PREPARED BY AND WHEN
--------------------
RECORDED RETURN TO:
------------------

Douglas C. Waddoups, Esq.
Parr, Waddoups, Brown, Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111-1536
telephone: (801) 532-7840
telecopier: (801) 532-7750


                KANSAS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
                   SECURITY AGREEMENT AND FINANCING STATEMENT

         THIS  MORTGAGE  (this  "Mortgage")  is executed as of the day of April,
1999, by NACO INDUSTRIES, INC., a Utah corporation ("Mortgagor"),  whose address
is 395 West 1400 North,  Logan, Utah 84321, in favor of WEBBANK  CORPORATION,  a
Utah  corporation  ("Mortgagee"),  whose  address  is P.O.  Box 1831,  136 Heber
Avenue, Suite 209, Park City, Utah 84060-1831.

         FOR THE  SUM OF TEN  DOLLARS  ($10.00)  and  other  good  and  valuable
consideration, and in order to secure for the benefit of Mortgagee the following
obligations  (collectively,  the  "Obligations"):  (i) the  timely  payment  and
performance  of the  obligations of Mortgagor  under this  Mortgage,  under that
certain  Adjustable  Rate  Promissory  Note (the  "Note") of even date with this
Mortgage,  executed by Mortgagor,  as maker, in favor of Mortgagee, as payee, in
the principal amount of ONE MILLION ONE HUNDRED  THOUSAND DOLLARS  ($1,100,000),
payable with interest as set forth in the Note, and under any other  instruments
given to further evidence or secure such obligations, as this Mortgage, the Note
or such  other  instruments  may be  extended,  renewed,  modified,  amended  or
replaced from time to time;  (ii) the repayment of principal and any  applicable
interest on any advances made by Mortgagee at the request of Mortgagor  prior to
the release and recordation of this Mortgage; and (iii) the payment of any loans
or advances made after the date of this Mortgage for any purpose by Mortgagee to
Mortgagor,  provided that the principal  amount of debt secured by this Mortgage
(not including sums advanced to protect the Security of this Mortgage) shall not
exceed, at any one time, the amount of $1,100,000.

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         Mortgagor CONVEYS,  WARRANTS AND TRANSFERS TO MORTGAGEE,  WITH POWER OF
SALE, the following (for reference purposes only, the "Real Property"):

         (A) The land (the  "Land")  located  in  Finney  County,  Kansas,  more
particularly described as follows:

         Beginning at a point 60 feet North and 1,080 feet West of the Southeast
corner of Section Three (3), Township Twenty-four (24) South, Range Thirty-three
(33) West of the 6th P.M., in Finney County, Kansas, for the point of beginning;
thence  West on a line  parallel  to and 60 feet North of the South line of said
Section 3 a distance of 420 feet;  thence North at an interior angle of 89o07' a
distance of 360 feet;  thence East at an interior  angle of 90o53' a distance of
420 feet; and thence South at an interior angle of 89o07' a distance of 360 feet
to the point of  beginning;  also  described as Tracts 8, 9 and 10 in the Larson
Survey of such real estate dated February 23, 1966, prepared by Robert H. Jones;
P.E.,  and filed for record in the County  Engineer's  Office of Finney  County,
Kansas, in Survey Book 3.

         TOGETHER WITH all minerals,  oil, gas and other hydrocarbon  substances
located in, on or under the Land,  and all air and water rights,  rights-of-way,
easements, tenements, hereditaments, possessory rights, claims (including mining
claims), privileges and appurtenances belonging to, or used or enjoyed with, all
or any part of the Land,  including,  without  limitation,  all right, title and
interest of Mortgagor, now owned or acquired after the date of this Mortgage, in
and to any  land  lying  in the  bed of any  street,  road  or  avenue,  open or
proposed,  in front of or adjoining  the Land,  and in and to all  sidewalks and
alleys and all strips and gores of land adjacent to or used in  connection  with
the Land; and

         (B) All buildings,  structures and other  improvements  on or after the
date of this Mortgage located on the Land  (collectively,  the  "Improvements");
and

         Mortgagor GRANTS TO MORTGAGEE A SECURITY INTEREST in the following (for
reference  purposes  only, the "Personal  Property")  (the terms set forth below
that are defined in the Utah Uniform  Commercial Code (the "UCC") shall have the
respective meanings set forth in the UCC):

         (A) All compensation  granted and awards made for the taking by eminent
domain or by any  proceeding or purchase in lieu of eminent  domain of the whole
or any part of the Real Property,  all proceeds of insurance paid as a result of
the partial or total destruction of the Improvements,  and all unearned premiums
under  all  insurance  policies  now  held or  obtained  after  the date of this
Mortgage by Mortgagor relating to the Improvements;

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         (B)  All  goods,  equipment,  farm  products,   inventory,   machinery,
supplies, fixtures, furniture, furnishings, tools, appliances and other tangible
personal  property  now owned or  acquired by  Mortgagor  after the date of this
Mortgage and located on or  necessary  for  construction  on or operation of the
Real Property,  and any  substitutions  and  replacements  of, any  attachments,
accessions and additions to, and any proceeds or products from, such property;

         (C)  All  businesses  located  on  the  Real  Property  and  good  will
associated with such businesses,  trademarks, trade names, logos and designs for
the operations located on the Real Property,  contract rights,  deposit,  escrow
and other accounts, accounts receivable, chattel paper, instruments,  documents,
general  intangibles,  certificates,  agreements,  insurance policies,  business
records, plans and specifications,  drawings, maps, surveys,  studies,  permits,
licenses,  zoning,  subdivision development and other applications,  filings and
approvals and other intangible personal property now owned or acquired after the
date of this Mortgage by Mortgagor and used in connection  with the ownership or
operation of the Real Property,  and any  substitutions and replacements of, and
any proceeds or products from, such property; and

         (D)  All water  stock  relating  to the  Land, and  deposits  and other
security  given to  utility  companies  or  governmental  or  quasi-governmental
agencies in connection with the Real Property.

(The Real  Property and the Personal  Property are referred to in this  Mortgage
collectively  as the  "Property,"  which shall mean, as  applicable,  all or any
portion of, and interest in, the Property.)

         MORTGAGOR AGREES WITH MORTGAGEE AS FOLLOWS:

         1.   Obligations;  Certain  Proceedings. Mortgagor shall timely pay and
perform the Obligations and all obligations  under any other encumbrance or lien
on the Property. No such other encumbrance or lien shall be modified,  increased
or refinanced  without the prior written  consent of Mortgagee.  Mortgagor shall
maintain  this  Mortgage  as a valid  lien on,  and  security  interest  in, the
Property of equal priority to that created by this Mortgage,  shall preserve and
protect  Mortgagor's  interests in the  Property and the  interests of Mortgagee
under this  Mortgage,  and shall  appear in and defend any action or  proceeding
which may affect the Property or the  obligations  of Mortgagor or the interests
of Mortgagee under this Mortgage.

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         2.   Maintenance  and Use. Mortgagor shall (a) maintain the Property in
good  condition  and  repair,  (b)  comply  with all  laws,  ordinances,  rules,
regulations,  covenants,  conditions and restrictions  relating to the Property,
(c) not permit  nuisances  to exist or commit or permit  waste in or on the Real
Property,   (d)  promptly  complete  in  a  good  and  workmanlike   manner  any
Improvements  which may be constructed,  and promptly restore and repair in like
manner any Improvements which may be damaged or destroyed,  (e) permit Mortgagee
and its representatives to inspect the Property at any time and conduct soil and
other tests on the  Property,  (f) not remove any personal  property or fixtures
from the Real Property unless replaced  immediately  with similar property of at
least equivalent  value, (g) preserve and extend all rights,  licenses,  permits
(including,  without limitation,  zoning variances, special exceptions,  special
permits and non-conforming uses),  privileges,  franchises and concessions which
are applicable to the Real Property, and (h) immediately on discovery,  clean up
all hazardous substances,  hazardous wastes, pollutants and contaminants located
on the Property.  Mortgagor  shall do or refrain from doing any act which,  from
the  character or use of the Property,  is  reasonably  necessary to protect and
preserve the fair market value of the  Property,  any specific  enumerations  in
this Mortgage not limiting such general  obligation.  Mortgagor shall indemnify,
defend and hold harmless  Mortgagee  from and against all  liabilities,  claims,
losses,  damages,  costs and expenses  (including,  without limitation,  cleanup
costs and attorneys' fees) directly or indirectly  arising out of, related to or
connected  with  any  hazardous  substances,  hazardous  wastes,  pollutants  or
contaminants located on the Real Property.  The liability of Mortgagor under the
indemnity set forth in the  immediately  preceding  sentence  shall arise on the
discovery  of an  unacceptable  environmental  condition  and shall  survive the
exercise of the power of sale, foreclosure of this Mortgage as a mortgage or any
other  event.  (As used in this  Mortgage,  the  terms  "hazardous  substances,"
"hazardous wastes," "pollutants" and "contaminants" mean any substances, wastes,
pollutants or contaminants included within those respective terms under any law,
ordinance, rule or regulation,  whether now existing or enacted or amended after
the date of this Mortgage.)

         3.   Development. Without Mortgagee's prior written consent,  Mortgagor
shall  not do any of the  following:  (a) make any  material  change to the Real
Property or to the use of the Real  Property;  (b) drill for on or extract  from
the Land any minerals, oil, gas or other hydrocarbon  substances,  or permit the
same to occur; (c) initiate or support any zoning  reclassification  of the Real
Property,  seek any variance under existing zoning ordinances  applicable to the
Real  Property or use or permit the use of the Real  Property in a manner  which

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<PAGE>


would be a nonconforming use under applicable zoning ordinances;  (d) impose any
covenants,  conditions,  restrictions,  easements or  rights-of-way  on the Real
Property,  execute or file any  subdivision  plat affecting the Real Property or
consent to the  annexation  of the Real  Property  to any  municipality;  or (e)
permit the Real  Property  to be used by any person in such manner as might make
possible a claim of adverse  usage or  possession  or of implied  dedication  or
easement.

         4.   Payment of Certain  Impositions. Mortgagor  shall pay when due all
taxes,  assessments  and  charges  relating to or levied  against the  Property,
including,  without  limitation,  real and personal property taxes,  general and
special assessments,  utility charges, mechanics' and materialmen's charges, and
charges arising from any covenants,  conditions or restrictions  relating to the
Real  Property.  Mortgagor  shall also pay to Mortgagee the amount of all taxes,
assessments  and charges  which may be levied by any  governmental  authority on
this  Mortgage,  the  Obligations  or  Mortgagee  by reason of the  interest  of
Mortgagee under this Mortgage; provided, that if the same cannot legally be paid
by Mortgagor,  Mortgagee may declare a default  under this  Mortgage.  Mortgagor
shall deliver to Mortgagee  official receipts of the appropriate taxing or other
authority or other proof  satisfactory  to Mortgagee  within ten (10) days after
the date any such taxes, assessments or charges are due and payable,  evidencing
the payment of such taxes,  assessments or charges (excluding payment of routine
utility charges,  unless directed to do so by Mortgagee).  Mortgagor may contest
in good faith the validity of any  mechanic's or  materialman's  lien,  provided
that Mortgagor first deposits with Mortgagee  security for such lien in form and
amount acceptable to Mortgagee, and then causes such lien to be removed.

         5.   Insurance.    Mortgagor   shall   maintain    insurance   policies
(collectively,  the  "Policies")  with respect to the  Property,  in amounts and
forms and with  deductibles  acceptable  to  Mortgagee,  providing:  (a)  hazard
insurance with special causes of loss including theft coverage, insuring against
fire,  extended  coverage risks,  vandalism,  malicious  mischief and such other
risks as  Mortgagee  may require,  including,  without  limitation,  the risk of
damage caused by earthquake  and flooding,  with  replacement  cost coverage and
agreed value endorsement;  (b) insurance against business  interruption and loss
of  rental  income,  including  full  loss  of  rents  coverage  (including  any
percentage  rents);  (c)  comprehensive  boiler  and  machinery  coverage;   (d)
commercial general liability insurance; (e) during any construction, restoration
or repair of the Improvements,  (i) workers'  compensation  insurance (including
employer's liability insurance,  if requested by Mortgagee),  and (ii) builder's
completed value risk insurance  against "all risks of physical loss,"  including
collapse and transit coverage;  and (f) such other insurance as may from time to
time be required by  Mortgagee  against  the same or other  hazards.  The hazard
insurance  policy shall  contain a standard  lender's  loss payable  endorsement
(such as Form 438  BFU),  in favor  of and in a form  acceptable  to  Mortgagee.

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<PAGE>


Mortgagee shall be named as an additional insured under the liability  insurance
policy, and such insurance shall be primary and non-contributing in the event of
loss with any other insurance  Mortgagee may carry. The insurers concerned shall
agree that the  coverage  under the  Policies  will not be  modified or canceled
unless at least  thirty  (30)  days'  advance  written  notice  of the  proposed
modification or cancellation  has been given to Mortgagee.  Mortgagee may review
the  Policies  from time to time and require that the Policies be modified so as
to protect Mortgagee's interests. Such insurance shall be carried with companies
approved by Mortgagee that are authorized to transact business in Utah and rated
Class A:XI or better in the most recent  publication of Best's Key Rating Guide,
Property-Casualty, or rated similarly in another similar publication selected by
Mortgagee.  Mortgagor  shall  deliver to Mortgagee  (at the option of Mortgagee)
either the  originals  of the  Policies  or  certificates  duly  executed by the
insurers  evidencing  such  insurance  coverage.  All  renewal  and  replacement
policies  must be delivered  to Mortgagee at least  fifteen (15) days before the
expiration of the old policies.

         6.  Reserve.  On written  notice by Mortgagee to  Mortgagor,  Mortgagor
shall  pay to  Mortgagee  on the  first  day of each  month an  amount  equal to
one-twelfth (1/12) of all taxes,  assessments and insurance premiums required to
be paid under this Mortgage by Mortgagor, in such manner as to provide Mortgagee
with  sufficient  funds to pay such  taxes,  assessments  and  premiums at least
thirty  (30)  days  prior to their  respective  due  dates.  Such  funds  may be
commingled  with other funds of  Mortgagee,  shall not bear  interest  and shall
periodically be used by Mortgagee for the payment of such taxes, assessments and
premiums.  Nothing contained in this Mortgage shall cause Mortgagee to be deemed
a trustee of such funds or to be  obligated to pay any amounts in excess of such
funds. If such funds are insufficient to pay all of such taxes,  assessments and
premiums, Mortgagor shall immediately pay the deficiency to Mortgagee.

         7.  Condemnation or Damage.  Mortgagor shall  immediately  give written
notice to Mortgagee of the  institution of any proceedings for the taking of the
Property or of the occurrence of any damage to the Property, and Mortgagee shall
receive all compensation, awards and insurance and other proceeds (collectively,
the  "Proceeds")  distributed  in  connection  with such taking or damage.  Each
person  concerned is authorized and directed to make payments for such taking or
damage  directly to Mortgagee,  instead of to Mortgagee  and Mortgagor  jointly.
Mortgagee may, but shall not be obligated to, commence,  appear in and prosecute
in its own name any action or proceeding  and make any  compromise or settlement
in connection with such taking or damage.  After deducting from the Proceeds all
costs  and  expenses  (including  attorneys'  fees)  incurred  by  Mortgagee  in
connection with such action, proceeding, compromise or settlement, Mortgagee may
use the  Proceeds  to reduce  the  Obligations  (whether  or not then due) or to

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restore or repair the  Property  damaged.  If  Mortgagee  determines  to use the
Proceeds for restoration and repair of the Property,  the Proceeds shall be made
available  to  Mortgagor  for use in  restoring  or  repairing  the  Property in
accordance with plans and specifications and construction  arrangements approved
by Mortgagee.  Mortgagee or its nominee shall hold the Proceeds and from time to
time shall, on compliance with such conditions or requirements as may be imposed
by  Mortgagee,  disburse  portions  of the  Proceeds  to  Mortgagor  or to those
entitled to the Proceeds as progress is made on such restoration and repair.  If
any of the Proceeds remain after the entire costs of such restoration and repair
have  been  paid,  Mortgagee  may use such  remaining  Proceeds  to  reduce  the
Obligations (whether or not then due) or may remit the same to Mortgagor.

         8.   Assignment of Rents and Possession. Mortgagor assigns to Mortgagee
all  rents,  deposits,  and  income  arising  at  any  time  from  the  Property
(collectively  referred  to as  "Rents"),  together  with all  leases  and other
similar  documents  (collectively,  the  "Leases")  pertaining  to the Property.
Mortgagor also authorizes Mortgagee or its agents at their option, upon default,
and without  appointment of a receiver or other judicial  intervention,  to take
possession of the Property and to collect all Rents and apply them to payment of
the interest,  principal,  insurance premiums,  taxes,  assessments,  repairs or
improvements necessary to keep the Property in such condition as Mortgagee deems
appropriate,  or to apply them to other charges or payments provided for in this
Mortgage.  All Rents received by Mortgagor after notice of default shall be held
by Mortgagor as trustee for the benefit of Mortgagee  only, to be applied to the
sums  secured by this  Mortgage.  All  lessees  under any such leases are hereby
authorized to make all lease payments to Mortgagee upon demand by the Mortgagee.
This right to possession and Rents  assignment shall continue in force until the
Note is fully paid.  The taking of possession by Mortgagee  shall not prevent or
retard  Mortgagee in the  collection of said sums by  foreclosure  or otherwise.
Nothing  contained in this paragraph shall be construed to bind Mortgagee to the
performance of any  obligations  under said leases,  except for giving  lessees'
proper credit for rent payments received by Mortgagee.  Mortgagor represents and
warrants that  Mortgagor has not executed any prior  assignment of the Rents and
has not ans  will  not  perform  any  act  that  would  prevent  Mortgagee  from
exercising its rights under this Mortgage.  Mortgagee, or Mortgagee's agent or a
judicially  appointed  receiver,  shall not be required to enter upon,  and take
control of or maintain the Property  before or after giving notice of default to
Mortgagor.  However,  Mortgagee, or Mortgagee's agents or a judicially appointed
receiver,  may do so at any time when a default occurs. Any application of Rents
shall not cure or waive any default or  invalidate  any other right or remedy of
Mortgagee.




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         9.   Leasing Requirements;Termination of Leases On Foreclosure. Without
the prior written consent of Mortgagee,  Mortgagor shall not enter into, modify,
terminate  or accept a surrender  of any Leases,  permit the  assignment  of any
Leases or accept payment of more than one (1)  installment of rent due under any
Leases  prior to its due date.  Mortgagor  shall  timely  comply with all of the
terms,  covenants and conditions as landlord under the Leases.  Mortgagor  shall
promptly notify Mortgagee in writing of (a) the default by a lessee under any of
the Leases,  (b) the commencement of any action by any lessee against Mortgagor,
or by Mortgagor  against any lessee,  or (c) the receipt of a written  notice by
Mortgagor  from any lessee  claiming that Mortgagor is in default under a Lease.
Mortgagor shall promptly deliver to Mortgagee a copy of any process, pleading or
notice  given or received by Mortgagor in reference to any such action or claim.
Prior to entering into any Lease, Mortgagor shall furnish a copy of the proposed
Lease to Mortgagee for its approval.  If Mortgagee  conditions its approval of a
Lease on certain  changes being made to such Lease,  Mortgagor shall make all of
such changes prior to the execution of such Lease.  Immediately on the execution
of any Lease, an executed copy of such Lease shall be furnished to Mortgagee. On
foreclosure  of this  Mortgage  (whether  pursuant to the power of sale which is
available  under this Mortgage or pursuant to  foreclosure of this Mortgage as a
mortgage), none of the Leases shall be terminated by application of the doctrine
of  merger,  as a  matter  of law or as a  result  of such  foreclosure,  unless
Mortgagee or the purchaser at the foreclosure sale shall so elect in writing. No
act by or on behalf of  Mortgagee  or any such  purchaser  shall  constitute  or
result in termination of any Lease unless Mortgagee or such purchaser shall give
written notice of such termination to the lessee under such Lease.

         10.  Transfers and  Encumbrances.  Without the prior written consent of
Mortgagee, which may be withheld by Mortgagee in its sole discretion,  Mortgagor
shall not, directly or indirectly,  do any of the following:  (a) sell,  convey,
assign or transfer the Property,  the Leases or the Rents, or contract to do so,
voluntarily,  involuntarily or by operation of law; or (b) subject the Property,
the Leases or the Rents to any mortgage,  deed of trust or other security device
(whether senior or junior to this Mortgage).  Mortgagee's consent to one or more
of such transactions  shall not be a waiver of the right to require such consent
with  respect to any  subsequent  or  successive  transactions.  Such consent of
Mortgagee may be conditioned on satisfaction  of such  requirements as Mortgagee
may impose.

         11.  Mortgagee Title  Insurance. Mortgagor shall provide to Mortgagee a
policy  of  title  insurance  insuring  the lien of this  Mortgage,  in form and
amount, and issued by a company, acceptable to Mortgagee.

