documents,  and under all other instruments  executed
            or delivered pursuant thereto;

      8.2   Maintenance of  Collateral.  Maintain their properly in good working
            order  and   condition;   make  all  needful  and  proper   repairs,
            replacements, additions and improvements thereto.

      8.3   Financial  Reports and  Condition.  The Borrower and the  Guarantors
            will  furnish or cause to be  furnished  to the Lender,  prepared in
            accordance  with  generally  accepted   accounting   principles  and
            certified  as to truth and  accuracy  by either the chief  executive
            officer or chief financial  officer of the Borrower or Guarantor the
            following:


                                      -9-

<PAGE>


      8.3.1 Weekly Borrowing Base  Certificate.  On a weekly basis, the Borrower
            will  provide  a  Weekly   Borrowing  Base  Certificate  in  a  form
            acceptable  to the  Lender  for  reporting  purposes  only.  For the
            purposes of determining credit  availability,  the Borrowing Base is
            determined on a monthly basis as provided above.

      8.3.2 Annual  Financial  Statements.  The  Borrower  and  Guarantors  will
            furnish to the Lender their audited annual financial statement on or
            before March 1st of each year.

      8.3.3 Income Tax Returns.  The Borrower and the Guarantors will furnish to
            the Lender copies of their respective federal income tax returns and
            requests for an  extension  of time in which to file within  fifteen
            (15) days after filing of same.

      8.3.4 Monthly Financial Reports.  Within fifteen (15) days after the close
            of each month  commencing  with the month ending May 31,  2003,  the
            Borrower and Guarantors will furnish to the Lender the following:

            1.    Accounts  Receivable   Aging/Listings.   A  current  aging  of
                  accounts   receivable  of  the  Borrower  and  each  corporate
                  Guarantor;

            2.    Inventory.  A current listing of the inventory of the Borrower
                  and each corporate Guarators.

            3.    Balance Sheet. A balance sheet which demonstrates a "Liquidity
                  Ratio" of 1.0 to 1.0.  The  Borrower  will  provide the Lender
                  with  within  forty-five  (45) days after the close of each of
                  its fiscal year's quarter information reasonably needed by the
                  Lender to  determine  the  Liquidity  Ratio.  As used  herein,
                  Liquidity   Ratio  shall  be  defined  as  the  ratio  of  the
                  Borrower's   current   assets   to  the   Borrower's   current
                  liabilities.  Notwithstanding anything herein to the contrary,
                  failure to obtain the stated  Liquidity  Ratio shall not be an
                  event of default until December 31, 2003.

            4.    Income  Statement.  An income  statement which  demonstrates a
                  "Debt  Service  Ratio" of not less  than 1.25 to 1.0.  As used
                  herein,  Debt  Service  Ratio shall be defined as the ratio of
                  the   Borrower's   earnings   before   interest,   taxes   and
                  depreciation  to  Borrower's  debt  service.   Notwithstanding
                  anything herein to the contrary,  failure to obtain the stated
                  Debt  Service  Ratio  shall not be an event of  default  until
                  December 31, 2003.


                                      -10-
<PAGE>


            5.    Cash Flow  Statements.  A  statement  of changes in cash and a
                  cash flow  statement of the Borrower in form  satisfactory  to
                  the Lender

            8.3.5 Other Information.  At the Lender's request from time to time,
                  the Borrower and the  Guarantors  will provide the Lender with
                  such other  information as the Lender may  reasonably  request
                  regarding the business  affairs or financial  condition of the
                  Borrower  or the  Guarantors  and the  Borrower  will  provide
                  access  to  the  Lender  at  all   reasonable   times  to  all
                  agreements,   purchase   and   sale   contracts,   maintenance
                  agreements and all other documents and information relating to
                  the Collateral.

      8.4   Taxes.  All  taxes  which  hereafter  become  due  and  assessments,
            governmental  charges and levies which are hereafter  imposed on the
            Borrower,  the  Guarantors or their  respective  assets,  income and
            profits  will be paid  prior to the date on which  penalties  attach
            thereto;  provided that the Borrower will not be required to pay any
            such  charge  which  is being  contested  in good  faith  by  proper
            proceedings as to which adequate reserves have been established.

      8.5   Tax on Indebtedness. The Borrower and the Guarantors hereby agree to
            pay any and all taxes  which may be levied or  assessed  directly or
            indirectly on the Note, the Mortgage, any of the Loan Documents,  or
            the debt  secured  thereby,  without  regard to any law which may be
            hereafter  enacted imposing payment of the whole or any part thereof
            upon the Lender,  its successors or assigns;  and, upon violation of
            this  agreement,  or upon the  rendering  by any court of  competent
            jurisdiction  of a decision  that such an agreement by a Borrower or
            Guarantor is legally  inoperative,  or if the rate of said tax, when
            added to the rate of interest provided for in the Note, shall exceed
            the then legal rate of interest,  then,  and in any such event,  the
            debt hereby secured, without deduction,  shall, at the option of the
            Lender,  become  immediately due and payable,  anything contained in
            the Loan  Documents  notwithstanding;  provided that the  Borrower's
            obligation to pay such taxes shall exclude  United States  franchise
            taxes and United States taxes imposed on or measured by Lender's net
            income or net receipts;

      8.6   Access. Permit any officer, employee, attorney or accountant for the
            Lender or for any participant  designated by the Lender,  to inspect
            the Collateral or to review, make extracts from, or copy any and all
            of its corporate and financial books,  records and properties of the
            Borrower and the  Guarantors at all times during  ordinary  business
            hours.

      8.7   Title; Pledge. The Borrower and the Guarantors agree to grant to the
            Lender first perfected  security  interests covering all or any part
            of the Collateral. The Borrower and the Guarantors will maintain and
            defend good and marketable title to the Collateral free and clear of
            all  claims,  liens  or  encumbrances  except  those in favor of the
            Lender.

                                      -11-
<PAGE>

      8.8   Qualification;  Licenses.  The Borrower and the Guarantors will take
            such  actions or cause such actions to be taken as might be required
            to maintain the Borrower's and the corporate  Guarantors'  corporate
            existence and all  governmental  and private  permits,  licenses and
            authorities  of the Borrower and corporate  Guarantors  necessary or
            desirable to the  continuation  of their  businesses and will comply
            with all statutes and governmental regulations.

      8.9   Notices.  The Borrower and the Guarantors will promptly give written
            notice to the  Lender of: (a) any  litigation  commenced  against or
            affecting the Borrower,  the Guarantors or the  Collateral;  (b) any
            dispute which exists  between the Borrower or the Guarantors and any
            governmental  regulatory body or law enforcement  authority relating
            to any  federal or state laws that could  reasonably  be expected to
            have a material  adverse  effect on (i) the  financial  condition or
            results of operations of the Borrower or the Guarantors, or (ii) the
            ability  of  the  Borrower  or  the   Guarantors  to  perform  their
            obligations  hereunder  or under any other Loan  Documents;  (c) any
            event of  Default;  (d) any change in the senior  management  of the
            Borrower or the  corporate  Guarantors  regardless of the reason for
            such change (i.e. action by stockholders,  board of directors, death
            or retirement); and (e) any other matter which has resulted or could
            be  expected  to  result  in a  material  adverse  change in (i) the
            financial  condition or results of operations of the Borrower or the
            Guarantors or (ii) the ability of the Borrower or the  Guarantors to
            perform under this Agreement or any of the Loan Documents.

      8.10  Additional  Documents.  At any  time and  from  time to  time,  upon
            written request of the Lender, the Borrower and the Guarantors agree
            to furnish  any  additional  information  and to execute any and all
            additional  documents,  not inconsistent with the provisions of this
            Agreement, which may be required by the Lender in connection with or
            pursuant to any  provision  set forth in this  Agreement or the Loan
            Documents;

      8.11  Compliance with Applicable Law. The Borrower and the Guarantors will
            continuously   comply  with  all  applicable   regulations,   rules,
            ordinances or orders of the United States of America,  any state, or
            any other jurisdiction,  or of any agency of federal state and local
            taxing   authority  or  other  agency  which  might  materially  and
            adversely affect the business,  operations or financial condition of
            the Borrower or the Guarantors;

      8.12  Books and Records.  The Borrower  and the  Guarantors  will keep and
            maintain  accurate  books  and  records  in  accordance  with  sound
            accounting practices consistently applied;

      8.13  Insurance. Maintain property, liability,  workman's compensation and
            other forms of insurance in amounts  designated  at any time or from
            time to time by the Lender;


                                      -12-
<PAGE>


      8.14  Notice to Existing Account Debtors.  The Borrower and the Guarantors
            shall provide notice in accordance with the Lockbox Agreement to all
            existing account debtors;

      8.15  Notice to New Account Debtors. The Borrower and the Guarantors shall
            insert language into all new contracts  notifying the contract party
            that the  Borrower's  or  Guarantors'  right to  payment  under  the
            contract  is pledged to the Lender and shall  instruct  the  account
            debtor to make such payments to the Lockbox; and

      8.16  Operating  Accounts.  The Borrower and the  Guarantors  will conduct
            their  banking  business  through  accounts  established  or  to  be
            established  with  the  Lender  for  all  accounts,  cash  and  cash
            equivalents.