         12.  Financial and Rental Statements;  Records and Books. Within twenty
(20) days after  request by  Mortgagee,  which  request may be made from time to
time,  Mortgagor shall deliver to Mortgagee an accurate and complete list of the



                                        8


<PAGE>


Leases,  setting  forth,  for each Lease,  the names of each  lessee,  the space
covered,  the term,  the amount of any  security  deposit,  the amount of rental
payable and such other information as Mortgagee may request. Said statements and
other  information  shall  be  prepared  in a form  and  certified  by a  person
acceptable to Mortgagee.  Mortgagor shall maintain adequate records and books of
account  relating to the Property and its own  financial  affairs  sufficient to
permit the preparation of such statements. Mortgagee may examine, copy and audit
such records and books of accounts from time to time on request.

         13.  Representations  and  Warranties.  Mortgagor  covenants  with, and
represents and warrants to,  Mortgagee that all of the following  statements are
true as of the date of this Mortgage and will remain true: (a) NACO  Industries,
Inc. is lawfully seized of indefeasible fee simple  marketable title to the Real
Property;  (b) this  Mortgage  has been  duly  executed  by  Mortgagor,  and the
Property  has been duly  conveyed  to  Mortgagee  under this  Mortgage;  (c) the
Property is free and clear of all liens,  encumbrances  and  interests  of third
parties not approved in writing by Mortgagee; (d) Mortgagor will defend title to
the Property  against all claims and demands;  (e) all of the Personal  Property
has been paid for in full,  is owned solely by Mortgagor and is not used and was
not bought for personal,  family or household purposes;  and (f) all obligations
incurred by  Mortgagor  in  connection  with or which relate to the Property are
current and without default.

         14.  Default.  Mortgagor shall be in default under this Mortgage on the
occurrence of any of the following: (a) Mortgagor fails to timely pay or perform
any of the  Obligations;  (b) an  event  of  default  occurs  under  any lien or
encumbrance  affecting  the  Property;  (c)  Mortgagor  or any  guarantor of the
Obligations (i) files a voluntary  petition in bankruptcy or files a petition or
answer  seeking or acquiescing in a  reorganization,  arrangement,  composition,
readjustment,  liquidation,  dissolution  or similar relief under any present or
future law or regulation relating to bankruptcy,  insolvency or other relief for
debtors,  (ii)  consents  to or  acquiesces  in the  appointment  of a  trustee,
receiver or  liquidator  of  Mortgagor  or such  guarantor,  the Property or the
Rents,  (iii) makes a general  assignment for the benefit of creditors,  or (iv)
admits in writing its  inability to pay its debts  generally as they become due;
(d) a court of  competent  jurisdiction  enters  an  order,  judgment  or decree
approving  a  petition  filed  against  Mortgagor  or such  guarantor  seeking a
reorganization,    arrangement,   composi   tion,   readjustment,   liquidation,
dissolution  or similar  relief  under any  present or future law or  regulation
relating to bankruptcy,  insolvency or other relief for debtors;  (e) a trustee,
receiver or liquidator of Mortgagor,  such guarantor,  the Property or the Rents
is appointed without the consent or acquiescence of Mortgagor or such guarantor;
(f) a writ of  execution,  attachment  or  similar  process  is issued or levied
against the Property or the Rents or a judgment  involving  monetary  damages is

                                        9


<PAGE>


entered against Mortgagor which becomes a lien on the Property or the Rents; (g)
any  representation  or  warranty  contained  in this  Mortgage  or in any other
instrument executed by Mortgagor is or becomes untrue; or (h) a change occurs in
the condition or affairs (financial or otherwise) of Mortgagor or such guarantor
which materially impairs Mortgagee's security or increases its risks.

         15.  Remedies. On a default under this Mortgage,  Mortgagee may (but is
not obligated  to) do any one or more of the  following:  (a) without  notice or
demand on Mortgagor and without releasing Mortgagor from any of the Obligations,
pay or perform a portion or all of the Obligations  that Mortgagor has failed to
pay or perform,  and Mortgagor  shall  immediately  reimburse  Mortgagee for all
costs and expenses (including  attorneys' fees) incurred in connection with such
payment or performance,  with interest on such costs and expenses at the Default
Rate (as defined in the Note),  both before and after judgment;  (b) declare all
of the  Obligations  immediately  due and  payable  and charge  interest  on the
Obligations  then  outstanding  at the  Default  Rate,  both  before  and  after
judgment;  (c) exercise the power of sale under  applicable  law; (d)  foreclose
this Mortgage in the manner  provided by law for the foreclosure of mortgages on
real  property;  (e) exercise all of the rights and remedies of a secured  party
under the UCC (whether now existing or created after the date of this Mortgage),
including,  without  limitation,  the right to require Mortgagor to assemble and
make  available to  Mortgagee  the Personal  Property at a place  designated  by
Mortgagee;  (f) take  possession or appoint a receiver to take possession of and
(without  liability or  obligation) as a matter of right under this Mortgage and
without the  necessity  of any showing as to the  inadequacy  of the Property as
security (i) hold, occupy, operate, use, maintain, repair and conserve the value
of the Property,  (ii) make,  modify,  enforce and  terminate the Leases,  (iii)
collect the Rents and (after deducting from the Rents  maintenance and operating
expenses,   including  reasonable   management  fees)  apply  the  same  to  the
Obligations,  and (iv)  exercise such other powers as may be fixed by the court;
(g) offset the  Obligations  against any amounts  owed by Mortgagee to Mortgagor
and apply toward the Obligations all funds of Mortgagor which Mortgagee may have
in its possession or under its control;  (h) if permitted by applicable law, sue
on the Obligations;  or (i) exercise any other rights and remedies  available at
law or in  equity.  A  receiver  appointed  pursuant  to this  Paragraph  may be
appointed  without  notice to  Mortgagor,  and  without  regard to  whether  the
Property is in danger of being lost, removed or materially injured,  whether the
Property or any other  security is sufficient to discharge  the  Obligations  or
whether Mortgagee forecloses this Mortgage judicially or nonjudicially, it being
the  intention  of Mortgagor to authorize  the  appointment  of a receiver  when
Mortgagor is in default  under this  Mortgage and  Mortgagee  has  requested the
appointment  of a  receiver.  Mortgagor  consents  to  the  appointment  of  the
particular person (including an officer,  director,  partner or employee, as the

                                       10


<PAGE>


case may be, of Mortgagee)  designated by Mortgagee as "receiver" and waives any
right to suggest or nominate any person as receiver in  opposition to the person
designated  by Mortgagee.  Neither the entering on and taking  possession of the
Property nor the collection and application of the Rents as aforesaid shall cure
or waive any default or notice of default under this  Mortgage,  invalidate  any
act done  pursuant  to such  notice of default or operate to postpone or suspend
any of the  Obligations.  No remedy provided in this Mortgage shall be exclusive
of any other remedy at law or in equity  (whether now existing or created  after
the  date of this  Mortgage),  and  all  remedies  under  this  Mortgage  may be
exercised  concurrently,  independently  or successively  from time to time. The
failure  on the part of  Mortgagee  to  promptly  enforce  any right  under this
Mortgage  shall not  operate  as a waiver of such  right,  and the waiver of any
default shall not constitute a waiver of any subsequent or other default.

         16.  Exhaustion  of Security.  If the sums secured by this Mortgage are
now or  hereafter  further  secured  by the liens of other  mortgages,  deeds of
trust,  security  agreements,  pledges,  contracts of guaranty,  assignments  of
leases,  assignments of  certificates  of deposit,  letters of credit,  or other
security,  Mortgagee  may,  at its  option,  exhaust  any one or  more of  those
securities  and  the  security  under  this  Mortgage,  either  concurrently  or
independently,  and in such order as  Mortgagee  shall  determine.  In doing so,
Mortgagee will not be deemed to have made an election of remedies or waiver that
would  prevent  it  from  later  exercising  its  remedies  as to any  remaining
security,  nor will any such  action  by  Mortgagee  be  deemed  as  bringing  a
multiplicity of suits or splitting causes of action.

         17.  Security  Agreement;  Fixture Filing. This Mortgage  constitutes a
security  agreement with respect to all personal  property and fixtures in which
Mortgagee is granted a security  interest  under this  Mortgage,  and  Mortgagee
shall have all of the  rights  and  remedies  of a secured  party  under the UCC
(whether now existing or created  after the date of this  Mortgage),  as well as
any other rights and remedies available at law or in equity. This Mortgage, with
Mortgagor,  as debtor,  and  Mortgagee,  as secured  party,  also  constitutes a
fixture filing with respect to any part of the Property which is or may become a
fixture.  The  record  owner  of the  Real  Property  is NACO  Industries,  Inc.
Mortgagee is not a seller or purchase  money  lender of the  Personal  Property.
Mortgagor  shall  immediately  notify  Mortgagee  if the  name  or  identity  of
Mortgagor is changed,  or if the place of business of Mortgagor is changed to an
address  different  from the  address  for  Mortgagor  set  forth  in the  first
paragraph of this  Mortgage.  With respect to any  instrument  or chattel  paper
covered by this Mortgage,  Mortgagee need not take any steps to preserve  rights
against  prior  parties.  A  carbon,  photographic  or other  reproduction  of a
financing statement is sufficient as a financing statement.

                                       11


<PAGE>



         18.  Waiver. Mortgagor  waives, to the fullest extent permitted by law,
any right (a) to obtain a partial  release of the Property from the lien of this
Mortgage by paying less than all of the Obligations,  (b) to redeem the Property
by paying less than the amount  necessary to effect  redemption in full,  (c) to
have the Property or any other property  securing the  Obligations  marshaled on
the  foreclosure of the lien of this Mortgage,  and agrees that any court having
jurisdiction  to  foreclose  such  lien may order the  Property  and such  other
property  sold as an  entirety,  (d) to  direct  the  order  of the  sale of the
Property  or any other  property  securing  the  Obligations,  and  agrees  that
Mortgagee may exhaust the security given for the  Obligations in any order,  and
(e) relating to procedural  or  substantive  limitations  on the recovery of any
deficiency,  including,  without  limitation,  any  requirement  that  Mortgagee
establish a  deficiency  in  connection  with the  indebtedness  secured by this
Mortgage  prior to the time that all of the  security  given for  payment of the
Obligations has been exhausted.  Mortgagor  further waives and  relinquishes all
exemptions  and  homestead  rights  which may  exist  with  respect  to the Real
Property,  and agrees not to file a declaration of homestead with respect to the
Real Property.

         19.  Expenses and Fees.Mortgagor shall pay all costs, expenses and fees
(including,  without  limitation,  trustee's  and  attorneys'  fees)  which  are
incurred by Mortgagee in connection  with the  Obligations,  this Mortgage,  the
servicing of the  indebtedness  secured by this Mortgage and the  enforcement or
protection  of the rights  and  interests  of  Mortgagee  under  this  Mortgage,
including,  without limitation,  premiums on receiver's bonds and the monitoring
of any  insolvency  or  bankruptcy  proceedings,  with  interest  on such costs,
expenses and fees at the Default Rate, both before and after judgment.

         20.  Further  Assurances. Mortgagor  shall at any time and from time to
time,  on  request  of  Mortgagee,  take or cause to be taken  any  action,  and
execute,  acknowl  edge,  deliver  or  record  any  further  instruments,  which
Mortgagee  deems  necessary  or  appropriate  to carry out the  purposes of this
Mortgage and to perfect and preserve the lien and security  interest intended to
be created and preserved in the Property.

         21.  Request for Notices. Mortgagor  requests that a copy of any notice
of default  and a copy of any notice of sale  under this  Mortgage  be mailed to
Mortgagor at the address of Mortgagor  set forth in the first  paragraph of this
Mortgage.

         22.  WAIVER OF JURY TRIAL. MORTGAGOR AND MORTGAGEE  WAIVE TRIAL BY JURY
IN ANY ACTION,  PROCEEDING,  COUNTERCLAIM,  OR CROSS-CLAIM  BROUGHT BY ANY PARTY
AGAINST  THE OTHER IN ANY MATTER  ARISING  OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSAC TION INVOLVED IN THIS MORTGAGE.



                                       12


<PAGE>




         23.  Miscellaneous.  Time  is of the  essence  of this  Mortgage.  This
Mortgage  shall be  binding  on  Mortgagor  and shall  inure to the  benefit  of
Mortgagee and its successors and assigns. The liability of each person executing
this  Mortgage  as  Mortgagor  shall be joint and  several.  The  invalidity  or
unenforceability  of any provision of this  Mortgage  shall in no way affect the
validity  or  enforceability  of any other  provision.  This  Mortgage  shall be
governed  by and  construed  in  accordance  with the laws of the  State of Utah
except where the laws of the State of Kansas  require that the laws of the State
of Kansas apply to any matters addressed herein.  Paragraph captions and defined
terms in this  Mortgage  are for  convenience  of  reference  only and shall not
affect the construction of any provision of this Mortgage. All pronouns shall be
deemed to refer to the masculine,  feminine or neuter or singular or plural,  as
the identity of the parties may require.

                  [Remainder of Page Intentionally Left Blank]



                                       13


<PAGE>


         MORTGAGOR has executed this Mortgage on the date set forth below, to be
effective as of the date first set forth above.

                                        MORTGAGOR:
                                        ---------

                                        NACO INDUSTRIES, INC.
                                        a Utah corporation

                                        By:
                                        Its:









State of                                    )
         --------------------------
                                    )  ss.
County of                                   )
          ------------------------

      The foregoing instrument was acknowledged before me this            day of
                                                               ----------
          , 1999, by                                                       , the
----------           ------------------------------------------------------
            of NACO Industries, Inc..
-----------


         (Seal)
                                                     ----------------------
                                                     Notary Public

My Commission Expires:                               Residing at:

---------------------                                ----------------------




                                       14

<PAGE>




                          DEPOSIT AND ESCROW AGREEMENT
                          ----------------------------

         THIS  DEPOSIT AND ESCROW  AGREEMENT  (this  "Agreement")  is made as of
April ___, 1999, by and among NACO  Industries,  Inc., a Utah  corporation  (the
"Company"),  WebBank Corporation (the "Lender") and WebBank Corporation,  acting
solely in its  capacity  as escrow  agent  under  this  Agreement  (the  "Escrow
Agent").  The  Company  and the Lender are  sometimes  collectively  referred to
herein as the "Parties" and individually as a "Party."

         WHEREAS,  the Parties have  entered  into that  certain Loan  Agreement
dated as of the date hereof (the "Loan Agreement")  pursuant to which the Lender
has agreed to loan the Company $1,100,000 (the "Loan");

         WHEREAS,  the Parties have entered into that certain Security Agreement
dated as of the date hereof  (the  "Security  Agreement")  pursuant to which the
Company  has granted  the Lender a security  interest  in certain  assets of the
Company  including any money placed in the Escrow  Account (as defined below) as
collateral for the Loan;

         WHEREAS,  the  Company  owes  approximately   $157,000.00  to  M.  Coen
("Coen"),  and the Lender desires that such debt be discharged within 30 days of
the date of this Agreement; and

         WHEREAS,  it is a condition  precedent  to the Loan  Agreement  and the
making of the Loan that the Company  enters into this  Agreement  and places the
Escrow Funds (as defined below) in the Escrow Account.

         NOW,  THEREFORE,  in  consideration  of the mutual  covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:

         1. Escrow Deposit. Simultaneously with the execution of this Agreement,
the  Company  has  deposited  with the Escrow  Agent  $157,000.00  (the  "Escrow
Amount")  in  accordance  with the  Loan  Agreement.  The  Escrow  Agent  hereby
acknowledges  receipt  of  $157,000.00  and  agrees to hold the  Escrow  Amount,
together  with all  products  and proceeds  thereof  (collectively,  the "Escrow
Funds"),  in a separate  and  distinct  account  in the name of the Lender  (the
"Escrow  Account"),  subject to the terms and conditions of this Agreement.  The
Escrow  Agent  shall not  distribute  or  release  the  Escrow  Funds  except in
accordance with the express terms and conditions of this Agreement.

                                        1


<PAGE>



         2.   Release  of  Escrow  Funds. The  Company  hereby  consents  to and
instructs  the Escrow  Agent  that the Escrow  Funds  shall be  distributed  and
released as follows:

                  (a)  Event of Default. The Company agrees that in the event of
an Event of Default under the Note,  the Lender may instruct the Escrow Agent to
release to the Lender all of the Escrow Funds, which Escrow Funds are pledged to
the Lender as collateral for the Note pursuant to the Security Agreement.

                  (b)  Release  to Coen.  Within  30 days  from the date of this
Agreement,  the Company  shall  instruct the Escrow Agent in writing,  in a form
satisfactory to the Lender, to release to Coen from the Escrow Account an amount
necessary  to  satisfy  the  Company's   outstanding  debt  owed  to  Coen  (the
"Request").  Such  Request  shall  (i)  include  the  account  number  and other
identifying information of Coen's account to which the funds are to be paid, and
(ii) be accompanied by a written  certification to the Lender from an officer of
the Company that no Event of Default  under the Loan  Agreement has occurred and
that no event has occurred that but for the passage of time would  constitute an
Event of Default  under the Loan  Agreement.  The Lender shall have the right in
its sole  discretion to deny any Request.  In the event the Company has not made
the Request within 30 days of this Agreement, the Lender shall have the right in
its sole  discretion  to instruct the Escrow Agent to release to Coen the amount
necessary to satisfy  Coen's  outstanding  debt owed by the Company.  Any amount
remaining  in the  Escrow  Account  on the 45th day  following  the date of this
Agreement shall be released by the Escrow Agent to the Company.

                  (c)  No Limitation of Remedies.The Company hereby acknowledges
and agrees  that the  payment of Escrow  Funds to the  Lender  pursuant  to this
Agreement  shall not  limit or  otherwise  affect  any  right of  payment  or of
indemnification which the Lender may have pursuant to the Loan Agreement,  Note,
Security  Agreement,  Mortgage  or  Guaranty  and that the  Escrow  Funds do not
constitute an exclusive remedy for Lender.

         3.   Termination. This  Agreement  shall  terminate when (i) all of the
Escrow  Funds in the  Escrow  Account  have been  released  and  distributed  in
accordance  with Section 2, or (ii) the Note has been paid in full including any
expenses  or late  fees  due  under  the  Note and  Loan  Agreement.  Upon  such
termination  this Agreement shall have no further force and effect,  except that
the  provisions of this Section 3 and Sections 4, 5 and 6 and Sections 8 through
19 below all survive such termination.

         4.   Conditions  to Escrow. The Escrow  Agent agrees to hold the Escrow
Funds  and to  perform  in  accordance  with the terms  and  provisions  of this

                                        2


<PAGE>


Material  Contracts The Parties agree that the Escrow Agent shall not assume any
responsibility  for the failure of the Parties to perform in accordance with the
Loan  Agreement or this  Agreement.  The  acceptance  by the Escrow Agent of its
responsibilities  hereunder  is subject to the  following  terms and  conditions
which the parties  hereto  agree shall  govern and control  with  respect to the
Escrow Agent's rights, duties and liabilities hereunder:

                  (a)  Documents.  The Escrow Agent shall be protected in acting
upon any written notice,  request,  waiver,  consent,  receipt or other paper or
document  furnished to it, not only as to its due execution and validity and the
effectiveness  of its  provisions,  but also as to the truth and accuracy of any
information therein contained,  which the Escrow Agent in good faith believes to
be genuine  and what it purports to be.  Should it be  necessary  for the Escrow
Agent to act upon any instructions,  directions, documents or instruments issued
or  signed  by or on  behalf  of  any  corporation,  partnership,  fiduciary  or
individual  acting on behalf of another party hereto,  it shall not be necessary
for  the  Escrow  Agent  to  inquire  into  such  corporation's,  partnership's,
fiduciary's or  individual's  authority.  The Escrow Agent is also relieved from
the necessity of satisfying  itself as to the authority of the persons executing
this Agreement in a representative capacity on behalf of any of the Parties.

                  (b)  Liability.  The  Escrow  Agent  shall not be  liable  for
anything  which it may do or refrain from doing in connection  herewith,  except
for its own gross negligence, bad faith or willful misconduct.

                  (c)  Legal  Counsel. The Escrow  Agent may consult  with,  and
obtain advice from,  legal counsel in the event of any question as to any of the
provisions hereof or its duties  hereunder,  and it shall incur no liability and
shall be fully  protected in acting in good faith in accordance with the opinion
and instructions of such counsel.

                  (d)  Limitation  of  Duties.  The Escrow  Agent  shall have no
duties  except  those which are  expressly  set forth herein and it shall not be
bound by any  agreement of the other parties  hereto  (whether or not it has any
knowledge thereof).

                  (e)  Resignation or  Termination  of Escrow Agent.  The Escrow
Agent  shall  have the right to resign at any time by giving  written  notice of
such  resignation  to  the  Parties   specifying  the  effective  date  of  such
resignation or termination.  After receiving or delivering the aforesaid notice,
as the case may be,  the  Lender  shall  have  the  exclusive  right in its sole
discretion  to appoint a successor  Escrow  Agent to which the Escrow  Agent may
distribute the property then held hereunder,  less the amount of any costs owing
to the Escrow Agent  hereunder as of such date. If a successor  Escrow Agent has
not been  appointed  and has not accepted  such  appointment  by the end of such

                                        3


<PAGE>


30-day period,  the Escrow Agent may apply to a court of competent  jurisdiction
for the  appointment of a successor  Escrow Agent,  and the costs,  expenses and
reasonable  attorneys'  fees  which are  incurred  in  connection  with any such
proceeding shall be paid by the Lender. Except as otherwise agreed to in writing
by the Parties, no Escrow Funds shall be released from the Escrow Account unless
and until a successor  Escrow Agent has been  appointed in accordance  with this
Section 4(e).