9.    NEGATIVE  COVENANTS.  Until  payment  in  full  of the  Indebtedness,  the
      Borrower and the  Guarantors  jointly and severally  agree that unless the
      Lender  otherwise  consents  in  writing,  neither  the  Borrower  nor the
      Guarantors  will  perform or permit to be performed  any of the  following
      acts:

      9.1   Use of Loan Proceeds. Neither the Borrowers nor the Guarantors shall
            permit any funds  advanced to Borrower  under this Loan Agreement to
            be used for any purposes  other than financing the businesses of the
            Borrower and the corporate Guarantors;

      9.2   Other Debt. Neither the Borrowers nor the Guarantors shall become or
            remain  liable  in any  manner in  respect  of any  indebtedness  or
            contractual liability (including,  without limitation, notes, bonds,
            debentures,  loans, guaranties, and pension liabilities,  whether or
            not contingent and whether or not subordinated), except indebtedness
            arising  under  this  Agreement,   presently  outstanding  unsecured
            indebtedness,  if any,  to the  extent  disclosed  in the  financial
            statements, unsecured indebtedness, other than for money borrowed or
            for the purchase of a capital asset, incurred in the ordinary course
            of its  business,  which  becomes  due and must be  fully  satisfied
            within  twelve (12) months  after the date on which it is  incurred,
            unsecured  indebtedness  subordinated  in  right of  payment  to all
            indebtedness  owed to the Lender  pursuant  to a debt  subordination
            agreement accepted or approved in writing by the Lender;

      9.3   Insider  Debt.  Permit  funds  to be owing  to the  Borrower  by the
            directors  or  shareholders  of the Borrower or the  Guarantors,  or
            members of their  families,  on account of any loan,  credit sale or
            other transaction or event;

      9.4   Contingent Liabilities. Neither the Borrower nor the Guarantors will
            assume,  guarantee,  endorse or otherwise become contingently liable
            for the  indebtedness  of any  other  person,  firm or  corporation,
            except by the  endorsement of negotiable  instruments for deposit or
            collection or other similar  transactions  in the ordinary course of
            their business;


                                      -13-

<PAGE>


      9.5   Senior Debt.  Neither the Borrower nor the  Guarantors  will take or
            permit to be taken any action which would or might impair the senior
            position of the Lender under the Loan Documents;

      9.6   Creation of Liens.  Neither the Borrowers nor the  Guarantors  shall
            create, assume or suffer to exist any mortgage, pledge, lien, charge
            or encumbrance on any of the Collateral  excluding only encumbrances
            to the Lender  contemplated by this  Agreement,  except the security
            interests  created  by the  Security  Agreement,  liens for taxes or
            assessments  not yet due or contested  in good faith by  appropriate
            proceedings,  security  interests approved by the Lender in writing,
            at its sole  discretion,  and other liens,  charges and encumbrances
            incidental  to the  conduct of their  business or the  ownership  of
            their  property  which  were not  incurred  in  connection  with the
            borrowing  of money or the  purchase of property on credit and which
            do not in the aggregate  materially  detract from the value of their
            property or materially impair the use thereof in their business;

      9.7   Disposition of Collateral.  Neither the Borrowers nor the Guarantors
            shall sell, convey, assign,  transfer or otherwise dispose of any of
            the Collateral or any other assets of the Borrower or the Guarantors
            except for the use of inventory in the ordinary  course of business.
            In addition,  neither the Borrowers nor the  Guarantors  shall enter
            into a  management  agreement or similar  agreement  with any person
            without the prior written consent of Lender;

      9.8   Liquidation  or Merger.  Neither the  Borrowers  nor the  Guarantors
            shall liquidate,  dissolve or enter into any consolidation,  merger,
            joint  venture,  syndicate,  pool,  management  agreement  or  other
            combination  and  neither the  Borrowers  nor the  Guarantors  shall
            discontinue  or  substantially  alter the normal  operation of their
            respective businesses.