                  (f)  Discharge of Escrow  Agent.  Upon  delivery of all of the
Escrow Funds  pursuant to the terms of Section 3 above or to a successor  Escrow
Agent,  the  Escrow  Agent  shall  thereafter  be  discharged  from any  further
obligations  hereunder.  The Escrow Agent is hereby  authorized,  in any and all
events, to comply with and obey any and all final judgments,  orders and decrees
of any court of competent  jurisdiction  which may be filed,  entered or issued,
and all final  arbitration  awards and, if it shall so comply or obey,  it shall
not be liable to any other person by reason of such compliance or obedience.

         5.   Indemnification. The Company hereby agrees to indemnify the Escrow
Agent for and to hold it harmless  against  any loss,  liability  or  reasonable
expense  (including  reasonable  attorneys' fees and expenses)  incurred without
gross  negligence,  willful  misconduct  or bad faith on the part of the  Escrow
Agent arising out of or in connection with its performance under this Agreement.

         6.   Escrow Costs. The Escrow Agent shall be entitled to be  reimbursed
for its reasonable  costs and expenses  incurred in connection with  maintaining
the Escrow  Account  hereunder,  which costs and  expenses  shall be paid by the
Company.

         7.   Lender's  Rights to Escrow Funds.  Except  for the first  priority
security  interest  of the  Lender to the funds in the  Escrow  Account  created
pursuant to the Security  Agreement,  none of the Parties  shall have any right,
title or interest in or to, or possession  of, the Escrow  Account and therefore
shall not have the ability to pledge,  convey,  hypothecate or grant as security
all or any portion of the Escrow  Funds  unless and until such Escrow Funds have
been released pursuant to Section 2 above.  Accordingly,  the Escrow Agent shall
be in  possession  of the Escrow  Funds and shall act as custodian of the Lender
under this Agreement for the purposes of perfecting a security interest therein,
and no other  creditor of the Company shall have any right to have or to hold or
otherwise  attach or seize all or any portion of the Escrow Funds as  collateral
for any obligation and shall not be able to obtain a security interest in any of
the Escrow Funds unless and until such Escrow Funds have been released  pursuant
to Section 2 above. Notwithstanding the foregoing, however, nothing herein shall
restrict or otherwise limit the ability of any creditor of the Company to attach
or obtain a security  interest in the right of the  Company to receive  payments
from the  Escrow  Account  in  accordance  with the  terms  hereof  and the Loan
Agreement.

                                        4


<PAGE>




         8.   Notices.All notices,demands or other communications to be given or
delivered  under or by reason of the  provisions of this  Agreement  shall be in
writing and shall be deemed to have been given when delivered  personally to the
recipient,  one day after being sent to the  recipient  by  reputable  overnight
courier  service  (charges  prepaid)  or five  days  after  being  mailed to the
recipient by certified or registered mail,  return receipt requested and postage
prepaid.  Such notices,  demands and other  communications  shall be sent to the
Escrow Agent, the Lender and the Company at the addresses  indicated below or to
such other  address or to the  attention of such other  person as the  recipient
party has specified by prior written notice to the sending party.

         The Company:
         -----------

         NACO Industries, Inc.
         395 West 1400 North
         Logan, UT  84321
         Attention:  Verne E. Bray

         The Lender:
         -----------

         WebBank Corporation
         P.O. Box 1831
         136 Heber Avenue, Ste. 209
         Park City, UT  84060-1831
         Attention:  Douglas L. Hesse

         with a copy to:

         Parr Waddoups Brown Gee & Loveless
         185 South State Street, Suite 1300
         Salt Lake City, Utah  84111
         Attention:  Douglas C. Waddoups

         The Escrow Agent:
         ----------------

         WebBank Corporation
         P.O. Box 1831
         136 Heber Avenue, Ste. 209
         Park City, UT  84060-1831
         Attention:  Douglas L. Hesse

                                        5


<PAGE>



         9.   Entire Agreement;Amendments.This Agreement, together with the Loan
Agreement and the Security Agreement,  contains the entire  understanding of the
parties  hereto with respect to the subject  matter  hereof and  supersedes  any
prior  understandings  or  agreements  by or among the parties  hereto,  whether
written or oral, which may have related to the subject matter hereof in any way.
This Agreement may be amended, or any provision of this Agreement may be waived,
so long as such  amendment or waiver is set forth in a writing  executed by each
of the Parties (a copy of which shall be promptly provided by the Company to the
Escrow  Agent);  provided  that if any such  amendment  or waiver would have the
effect of increasing or expanding the Escrow Agent's obligations or duties under
this  Agreement,  the written  consent of the Escrow  Agent shall be required in
addition to the written consent of the Parties.  No course of dealing between or
among the parties hereto shall be deemed effective to modify, amend or discharge
any part of this  Agreement  of any rights or  obligations  of any party  hereto
under or by reason of this Agreement.

         10.  Assigns and  Assignment. This Agreement shall inure to the benefit
of and shall be binding upon Lender and Lender's successors and assigns.  Escrow
Agent shall not be  permitted to assign or delegate  its  obligations  hereunder
except as provided in Section 4(e) above.  The Company  shall not have the right
to assign  or  otherwise  transfer  its  rights  hereunder  (including,  without
limitation, its rights to the funds in the Escrow Account), and any such attempt
to assign or transfer shall be void.

         11.  No Third-Party  Beneficiaries. Nothing herein expressed or implied
is intended  or shall be  construed  to confer upon or to give any person  other
than the Escrow  Agent,  the Parties and their  permitted  assigns any rights or
remedies under or by reason of this Agreement.

         12.  Interpretation.  The headings in this  Agreement  are inserted for
convenience  of  reference  only and shall not be a part of or control or affect
the meaning hereof.

         13.  No Waiver. No failure or delay by a party hereto in exercising any
right,  power or privilege  hereunder shall operate as a waiver thereof,  and no
single or partial  exercise thereof shall preclude any right of further exercise
or the exercise of any other right, power or privilege. The right of the Parties
to  receive  all or a  portion  of the  Escrow  Funds  under  the  circumstances
described  in Section 2 above is in  addition  to, and not in lieu of, any other
remedies  that any such  party may have  against  another  pursuant  to the Loan
Agreement in the event of a breach of the Loan Agreement.

                                        6


<PAGE>



         14.  Severability.  The parties hereto agree that (a) the provisions of
this  Agreement  shall be severable in the event that for any reason  whatsoever
the provisions  hereof are invalid,  void or otherwise  unenforceable,  (b) such
invalid,  void or  otherwise  unenforceable  provisions  shall be  automatically
replaced by other  provisions  which are as similar as possible in terms to such
invalid,  void  or  otherwise  unenforceable  provisions,   but  are  valid  and
enforceable,  and (c) the remaining  provisions shall remain  enforceable to the
fullest extent permitted by law.

         15.  No Strict  Construction. The language used in this Agreement shall
be deemed to be the  language  chosen by the  parties  hereto to  express  their
collective mutual intent,  and no rule of strict  construction  shall be applied
against  any person.  The term  "including"  as used  herein  shall be by way of
example,  and  shall not be deemed to  constitute  a  limitation  of any term or
provision  contained  herein.  Each  defined term used in this  Agreement  has a
comparable meaning when used in its plural or singular form.

         16.  Releases  on  Non-Business  Days.  In the event  that a release of
Escrow  Funds  hereunder is required to be made on a date that is not a business
day, such release may be made on the next succeeding  business day with the same
force and effect as if made when required.

         17.  Governing   Law.   All  issues  and   questions   concerning   the
construction,  validity,  enforcement and interpretation of this Agreement shall
be governed by, and construed in accordance  with, the laws of the State of Utah
without  giving  effect  to any  choice  of  law or  conflict  of law  rules  or
provisions  (whether of the State of Utah or any other  jurisdiction) that would
cause the  application of the laws of any  jurisdiction  other than the State of
Utah. In  furtherance  of the  foregoing,  the internal law of the State of Utah
shall control the interpretation and construction of this Agreement, even though
under  that  jurisdiction's  choice  of law or  conflict  of law  analysis,  the
substantive   law  of  some   other   jurisdiction   would   ordinarily   apply.
Notwithstanding  the  foregoing,  each of the parties hereto agrees that each of
the other  parties  shall have the right to being any action or  proceeding  for
enforcement  of a  judgment  entered  by  Utah  courts  in any  other  court  or
jurisdiction.  Additionally,  the foregoing  shall not be deemed to prohibit any
party hereto or any other person or entity that may have the right to enforce or
sue under this  Agreement  from  commencing an action in any court that may have
jurisdiction.

                                        7


<PAGE>



         18.  Counterparts. This Agreement may be executed by the parties hereto
individually or in any combination,  in one or more  counterparts  (including by
means of telecopied signature pages), each of which shall be an original and all
of which shall together constitute one and the same agreement.


                (Remainder of this page intentionally left blank)



                                        8


<PAGE>


         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date first written above.

                                       NACO Industries, Inc.

                                       By: _________________________

                                       Its: _________________________


                                       WebBank Corporation

                                       By: _________________________

                                       Its: _________________________


                                       WebBank Corporation,
                                       acting solely in its capacity as
                                       Escrow Agent under this Agreement

                                       By: _________________________

                                       Its: _________________________



                                        9


<PAGE>




                                    GUARANTY
                                    --------

         For good and valuable  consideration,  the receipt and  sufficiency  of
which are hereby acknowledged,  the undersigned,  Verne E. Bray and Beverly Bray
(collectively "Guarantors" and each a "Guarantor"), individuals residing at 1367
Pheasant Hill Place, Logan, Utah 84321, hereby guarantee the payment when due of
the Obligations (as defined below) of NACO Industries,  Inc., a Utah corporation
("Parent")  and NACO  Composites,  Inc., a Utah  Corporation  and a wholly owned
subsidiary of Parent ("Subsidiary" together with Parent collectively referred to
herein as "Obligor") to WebBank  Corporation,  a Utah  corporation  ("WebBank"),
whose  address is P.O. Box 1831,  136 Heber Avenue,  Suite 209, Park City,  Utah
84060.

                                    RECITALS
                                    --------

                  A.   Pursuant  to that certain  Loan  Agreement  by and  among
WebBank and Obligor dated as of the date hereof (the "Loan Agreement"),  Obligor
has executed that certain  Adjustable  Rate Promissory Note dated as of the date
hereof in the original  principal  amount of ONE MILLION,  ONE HUNDRED  THOUSAND
DOLLARS  (the  "Note") in favor of WebBank,  Parent has  executed  that  certain
Mortgage in favor of WebBank dated as of the date hereof (the  "Mortgage"),  and
Obligor has executed that certain  Security  Agreement in favor of WebBank dated
as of the date hereof (the  "Security  Agreement,"  and  together  with the Loan
Agreement,  the Note, the Mortgage and all other related  documents the "Related
Documents").

                  B.   Guarantor Verne E. Bray is an  officer of Parent and owns
approximately  70% of the issued  and  outstanding  stock of  Parent.  Guarantor
Beverly Bray is the spouse of Verne E. Bray.

                                    AGREEMENT
                                    ---------

         NOW, THEREFORE,  to induce WebBank to enter into the Loan Agreement and
accept the Note, each Guarantor has executed and delivered this Guaranty:

                  1.   Definitions. When used in this  Guaranty  and not defined
herein,  the  capitalized  terms  have  the  meanings  given to them in the Loan
Agreement.



                                        1


<PAGE>


                  2.       Guaranty of Payment and Performance Obligation.
                           -----------------------------------------------
                           a.       Guarantors  and each of them hereby  jointly
and severally  and  absolutely,  unconditionally  and  irrevocably  guarantee to
WebBank and its respective  successors,  indorsees,  transferees and assigns (i)
the prompt and complete  payment when due of all  principal,  interest and other
amounts, and all extensions, renewals, refunding, replacements and modifications
thereof  under  the Note and the  other  Related  Documents,  including  without
limitation,  payments due under the Note and the other Related Documents for any
breach under such agreements and (ii) the prompt and complete performance of all
obligations  under the Note and the other Related Documents  (collectively,  the
"Obligations").  Guarantors  jointly and severally  further agree to pay any and
all expenses which may be paid or incurred by WebBank enforcing any rights under
this Guaranty, including, but not limited to, attorneys' fees. Guarantors hereby
jointly  and  severally  guarantee  that  any  amounts  due  WebBank  under  the
Obligations will be paid in full to WebBank, without set-off or counterclaim, in
lawful  currency of the United States of America at the office of WebBank as set
forth herein.

                           b.       No payment,  payments or performance made by
Obligor or any other  Person or received or collected by WebBank from Obligor or
any other  Person  by virtue of any  action  or  proceeding  or any  set-off  or
appropriation or application at any time or from time to time in reduction of or
in payment of the  Obligations,  shall be deemed to release the liability of any
Guarantor  hereunder,  both of whom  shall,  notwithstanding  any such  payment,
payments or performance, remain jointly and severally liable for the Obligations
until each of the Obligations is paid or performed in full.

                  3.       Unconditional Character of Guaranty.
                           -----------------------------------

                           a.       The  obligations  of  Guarantors  under this
Guaranty shall be absolute and unconditional,  joint and several, and shall be a
guaranty of payment and performance  and not of collection,  irrespective of the
validity,  regularity  or  enforceability  of  the  Related  Documents,  or  any
provisions thereof, the absence of any action to enforce the same, any waiver or
consent  with  respect to any  provision  thereof,  the recovery of any judgment
against any person or entity or action to enforce the same, any failure or delay
in the  enforcement  of the  obligations  of the Obligor  under the Note, or any
set-off,  counterclaim,  recoupment,  limitation,  defense or termination.  Each
Guarantor hereby waives diligence, demand for payment, filing of claims with any
court,  any  proceeding to enforce any provision of the Related  Documents,  any
right to require a proceeding first against Obligor,  any protest,  presentment,
notice or demand  whatsoever,  and each  Guarantor  hereby  covenants  that this
Guaranty   shall  not  be  terminated,   discharged  or  released   except  upon
satisfaction  of the conditions  specified in Section 2 above,  and only to such
extent of any such payment and performance.

                                        2


<PAGE>



                           b.       Without   limiting  the  generality  of  the
foregoing,  such  obligations,  and the rights of WebBank to enforce the same by
proceedings, whether by action at law, suit in equity or otherwise, shall not be
in  any  way   affected  by  (i)  any   insolvency,   bankruptcy,   liquidation,
reorganization,  readjustment,  composition,  dissolution,  winding  up or other
proceeding  involving or affecting  Obligor or any Guarantor or others,  or (ii)
any change in the ownership of any of the capital  stock of the Obligor,  or any
of its respective affiliates.

                           c.       Guarantors  and each of them hereby waive to
the fullest extent possible under applicable law:

                                    (1) any defense  based upon the  doctrine of
marshalling  of assets or upon an election  of  remedies by WebBank,  including,
without  limitation,  an election to proceed by nonjudicial rather than judicial
foreclosure which election destroys or otherwise impairs the subrogation  rights
of any  Guarantor or the right of any Guarantor to proceed  against  Obligor for
reimbursement, or both;

                                    (2) any  defense  based upon any  statute or
rule of law which  provides  that the  obligation  of a surety  must be  neither
larger  in  amount  nor in  other  respects  more  burdensome  than  that of the
principal;

                                    (3) any  duty  on the  part  of  WebBank  to
disclose to any  Guarantor  any facts  WebBank may now or  hereafter  know about
Obligor  regardless of whether WebBank has reason to believe that any such facts
materially  increase the risk beyond that which any Guarantor  intends to assume
or has reason to believe  that such facts are unknown to any  Guarantor or has a
reasonable  opportunity  to  communicate  such facts to any  Guarantor,  as each
Guarantor acknowledges that he or she is fully responsible for being and keeping
informed of the financial condition of Obligor and of all circumstances  bearing
on the risk of breach of any representations, warranties, covenants or agreement
or nonpayment of any obligation caused by such breach hereby guaranteed;

                                    (4) any defense arising because of WebBank's
election, in any proceeding instituted under the Federal Bankruptcy Code, of the
application of Section  1111(b)(2) of the Federal Bankruptcy Code, as amended or
supplemented;

                                    (5) any    claim    for       reimbursement,
contribution,  indemnity or  subrogation  which any Guarantor may have or obtain
against Obligor by reason of the payment by any Guarantor of any Obligation; and


                                        3


<PAGE>



                                    (6) any  other  event or  action  (excluding
Guarantors'  compliance  with the  provisions  hereof)  that would result in the
discharge by operation of law or otherwise of any Guarantor from the performance
or  observance  of any  obligation,  covenant  or  agreement  contained  in this
Guaranty.

                           d.       WebBank  may deal with  Obligor  in the same
manner and as freely as if this  Guaranty  did not exist,  and WebBank  shall be
entitled,  without  notice to any  Guarantor,  among other  things,  to grant to
Obligor such  extension or  extensions of time to perform any act or acts as may
seem advisable to WebBank at any time and from time to time without terminating,
affecting or impairing  the validity or  enforceability  of this Guaranty or the
obligations of Guarantors hereunder.

                           e.       WebBank may proceed,  either in its own name
or in the name of any Guarantor or both,  or  otherwise,  to protect and enforce
any or all of its rights under this Guaranty by suit in equity, action at law or
by other appropriate proceedings,  or to take any action authorized or permitted
under  applicable  law,  and  shall be  entitled  to  require  and  enforce  the
performance  of all  acts and  things  required  to be  performed  hereunder  by
Guarantors.  Each and every remedy of WebBank shall, to the extent  permitted by
law, be cumulative and shall be in addition to any other remedy given  hereunder
or now or hereafter existing at law or in equity.

                           f.       No waiver or release shall be deemed to have
been made by WebBank of any of its rights  hereunder unless the same shall be in
writing  and signed by or on behalf of WebBank,  and any such waiver  shall be a
waiver or release only with respect to the specific matter involved and shall in
no way impair the rights of WebBank or the  obligations  of any Guarantor  under
this Guaranty in any other respect at any other time.

                           g.       At the option of WebBank,  any  Guarantor or
both may be joined in any action or  proceeding  commenced  by  WebBank  against
Obligor for any Obligation  covered by this Guaranty in connection with or based
upon the Related Documents, or other obligation, or any other provision thereof,
and recovery may be had against any Guarantor in such action or proceeding or in
any  independent  action  or  proceeding  against  any  Guarantor,  without  any
requirement that WebBank first assert,  prosecute or exhaust any remedy or claim
against Obligor.

                  4.   Subrogation. Notwithstanding any payment or payments made
by any  Guarantor  hereunder  or any  set-off  or  application  of  funds of any
Guarantor by WebBank,  no Guarantor shall be entitled to be subrogated to any of
the rights of WebBank against Obligor or any collateral  security or guaranty or
right of offset held by WebBank for the payment of the Obligation, nor shall any

                                        4


<PAGE>


Guarantor seek any reimbursement from the Obligor in respect of payments made by
any Guarantor hereunder, until all amounts owing to WebBank by Obligor for or on
account of the Obligation are paid in full.

                  5.   Representations  and Warranties. Each Guarantor makes the
following representations and warranties to WebBank, each of which shall survive
the  execution,  delivery and  performance  of this  Guaranty  until each of the
Obligations is fully satisfied:

                           a.       Guarantors  have  delivered  to WebBank  the
unaudited  financial  statement attached hereto as Schedule 5(a) (the "Financial
Statement")  which Financial  Statement  fairly and accurately  presents the net
assets and financial position of Guarantors as of the date hereof;

                           b.       Guarantor   has   made  no   agreements   or
representations  of any kind  that  would  limit or  qualify  the  terms of this
Guaranty;

                           c.       This   Guaranty  is  executed  at  Obligor's
request and not at the request of WebBank;

                           d.       WebBank  has  made  no   representation   to
Guarantor as to the credit worthiness of Obligor; and

                           e.       This Guaranty  constitutes the legal,  valid
and binding obligation of Guarantor.

                  6.   Covenants.Each   Guarantor   covenants  with  WebBank  as
follows:

                           a.       Except as provided in this  Guaranty and the
Related  Documents,  Guarantor  will not,  without the prior written  consent of
WebBank, sell, dispose of, assign, pledge, mortgage,  hypothecate,  or otherwise
encumber  or  transfer  any  property  of any kind  owned by  Guarantor  if such
encumbering  or transfer (i) relates to property of such monetary value as to be
deemed  "material" to this Guaranty,  (ii) would materially and adversely affect
Guarantor's  financial  condition,  as such financial  condition is reflected by
Guarantor's  current  Financial  Statement,  or (iii)  would  materially  impair
WebBank's ability to enforce this Guaranty; and

                           b.       Guarantor  will notify WebBank in writing in
the event  there is any  change  in his or her  Financial  Statement,  and shall
furnish WebBank with (i) a current  Financial  Statement within ninety (90) days
after the end of each calendar year and at any other time WebBank  requests such
current  Financial  Statement  and (ii) copies of each  Guarantor's  federal and
state tax returns within 30 days of filing such returns.