      9.9   Distribution.  Neither the Borrowers nor the Guarantors  shall:  (a)
            declare  or  pay  any   dividends,   stock   bonuses  or  any  other
            distributions  to  any  stockholder  or  any  other  person;  or (b)
            authorize  or  make  any  other  distribution  to  any  stockholder,
            subsidiary,  affiliate or person of any of the assets or business of
            the Borrower or the Guarantors;

      9.10  Stock  Redemption.  Neither the Borrowers nor the  Guarantors  shall
            purchase,  acquire, redeem, retire or call or make any commitment to
            purchase,  acquire,  redeem, retire or call any of the capital stock
            or other  equity  instruments  of the  Borrower  or the  Guarantors.
            Neither the Borrowers  nor the  Guarantors  shall sell,  transfer or
            otherwise  dispose of any of the  capital  stock of the  Borrower or
            Guarantors;

      9.11  Excessive  Compensation.  Neither the Borrowers  nor the  Guarantors
            shall  pay  excessive  or  unreasonable  salaries,   bonuses,  fees,
            commissions or other compensation;


                                      -14-
<PAGE>


      9.12  Investments. Neither the Borrowers nor the Guarantors shall purchase
            stock or securities  of, extend  credit to or make  investments  in,
            become liable as surety for, or guarantee or endorse any  obligation
            of, any person,  firm or corporation,  except direct  obligations of
            the United States and commercial lender deposits;

      9.13  Margin Stock. Neither the Borrowers nor the Guarantors shall use any
            of the  proceeds  received  from  the  Lender  for  the  purpose  of
            purchasing or carrying margin stock within the meaning of Regulation
            U of the Board of Governors of the Federal Reserve System;

      9.14  Purchase of Property. Neither the Borrowers nor the Guarantors shall
            expend or contract to expend  funds for the purchase or lease of any
            property,  whether real,  personal or mixed,  except  current assets
            purchased in the ordinary course of business;

      9.15  Default.  Neither the Borrowers nor the Guarantors  shall permit any
            default or event of default to occur under any note, loan agreement,
            lease,  mortgage,  contract  for deed,  security  agreement or other
            contractual obligation binding upon Borrower or the Guarantors;

      9.16  Other  Agreements.  Neither the Borrowers nor the  Guarantors  shall
            enter into any agreement that limits or restricts the ability of the
            Borrower  or the  Guarantors  to  comply  with the terms of the Loan
            Documents.

10.   EVENTS OF DEFAULT.  Unless  consented to by the Lender,  the occurrence of
      any of the  following  events will  constitute a "Default"  under the Loan
      Documents:

      10.1  Nonpayment  of Note.  Default in payment when due of any interest or
            principal of any of the notes when and such failure  shall  continue
            for five (5) calendar days.

      10.2  Other  Nonpayment.   Default  in  payment  when  due  of  any  other
            indebtedness  payable  to the  Lender  under  the  terms of the Loan
            Documents  and such  failure  shall  continue  for five (5) calendar
            days;

      10.3  Breach of  Agreement.  Default by the Borrower or the  Guarantors in
            the performance or observance of any covenant  contained in the Loan
            Documents  or under the terms of any other  instrument  delivered to
            the Lender in connection  with any of the Loan  Documents  when such
            failure continues for a period of ten (10) calendar days;

      10.4  Representations  and  Warranties.  Any  representation,   statement,
            certificate,  schedule or report made or  furnished to the Lender on
            behalf  of the  Borrower  or the  Guarantors  proves  to be false or
            erroneous in any material  respect at the time of the making thereof
            or any warranty ceases to be complied with in any material respect;


                                      -15-

<PAGE>


      10.5  Default  on  Substantial  Obligations.  The  Borrower  or any of the
            Guarantors  shall fail to pay when due any substantial  liability or
            liabilities  owed to persons other than the Lender;  or the maturity
            of any such liability or liabilities  shall be  accelerated;  or any
            breach, default or event of default shall occur under any indenture,
            loan agreement,  note or agreement pertaining to any such liability,
            entitling a creditor or  representative of creditors of the Borrower
            or the Guarantors, acting with or without the consent or concurrence
            of other  creditors and with or without notice or a period of grace,
            to  accelerate  the  maturity  of or  demand  payment  of  any  such
            liability,  whether  such  breach,  default  or event of  default is
            waived  by  the  creditor  so  entitled.   "Substantial"  for  these
            purposes, means in excess of Twenty-Five Thousand and No/100 Dollars
            ($25,000);

      10.6  Insolvency.  The  making of an  assignment  for the  benefit  of the
            creditors of the Borrower or the Guarantors;

      10.7  Bankruptcy.   The   institution   of   bankruptcy,   reorganization,
            liquidation or  receivership  proceedings by or against the Borrower
            or the Guarantors  under the Bankruptcy  Code, as amended,  or under
            any other laws, whether state or federal, for the relief of Borrower
            or Guarantors, now or hereafter existing;

      10.8  Receivership.  The  appointment  of a receiver  or  trustee  for the
            Borrower,  the  Guarantors  or  for  any  substantial  part  of  the
            Collateral,  or the discontinuance of business or a material adverse
            change  in  the  nature  of the  business  of  the  Borrower  or the
            Guarantors  or in the  financial  condition  of the  Borrower or the
            Guarantors;

      10.9  Benefit Plan  Insecurity.  Any event or  reportable  event which the
            Lender in good faith determines to constitute  potential grounds for
            the  termination  of  any  employee   benefit  plan  or  other  plan
            maintained for employees of the Borrower or the  Guarantors,  or for
            the appointment of a trustee to administer any such plan, shall have
            occurred and be  continuing  thirty (30) calendar days after written
            notice to such  effect  shall  have been  given by the Lender to the
            Borrower or the Guarantors; or any such plan shall be terminated, or
            a trustee  shall be appointed to  administer  any such plan;  or the
            Pension Benefit Guaranty Corporation shall institute  proceedings to
            terminate  any such plan or to appoint a trustee to  administer  any
            such plan;

      10.10 Judgment.  Entry  by any  court  of a  final  judgment  against  the
            Borrower or any of the Guarantors or an attachment of any portion of
            the Collateral;

      10.11 Termination of Corporate Existence. The cessation by the Borrower or
            the corporate  Guarantors to be a validly existing corporation under
            the laws of their respective states of organization; or

      10.12 Failure  of  Liens.  Failure  of  the  Lender's  security  interests
            covering the  Collateral to constitute  first and prior liens on any
            of the Collateral.


                                      -16-

<PAGE>


11.   REMEDIES.  On the  occurrence  of an event of  Default  which has not been
      timely  cured,  the Lender may terminate  all  Indebtedness  of the Lender
      under the Loan Documents, including, without limitation, any obligation to
      make advances under the Revolver,  and may exercise any one or more of the
      following options:

      11.1  Termination  of Lender  Obligations.  The Lender may  terminate  the
            obligations of the Lender under this Agreement.

      11.2  Acceleration.  The Lender may declare the Indebtedness  evidenced to
            be  immediately  due and  payable,  and the same shall  thereupon be
            immediately due and payable,  without notice or presentment or other
            demand, and the Lender thereupon may exercise and enforce all rights
            and remedies available to it to collect the Indebtedness;

      11.3  Selective Enforcement. In the event the Lender elects to selectively
            and  successively  enforce the Lender's rights under any one or more
            of the instruments securing payment of the Indebtedness, such action
            will not be  deemed a  waiver  or  discharge  of any  other  lien or
            encumbrance  securing payment of the Indebtedness until such time as
            the Lender has been paid in full all sums advanced by the Lender;

      11.4  Waiver of Event of  Default.  The Lender may,  by an  instrument  in
            writing  signed by the Lender,  waive any event of Default  that has
            occurred and any of the  consequences of such event of Default;  and
            in such event,  the Lender,  the Borrower and the Guarantors will be
            restored  to  their   respective   former   positions,   rights  and
            Indebtedness  under  the Loan  Documents.  Any event of  Default  so
            waived will, for all purposes of this  Agreement,  be deemed to have
            been cured and not to be continuing,  but no such waiver will extend
            to  any   subsequent  or  other  event  of  Default  or  impair  any
            consequence of such subsequent or other event of Default. The rights
            and remedies of the Lender shall be  cumulative  and the exercise or
            enforcement  of any one right or remedy shall neither be a condition
            to nor bar the exercise and enforcement of any other;