                                        5


<PAGE>




                  7.       Event of Default; Remedies.
                           --------------------------

                           a.       Event of Default.  The  occurrence of any of
the  following  events or existence  of any of the  following  conditions  shall
constitute  an Event of Default  under this  Guaranty  (each such  occurrence an
"Event of Default"):

                                    (1)  Any  Guarantor  shall  default  in  the
performance  of or compliance  with any covenant or agreement  contained in this
Guaranty or in any document related hereto, and such default is not cured within
five (5) days;

                                    (2)  Any material representation or warranty
made by any Guarantor herein or in any statement,  certificate or other document
related  hereto  proves to have been false or incorrect in any material  respect
when made; and

                                    (3)  Any Event of Default  as defined in the
Loan  Agreement  shall occur and shall not be cured within the  applicable  cure
period, if any, provided in the Loan Agreement.

                           b.       Remedies upon Default. In the event that any
Event of Default shall occur and be continuing, WebBank shall be entitled to all
remedies set forth in this  Guaranty,  the Loan  Agreement and the other Related
Documents, and to all remedies available at law or in equity.

                  8.   Consent. Each Guarantor hereby consents that, without the
necessity of any  reservation of rights against any Guarantor and without notice
to or further assent by any Guarantor,  any demand for payment or performance of
any of the  Obligations  made by WebBank may be  rescinded by WebBank and any of
the Obligations  continued,  and the Obligations,  or the liability of any other
party upon or for any part  thereof,  or any  collateral  security  or  guaranty
therefor or right of offset with respect  thereto,  may,  from time to time,  in
whole  or  in  part,  be  renewed,  extended,  amended,  modified,  accelerated,
compromised,  waived,  surrendered  or released by WebBank,  as WebBank may deem
advisable from time to time, and any collateral security or guaranty or right of
offset  at any time  held by  WebBank  for the  payment  or  performance  of the
Obligations may be sold, exchanged,  waived, impaired,  surrendered or released,
all without the necessity of any reservation of rights against any Guarantor and
without  notice to or further  assent by any  Guarantor  who will  remain  bound
hereunder,   notwithstanding   any  such   renewal,   extension,   modification,
acceleration,  compromise,  amendment, supplement,  termination, sale, exchange,

                                        6


<PAGE>


waiver,  impairment,  surrender or release.  Except to the extent the applicable
law  provides  that  Guarantors  may not so  agree,  WebBank  shall not have any
obligation  to  protect,  secure,  perfect  or insure  any  collateral  security
document  or  property  subject  thereto  at any time held as  security  for the
Obligations of this Guaranty. THIS IS A GUARANTY OF PAYMENT AND PERFORMANCE, NOT
OF COLLECTION. WEBBANK MAY SEEK TO COLLECT PAYMENT OR ENFORCE PERFORMANCE OF THE
OBLIGATIONS  FROM ANY  GUARANTOR AS THOUGH THE  OBLIGATIONS  WERE THE DIRECT AND
PRIMARY  OBLIGATION OF SUCH GUARANTOR AND MAY SEEK PAYMENT OR PERFORMANCE OF THE
OBLIGATIONS  FROM ANY GUARANTOR  WITHOUT  MAKING ANY DEMAND FOR PAYMENT  THEREOF
UPON  OBLIGOR OR TAKING ANY OTHER  ACTION TO COLLECT OR ENFORCE THE  OBLIGATIONS
FROM OBLIGOR.  When making any demand hereunder  against any Guarantor,  WebBank
may, but shall be under no obligation to, make a similar demand on Obligor,  and
any failure by WebBank to make any such demand or to collect any  payments  from
Obligor  shall not relieve any  Guarantor  of such  Guarantor's  obligations  or
liabilities  hereunder,  and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of WebBank against any Guarantor. For
the purposes hereof,  "demand" shall include the commencement and continuance of
any legal proceedings.

                  9.   Enforcement.No  lawful act of  commission  or omission of
any  kind or at any time  upon the part of  WebBank  in  respect  of any  matter
whatsoever  shall in any way  affect or impair  the rights of WebBank to enforce
any right, power or benefit under this Guaranty.  Nothing in this Guaranty shall
be construed as a waiver by any  Guarantor of any rights or claims he or she may
have against  Obligor under this  Guaranty or  otherwise,  but any recovery upon
such rights and claims shall be had from Obligor separately, it being the intent
of this Guaranty that each Guarantor  shall be  unconditionally  and absolutely,
jointly  and  severally  obligated  to  perform  fully  all of such  Guarantor's
obligations, covenants and agreements hereunder for the benefit of WebBank.

                  10.  Continuing  Effect.  This Guaranty  shall  continue to be
effective, or be reinstated,  as the case may be, if at any time payment, or any
part thereof,  of the  Obligation is rescinded or must  otherwise be restored or
returned by WebBank upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization  of  Obligor,  or upon or as a  result  of the  appointment  of a
receiver, intervenor or conservator of, or trustee, custodian or similar officer
for Obligor or any  substantial  part of its  property,  or other  wise,  all as
though such payments had not been made.



                                        7


<PAGE>



                  11.      Miscellaneous.
                           -------------

                           a.       Governing   Law.  This  Guaranty   shall  be
interpreted and the rights of the parties  hereunder  shall be determined  under
the laws of the State of Utah, without reference to conflict of laws principles.

                           b.       Severability.  If any term or  provision  of
this Guaranty or the  application  thereof to any  circumstances  shall,  to any
extent,  be invalid or  unenforceable,  the remainder of this  Guaranty,  or the
application  of such term or provision to  circumstances  other than those as to
which it is held invalid or unenforceable,  shall not be affected  thereby,  and
each term and provision of this Guaranty  shall be valid and  enforceable to the
fullest extent permitted by law.

                           c.       Notices. All notices,  requests, demands and
other  communications  which are  required or  permitted  to be given under this
Guaranty  will be in  writing  and will be deemed to have been duly given if (i)
delivered  in person,  or (ii)  mailed,  first class  certified,  registered  or
express mail,  return receipt  requested and postage  prepaid,  or (iii) sent by
recognized  overnight  courier,  with proof of  delivery  requested  and charges
prepaid, to:

                  If to Guarantors:

                           Verne E. Bray and Beverly Bray
                           1367 Pheasant Hill Place
                           Logan, Utah  84321

                   If to WebBank:

                           WebBank Corporation
                           P.O. Box 1831
                           136 Heber Avenue, Ste. 209
                           Park City, Utah  84060-1831
                           Attention:  Douglas L. Hesse




                                        8


<PAGE>



                  with a copy to:

                           Douglas C. Waddoups

                           Parr Waddoups Brown Gee & Loveless
                           185 South State, Suite 1300
                           Salt Lake City, Utah  84111

or to such other  address as a party may specify by written  notice to the other
parties.

                           d.       Right of Offset. Each Guarantor acknowledges
the right of WebBank to offset  against any  obligations  of such  Guarantor  to
WebBank under this Guaranty, any amount owing by WebBank to such Guarantor.

                           e.       Right   to   Cure.    Notwithstanding    the
provisions of Section 7 hereof,  any  Guarantor  shall have the right to cure an
Event of Default occurring pursuant to the Loan Agreement,  provided,  that such
cure is effected  within the applicable  period set forth in the Loan Agreement;
and provided further that such cure can be effected in compliance with the Note.
The  exercise  of such  right  to cure by any  Guarantor  shall  not  reduce  or
otherwise affect the liability of any Guarantor under this Guaranty.

                           f.      Jurisdiction.    Each    Guarantor    hereby
expressly and irrevocably submits to the non-exclusive  personal jurisdiction of
the United  States Dis trict Court for the  District of Utah - Central  Division
and to the  jurisdiction  of any  other  competent  court  of the  State of Utah
located  in  the  County  of  Salt  Lake  (collectively,   the  "Utah  Courts"),
preserving, however, all rights of removal to such federal court under 28 U.S.C.
Section 1441, in  connection  with all disputes  arising out of or in connection
with this Agreement or the  transactions  contemplated  hereby and agrees not to
commence  any  litigation  relating  thereto  except  in  such  courts.  If  the
aforementioned  courts  do  not  have  subject  matter  jurisdiction,  then  the
proceeding  shall be brought in any other state or federal  court located in the
State of Utah, preserving,  however, all rights of removal to such federal court
under 28 U.S.C.  Section  1441.  Each  Guarantor  hereby waives the right to any
other  jurisdiction or venue for any litigation  arising out of or in connection
with this Guaranty or the  transactions  contemplated  hereby to which he or she
may be entitled  by reason of present or future  domicile.  Notwithstanding  the
foregoing,  each  Guarantor  hereto  agrees that WebBank shall have the right to
bring any action or proceeding for enforcement of a judgment entered by the Utah
Courts in any other court or jurisdiction,  including,  without limitation,  the
courts of the States of Kansas and California. Additionally, the foregoing shall



                                        9


<PAGE>


not be deemed to prohibit  any party  hereto or any other  person or entity that
may have the right to enforce this  Guaranty  from  commencing  an action in any
court or courts that may have jurisdiction.

                           g.       Service   of   Process.    Each    Guarantor
irrevocably   consents  to  the  service  of  process  outside  the  territorial
jurisdiction  of the  courts  referred  to in Section  11(f)  hereof in any such
action or proceeding by mailing copies thereof by registered United States mail,
postage prepaid,  return receipt  requested,  to such address as specified in or
pursuant to Section 11(c)  hereof.  However,  the foregoing  shall not limit the
right of WebBank to effect  service  of  process on any  Guarantor  by any other
legally available method.

                           h.       WAIVER  OF  JURY  TRIAL.   AS  AN  IMPORTANT
INDUCEMENT TO WEBBANK TO ENTER THIS AGREEMENT,  EACH GUARANTOR  WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY  ACTION  ARISING  UNDER  OR IN ANY WAY  RELATED  TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

                           i.       Section   Headings.   The  section  headings
contained in this Guaranty are for reference  purposes only and shall not affect
the meaning or interpretation of this Guaranty.

                           j.       Delay.  No failure to exercise  and no delay
in  exercising,  on the part of WebBank,  any right,  power or  privilege  shall
preclude  any other or further  exercise  thereof,  or the exercise of any other
power or right.  The rights and remedies  herein provided are cumulative and not
exclusive of any rights or remedies provided by law.

                           k.       Modification.  No provision of this Guaranty
shall  be  waived,  amended,  supplemented  or  released  except  by  a  written
instrument executed by Guarantors and WebBank.

                           l.       Binding  Effect.   This  Guaranty  shall  be
binding upon the successors,  assigns,  heirs and legal  representatives of each
Guarantor.


                  [Remainder of Page Left Blank Intentionally]




                                       10


<PAGE>




         IN WITNESS WHEREOF,  and intending to be legally bound, the undersigned
have caused this  Guaranty to be duly  exercised and delivered as of the day and
year first above written.

                                GUARANTORS
                                /s/Verne E. Bray
                                -------------------------------
                                Verne E. Bray, individually

                                /s/Beverly Bray
                                -------------------------------
                                Beverly Bray, individually



                                       11


<PAGE>


                                  SCHEDULE 5(a)

                     FINANCIAL STATEMENTS OF EACH GUARANTOR

                    [To be provided by counsel for Obligor.]



                                        i


<PAGE>



                                 LOAN AGREEMENT

This Loan Agreement (this  "Agreement") is entered into this _____ day of April,
1999, by and between NACO Industries, Inc., a Utah corporation (the "Borrower"),
and WebBank Corporation, a Utah corporation (the "Lender").

WHEREAS,  the Lender desires to make a loan to the Borrower in the amount of ONE
MILLION,  ONE HUNDRED THOUSAND AND 00/100 DOLLARS  ($1,100,000.00)  (the "Loan")
which is eighty percent (80%) guaranteed by RBS/USDA (the "RBS/USDA  Guaranty"),
in  accordance  with and subject to the terms and  conditions  of such  RBS/USDA
Guaranty, all of which are incorporated herein by reference; and

WHEREAS, the Borrower desires that the Lender make the Loan to the Borrower.

NOW,  THEREFORE,  in  consideration  of  the  representations,  warranties,  and
covenants contained herein, and for other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

Unless the context  otherwise  requires,  all  capitalized  terms not  otherwise
specifically  defined  herein  shall have the  meanings  set forth below in this
Article 1:

"Accounting Terms" are those generally accepted in accordance with GAAP.

"Affiliate"  as applied to any Person  shall mean any other  Person  directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person.  For purposes of this definition,  a Person shall be deemed to
control another Person if such first Person possesses directly or indirectly the
power to (a) vote 10% or more of the securities having ordinary voting power for
the selection of directors of such Person or (b) direct,  or cause the direction
of, the  management  and  policies  of the second  Person,  whether  through the
ownership of voting securities, by contract or otherwise. In addition, as to the
Lender,  "Affiliate" shall include any partnership a majority of the partners of
which are officers, directors,  employees or Affiliates of the Lender; and as to
the Borrower, "Affiliate" shall not include any Lender.

                                        1


<PAGE>



"Assets"  shall mean all of the  properties,  asset  rights,  claims,  leasehold
interests, contracts, and goodwill used in the Business or owned by the Borrower
of  every  kind and  character,  wherever  located,  whether  real or  personal,
tangible or intangible.

"Business"  shall mean the business of the Borrower and all  activities  related
thereto, including but not limited to the activities, at any location, conducted
by the  Borrower  under the name "NACO  Industries,  Inc." or "NACO  Composites,
Inc."

"Capital  Expenditure"  means any payment made  directly or  indirectly  for the
purpose of acquiring or  constructing  fixed assets,  Real Property or equipment
which in  accordance  with  GAAP  would be added as a debit to the  fixed  asset
account of the Person making such expenditure,  including,  without  limitation,
amounts  paid or payable  under any  conditional  sale or other title  retention
agreement or under any lease or other periodic payment  arrangement  which is of
such a nature that payment obligations of the lessee or obligor thereunder would
be required by GAAP to be  capitalized  and shown as  liabilities on the balance
sheet of such lessee or obligor.

"Change of Control" shall mean:

         (a)      if  any   Person  or  group   besides   Verne  E.  Bray  shall
beneficially  own more  than  50% of the  voting  power of the  then-outstanding
voting equity interests of Borrower; or

         (b)      if any shares of capital stock of Borrower which Verne E. Bray
beneficially  owns shall by any means come into the beneficial  ownership of any
other Person or any group; or

         (c)      if  Verne  E.  Bray or  Jeffrey  Kirby  shall  cease  to be an
executive officer of Borrower.

         For  purposes  of  this  definition,   the  terms  "beneficially  own,"
"beneficial  ownership" and "group" shall have the respective  meanings ascribed
to them  pursuant to Section  13(d) of the  Securities  Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.

"Closing" shall have the meaning specified in Article 2.

"Closing Date" shall have the meaning specified in Article 2.

"Closing  Transactions"  means the transactions  which will occur on the Closing
Date pursuant to the Loan Documents.

                                        2


<PAGE>



"Code"  shall  mean  the  Internal   Revenue  Code  of  1986,  as  amended,   or
corresponding provisions of any subsequent federal tax laws.

"Deposit and Escrow  Agreement" means the Deposit and Escrow  Agreement  between
the Borrower and the Lender dated as of the date hereof.

"Environmental Complaint" shall mean any complaint,  summons,  citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment, letter
or other  communication from any federal,  state, or municipal  authority or any
other Person  involving a Hazardous  Discharge from or on Real Property owned or
leased by the Borrower or any  violation of any order,  permit or  Environmental
Law.

"Environmental  Laws" shall mean any federal,  state or local laws,  common law,
ordinances,  regulations or policies, as well as orders,  decrees,  judgments or
injunctions issued,  promulgated,  approved, or entered thereunder,  relating to
the environment,  health and safety,  Hazardous Substances  (including,  without
limitation, the use, handling,  transportation,  production, disposal, discharge
or storage thereof) or to industrial hygiene or the environmental conditions on,
under or about the Real  Property  owned or leased  by the  Borrower  including,
without limitation, soil, groundwater, and indoor and ambient air conditions.

"ERISA" means the Employee  Retirement  Income Security Act of 1974, as amended,
and any regulations promulgated thereunder.

"ERISA  Affiliate"  means any corporation or trade or business which is a member
of the same  controlled  group of  corporations  (within  the meaning of Section
414(b) of the Code) as the  Borrower  or is under  common  control  (within  the
meaning of Section 414(c) of the Code) with the Borrower.

"GAAP" means generally accepted accounting principles in the United States.

"Guaranty"  means the  Guaranty  executed by Verne E. Bray and  Beverly  Bray in
favor of the Lender as of the date hereof.

"Hazardous  Discharge"  shall mean any releasing,  spilling,  leaking,  pumping,
pouring,  emitting,  emptying,   discharging,   injecting,  escaping,  leaching,
disposing or dumping of Hazardous Substances from or onto Real Property owned or
leased by the Borrower.

"Hazardous  Substances"  shall mean any pollutant,  toxic  substance,  hazardous
waste,  compound,  element or chemical that is or shall be defined as hazardous,
toxic, noxious or dangerous pursuant to Laws or regulated in any manner pursuant
to any Law.

                                        3


<PAGE>



"Indebtedness" means, for any Person,  without duplication,  (a) all obligations
of such Person for borrowed money,  (b) all obligations of such Person evidenced
by bonds, debentures,  notes or other similar instruments,  (c) all indebtedness
of such Person on which interest  charges are customarily  paid or accrued,  (d)
all guarantees by such Person,  (e) the unfunded or unreimbursed  portion of all
letters of credit issued for the account of such Person,  (f) any  obligation of
such Person  representing  the deferred  purchase  price of property or services
purchased by such Person, (g) all obligations  secured by a lien on any property
or asset  owned or held by such Person  regardless  of whether  such  obligation
shall have been assumed by that Person or is  nonrecourse  credit of that Person
and (h) all liability of such Person as a general  partner or joint venturer for
obligations of the nature described in (a) through (g) preceding.

"Law" or "Laws" shall mean any and all applicable  statutes,  laws,  ordinances,
proclamations, regulations, published requirements, orders, decrees and rules of
any  foreign,  federal,  state or local  government,  political  subdivision  or
governmental  or  regulatory  authority,   agency,  board,  bureau,  commission,
instrumentality or court or  quasi-governmental  authority,  including,  without
limitation,   those  covering   environmental,   tax,  energy,  safety,  health,
transportation,  bribery, record keeping, zoning, discrimination,  antitrust and
wage and hour  matters,  and in each case as amended  and in effect from time to
time.

"Lease  Obligation"  shall  mean  any  lease,   sublease,   license  or  similar
arrangement,  pursuant to which a Person  leases,  subleases,  or  otherwise  is
granted the right to occupy, take possession of or use property,  whether, real,
personal or mixed.

"Lien" shall mean any lien, pledge, claim, charge,  security interest,  mortgage
or encumbrance of any nature whatsoever, other than Permitted Liens.

"Loan Documents"  means this Agreement,  the Note, the Security  Agreement,  the
Mortgage, the Guaranty, the Deposit and Escrow Agreement, the RBS/USDA Guaranty,
and all  other  documents  executed  by the  parties  in  connection  with  this
transaction.

"Material  Adverse  Change" means a material  adverse effect on the Assets or on
the financial condition, operations, or prospects of the Business.

"Mortgage" means the Mortgage executed by the Borrower in favor of the Lender as
of the date hereof.

"Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37)
of ERISA to which  contributions  have  been made by the  Borrower  or any ERISA
Affiliate and which is covered by Title IV of ERISA.

                                        4


<PAGE>



"Note" means the Adjustable  Rate  Promissory  Note of the Borrower of even date
herewith in the original  principal sum of $1,100,000.00,  payable to the Lender
and secured by the Security Agreement and the Mortgage.

"PBGC" means the Pension Benefit Guaranty  Corporation or any entity  succeeding
to all or any of its functions under ERISA.

"Permitted  Liens" as to the business  shall mean (a) liens securing the payment
of taxes,  assessments or other governmental charges or levies which are not yet
delinquent or which are being  contested in good faith and as to which  reserves
have been  established in accordance with GAAP; (b)  materialmen's,  mechanics',
carriers', workmen's,  repairmen's, or other like liens incurred in the ordinary
course of business  securing  obligations not yet due; (c) zoning  restrictions,
easements,  licenses,  restrictions  on  the  use  of  Real  Property  or  minor
irregularities in title thereto, which do not materially impair, alone or in the
aggregate,  the use of the  property  affected  thereby in the  operation of the
Business  or the value of such  property  for the purpose of the  Business;  (d)
workers'  compensation,  Social Security or unemployment  compensation liens for
amounts not yet due; (e) liens in favors of holders of  additional  Indebtedness
incurred  pursuant  to  Section  3.5(A)  hereof;  and  (f) and  contractual  and
statutory liens in favor of landlords and lessors.

"Person"  shall mean a corporation,  an  association,  a partnership,  a limited
liability  company, a joint venture,  a trust, an organization,  a business,  an
individual, a government or political subdivision thereof, a governmental agency
or any other legal entity.

"Plan" means any employee benefit plan established or maintained by the Borrower
or any ERISA Affiliate and which is covered by Title IV of ERISA.

"Prohibited  Transaction"  means any transaction set forth in Section 406 or 407
of ERISA or  Section  4975(c)(1)  of the Code for which  there  does not exist a
statutory or administrative exemption.

"RBS/USDA" means the Rural Business-Cooperative Service, an agency of the United
States  Department of  Agriculture,  and any successor  department,  agency,  or
instrumentality  authorized to administer the Business and Industrial Guaranteed
Loan Program.

"RBS/USDA Guaranty" shall be given the meaning set forth in the recitals above.