      11.5  Performance  by Lender.  In the event the Borrower or the Guarantors
            fail to cure any Default in the time  provided  by the  Lender,  the
            Lender  will at any  time  thereafter  have the  right  (but not the
            obligation)  to pay any claim or lien (whether  prior or subordinate
            to liens held by the Lender)  affecting the  Collateral  and to take
            possession   of  the   Collateral  in  such  manner  as  the  Lender
            determines.  The Borrower and the  Guarantors  hereby  authorize the
            Lender to increase  the  indebtedness  owing by the  Borrower to the
            Lender by the cost of satisfying  claims  against the Collateral and
            the cost of  repossession of the Collateral and agrees that the Loan
            Documents  will evidence and secure payment of such costs whether or
            not the total  funds  advanced  exceed  the face  amount of the Loan
            Documents;

      11.6  Cumulative  Remedies.  No  failure  on the  part  of the  Lender  to
            exercise and no delay in exercising any right hereunder will operate
            as a waiver thereof,  nor will any single or partial exercise by the


                                      -17-

<PAGE>


            Lender of any right hereunder preclude any other or further right of
            exercise  thereof or the exercise of any other  right.  The remedies
            herein provided are cumulative and not alternative; and

      11.7  Setoff.  Regardless of the adequacy of any other  Collateral held by
            the Lender,  any deposits or other sums  credited by or due from the
            Lender to the  Borrower or any of the  Guarantors  will at all times
            constitute  collateral  security for all of the  Indebtedness of the
            Borrower and the  Guarantors  and may be set off against any and all
            liabilities,  direct or indirect,  absolute or contingent, due or to
            become due, now existing or  hereafter  arising,  of the Borrower or
            the  Guarantors to the Lender.  The rights granted by this paragraph
            will be in addition to the rights of the Lender under any  statutory
            lien.



<PAGE>


12.   RELEASE.  Borrower and Guarantors  hereby  jointly and severally  release,
      acquit and forever  discharge  the Lender and the  Lender's  subsidiaries,
      affiliates,   officers,   directors,   shareholders,   agents,  employees,
      servants, attorneys and representatives,  as well as the respective heirs,
      personal  representatives,  successors  and assigns of any and all of them
      (hereafter collectively called the "Released Lender Parties") from any and
      all claims,  demands,  debts, actions, causes of action, suits, contracts,
      agreements,  obligations, accounts, defenses, offsets against indebtedness
      and  liabilities  of any kind or character  whatsoever,  known or unknown,
      suspected  or  unsuspected,  in contract or in tort,  at law or in equity,
      including without implied  limitation,  such claims and defenses as fraud,
      mistake,  duress and usury,  which the Borrower or Guarantor ever had, now
      have, or might hereafter have against the Released Lender Parties, jointly
      or severally,  for or by reason of any matter,  cause or thing  whatsoever
      occurring prior to the date of this  Agreement,  whether or not related in
      whole or in part,  directly or indirectly to the Borrower's or Guarantor's
      indebtedness.  In  addition,  the  Borrower  and  Guarantor  agree  not to
      commence,  join  in,  prosecute  or  participate  in  any  suit  or  other
      proceeding  in a position  which is adverse to any of the Released  Lender
      Parties arising directly or indirectly from any of the foregoing matters.

13.   MISCELLANEOUS. It is further agreed as follows:

      13.1  Recitals.  The recitals are hereby acknowledged by the parties to be
            true and correct and are adopted and incorporated herein as material
            terms of this Agreement.

      13.2  Fees.   In  partial   consideration   of  the  extension  of  credit
            contemplated  under this  Agreement,  the Borrower  shall pay to the
            Lender  origination  fees in the  amount  of  1.5%  of the  original
            principal  balances of Term Note I and the Revolving Note and of .5%
            of the  original  principal  balance of Term Note II.  The  Borrower
            shall  also pay a fee of  $5,000  in  partial  consideration  of the
            Lender's  waiver of financial  covenant  defaults in connection with
            the Prior  Loan  Documents  and of the  Lender's  consent  to future
            distributions.


                                      -18-

<PAGE>


      13.3  Hold  Harmless.  The  Borrower  and the  Guarantors  hereby agree to
            indemnify  and hold the Lender  harmless from all  liability,  loss,
            damage or expense,  including  reasonable  attorney's fees,  whether
            incurred under  retainer,  salary or otherwise,  that the Lender may
            incur in good faith in  compliance  with or the  enforcement  of the
            terms of this Agreement or any of the Loan Documents.

      13.4  Expenses.  The Borrower will pay all reasonable  expenses (including
            legal expenses and attorney's fees) of every kind resulting from any
            future modification or enforcement of the Loan Documents.

      13.5  Supersession.  It is agreed and understood between the Borrower, the
            Guarantors  and the Lender that:  (a) except to the extent the Prior
            Loans Documents are amended  hereby,  the Prior Loans will remain in
            full force and effect;  (b) the Borrower and Guarantor hereby adopt,
            confirm  and  reaffirm  each  and  every  promise,   representation,
            warranty and covenant set forth in each of the Prior Loan  Documents
            as fully as if each of such matters  were  restated and set forth in
            this  Agreement;  and (c) the execution of this  Agreement  will not
            discharge, interrupt, impair, abate or otherwise modify the priority
            or the validity of any lien or security interest securing payment of
            the indebtedness evidenced by the Prior Loan Documents.

      13.6  Notices.  All notices,  requests and demands will be served by first
            class or express mail, postage prepaid, or sent by telex,  telegram,
            telecopy or other  similar form of rapid  transmission  confirmed by
            mailing written  confirmation at substantially the same time as such
            rapid transmission, as follows:

            The Borrower and
            the Guarantors-     16825 Northcase Drive
                                Suite 630


<PAGE>


                                Houston, TX  77060
                                Attn: CFO
                                Fax:     (281) 877-9701

            With a copy to-     Thomas J. McCaffrey
                                Haynes & Boone, LLP
                                1000 Louisiana, Suite 4300
                                Houston, Texas 77002
                                Fax:  (713) 236-5661

            The Lender -        Stillwater National Lender and Trust Company
                                1500 S. Utica
                                Tulsa, Oklahoma  74104
                                Attn:  Jerry L. Lanier, Executive Vice President
                                Fax: (918) 523-3892

            With a copy to -    Bryan J. Wells
                                Conner & Winters, P.C.
                                211 N. Robinson
                                1700 One Leadership Square
                                Oklahoma City, Oklahoma 73102
                                Fax: (405) 232-2695

                                      -19-

<PAGE>


            or at such other address as any party designates for such purpose in
            a written  notice to the other  parties.  Notices  will be deemed to
            have been given on the date notice is sent by rapid  transmission or
            three  business  days after  notice is placed in the mail,  properly
            addressed, postage prepaid.

      13.7  Construction.  Nothing contained in this Agreement will be construed
            to  constitute  the Lender as a joint  venturer with the Borrower or
            the  Guarantors  or to  constitute a  partnership.  The  descriptive
            headings of the  paragraphs of this  Agreement  are for  convenience
            only and are not to be used in the  construction  of the  content of
            this   Agreement.   This  Agreement  may  be  executed  in  multiple
            counterparts,  each of which will be an original instrument, but all
            of which will constitute one agreement.

      13.8  Venue.  This  Agreement  and  the  documents  issued  hereunder  are
            executed  and  delivered  as an  incident  to a lending  transaction
            negotiated and to be performed in Tulsa, Tulsa County, Oklahoma. The
            Loan  Documents are intended to constitute a contract made under the
            laws of the State of Oklahoma and to be construed in accordance with
            the internal laws of said state.  The Borrower,  the  Guarantors and
            the  Lender  hereby  waive  all   objections   and  consent  to  the
            jurisdiction  and venue of any state or  federal  court  sitting  in
            Tulsa County, Oklahoma.



<PAGE>


      13.9  Severability. In case any one or more of the provisions contained in
            the Loan Documents  should be invalid,  illegal or  unenforceable in
            any  respect  in  any  jurisdiction,   the  validity,  legality  and
            enforceability  of such provision or provisions  will not in any way
            be affected or impaired thereby in any other  jurisdiction;  and the
            validity,  legality and  enforceability of the remaining  provisions
            contained  herein and  therein  will not in any way be  affected  or
            impaired thereby.

      13.10 No Oral  Modification.  This Agreement may not be amended,  altered,
            modified or changed  verbally,  but only by an  agreement in writing
            signed by the  party  against  whom  enforcement  of any  amendment,
            waiver, change, modification or discharge is sought.

      13.11 Extension of Loan Term. It is understood that the Lender is under no
            obligation to extend the term of this Agreement  beyond the maturity
            of any of the notes and that any such  extension will be made at the
            Lender's sole  discretion.  Any such  extension will be evidenced by
            the  acceptance  by the Lender of a  promissory  note  renewing  and
            extending  the  time  of  payment  of  any  of the  notes  on  terms
            acceptable to the Lender.