                                        5


<PAGE>



"Real  Property"  shall mean all real  property,  buildings and fixtures  owned,
leased or used by a Person.

"Reportable  Event"  means any of the events set forth in Section  4043 of ERISA
for which the 30-day notice requirement has not been waived by the PBGC.

"Security  Agreement" means the Security  Agreement  executed by the Borrower in
favor of the Lender as of the date hereof.

"Subsidiary"  shall  mean any  corporation,  association,  partnership,  limited
liability company, joint venture or other business entity of which more than 50%
of the outstanding voting stock (or equivalent interest) is at the time owned by
the Borrower or by one or more  Subsidiaries  or by the Borrower and one or more
Subsidiaries.

"Tax"  means any  federal,  state,  or local tax,  assessment,  or charge of any
nature whatsoever,  including,  without limitation, (i) income, franchise, sales
and use, unemployment compensation, excise, severance, property, gross receipts,
profits,  and payroll  taxes,  and (ii) any  penalties,  additions,  fines,  and
interest assessed on or related to any of the foregoing.

"Transactions" means the transactions contemplated by this Agreement.

                                    ARTICLE 2

                                    THE LOAN

2.1 Amount and Term of Loan. The amount of the Loan shall be $1,100,000.00  (the
"Loan Amount"),  and the Loan Amount shall be amortized over a period of fifteen
(15) years with monthly  installments  of principal  and interest in  accordance
with the terms of the Note.

2.2 Interest Rate. The Loan Amount shall bear interest as provided in the Note.

2.3 Loan Disbursement. The closing (the "Closing") of the Transactions is taking
place at the offices of Parr Waddoups  Brown Gee & Loveless on April ____,  1999
(the  "Closing  Date").  At the  Closing,  the Lender will deliver the full Loan
Amount in United  States  money to the  Borrower  by wire  transfer  as  further
explained in the Wire Transfer Instructions and Receipt of Funds attached hereto
as Exhibit "2.3."

                                        6


<PAGE>



2.4  Prepayment  Premium.  The  principal  balance  of the Loan  may be  prepaid
according to the terms,  and subject to the prepayment  penalties,  set forth in
the Note.

2.5  Origination  Fee;  RBS/USDA  Guaranty Fee. The Origination Fee shall be two
percent  (2%) of the total Loan amount (in  addition to any fees due  RBS/USDA),
paid by the Borrower to the Lender at closing. In addition,  the Borrower agrees
to pay the RBS/USDA guarantee fee of two percent (2%) of eighty percent (80%) of
the total amount of the Loan.

2.6  Collateral/Security.  The collateral/security for the Loan shall consist of
the
following:

         A. A first  mortgage on the Borrower's  real property and  improvements
located at 3445 West Jones Avenue, Garden City, Kansas 67846 as described in the
appraisal  required by Section 5.12(i)  hereof.  Title to this property shall be
recorded in the Borrower's name.

         B. A first  priority  security  interest in the  Borrower's  machinery,
equipment, titled and untitled vehicles, furniture,  fixtures, deposits, and all
other tangible and intangible assets (including, without limitation, patents and
patent applications), as described in the appraisal required by Section 5.12(ii)
hereof, provided,  however, that the Borrower shall not grant the Lender a first
priority  interest in  inventory or accounts.  Title to this  property  shall be
recorded in the Borrower's name.

         C. Life  insurance  on Verne E.  Bray in  the  amount  of no less  than
$500,000,  and life  insurance  on  Jeffrey  Kirby in the amount of no less than
$500,000, as required by Section 4.2(c) hereof.

         D. A second priority security interest in the Borrower's  inventory and
accounts as described in the appraisal required by Section 5.12(ii) hereof.

         E. Absolute and  unconditional  guarantee of payment and performance of
Verne E. Bray and Beverly Bray, according to the terms of the Guaranty.

         F. A first priority security interest in the deposit and escrow account
established and maintained pursuant to the Deposit and Escrow Agreement.

2.7. Escrow  Fund.   At the option of the  Lender,  the Lender may  require  the
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations  for the  payment  of taxes,  insurance  premiums,  and  maintenance
pursuant to this Agreement.  (The initial deposits  together with the amounts in

                                        7


<PAGE>


(a), (b), and (c) below shall be called the "Escrow Fund"). Initial deposits for
taxes,  premiums, and maintenance shall be made by the Borrower to the Lender in
amounts determined by the Lender in its discretion on the date hereof to be held
in the Lender's Escrow Fund. Additionally,  the Borrower shall pay to the Lender
on the first day of each  calendar  month:  (a)  one-twelfth  of an amount which
would be sufficient to pay the taxes  payable,  or estimated by the Lender to be
payable,  upon the due dates  established by the  appropriate  taxing  authority
during the ensuing twelve (12) months;  (b) one-twelfth of an amount which would
be sufficient to pay the insurance  premiums due for the renewal of the coverage
afforded by the policies upon the expiration thereof;  and (c) one-twelfth of an
amount which would be sufficient to pay all costs  associated  with  maintenance
and upkeep of buildings,  grounds, equipment, and all other property which needs
to be maintained in the ordinary course of business ("CAM"). The Borrower agrees
to notify the Lender immediately of any changes to the amounts,  schedules,  and
instructions for payment of taxes,  insurance premiums,  and CAM of which it has
obtained  knowledge and  authorized  the Lender or its agent to obtain the bills
for taxes and other charges directly from the appropriate taxing authority.  The
Escrow Fund and the payments of interest or principal, or both, payable pursuant
to the Note, shall be added together;  and shall be paid as the aggregate sum by
the Borrower to the Lender.  Provided there are sufficient amounts in the Escrow
Fund and no Event of Default  exists,  the Lender  shall be  obligated to pay on
behalf of the Borrower the taxes, insurance premiums, and CAM as they become due
on their  respective  due dates by applying  the Escrow Fund to the  payments of
such taxes,  insurance  premiums,  and CAM  required to be made by the  Borrower
pursuant to this  Agreement.  If the amount of the Escrow Fund shall  exceed the
amounts due for taxes, insurance, and CAM pursuant to this Agreement, the Lender
shall, at its  discretion,  return any excess against future payments to be made
to the Escrow Fund.  In  allocating  such  excess,  the Lender may deal with the
persons shown on the records of the Lender to be the owner of the  property.  If
the Escrow Fund is not  sufficient  to pay the items set forth in (a),  (b), and
(c) above,  the  Borrower  shall  promptly pay to the Lender,  upon  demand,  an
amount,  which the Lender shall reasonably estimate as sufficient to make up the
deficiency.  The  Escrow  Fund  shall  not  constitute  a trust  fund and may be
commingled with other monies held by the Lender.  Unless  otherwise  required by
applicable  law, no earnings  or  interest,  if any, on the Escrow Fund shall be
payable to the Borrower. Lender may elect to appoint a third party to perform on
Lender's behalf the tasks  associated with managing the Escrow Fund as described
in this  Section  2.7, in which case  Borrower  agrees to pay the costs for such
third party.  In the event the Lender does not  establish  an Escrow  Fund,  the
Borrower shall make all required  payments  herein  described in a timely manner
and shall provide evidence thereof as required by the Lender.

                                        8


<PAGE>



                                    ARTICLE 3

                               FINANCIAL COVENANTS

3.1  Financial Statements. A current financial statement from the Borrower, less
than  sixty  (60)  days old,  is  required  at the  Closing.  An annual  audited
financial  statement  prepared  on  an  accrual  basis  by  a  Certified  Public
Accountant  in  accordance  with GAAP is required  from the Borrower and will be
forwarded  to the  Lender  within  ninety  (90)  days of the  Borrower's  fiscal
year-end.  Quarterly in-house financial statements for the Borrower also must be
submitted to the Lender  within  forty-five  (45) days of the end of each fiscal
quarter,  and such  additional  financial  statements as may be requested by the
Lender shall be submitted in a timely manner in a form acceptable to the Lender.
The Borrower must submit to Lender year-end federal and state tax returns within
ninety (90) days of each fiscal year end. The Borrower must submit to the Lender
a copy of each Form 10K and Form 10Q  concurrently  with the filing of such form
with the Securities and Exchange Commission.

3.2  Certificate of No Default. Concurrently  with delivery to the Lender of any
financial  statement  prepared  pursuant to Section  3.1  (except the  financial
statement delivered at the Closing), a completed  compliance  certificate of the
president  or chief  financial  officer of the  Borrower  in the form of Exhibit
"3.2" shall be  delivered to the Lender,  certifying  (i)  compliance  with each
financial  covenant in Article 3 hereof, and (ii) that to the best of his or her
knowledge no default or Event of Default has occurred and is continuing, or if a
default or Event of Default has  occurred and is  continuing,  a statement as to
the nature thereof and the action proposed to be taken with respect thereto.

3.3  Dividends. The Borrower shall not, during the life of the Loan,  declare or
pay a cash  dividend  unless a profit was made in the  fiscal  year prior to the
year in which the dividend is being declared, all debts are paid current and all
Loan  covenants  and  ratios  are being met and will  continue  to be met on the
annual  statement,  and such payment  would not result in a reduction of capital
below the prior fiscal year end level (determined in accordance with GAAP) after
the dividends are paid.  Authorized  dividend  payments may not reduce  retained
earnings  below  the  amount  reflected  on the  year-end  balance  sheet of the
immediately  preceding  fiscal year. If the Borrower  operates as a Subchapter S
corporation,  dividends  may be  distributed  to the  owners to pay taxes on its
profits.

                                        9


<PAGE>



3.4      Compensation of Officers and Owners.

         A. No advances or loans from the  Borrower  are to be made to officers,
owners,  affiliates  or others  during the life of the Loan  without the written
approval of the Lender and RBS/USDA.

         B. Salaries,  compensation,  and/or  payments to officers and/or owners
will not be increased unless a profit was made in the preceding fiscal year, all
of the  Borrower's  debts are paid to a current  status and the  Borrower  is in
compliance with all covenants of this Agreement,  including without  limitation,
the  financial  covenants  and ratios  (calculated  after  giving  effect to the
contemplated increases or payments).

3.5      Fixed Asset Limitation; Sale of Assets.

         A. The Borrower may incur up to $150,000 per calendar  year for Capital
Expenditures,  including through the incurrence of additional  Indebtedness,  if
the financial  ratios of Article 3 would be met after  incurring such expense or
such indebtedness. All such purchases are to be added to the collateral for this
Loan under the  after-acquired  clause and specifically  described as collateral
when the Security Agreement is updated.

         B. Other than in the ordinary  course of business,  the Borrower  shall
not sell, transfer or assign any of its assets,  including,  without limitation,
any  collateral for the Loan,  without the prior written  consent of the Lender,
which consent may be withheld in its sole discretion.

3.6  Consolidations,  Mergers,  Sale of Business.  The Borrower  will not merge,
consolidate, reclassify or sell the business or any of its capital stock without
the prior  written  approval of the Lender and  RBS/USDA.  The Borrower will not
purchase  any  Treasury  stock  or  redeem  any of its  capital  stock  from any
shareholders  without  the  written  approval  of the Lender and  RBS/USDA.  The
Borrower  shall make no  investments  outside of the day to day operation of the
business.

3.7      Additional Debt.

         A. Except as  provided  in Section  3.5,  the  Borrower  will not incur
additional  Indebtedness  other than in the ordinary  course of business and due
within one year,  nor assume the  liabilities or obligations of any other person
or entity, without the prior written consent of the Lender and RBS/USDA.

                                       10


<PAGE>



         B. Borrower  will not incur  additional  borrowing for working  capital
purposes that will reduce the current ratio below 1 to 1 or increase the debt to
net worth ratio above 3 to 1.

         C. The parties  acknowledge and agree that the Lender shall not advance
to the Borrower any  additional  funds beyond the Loan Amount  without the prior
written consent of RBS/USDA.

3.8      Debt to Equity and Other Financial Ratios.

         A. The Borrower will maintain a debt-to-equity ratio of not more than 3
to 1, as shown on the annual  audited  financial  statement and defined as total
debt divided by tangible  net worth plus  subordinated  debt,  at the end of the
Borrower's fiscal year.

         B. Any and all  Indebtedness to stockholders now or hereafter made will
be subordinate to the Loan.

         C. The Borrower will maintain a debt service coverage ratio of not less
than 1.2 to 1 as shown on the annual audited statement financial statement.

         D. The Borrower will maintain a current ratio  (current  assets divided
by current liabilities) of not less than 1 to 1 and shall maintain a net working
capital  position of at least $10,000 as shown on the annual  audited  financial
statement.

         E. The  Borrower  shall  maintain  a  1  to  1  loan  to   value  ratio
(outstanding  loan balance  divided by  collateral  for loan),  with  collateral
discounted pursuant to RBS/USDA Form 4279-1, Part B.

         F. The annual  audited  financial  statement  required  by Section  3.1
hereof shall include a calculation of each financial ratio of this Article 3 and
a certification that the Borrower is in compliance with each such ratio.

3.9  Equity.  At the  Closing,  the  Borrower  will  provide  the Lender  with a
certification  from an  independent  public  accountant  that the Borrower has a
tangible  balance sheet equity  position of a minimum of ten percent (10%).  The
certification  shall  detail  the  sources  that  constitute  such  equity.  The
certification  will  also be  supported  by a pro  forma  balance  sheet  of the
Company,  reconciled  to the most recent  balance  sheet of the Company  (not to
exceed 90 days old), and dated as of the date hereof.

                                       11


<PAGE>



                                    ARTICLE 4

                                 OTHER COVENANTS

4.1  Use of the Loan  Proceeds. The  proceeds  of the Loan shall be  utilized as
follows:

         Restructure Debt                                        $   925,000
         Working Capital (including transaction costs)               175,000
                                                                 ===========
         Total                                                   $ 1,100,000

4.2  Insurance. The Borrower shall obtain and maintain all required insurance at
its own  expense,  except as  modified by Section  2.7 at the  Lender's  option.
Grantor  shall  provide the Lender with  originals  or  certified  copies of all
required insurance policies (including, without limitation,  renewals thereof or
replacements  thereto),  with copies of all renewal notices and, if requested by
the Lender, with copies of receipts for paid premiums.  Required insurance shall
include, but not be limited to, the following:

         A. The Borrower shall maintain a policy of general liability  insurance
of not less than one million and 00/100  dollars  ($1,000,000)  designating  the
Lender as an  additional  insured  party,  placed with an  insurance  company or
companies acceptable to the Lender.  Further, the Borrower shall maintain hazard
insurance  and general  liability  insurance  during the entire term of the Loan
with a standard  mortgage  clause naming the Lender as  beneficiary in an amount
which is at least the lesser, with the Lender reserving the right to require the
greater of such, of the  depreciated  replacement  value of the Loan security or
the  amount  of the Loan  balance  and that  must  contain  a  replacement  cost
guarantee.   Hazard  insurance  includes  fire,  windstorm,   lightning,   hail,
explosion,  riot, civil commotion,  aircraft,  vehicle, marine, smoke, builder's
risk,  public  liability,  property damage,  flood or mudslide,  or other hazard
insurance  that may be  required  to  protect  the  collateral,  placed  with an
insurance  company or companies  acceptable  to the Lender.  The Borrower  shall
maintain  flood  insurance  if the  collateral  property  is  located in an area
designated as an area for special hazards under the National Flood Insurance Act
of 1968. The flood  insurance must be in an amount equal to at least 100% of the
value  of the  insured  improvements  of  the  collateral  property.  All of the
foregoing insurance policies shall be in form and substance  satisfactory to the
Lender and must name the Lender as a loss payee.

         B. The  Borrower  shall  maintain  Worker's  Compensation  Insurance as
required by applicable law with respect to each of Borrower's places of business
during the period of time the Loan is unpaid,  placed with an insurance  company
or companies acceptable to the Lender.

                                       12


<PAGE>



         C. The Borrower shall maintain,  with an insurance company or companies
acceptable to the Lender,  key man life insurance  policies on Verne E. Bray and
Jeffrey  Kirby in the amount of $500,000 each for the period the Loan is unpaid,
and such policies of insurance shall name the Lender as the loss Payee.

4.3  Inspections.  The Borrower will permit the Lender and RBS/USDA to visit and
inspect any of the collateral  securing the Loan, to conduct a periodic audit of
the number of jobs to determine program  effectiveness,  and access to company's
books and records for  periodic  examination.  The Lender  reserves the right to
conduct audits on an as- needed basis, as determined solely by the Lender.

4.4  Change of Control.  The Borrower will not undergo a Change of Control.

4.5  Legal Existence;  Compliance with Laws, etc. The Borrower will:(a) maintain
its  corporate  existence and business;  (b) maintain all  properties  which are
reasonably  necessary for the conduct of such business,  now or hereafter owned,
in  reasonable  repair,  working order and  condition;  and (c) take all actions
necessary  to  maintain  and  keep in full  force  and  effect  all  rights  and
franchises  reasonable  for the  operation of the Business;  and,  comply in all
material  respects  with all  applicable  Laws in respect of the  conduct of the
Business and the ownership of the Assets;  provided that the Borrower  shall not
be required by reason of this subsection to comply  therewith at any time if the
Borrower  shall  be  contesting  its  obligations  to  do so in  good  faith  by
appropriate  proceedings  timely initiated and diligently  conducted,  and if it
shall have set aside on its books such reserves, if any, with respect thereto as
are required by GAAP and deemed  adequate by the  Borrower  and its  independent
public accountants.

4.6  Environmental Liabilities. The Borrower shall not violate any Law regarding
Hazardous Substances; and, without limiting the foregoing, the Borrower will not
dispose of any Hazardous  Substance into or onto, or (except in accordance  with
Law) from,  any Real  Property  owned,  leased or operated by the Borrower or in
which the  Borrower  holds,  directly  or  indirectly,  any legal or  beneficial
interest or estate,  nor allow any Lien imposed  pursuant to any Law relating to
Hazardous  Materials or the disposal  thereof to be imposed or to remain on such
Real  Property,  except for Liens being  contested in good faith by  appropriate
proceedings and for which adequate  reserves have been established and are being
maintained on the books of the Borrower.

4.7  Compliance with ERISA. The Borrower will make all payments or contributions
to employee  benefit  plans  required  under the terms thereof and in accordance
with  applicable  minimum  funding  requirements  of  ERISA  and  the  Code  and
applicable  collective  bargaining  agreements.  The  Borrower  will  cause  all
employee  benefit plans sponsored by it to be maintained in material  compliance

                                       13


<PAGE>


with  ERISA  and the  Code.  The  Borrower  will not  engage  in any  prohibited
transaction  for which an exemption  is not  available.  The  Borrower  will not
terminate, or cause to be terminated, any employee benefit plan or withdraw from
any multi-employer  plan, in any manner which could result in material liability
of the Borrower.

4.8  Mortgages,  Liens,  etc. The Borrower  shall not,  directly or  indirectly,
create,  incur, assume or suffer to exist any Lien with respect to any Asset now
owned or hereafter acquired by the Borrower, except:

                  (a)      Liens set forth on Schedule "4.8" hereof  ("Permitted
Senior Indebtedness");

                  (b)      Any Lien securing the Notes;

                  (c)      Any Liens permitted by Section 3.7.

4.9  Creation and  Acquisition of  Subsidiaries. The Borrower will not create or
acquire any  Subsidiaries  except for wholly owned  Subsidiaries  created in the
ordinary  course of business.  Each new Subsidiary will be required to execute a
Joinder  Agreement in the form of Exhibit  "4.9" hereto making it a party to the
Security   Agreement  and  the  Mortgage  and  a  guarantor  of  the  Borrower's
obligations  under  this  Agreement  and the  other  Loan  Documents.  Each  new
Subsidiary  will also be required to grant a security  interest in its assets as
collateral for the Loan. The Borrower will ensure that any and all  subsidiaries
execute the documents necessary to comply with this Section 4.9.

4.10 Lease  Obligations.  The Borrower shall not enter into, or become liable as
lessee under, any new Lease Obligations.

4.11 Payment of Taxes.  The  Borrower  will pay and  discharge  promptly as they
become due and payable,  subject to extension,  all Taxes, assessments and other
governmental  charges or levies imposed upon it or its income or upon any of its
Assets,  or upon any part  thereof,  as well as all  lawful  claims  of any kind
(including claims for labor,  materials and supplies) which, if unpaid, might by
law become a Lien (other than a Permitted  Lien) or a charge upon its  property;
provided  that Borrower  shall not be required to pay any such Tax,  assessment,
charge,  levy or claim if the amount,  applicability  or validity  thereof shall
currently be contested in good faith by appropriate proceedings timely initiated
and  diligently  conducted and if the Borrower shall have set aside on its books
such reserves,  if any, with respect  thereto as are required by GAAP and deemed
appropriate by the Borrower and its independent public accountants.

                                       14


<PAGE>



4.12 Payment of Other Indebtedness, etc. Except as to matters being contested in
good faith and by  appropriate  proceedings,  the Borrower  will, and will cause
each Subsidiary to, pay promptly when due all other Indebtedness.