                                      -20-

<PAGE>


      13.12 No  Waiver.  No  advance  of loan  proceeds  under  any of the  Loan
            Documents  will  constitute a waiver of any of the  representations,
            warranties,   conditions   or  covenants  of  the  Borrower  or  the
            Guarantors  under the Loan  Documents.  In the event the Borrower or
            the  Guarantors  are unable to satisfy any  warranty,  condition  or
            covenant  contained  in the  Loan  Documents,  no  advance  of  loan
            proceeds will  preclude the Lender from  thereafter  declaring  such
            inability to be an event of Default.

      13.13 Exclusive Benefit.  All provisions of the Loan Documents are for the
            sole and  exclusive  benefit of the  Lender,  the  Borrower  and the
            Guarantors  and no  other  person  will  have  standing  to  require
            satisfaction of the provisions thereof or be entitled to assume that
            advances thereunder will not be made by the Lender in the absence of
            strict compliance with the provisions of the Loan Documents. Any and
            all  provisions of the Loan Documents may be waived by the Lender in
            whole  or in part at any  time if,  in the  sole  discretion  of the
            Lender, it is advisable to do so.

      13.14 Application of Loan Proceeds. The Lender may apply the loan proceeds
            under  Term  Note  I,  Term  Note  II or the  Revolving  Note to the
            satisfaction of any condition,  warranty or covenant of the Borrower
            under any of the Loan Documents, and any proceeds so applied will be
            considered as a part of the loan proceeds  advanced  under Term Note
            I, Term Note II or the  Revolving  Note will be  secured by the Loan
            Documents.

      13.15 Binding Effect. This Agreement will be binding on the Borrower,  the
            Guarantors and their successors and permitted assigns and will inure
            to the  benefit  of the  Lender  and  the  Lender's  successors  and
            assigns.

      13.16 Counterparts.   This   Agreement   may  be   executed   in  multiple
            counterparts,  each of which will be an original instrument, but all
            of which will constitute one agreement.

     IN WITNESS WHEREOF,  the Borrower,  the Guarantors and the Lender have duly
executed this Agreement effective the date first above written.


                                                 EXCALIBUR HOLDINGS, INC.,
                                                  a Texas corporation

                                                 By: /s/ Matthew C. Flemming
                                                    ------------------------
                                                 Name:  Matthew C. Flemming
                                                 Title:  CFO



                                      -21-

<PAGE>


                                                  EXCALIBUR INDUSTRIES, INC.,
                                                   a Delaware corporation

                                                  By: /s/ Matthew C. Flemming
                                                     ------------------------
                                                  Name:  Matthew C. Flemming
                                                  Title:  CFO



                                                  EXCALIBUR STEEL INC.,
                                                  an Oklahoma corporation

                                                  By: /s/ Matthew C. Flemming
                                                     ------------------------
                                                  Name:  Matthew C. Flemming
                                                  Title:  CFO



                                                  EXCALIBUR AEROSPACE, INC.
                                                  an Oklahoma corporation

                                                  By: /s/ Matthew C. Flemming
                                                     ------------------------
                                                  Name:  Matthew C. Flemming
                                                  Title:  CFO




                                                  EXCALIBUR SERVICES, INC.
                                                  an Oklahoma corporation

                                                  By: /s/ Matthew C. Flemming
                                                     ------------------------
                                                  Name:  Matthew C. Flemming
                                                  Title:  CFO


                                                  SHUMATE MACHINE WORKS, INC.
                                                  a Texas corporation

                                                  By: /s/ Matthew C. Flemming
                                                     ------------------------
                                                  Name:  Matthew C. Flemming
                                                  Title:  CFO



                                                  /s/ Matthew C. Flemming
                                                  -----------------------
                                                  MATTHEW FLEMMING, individually






                                      -22-

<PAGE>






                                                 /s/ William S.H. Stuart
                                                 -----------------------
                                                 WILLIAM H. STUART, individually



                                                 STILLWATER NATIONAL BANK AND
                                                 TRUST COMPANY, a national
                                                 banking association

                                                 By: /s/ Carol A. Kinzer
                                                     ------------------------
                                                 Name: Carol A. Kinzer
                                                 Title: Senior Vice President
                                                  (the "Lender")






                                      -23-