4.13 Loan, Guarantees and Investments. The Borrower shall not (i) make or permit
to remain  outstanding  any loan or advance to any  Person,  (ii)  guarantee  or
endorse (except as a result of endorsing  negotiable  instruments for deposit or
collection  in the ordinary  course of  business) or otherwise  assume or remain
liable with respect to any  obligation  of any Person,  or (iii) make or own any
investment in, or acquire (except in the ordinary course of business) the assets
of, any Person, except:

                  (a)      Extensions  of trade  credit by the  Borrower  in the
ordinary course of business in accordance with customary trade practices;

                  (b)      Cash  or  short-term  liquid  investments   generally
regarded as cash;

                  (c)      Marketable direct obligations of the United States of
America or any department or agency thereof maturing not more than one year from
the date of issuance thereof;

                  (d)      Certificates of deposit, repurchase agreements, money
market deposits or other similar types of investments maturing not more than one
year from the date of acquisition  thereof and evidencing direct  obligations of
any bank within the United States of America; and

                  (e)      Capital  Expenditures  to  the  extent  permitted  by
Section 3.5.

4.14 Compliance  with Year 2000.  The Borrower shall perform all acts reasonably
necessary  to ensure  that the  Borrower  and any  Subsidiary  become  Year 2000
Compliant  in a timely  manner.  Such acts shall  include,  without  limitation,
performing  a  comprehensive  review  and  assessment  of all of the  Borrower's
systems and adopting a detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. As used in this Section 4.14, "Year 2000
Compliant"  shall mean, in regard to any entity,  that all  software,  hardware,
firmware,  equipment,  goods or systems  utilized by or material to the business
operations or financial  condition of such entity,  will  properly  perform date
sensitive functions before,  during and after the year 2000. The Borrower shall,
immediately  upon  request,  provide  to  Lender  such  certifications  or other
evidence of the  Borrower's  compliance  with the terms of this  Section 4.14 as
Lender may from time to time reasonably require.

                                       15


<PAGE>



4.15 Further Assurances.  From time to time hereafter, the Borrower will execute
and  deliver,  or will  cause to be  executed  and  delivered,  such  additional
instruments,  certificates or documents,  and will take all such actions, as the
Lender may reasonably request,  for the purposes of implementing or effectuating
the  provisions  of the Loan  Documents.  Upon the exercise by the Lender of any
power, right,  privilege or remedy pursuant to this Agreement and the other Loan
Documents which requires any consent, approval,  registration,  qualification or
authorization of any  governmental  authority or  instrumentality,  the Borrower
will  execute and  deliver,  or will cause the  execution  and  delivery of, all
applications,  certifications,  instruments  and other documents and papers that
the Lender may be  required to obtain from the  Borrower  for such  governmental
consent, approval, registration, qualification or authorization.

                                    ARTICLE 5

                              CONDITIONS TO CLOSING

         The  obligation  of the  Lender  to make  the  Loan is  subject  to the
following conditions precedent:

5.1      Government  Guarantee.  The Lender  shall have  received  the  RBS/USDA
Guaranty in a form satisfactory to the Lender.

5.2      The Note.  The Lender  shall have  received the Note,  duly  completed,
executed, and delivered by the Borrower in the form of Exhibit "5.2" hereto.

5.3      The  Guaranty.  The  Lender  shall have  received  the  Guaranty,  duly
completed, executed, and delivered by Verne E. Bray and Beverly Bray in the form
of Exhibit "5.3" hereto.

5.4      The Security  Agreement.  The Lender  shall have  received the Security
Agreement duly completed, executed, and delivered by the Borrower in the form of
Exhibit "5.4" hereto.

5.5      Opinion of the Borrower's  Counsel.  The Lender shall have received the
legal opinions of Hillyard,  Anderson & Olsen,  Weintraub Genshlea & Sproul, and
Calihan, Brown, Burgardt,  Wurst & Daniel, dated as of the Closing Date and duly
executed,  completed,  and delivered in the form of Exhibits  "5.5(a)," "5.5(b)"
and "5.5(c)" hereto.

5.6      No Change.  No material adverse change shall have occurred with respect
to the financial condition of Verne E. Bray or Beverly Bray.


                                       16


<PAGE>



5.7      Third-Party Consents. The Lender shall have received the consents (and,
if  necessary,  waivers  of  defaults)  of any  third-parties  required  for the
Borrower to consumate the transactions contemplated by this Agreement.

5.8      Corporate  Authorization.  The Lender shall have received any corporate
documents and resolutions  necessary to authorize the execution,  delivery,  and
performance by the Borrower of the Loan Documents to which the Borrower is or is
to be a party.

5.9      Environmental  Report. The Lender shall have received from the Borrower
a certified  environmental  report  regarding  the Real Property of the Borrower
prepared  in  accordance  with  "Standard   Practices  for  Environmental   Site
Assessments  :  Transaction  Screen  Questionnaire"  and "Phase I  Environmental
Assessment," both published by the American Society of Testing and Materials.

5.10     Change of Control.  No Change in Control shall have occurred.

5.11     Insurance.  The Borrower  shall have  obtained the  insurance  policies
required by Section 4.2 hereof, and made proof of the same to Lender.

5.12     Appraisal.  Lender shall have received (i) a certified appraisal of the
Real  Property  of Borrower  meeting the  requirements  of  Instruction  4279-B,
published by United States  Department of Agriculture  Rural  Development and in
form  and  substance  satisfactory  to  Lender,  and (ii) an  itemized  list and
valuation  of  all  other   collateral  for  the  Loan  in  form  and  substance
satisfactory to Lender.

5.13     Survey.  Lender  shall  have  received  a  current  survey  of the Real
Property in form  acceptable to Lender and prepared by a surveyor  acceptable to
Lender.

5.14     Title Insurance.  Lender shall have received a title policy in favor of
Lender issued by an underwriter  acceptable to Lender,  (i) showing  Borrower to
own fee simple title in its Real Property, (ii) insuring the Mortgage as a first
lien on the Borrower's  Real  Property,  and (iii) not containing any exceptions
other than those approved in writing by Lender.

5.15     Flood Hazard Determination. Lender shall have received a duly completed
Form 81-93, "Standard Flood Hazard Determination," published by the Federal
Emergency Management Administration.

5.16     Mortgage.  The Lender shall have received the Mortgage duly  completed,
executed, and delivered by the Borrower in the form of Exhibit "5.16" hereto.

                                       17


<PAGE>



5.17     The Deposit and Escrow  Account.  The Lender  shall have  received  the
Deposit and Escrow  Agreement  duly  completed,  executed  and  delivered by the
Borrower in the form of Exhibit "5.17" hereto.


                                    ARTICLE 6

                 REPRESENTATIONS AND WARRANTIES OF THE BORROWER

         The   Borrower   represents   and   warrants  to  the   Lender,   which
representations  and warranties  shall survive the Closing and the execution and
delivery of this Agreement, that:

6.1      Incorporation,  Good Standing, and Due Qualification. The Borrower is a
corporation duly  incorporated,  validly  existing,  and having an active status
under the laws of the State of Utah;  has the  corporate  power and authority to
own its  assets  and to  transact  the  business  in which it is now  engaged or
proposed to be engaged;  and is duly qualified as a foreign  corporation  and in
good  standing  under  the  Laws  of  each  other  jurisdiction  in  which  such
qualification is required, if any.

6.2      Corporate Power and Authority. The execution, delivery, and performance
by the  Borrower  of the Loan  Documents  to which it is a party  have been duly
authorized by all necessary corporate action and do not and will not (1) require
any consent or  approval  of its  stockholders;  (2)  contravene  its charter or
bylaws;  (3) violate any  provision  of any law,  rule,  regulation  (including,
without  limitation,  Regulation  U of the  Board of  Governors  of the  Federal
Reserve System), order, writ, judgment,  injunction,  decree, determination,  or
award presently in effect having applicability to the Borrower;  (4) result in a
breach  of or  constitute  a  default  under  any  indenture  or loan or  credit
agreement or any other agreement,  lease, or instrument to which the Borrower is
a party or by which it or its properties may be bound or affected; (5) result in
or require the creation or imposition of any lien upon or with respect to any of
the  properties now owned or hereafter  acquired by the Borrower;  and (6) cause
the Borrower to be in default under any such law, rule, regulation,  order writ,
judgment,  injunction,  decree,  determination,  or award or any such indenture,
agreement, lease, or instrument.

6.3      Capitalization.  The authorized  capital stock of the Borrower consists
solely of 10,000,000 shares of common stock, par value $.01, 2,147,102 shares of
which are issued and outstanding,  and 330,000 shares of 7% cumulative preferred
stock, par value $3.00,  165,412 of which are issued and  outstanding.  Schedule
"6.3"  sets  forth the  record and  beneficial  ownership  of the fully  diluted
outstanding  common stock of the Borrower held by Verne E. Bray.  Except for the

                                       18


<PAGE>


common stock and the preferred stock,  there are no other authorized  classes or
series of capital stock of the Borrower.  All outstanding shares of common stock
and preferred stock of each of the Borrower are duly authorized, validly issued,
fully paid, and nonassessable and have been offered, issued, sold, and delivered
by the Borrower in compliance with applicable securities laws. Other than as set
forth on Schedule "6.3," there are no preemptive rights, rights of first refusal
or similar  rights with respect to the capital stock of the Borrower.  Except as
set forth on Schedule  "6.3," there are no outstanding  subscriptions,  options,
warrants,  rights,  or other  arrangements  or  commitments,  whether express or
implied,  obligating  the  Borrower  to issue  any  shares  of  common  stock or
securities  exchangeable  for or convertible  into common stock.  Except for the
Articles of  Incorporation  and Bylaws of the Borrower  and the Loan  Documents,
there are no outstanding  agreements or documents binding on the Borrower or its
shareholders regarding the transfer, voting, pledge, optioning or gifting of any
capital stock of the Borrower.  If there are any  preemptive  rights,  rights of
first  refusal,  or similar  rights  with  respect to the  capital  stock of the
Borrower,  the Borrower has complied with all applicable corporate and statutory
procedures  and  requirements  relating  to  such  rights  (including,   without
limitation,  procedures for giving the holders of such rights the opportunity to
exercise such rights).

6.4      Brokerage  Fees.  Except as set forth on  Schedule  "6.4"  there are no
claims for investment  bankers' fees,  brokerage  commissions,  finders' fees or
similar   compensation  in  connection  with  the  Transactions   based  on  any
arrangement or agreement made by or on behalf of the Borrower.

6.5      Environmental  Compliance.  Except as set forth on Schedule "6.5" there
has been no Hazardous Discharge or generation, treatment, storage or disposal of
any Hazardous  Substance by the Borrower or any other Person  resulting from the
operations  of the Business or the  ownership or use of the Assets,  in a manner
which violates any applicable Environmental Law. Except as set forth on Schedule
"6.5"  there are no  Environmental  Complaints  now  pending to or  against  the
Borrower or any other Person  resulting  from the  operations of the Business or
the  ownership  or  use of the  Assets,  and,  to  the  best  of the  Borrower's
knowledge,   there  is  no  reasonable   basis  for  believing   that  any  such
Environmental  Complaint  may be  asserted  against  the  Borrower  or any other
persons with respect to the Borrower's operations. Schedule "6.5" lists, for the
entire  period  of  operations  of  the  Borrower,  any  and  all  Environmental
Complaints  resulting from the Borrower's  operations or the ownership or use of
the  Assets  and the  disposition  of each such  Environmental  Complaint.  With
respect to each such pending or prior  Environmental  Complaint,  Schedule "6.5"
lists the date of the  Environmental  Complaint;  the claimant or  investigating
agency; the nature and a brief description of the matter; the damages claimed or
relief sought;  and the status or outcome of the matter. In addition,  except as

                                       19


<PAGE>


listed  on  Schedule  "6.5,"  the  Borrower  is  operating  and has at all times
previous hereto operated the Business in compliance with all Environmental Laws.

6.6      Other  Information.  All information  relating to the Borrower has been
disclosed  to Lender  which would  reasonably  be  material  to any  prospective
third-party investor in the Borrower.  In furtherance of the foregoing,  and not
in limitation thereof,  all information  furnished by the Borrower to the Lender
or its representatives in connection with the Loan Documents (including, without
limitation,  information  contained in the  Schedules  and  Exhibits  hereto and
thereto,  the  instruments  referred to in such  Exhibits and  Schedules and the
certificates and other documents to be executed or delivered  pursuant hereto or
thereto by the Borrower) is not, nor at the Closing will be, false or misleading
in any material  respect,  or  contains,  or at the Closing  will  contain,  any
misstatement  of material fact, or omits,  or at the Closing will omit, to state
any material fact required to be stated in order to make the statements  therein
not materially misleading.

6.7      Employee  Benefits  Matters.  The  Borrower is in  compliance  with all
applicable  provisions  of ERISA.  Neither a  Reportable  Event nor a Prohibited
Transaction  has occurred and is continuing  with respect to any Plan. No notice
of intent to terminate a Plan has been filed,  nor has any Plan been terminated.
No circumstances  exist which constitute grounds entitling the PBGC to institute
proceedings to terminate,  or appoint a trustee to  administer,  a Plan, nor has
the PBGC  instituted  any such  proceedings.  Neither the Borrower nor any ERISA
Affiliate has completely or partially  withdrawn from a Multiemployer  Plan. The
Borrower and each ERISA  Affiliate have met their minimum  funding  requirements
under ERISA with respect to all of their Plans.  The present value of all vested
benefits  under each Plan do not exceed the fair market value of all Plan assets
allocable to such benefits,  as determined on the most recent  valuation date of
the Plan and in  accordance  with  ERISA.  Neither  the  Borrower  nor any ERISA
Affiliate  has  incurred  any  liability  to the PBGC under  ERISA  (other  than
liability for the payment of PBGC premiums in the ordinary course of business).

6.8      Legally Enforceable Agreement.  This Agreement is and each of the other
Loan  Documents  to which the  Borrower is a party,  when  delivered  under this
Agreement,  will be  legal,  valid,  and  binding  obligations  of the  Borrower
enforceable  against the  Borrower in  accordance  with their  respective  terms
except  to the  extent  that  such  enforcement  may be  limited  by  applicable
bankruptcy,  insolvency,  and other  similar laws  affecting  creditor's  rights
generally and  principles of equity.  The Borrower  represents and warrants that
neither it or any  Guarantor is insolvent  or  contemplating  filing a voluntary
petition for bankruptcy  nor is the Borrower aware of any  possibility or threat
of being subject to any petition for involuntary bankruptcy.

                                       20


<PAGE>



6.9      Financial  Statements.  All financial  statements of the Borrower which
have been  furnished to the Lender are  complete and correct and fairly  present
the financial condition of the Borrower and the results of the operations of the
Borrower for the periods covered by such statements, all in accordance with GAAP
consistently  applied  to the  Borrower's  statements,  and  there  has  been no
Material  Adverse  Change.  There are no liabilities  of the Borrower,  fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto,  other than liabilities  arising in the ordinary course
of business of the Borrower. No information, exhibit, or report furnished by the
Borrower to the Lender in  connection  with the  negotiation  of this  Agreement
contains any material  misstatement of fact or omits to state a material fact or
any fact  necessary  to make the  statement  contained  therein  not  materially
misleading.

6.10     Other Agreements.  The Borrower is not a party to any indenture,  loan,
or credit  Agreement,  or, to the  Borrower's  knowledge,  to any lease or other
Agreement  or  instrument,  or subject to any charter or  corporate  restriction
which could have a material adverse effect on the business,  properties, assets,
operations,  or  conditions,  financial  or  otherwise,  of the  Borrower or the
ability of the Borrower to carry out its obligations under the Loan Documents to
which it is a party.  The Borrower is not in default in any material  respect in
the performance, observance, or fulfillment of any title obligations, covenants,
or conditions  contained in any Agreement or instrument material to its business
to which it is a party.

6.11     Litigation.  There  is no  pending  or,  to the  Borrower's  knowledge,
threatened  action or proceeding  against or affecting  the Borrower  before any
court,  governmental  agency or arbitrator  which may, in any one case or in the
aggregate,  materially  adversely  affect the financial  condition,  operations,
properties,  or  business  of the  Borrower  or the  ability of the  Borrower to
perform its obligation under the Loan Documents to which it is a party.

6.12     No  Defaults on  Outstanding  Judgments  or Orders.  The  Borrower  has
satisfied all judgments,  and the Borrower is not in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator,
or federal,  state,  municipal,  or other  governmental  authority,  commission,
board, bureau, agency or instrumentality, domestic or foreign.

6.13     Operation  of Business.  To the best of the  Borrower's  knowledge,  it
possesses all licenses, permits, franchises, patents, copyrights, trademarks and
trade names, or rights  thereto,  to conduct its business  substantially  as now
conducted and as presently proposed to be conducted,  is not in violation of any
valid  rights  of  others  with  respect  to  any of  the  foregoing,  and is in
compliance  with all  rules  and  regulations  regarding  the  operation  of its
business.

                                       21


<PAGE>



6.14     Taxes.  The  Borrower  has filed all Tax  returns  (federal,  state and
local) required to be filed and has paid all Taxes which are due.

6.15     Adverse Change.  The Borrower certifies that by accepting the Loan, the
Borrower  understands that the intent of RBS/USDA  Instruction  4279-B,  Section
4279.181(m),  is that no adverse  change has occurred  during the period of time
from  RBS/USDA's  issuance  of the  Conditional  Commitment  to  issuance of the
RBS/USDA Guaranty relating to the Borrower, regardless of the cause or causes of
the change and  whether  the change or  cause(s)  of the change  were within the
Borrower's control.

Upon the issuance of the RBS/USDA Guaranty, the Borrower must certify that there
have been no unremedied adverse changes since the date of the application in the
financial or other  condition of the Borrower which warranty  withholding or not
making the Loan.  Therefore,  the Borrower does hereby  represent and warrant to
the Lender that there have been no adverse changes since the date of its initial
loan application in its financial condition.

6.16     Subsidiaries. The Borrower does not own, directly or indirectly, any of
the  capital  stock  of  any  other  company  or  any  equity,  profit  sharing,
participation or other interest in any other entity.

6.17     Patents,  Trademarks  and  Licenses.  Schedule  "6.17"  sets  forth all
patents,  patents pending,  inventions  (whether or not patentable),  trademarks
(registered and  unregistered),  service marks  (registered  and  unregistered),
trade  names  (registered  and   unregistered),   brand  names  (registered  and
unregistered) or copyrights  (registered and unregistered),  owned or used by or
licensed to or by the  Business,  together with a summary  description  and full
information  in respect of the  filing,  registration  or issuance or the status
thereof.  All of such patents,  inventions,  trademarks,  service  marks,  trade
names, brand names, copyrights,  pending applications and licenses are valid and
in  good  standing  and  will  not  be  materially  adversely  affected  by  the
Transactions;  no patent  application or patent used in the Business is involved
in any interference proceeding,  and no trademark,  service mark, trade name, or
brand name, whether or not registered, nor any application therefor, is involved
in  any  opposition  or  cancellation  proceeding.  No  licenses,   sublicenses,
covenants  or  agreements  have been  granted or entered into by the Borrower in
respect of such patents,  inventions,  trademarks,  service marks,  trade names,
brand names,  copyrights,  applications  or licenses,  except those described on
Schedule  "6.17." The Borrower  validly owns, is validly  licensed under, or has
legal right to use all patents, patent applications,  trademarks, service marks,
trade names, brand names,  inventions,  processes,  know-how,  trade secrets and
copyrights which are necessary for the conduct of the Business as now conducted,
and all such rights are  valid and in good  standing,  and free and clear of all

                                       22


<PAGE>



Liens and have not been  challenged in any way or involved in any  interference,
opposition  or  cancellation  proceedings.  With respect to the Business and the
operations  of the  Borrower  and  the use or  publication  by the  Borrower  in
connection with its patents, trademarks, service marks, trade names, brand names
and advertising,  technical or other  literature do not involve  infringement or
claim  infringement  of any  patent,  trademark,  service  mark,  trade  name or
copyright.  Except  as set  forth  on  Schedule  "6.17"  no  director,  officer,
employee,  consultant or Affiliate of the Borrower owns, directly or indirectly,
in whole or in part, any inventions or patents, trademarks, service marks, trade
names, brand names, or copyrights or applications therefor which the Business is
presently  using  or  which is  necessary  or  useful  for the  Business  as now
conducted  or has made any  invention  not  assigned  to the  Borrower  which is
necessary  or useful for the Business as now  conducted.  Except as set forth on
Schedule  "6.17," no officer,  director,  employee,  agent or  Affiliates of the
Borrower has entered  into any  agreement  regarding  know-how,  trade  secrets,
assignment of rights in inventions, or prohibition or restriction of competition
or  solicitation  of customers,  or any other similar  restrictive  agreement or
covenant  relating to the  Business,  whether  written or oral,  with any Person
other than the Borrower.

                                    ARTICLE 7

                                EVENTS OF DEFAULT

7.1      Events  of  Default.  The  occurrence  of one or more of the  following
events or existence of one or more of the following  conditions shall constitute
an Event of Default (each such occurrence or existence an "Event of Default"):

         A. The Borrower shall fail to perform or observe any term, covenant, or
agreement  contained in this Agreement,  and such failure is not cured within 30
days after written notice to the Borrower,  provided,  that no cure period shall
apply if such failure to perform is a breach pursuant to Section 7.1(B) hereof.

         B. The Borrower  shall  default in the payment of principal or interest
on the Note or any other fee, charge,  tax or other payment due under any of the
Loan Documents  (including,  without limitation,  premiums on insurance policies
required by this  Agreement)  when the same becomes due and payable,  whether on
maturity, acceleration, or otherwise.

         C. A  default  occurs  under  any  document   evidencing   Indebtedness
(including Indebtedness incurred after the date hereof) or any related document,
and is not cured or waived within the applicable grace period.

                                       23


<PAGE>



         D. Any representation or warranty made by the Borrower herein or in any
other Loan Document  shall prove to have been false or incorrect in any material
respect when made.

         E. The  Borrower  shall  (i)  discontinue  its  business,  (ii) make an
assignment  for the benefit of creditors,  (iii) fail generally to pay its debts
as such debts  become due,  (iv) apply for or consent to the  appointment  of or
taking  possession  by a  trustee,  receiver  or  liquidator  (or other  similar
official)  of the  Borrower  or any  substantial  part of the Assets or (v) take
action to dissolve or liquidate the Borrower.

         F. If,  within  sixty  (60) days  after the  commencement  against  the
Borrower  of a case  under the  federal  bankruptcy  laws,  as now or  hereafter
constituted, or any other applicable federal or state bankruptcy,  insolvency or
other similar law, (i) such case shall have been  consented to or shall not have
been dismissed or all orders or proceedings  thereunder affecting the operations
or the business of the Borrower stayed, or (ii) if the stay of any such order or
proceeding  shall  thereafter  be set aside or (iii) if within  sixty  (60) days
after the entry of a decree  appointing a trustee,  receiver or  liquidator  (or
other similar official ) of the Borrower or any substantial part of the property
of the Borrower, such appointment shall not have been vacated.

         G. An uninsured final judgment which, with other outstanding  uninsured
final judgments against the Borrower,  exceeds $50,000 shall be rendered against
the Borrower  unless such  judgment has been  appealed and an execution  thereof
stayed pending appeal or unless,  within sixty (60) days after the expiration of
any such stay, such judgment has been discharged,  or if any such judgment shall
not be discharged  forthwith upon the  commencement  of proceedings to foreclose
any Lien  which may  attach as  security  therefor  and before any of the Assets
shall have been seized in satisfaction thereof.

         H. A Material Adverse Change shall occur.

         I. A Change in Control shall occur.

         J. A  defined  Event  of  Default  shall  occur  under  any of the Loan
Documents.

7.2      Remedies Upon Default; Acceleration.  In case any one or more Events of
Default shall occur and be continuing:

         A. The  Lender,  at its sole  option and  discretion,  may  declare the
principal of and accrued  interest in respect of the Note to be immediately  due

                                       24


<PAGE>


and payable,  whereupon the principal of and accrued  interest in respect of the
Note  shall  become  immediately  due and  payable  without  notice of intent to
accelerate, notice of acceleration, presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrower; and

         B. The Lender  may  proceed to  protect  and  enforce  its rights by an
action at law, suit in equity or other appropriate  proceeding,  whether for the
specific  performance  of any  provision  contained  herein or in any other Loan
Document or for an injunction  against a violation of any of the terms hereof or
thereof,  or in aid of the exercise of any power granted hereby or thereby or by
law; and

         C. The Lender shall be entitled to any other remedy available at law or
under any of the Loan Documents.

                                    ARTICLE 8

                                  MISCELLANEOUS

8.1      Amendments, Etc. No amendment, modification,  termination, or waiver of
any  provision of any Loan Document to which the Borrower is a party nor consent
to any  departure by the Borrower  from any Loan Document to which it is a party
shall in any event be  effective  unless the same shall be in writing and signed
by the Lender and  RBS/USDA,  and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

8.2      Notices,  Etc. All notices and other communications  provided for under
this  Agreement  and under the other Loan  Documents  to which the Borrower is a
party   shall   be  in   writing   (including   telefacsimile   or   telegraphic
communications) and faxed, mailed, telegraphed, or delivered

If to the Borrower:

                  NACO Industries, Inc.
                  395 West 1400 North
                  Logan, UT  84341
                  Attention:  Verne E. Bray


                                       25


<PAGE>



If to the Lender:

                  WebBank Corporation
                  P.O. Box 1831
                  136 Heber Avenue, Ste. 209
                  Park City, UT  84060-1831
                  Attention:  Douglas L. Hesse

                                    and

                  Parr Waddoups Brown Gee & Loveless
                  185 South State Street, Ste. 1300
                  Salt Lake City, UT  84111
                  Attention:  Douglas C. Waddoups

or, as to each party, at such other address as shall be designated by such party
in a written  notice to the other party  complying as to delivery with the terms
of this Section 8.2. All such notices and  communications  shall, when mailed or
telegraphed,  be  effective  when  deposited  in the mails or  delivered  to the
telegraph company,  respectively,  addressed as aforesaid,  and when faxed, when
machine  confirmation of receipt is acquired,  except that notices to the Lender
pursuant to the provisions of Article 3 shall not be effective until received by
the Lender.

8.3      No Waiver;  Remedies.  No failure on the part of the Lender to exercise
and no delay in exercising any right,  power,  or remedy under any Loan Document
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any rights  under any Loan  Documents  preclude  any other or  further  exercise
thereof of any other right.  The  remedies  provided in the Loan  Documents  are
cumulative and not exclusive of any remedies provided by law.

8.4      Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the  Borrower and the Lender and their  respective  successors
and  assigns,  except that the  Borrower  may not assign or transfer  any of its
rights  under any Loan  Document to which the  Borrower  is a party  without the
prior written consent of the Lender and RBS/USDA. Notwithstanding the foregoing,
an assumption fee equal to one percent (1%) of the outstanding principal balance
shall  be paid  by the  Borrower  to the  Lender  upon  written  consent  of any
assignment.

8.5      Costs,  Expense,  and Taxes.  The Borrower  agrees to pay on demand all
costs and expenses in  connection  with the  preparation,  execution,  delivery,
filing,  recording,  administration and termination of any of the Loan Documents

                                       26


<PAGE>


including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Lender,  with  respect  thereto and with respect to advising the
Lender as to its rights and  responsibilities  under any of the Loan  Documents,
and all costs and expenses, if any, in connection with the enforcement of any of
the Loan Documents all as provided in the Loan commitment letter from the Lender
to the Borrower. In addition, the Borrower shall pay any and all stamp and other
taxes and fees  payable  or  determined  to be payable  in  connection  with the
execution,  delivery,  filing and recording of any of the Loan Documents and the
other  documents to be delivered  under any such Loan  Documents,  and agrees to
save the Lender harmless from and against any and all  liabilities  with respect
to or resulting from any delay in paying or omission to pay such taxes and fees.
Notwithstanding  the foregoing,  the Borrower  shall not be responsible  for the
Lender's  attorneys'  fees and costs incurred in connection with the preparation
of the Loan Documents and the Closing which exceed $10,000.

8.6      Governing  Law. This  Agreement  shall be governed by, and construed in
accordance with, the laws of the State of Utah, without reference to conflict of
law principles.

8.7      Severability of Provisions. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the remaining  provisions of such Loan  Documents or affecting the
validity or enforceability of such provision in any other jurisdiction.

8.8      Headings.  Article  and  Section  headings  in the Loan  Documents  are
included in such Loan Documents for the  convenience of reference only and shall
not constitute a part of the applicable Loan Documents for any other purpose.

8.9      Survive Closing.  The covenants  contained  herein,  which obligate the
Borrower to perform any covenant following  closing,  shall be deemed to survive
the closing.

8.10     WAIVER OF JURY TRIAL. AS AN IMPORTANT INDUCEMENT TO THE LENDER TO ENTER
THIS  AGREEMENT,  THE  BORROWER  WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING  UNDER OR IN ANY WAY RELATED TO THIS  AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS.

8.11     Indemnification.  The  Borrower  and its  successors  and assigns  will
indemnify and hold  harmless  Lender,  its  directors,  officers,  shareholders,
agents, employees, servants, partners,  contractors, any person who controls the
Lender and  Lender's  successors  and assigns  (collectively,  the  "Indemnified

                                       27


<PAGE>


Persons") from and against any and all claims,  suits, costs,  damages,  losses,
liabilities,  judgments, and expenses (including, without limitation, attorney's
fees and litigation expenses) (collectively,  "Losses") which are incurred by or
asserted against any Indemnified Person in connection with or arising out of any
litigation, investigation, proceeding, or subpoena involving, or act or omission
of,  the  Borrower  or  its  Affiliates,   Subsidiaries,   directors,  officers,
shareholders,  agents, employees,  servants,  partners,  contractors,  invitees,
licensees,  successors, or assigns. Without limiting the foregoing, the Borrower
and its successors and assigns will indemnify and hold harmless the  Indemnified
Persons from and against any and all Losses  connected  with or arising from any
Hazardous  Discharge,  whether  such  discharge  occurred  before  or after  the
execution  of this  Agreement  or before or after  Lender  exercises  any of its
remedies  available  upon  default,  and from  and  against  any and all  losses
relating to any Environmental Complaint.

8.12     Jurisdiction.   Each  of  the  parties  hereto  hereby   expressly  and
irrevocably  submits to the  non-exclusive  personal  jurisdiction of the United
States  District  Court for the  District of Utah - Central  Division and to the
jurisdiction  of any other  competent  court of the State of Utah located in the
County of Salt Lake (collectively,  the "Utah Courts"), preserving, however, all
rights of  removal  to such  federal  court  under 28 U.S.C.  Section  1441,  in
connection with all disputes arising out of or in connection with this Agreement
or  the  transactions  contemplated  hereby  and  agrees  not  to  commence  any
litigation relating thereto except in such courts. If the aforementioned  courts
do not have subject matter jurisdiction, then the proceeding shall be brought in
any other  state or  federal  court  located  in the State of Utah,  preserving,
however,  all rights of removal to such  federal  court under 28 U.S.C.  Section
1441. Each party hereby waives the right to any other  jurisdiction or venue for
any  litigation  arising  out of or in  connection  with this  Agreement  or the
transactions  contemplated hereby to which any of them may be entitled by reason
of its present or future domicile.  Notwithstanding  the foregoing,  each of the
parties  hereto  agrees that each of the other  parties  shall have the right to
bring any action or proceeding for enforcement of a judgment entered by the Utah
Courts in any other court or jurisdiction,  including,  without limitation,  the
States of Kansas and California. Additionally, the foregoing shall not be deemed
to  prohibit  any party  hereto or any other  person or entity that may have the
right to enforce or sue under this  Agreement  from  commencing an action in any
court that may have jurisdiction.

8.13     Service of Process.  Each party irrevocably  consents to the service of
process outside the  territorial  jurisdiction of the Utah Courts referred to in
Section 8.12 hereof in any such action or proceeding by mailing  copies  thereof
by registered United States mail, postage prepaid,  return receipt requested, to
its address as  specified  in or pursuant  to Section 8.2 hereof.  However,  the
foregoing  shall not limit the right of a party to effect  service of process on
the other party by any other legally available method.

                                       28


<PAGE>



8.14     Other  Certification.  The Borrower shall execute such certification as
may be required by Lender and RBS/USDA from time to time.

            (The remainder of this page is intentionally left blank)







                                       29


<PAGE>



IN WITNESS  WHEREOF,  the parties  have caused this  Agreement to be executed by
their respective  officers  thereunto duly authorized as of the date first above
written.

                                            THE BORROWER:

                                            NACO INDUSTRIES, INC.
                                            a Utah corporation

                                            By:  __________________________
                                            Title:  _________________________


                                            THE LENDER:

                                            WEBBANK CORPORATION
                                            a Utah corporation

                                            By:  __________________________
                                            Title:  _________________________

                               NOTICE TO BORROWER
                               ------------------

         THIS  WRITTEN  LOAN  AGREEMENT  IS THE  FINAL  EXPRESSION  OF THE  LOAN
AGREEMENT  BETWEEN  BORROWER AND LENDER.  THIS WRITTEN LOAN AGREEMENT MAY NOT BE
CONTRADICTED   BY   EVIDENCE  OF  ANY  PRIOR  ORAL  LOAN   AGREEMENT   OR  OF  A
CONTEMPORANEOUS ORAL LOAN AGREEMENT BETWEEN BORROWER AND LENDER.

         Affirmation of No Unwritten Oral Credit Agreements. Borrower and Lender
affirm by their initials below that no unwritten,  oral credit  agreement exists
between them.

            ----------                                  -----------
            Borrower's                                  Lender's
            Initials                                    Initials

                                       30


<PAGE>



                                 Schedule "4.8"
                                 --------------

                          PERMITTED SENIOR INDEBTEDNESS

                         [See document attached hereto.]

                                        i

<PAGE>



                                 Schedule "6.3"
                                 --------------

                                 CAPITALIZATION

                         [See document attached hereto.]

                                       ii

<PAGE>



                                 Schedule "6.4"
                                 --------------

                                 BROKERAGE FEES

                         [See document attached hereto.]

                                       iii

<PAGE>



                                 Schedule "6.5"
                                 --------------

                            ENVIRONMENTAL COMPLIANCE

                         [See document attached hereto.]

                                       iv

<PAGE>



                                 Schedule "6.17"
                                 ---------------

                        PATENTS, TRADEMARKS, AND LICENSES

                         [See document attached hereto.]

                                        v

<PAGE>



                                  Exhibit "2.3"
                                  -------------

                         WIRE TRANSFER INSTRUCTIONS AND
                       ACKNOWLEDGMENT OF RECEIPT OF FUNDS

                         [See document attached hereto.]

                                       vi

<PAGE>



                                  Exhibit "3.2"
                                  -------------

                             COMPLIANCE CERTIFICATE

Date:    _________________________

To:      WebBank  Corporation,  as the Lender under that certain Loan  Agreement
         dated as of April ____,  1999 (as  extended,  renewed or restated  from
         time  to  time,  the  "Loan   Agreement"),   between  Lender  and  NACO
         Industries, Inc. (the "Borrower").

         Capitalized  terms used herein shall be given the  respective  meanings
set forth in the Loan Agreement.

         Enclosed  herewith  is a  copy  of  the  [annual]  [quarterly]  [other]
financial statement (the "Statement") of the Borrower required by Section 3.1 of
the  Loan  Agreement.  The  undersigned,  as the  [president]  [chief  financial
officer] of the Borrower hereby certifies, represents and warrants to the Lender
that,  (i) for the  period  for  which  the  Statement  has been  prepared,  the
Statement fairly and accurately  presents the financial condition and results of
operations  of the Borrower and its  Subsidiaries,  if any, in  accordance  with
GAAP;  (ii) for the  period  for  which the  Statement  has been  prepared,  the
Borrower has fully complied with each financial  covenant set forth in Article 3
of the Loan Agreement;  and (iii) as of the date hereof, the Borrower is in full
compliance  with each  financial  covenant  set  forth in  Article 3 of the Loan
Agreement.

         The undersigned  further  certifies,  represents,  and warrants that no
Event of Default has occurred  and is  continuing  as of the date hereof  [other
than the  following:  [INSERT  DESCRIPTION  AND STEPS,  IF ANY,  BEING  TAKEN TO
CURE]].

                                   NACO INDUSTRIES, INC.


                                   By:      _____________________________
                                   Name:    _____________________________
                                   Title:   _____________________________




                                       vii

<PAGE>



                                  Exhibit "4.9"
                                  -------------

                                JOINDER AGREEMENT

         This  Joinder  Agreement  is  executed  by  ___________________________
("Subsidiary"), a newly created or acquired subsidiary of NACO Industries, Inc.,
a Utah corporation ("Borrower"),  pursuant to the requirements of Section 4.9 of
that  certain  Loan  Agreement   entered  into  between   Borrower  and  WebBank
Corporation,  a Utah corporation  ("Lender"),  as of the ____ day of April, 1999
(the "Loan Agreement").

         Subsidiary  hereby agrees to guarantee the payment and  performance  of
Borrower  under the Loan  Agreement  or under any other  document  or  agreement
executed  by  Borrower in  connection  therewith,  to become a party to the Loan
Agreement,  and to undertake  all  obligations  and to be bound to all covenants
that may be  applicable  to  Subsidiary  with  respect  to the  Loan  Agreement.
Subsidiary  further  agrees to grant a  security  interest  in all its assets to
Lender by separate agreement.

         Executed as of the ____ of ___________, _____.


                            By:__________________________________
                            Name:________________________________
                            Title:_________________________________



                                      viii

<PAGE>



                                  Exhibit "5.2"
                                  -------------

                                    THE NOTE

                         [See document attached hereto.]

                                       ix

<PAGE>



                                  Exhibit "5.3"
                                  -------------

                                  THE GUARANTY

                         [See document attached hereto.]

                                        x

<PAGE>



                                  Exhibit "5.4"
                                  -------------

                             THE SECURITY AGREEMENT

                         [See document attached hereto.]

                                       xi

<PAGE>



                                Exhibit "5.5(a)"
                                ----------------

                    OPINION LETTER OF THE BORROWER'S COUNSEL

                         [See document attached hereto.]

                                       xii

<PAGE>



                                Exhibit "5.5(b)"
                                ----------------

                OPINION LETTER OF THE LENDER'S CALIFORNIA COUNSEL

                         [See document attached hereto.]

                                      xiii

<PAGE>



                                Exhibit "5.5(c)"
                                ----------------

                  OPINION LETTER OF THE LENDER'S KANSAS COUNSEL

                         [See document attached hereto.]

                                       xiv

<PAGE>



                                 Exhibit "5.16"
                                 --------------

                                  THE MORTGAGE

                         [See document attached hereto.]

                                       xv

<PAGE>


                                 Exhibit "5.17"
                                 --------------

                        THE DEPOSIT AND ESCROW AGREEMENT

                         [See document attached hereto.]

                                       xvi

<PAGE>



                         ADJUSTABLE RATE PROMISSORY NOTE
                         -------------------------------

$1,100,000                                               Dated:  April ___, 1999



         FOR VALUE RECEIVED,  NACO INDUSTRIES,  INC., a Utah corporation with an
office at 395 West 1400 North, Logan, UT 84341 ("Maker"), promises to pay to the
order of WEBBANK  CORPORATION,  a Utah corporation  having an office at P.O. Box
1831, 136 Heber Avenue,  Suite 209, Park City, UT 84060-1831  (together with its
successors and assigns,  "Payee"),  at such office of Payee, or such other place
as Payee may  designate  from time to time in writing,  the principal sum of ONE
MILLION, ONE HUNDRED THOUSAND AND NO/100s DOLLARS ($1,100,000),  in lawful money
of the United States of America,  together  with interest  thereon from the date
hereof as follows:

                  1.       The  Note.
                           ----------

                           This Adjustable Rate Promissory Note (this "Note") is
being issued by Maker pursuant to a Loan  Agreement  dated as of the date hereof
by and  between  Payee  and  Maker (as  amended,  from  time to time,  the "Loan
Agreement"), and Payee's rights and Maker's obligations hereunder are subject to
the provisions of the Loan  Agreement.  Capitalized  terms used in this Note and
not  otherwise  defined  shall have the  meanings  given those terms in the Loan
Agreement.  Reference  to  the  Loan  Agreement  shall  in  no  way  impair  the
negotiability  hereof or the absolute and  unconditional  obligation of Maker to
pay both principal and interest hereon as provided herein. The principal balance
of the Note which is outstanding  and unpaid from time to time is referred to as
the "Principal Amount."

                  2.       Interest Rate.
                           --------------

                           a.  Note Rate;  Default  Rate. The  Principal  Amount
shall bear  interest  beginning on and  including  the date hereof at a variable
rate equal to The Wall Street  Journal Prime Interest Rate plus one and one-half
percent (1.5%) ("Note Rate"), provided,  however, that the Note Rate shall never
exceed 14.75% nor be less than 9.75%.  The initial Note Rate is 9.75% per annum.
While  an  Event  of  Default  (as  defined  hereinafter)  has  occurred  and is
continuing,  the Principal  Amount shall  immediately  and without notice accrue
interest at the lesser of The Wall Street  Journal Prime Interest Rate plus five
percent (5%) or the highest interest rate permitted by law (the "Default Rate").
Interest shall be calculated on the basis of a 360-day year and shall accrue for

                                        1


<PAGE>


the actual  number of days  elapsed.  The term "The Wall  Street  Journal  Prime
Interest  Rate" as used herein shall mean, as of any  particular  date, the rate
quoted as the "Prime  Rate" (or  comparable  reference  rate) in the Money Rates
Column of the Wall Street  Journal as  published on such day (or, if such day is
not a business day of the Lender,  as published on the most recent  business day
of the  Lender),  but if more  than one such rate is quoted on any such day then
the rate shall be the highest of such rates. In the event of the  discontinuance
of such  publication  or such section  thereof,  the Wall Street  Journal  Prime
Interest  Rate shall mean the average  monthly rate as reported and published in
the Federal Reserve Bulletin  published monthly by the Board of Governors of the
Federal Reserve System under the table styled "Prime Rate Charged by Banks Short
Term Business Loans." The rate of interest will be adjusted quarterly on January
1st,  April 1st, July 1st, and October 1st of each year or if such date is not a
business day on the next  following  business day (each such date an "Adjustment
Date"), which adjustment shall be effective on the next following payment date.

                           b.  Maximum  Rate.  Notwithstanding  anything  to the
contrary  contained herein,  the effective rate of interest  hereunder shall not
exceed the maximum  effective  rate of interest  permitted by applicable  law or
regulation.  If the amount of interest payable on any date under this Note would
exceed the maximum amount  permitted by applicable  law or regulation,  then the
amount of interest  payable on such date shall be reduced  automatically to such
maximum  amount.  If any  interest  or other  charge paid or payable by Maker in
connection with this Note results in charging, compensation,  payment or earning
of interest in excess of the maximum  allowed by applicable law or regulation as
aforesaid,  then any and all such excess shall be and the same is hereby  waived
by Payee,  and any and all such excess  previously  paid shall be  automatically
credited against and in reduction of the Principal Amount.

                  3.       Payments of Principal and Interest.
                           ----------------------------------

                           a.  The Principal  Amount and all  accrued and unpaid
interest shall be payable in full on April _____,  2014 (the  "Maturity  Date").
Beginning on June 1, 1999,  and  continuing  each month until the Maturity Date,
monthly  payments of principal  and  interest  shall be made on the first day of
each month, or if such date is not a business day on the next following business
day, in an amount  sufficient to fully  amortize the  Principal  Amount over the
remaining  time  period  before the  Maturity  Date.  The  monthly  payments  of
principal and interest will be made according to the Payment  Schedule  attached
as Exhibit A hereto  which  shall be revised by Payee and  provided to the Maker
within 15 business days after each  Adjustment Date and shall be incorporated by
reference  into and made a part of this Note upon receipt by Maker.  Any payment
of principal or interest  made more than fifteen (15) days after it is due shall
bear a late penalty of five percent (5%) of the late payment. Interest shall not
accrue on late penalties. All amounts of principal, interest, and late penalties
made hereunder  shall be paid by Maker by automated bank transfer in immediately

                                        2


<PAGE>



available and freely transferable funds. All payments shall be credited first to
late penalties,  second, to Payee's costs and expenses as provided in Section 13
hereof,  third,  to accrued and unpaid  interest,  and fourth,  to the Principal
Amount.

                           b.  Funds on Deposit. In all circumstances when Maker
has funds  available on deposit in the Escrow Account (as defined in the Deposit
and Escrow  Agreement  as defined  below)  maintained  pursuant to that  certain
Deposit and Escrow  Agreement (the "Deposit and Escrow  Agreement")  dated as of
the date hereof  among  Maker,  Payee,  and Payee in Payee's  capacity as Escrow
Agent ("Escrow Agent"),  Maker agrees and acknowledges that Payee shall have the
right  pursuant to Section 2(a) of the Deposit and Escrow  Agreement to instruct
Escrow Agent to release funds from the Escrow Account to make payments  required
under this Note.

                  4.       Prepayment Premium. Subject to the provisions of this
Section 4, the Principal Amount may be prepaid in whole or in part upon not less
than thirty (30) days' prior written  notice,  provided that each and every such
prepayment, whether made voluntarily or involuntarily because of acceleration of
the payment  date due to an Event of Default and  whether  made  directly by the
Borrower or otherwise, shall be accompanied by a prepayment premium as set forth
on the following table (the "Prepayment Premium"):

================================================================================
                   YEAR IN WHICH
                  PREPAYMENT MADE                      PREPAYMENT PENALTY
--------------------------------------------------------------------------------
First year following closing of Loan                  5% of amount prepaid
--------------------------------------------------------------------------------
Second year following closing of Loan                 4% of amount prepaid
--------------------------------------------------------------------------------
Third year following closing of Loan                  3% of amount prepaid
--------------------------------------------------------------------------------
Fourth year following closing of Loan                 2% of amount prepaid
--------------------------------------------------------------------------------
Fifth year following closing of Loan or               1% of amount prepaid
any year thereafter
================================================================================

The Maker agrees that the Prepayment  Premium has been freely bargained  between
the  parties  to  provide  the  Payee  with  compensation  for  the  loss of the
contracted-for return on the Loan, that the Prepayment Premium is not a penalty,
and that such Prepayment Premium is reasonable. The Payee's determination of the
Prepayment  Premium  shall be conclusive  and binding,  absent  manifest  error.
Prepayments  shall be credited first to Prepayment  Premiums,  second to Payee's
costs and  expenses  as  provided  in Section 13 hereof,  third,  to accrued and
unpaid interest, and fourth, to the Principal Amount.

                                        3


<PAGE>



                  5.       Events of Default. The occurrence or existence of any
one or more of the following  events or conditions  shall constitute an Event of
Default hereunder (each such occurrence or existence an "Event of Default"):

                           a.  Maker shall fail to pay any principal or interest
under this Note when due.

                           b.  A defined  Event of Default shall occur under the
Loan Agreement.

                  6.       Remedies.  Upon  the  occurrence  of and  during  the
continuation of any Event of Default,  Payee shall have the rights, and shall be
entitled to the  remedies,  set forth in the Loan  Agreement  and the other Loan
Documents,  which rights  include,  but are not limited to, the right to declare
the outstanding  Principal  Amount together with accrued  interest to be due and
payable immediately.

                  7.       Remedies Cumulative;  Waiver;  Jurisdiction;  No Jury
Trial.

                           a.  Remedies Cumulative. No right or remedy conferred
upon or reserved to Payee,  or now or hereafter  existing at law or in equity or
by statute or other  legislative  enactment,  is intended to be exclusive of any
other  right or  remedy,  and each  and  every  such  right or  remedy  shall be
cumulative and concurrent, and shall be in addition to every other such right or
remedy, and may be pursued singly, concurrently,  successively, or otherwise, at
the sole  discretion  of Payee,  and shall not be  exhausted by any one exercise
thereof but may be exercised as often as occasion  therefor shall occur.  No act
of Payee shall be deemed or  construed  as an election to proceed  under any one
such  right or  remedy  to the  exclusion  of any other  such  right or  remedy.
Furthermore, each such right or remedy of Payee shall be separate, distinct, and
cumulative  and none shall be given effect to the  exclusion  of any other.  The
failure to  exercise  or delay in  exercising  any such right or remedy,  or the
failure to insist upon strict  performance of any term of this Note shall not be
construed  as a waiver  or  release  of the  same,  or of any  event of  default
thereunder, or of any obligation or liability of Maker thereunder.

                           b.  Waiver  of  Notice,   etc.  Maker  hereby  waives
presentment  for payment,  demand of notice of  nonpayment,  protest,  notice of
protest,  or  other  notice  of  dishonor,  and  any and all  other  notices  in
connection with any default in the payment of, or any enforcement of the payment
of all amounts due under this Note. To the extent permitted by law, Maker waives
the right to any stay of execution and the benefit of all exemption  laws now or
hereafter in effect.

                                        4


<PAGE>



                           c.  Submission to  Jurisdiction.  Maker hereby agrees
that any  action or  proceeding  against  Maker to  enforce  this Note  shall be
commenced  in any court  having  jurisdiction  in the County of Salt Lake in the
State of Utah (the "Utah Courts") and Maker waives  personal  service of process
and agrees that a summons and  complaint  commencing  an action or proceeding in
any such court shall be properly served and shall confer  personal  jurisdiction
if  served  by  registered  or  certified  mail in  accordance  with the  notice
provisions set forth herein.  Notwithstanding the foregoing, each of the parties
hereto  agrees that each of the other  parties shall have the right to bring any
action or proceeding for enforcement of a judgment entered by the Utah Courts in
any other court or jurisdiction,  including,  without limitation,  the courts of
the states of California and Kansas.  Additionally,  the foregoing  shall not be
deemed to prohibit  any party hereto or any other person or entity that may have
the right to  enforce or sue under  this Note from  commencing  an action in any
court that may have jurisdiction.

                           d.  Service of Process. Maker irrevocably consents to
the service of process outside the  territorial  jurisdiction of the Utah Courts
in any such action or proceeding by mailing copies thereof by registered  United
States  mail,  postage  prepaid,  return  receipt  requested,  to its address as
specified in the first paragraph of this Note. However,  the foregoing shall not
limit the right of a party to effect  service of  process on the other  party by
any other legally available method.

                           e.  Waiver of Jury Trial. AS AN IMPORTANT  INDUCEMENT
TO THE PAYEE TO ENTER  THIS  AGREEMENT,  THE MAKER  WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY ACTION  ARISING  UNDER OR IN ANY WAY  RELATED TO THIS NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS.

                  8.       Guaranty;  Security.  Payment and performance of this
Note is  guaranteed  by Verne E. Bray and  Beverly  Bray  pursuant to a Guaranty
dated as of the date hereof. This Note is secured by a Security Agreement by and
between  Maker and Payee and dated as of the date  hereof,  by a Mortgage by and
between  Maker  and Payee  dated as of the date  hereof,  and by an  Escrow  and
Deposit Agreement by and between Maker and Payee dated as of the date hereof.

                  9.       Severability.  If for any  reason  one or more of the
provisions of this Note or their application to any person or circumstance shall
be held to be  invalid,  illegal,  or  unenforceable  in any  respect  or to any
extent,  such provisions shall nevertheless remain valid, legal, and enforceable
in all  such  other  respects  and to  such  extent  as may be  permissible.  In
addition, any such invalidity,  illegality, or unenforceability shall not affect
any other  provisions of this Note,  but this Note shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.

                                        5


<PAGE>




                  10.      Successors  and  Assigns.  This  Note  inures  to the
benefit of Payee and binds Maker, and their  respective  successors and assigns,
and the words "Payee" and "Maker" whenever  occurring herein shall be deemed and
construed to include such respective successors and assigns.

                  11.      Notices.  All notices  required to be given to any of
the parties hereunder shall be given as provided in the Loan Agreement.

                  12.      Captions.  The captions or headings of the paragraphs
in this  Note are for  convenience  only and  shall not  control  or affect  the
meaning or construction of any of the terms or provisions of this Note.

                  13.      Reimbursement  of  Expenses.  Maker  shall  reimburse
Payee  for the  reasonable  costs  and  expenses  incurred  by Payee  (including
reasonable   attorneys'  fees,   advisory  and  consulting   fees,   travel  and
communication expenses, and reproduction costs) in connection with this Note and
all reasonable costs and expenses incurred in amending,  modifying, or enforcing
this Note.

                  14.      Governing  Law.  This Note shall be  governed  by and
construed  in  accordance  with the  internal  laws of the State of Utah without
regard to conflict of law principles.



                  [Remainder of Page Left Blank Intentionally]


                                        6


<PAGE>



         IN WITNESS WHEREOF, Maker has executed this Note as of the day and year
first above written.

                                      NACO INDUSTRIES, INC.
                                      a Utah corporation

                                      By: _____________________________

                                      Its: _____________________________







                                        7


<PAGE>


                                    Exhibit A
                                    ---------

                                       to

                         ADJUSTABLE RATE PROMISSORY NOTE


                         -------------------------------


                                Payment Schedule

         Initial  payments under this Note will be made monthly in the amount of
$11,653.01.  Payee will provide Maker an updated Payment Schedule as provided in
Section 3(a) of the Note.

                                        8


<PAGE>



                               SECURITY AGREEMENT
                               ------------------

         THIS SECURITY AGREEMENT (the "Security  Agreement") is made as of April
__, 1999, by NACO Industries, Inc. a Utah corporation, with principal offices at
395 West  1400  North,  Logan,  Utah  84341  ("Debtor"),  in  favor  of  WEBBANK
CORPORATION,  a Utah  corporation,  with offices at 136 Heber Avenue,  Ste. 209,
P.O. Box 1831, Park City, Utah 84060-1831 ("Lender" or "Secured Party").

                                    RECITALS
                                    --------

         A. Pursuant to that certain Loan Agreement of even date herewith by and
between Debtor and Lender (the "Loan  Agreement")  Lender has advanced a loan to
Debtor (the "Loan"),  as evidenced by that certain  Adjustable  Rate  Promissory
Note dated of even date herewith (as amended,  modified or restated from time to
time, the "Note"); and

         B. It is a  condition  to  Lender's  willingness  to make the Loan that
Debtor has entered into this Security Agreement.

                                    AGREEMENT
                                    ---------

         NOW THEREFORE,  to induce Lender to make the Loan, and in consideration
of the  mutual  covenants  herein  contained,  and for other  good and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, Debtor and Lender hereby agree as follows:

                  1.       Definitions.  All  capitalized  terms  not  otherwise
defined  herein  shall  have  the  meaning  ascribed  to such  terms in the Loan
Agreement  except as the context  requires  otherwise.  For the purposes of this
Security Agreement, the following terms shall have the following meanings:

                           a. "Books and  Records"  means all of Debtor's  books
and records, including, but not limited to, records indicating,  summarizing, or
evidencing  the  Collateral,  the Secured  Obligations,  and Debtor's  property,
business  operations,  or financial condition,  computer runs, invoices,  disks,
cd-roms, tapes, processing software, processing contracts (such as contracts for
computer  time  and  services)  and any  computer-prepared  information,  disks,
cd-roms, tapes, or data of every kind and description, whether in the possession
of Debtor or in the possession of third parties.

                                        1


<PAGE>



                           b. "Collateral"  means all  tangible  and  intangible
property  owned by Debtor or in which Debtor has an interest,  whether now owned
or hereafter acquired,  including, but not limited to, Debtor's interest now and
in the future in the following types or items of property:

                                    (1)  Accounts:   All  presently   owned  and
hereafter  acquired  accounts,  accounts  receivable,  contract  rights,  bills,
acceptances,  and other forms of obligations  arising out of the sale,  lease or
consignment  of goods or the rendition of services by Debtor;  together with any
property  evidencing  or relating to the Accounts  (such as  guaranties,  credit
insurance,  Letters of Credit),  any  security for the  Accounts,  all Books and
Records relating  thereto,  and all Proceeds of any of the foregoing,  including
returned or reclaimed inventory;

                                    (2)  Inventory:   All  presently  owned  and
hereafter  acquired inventory of every nature,  kind, and description,  wherever
located,  including,  without limitation, raw materials, goods, work in process,
finished goods, parts or supplies; all goods and property held for sale or lease
or to be  furnished  under  contracts  of service;  and all goods and  inventory
returned,  reclaimed or  repossessed,  together  with all Proceeds of any of the
foregoing;

                                    (3)  Equipment:   All  presently  owned  and
hereafter  acquired  equipment,  whether or not  affixed  to realty,  including,
without limitation,  machines,  computers,  trucks, trailers,  vehicles,  goods,
accessories,  handling and delivery equipment,  fixtures,  improvements,  office
machines,  restaurant equipment and furniture, together with all Proceeds of any
of the foregoing, and all accessions,  accessories,  replacements and the rights
of the Debtor under any manufacturer's warranties relating to the foregoing;

                                    (4)  Chattel Paper: All presently  owned and
hereafter acquired chattel paper, including,  but not limited to, any writing or
writings which evidence both a monetary obligation and a security interest in or
a lease of specific goods, together with all Proceeds of any of the foregoing;

                                    (5)  General Intangibles:All presently owned
and hereafter acquired general intangibles,  including,  without limitation, any
"general intangible" as that term is defined in the Uniform Commercial Code, any
software products,  any personal property,  choses in action,  causes of action,
designs,  plans, goodwill,  tax refunds,  licenses,  franchises,  IP Collateral,
trade agreements, customer lists and all rights under license agreements for use
of the same, together with all Proceeds of any of the foregoing;

                                        2


<PAGE>



                                    (6)  Instruments:  All  presently  owned and
hereafter  acquired  instruments,   including,   without  limitation,  bills  of
exchange,  notes, and all negotiable instruments,  all certificated  securities,
all  certificates of deposit and any other writing that evidences a right to the
payment  of money and is not itself a  security  agreement  or lease and is of a
type that is in the ordinary course of business transferred by delivery with any
necessary  endorsement or  assignment,  together with all Proceeds of any of the
foregoing;

                                    (7)  Documents:   All  presently  owned  and
hereafter acquired documents,  including, but not limited to, documents of title
(as  that  term is  defined  in the  Uniform  Commercial  Code)  and any and all
receipts,  including,  but not limited to,  receipts  of the kind  described  in
Article 7 of the Uniform  Commercial Code,  together with all Proceeds of any of
the foregoing;

                                    (8)  Letters of Credit: All presently  owned
and hereafter  acquired  letters of credit,  including,  but not limited to, any
written  undertaking to pay money  conditioned  upon  presentation  of specified
documents,  and advices of letters of credit,  together with all Proceeds of any
of the foregoing; and

                                    (9)  Proceeds:   All  presently   owned  and
hereafter acquired  proceeds,  as that term is defined in the Uniform Commercial
Code, including,  without limitation,  whatever is received upon the use, lease,
sale, exchange,  collection,  any other utilization or any disposition of any of
the  Collateral  described in this section 1(b),  whether cash or non-cash,  all
rental or lease  payments,  accounts,  chattel  paper,  instruments,  documents,
contract  rights,  general  intangibles,  equipment,  inventory,  substitutions,
additions, accessions,  replacements, products, and renewals of, for, or to such
property and all insurance therefor.

                                    (10) The  Escrow  Account:  All of  Debtor's
interest in and to the deposit and escrow  account  established  and  maintained
pursuant to that certain Deposit and Escrow Agreement among Debtor,  Lender, and
Escrow Agent dated of even date herewith.

                           c. "Loan  Documents"   means  collectively,  the Loan
Agreement,  the  Note,  all  credit  accommodations,   notes,  loan  agreements,
guarantees,  security  agreements,  mortgages,  instruments,  pledge agreements,
assignments,  acceptance  agreements,  commitments,   facilities,  reimbursement
agreements and any other agreements, documents and instruments, now or hereafter
existing, creating, evidencing,  guarantying, securing or relating to any or all
of  the  Secured  Obligations,  together  with  all  amendments,  modifications,
renewals, or extensions thereof.

                                        3


<PAGE>



                           d. "Event of  Default"  means any Event of Default as
defined in the Loan Agreement which is not cured within the cure period, if any,
provided in the Loan  Agreement or any Event of Default as defined in any of the
other Loan Documents,  (ii) failure of Debtor to pay any sum due pursuant to any
of the Secured Obligations as and when due, whether by stated maturity,  demand,
acceleration   or   otherwise,   or  (iii)  any  breach  or   violation  of  any
representation, warranty, covenant or term of this Security Agreement.

                           e. "IP Collateral" means any and all patents,  patent
applications and related filings, trademarks (both registered and unregistered),
trademark  applications and related filings,  service marks (both registered and
unregistered),  service  mark  applications  and related  filings,  trade names,
know-how and trade  secrets,  copyrights,  copyright  registrations  and related
filings, computer software,  programs and technology, and all other intellectual
property and proprietary rights, and shall include without limitation all of the
Debtor's right, title and interest in and to:

                                    (1)  all of its now  owned  or  existing  or
hereafter  acquired  trademarks,   service  marks,  trademark  or  service  mark
applications,  whether the foregoing are domestic (state or federal) or foreign,
including,  without limitation, each mark, registration,  and application listed
on Schedule A, attached hereto and made a part hereof, and (A) renewals thereof,
(B) all income,  royalties,  damages and payments  hereafter due and/or  payable
with respect thereto,  including,  without  limitation,  damages and payment for
past, present or future  infringements  thereof,  (C) the right to sue for past,
present and future infringements  thereof, (D) all rights corresponding  thereto
throughout the world, (E) the Trademark License Rights, as hereinafter  defined,
(F)  trade  dress,  (G) all  customer  and  other  lists  related  to any of the
foregoing,  (H)  together in each case with the  goodwill  of Debtor's  business
connected  with  the use of,  and  symbolized  by any of the  foregoing  and (I)
Debtor's  entire  right,  title  and  interest  in,  to and  under  all  license
agreements  with any person or entity,  whether  Debtor is  licensor or licensee
under any such license agreement,  including,  without limitation,  the licenses
listed on Schedule A (the  "Trademark  License  Rights," and  together  with all
other interests described in this clause (1), the "Trademark Collateral");

                                    (2)  all of its now  owned  or  existing, or
hereafter acquired  inventions  (whether  patentable or not), patents and patent
applications,  whether the foregoing be domestic or foreign,  including  without
limitation the inventions and improvements  described and claimed therein, those
patents  listed on Schedule B which is attached  hereto and made a part  hereof,
and  together  with  (A)  the  reissues,  divisions,  continuations,   renewals,
extensions and continuations-in-part thereof, (B) all income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto, including

                                        4


<PAGE>


without   limitation   damages  and  payments   for  past,   present  or  future
infringements  thereof,  (C) the  right  to sue for  past,  present  and  future
infringements  thereof,  (D) all rights  corresponding  thereto  throughout  the
world,  and (E) all rights as licensor or licensee  with respect to any patents,
patent  applications  and  rights  thereto  and  thereunder,  including  without
limitation  the  licenses  listed on  Schedule  B (such  rights as  licensor  or
licensee, collectively, the "Patent License Rights," and together with all other
interests described in this clause (2), the "Patent Collateral"); and

                                    (3)  all of its now owned  or  existing,  or
hereafter acquired copyrights, copyright registrations, whether the foregoing be
domestic or foreign,  including without  limitation each copyright  registration
listed on  Schedule  C which is  attached  hereto  and made a part  hereof,  and
together with (A) the derivatives  thereof, (B) all income,  royalties,  damages
and payments now or hereafter due and/or payable with respect thereto, including
without   limitation   damages  and  payments   for  past,   present  or  future
infringements  thereof,  (C) the  right  to sue for  past,  present  and  future
infringements  thereof,  (D) all rights  corresponding  thereto  throughout  the
world,  (E) all rights as licensor or licensee  with respect to any  copyrights,
copyright  registrations  and rights thereto and thereunder,  including  without
limitation  the  licenses  listed on  Schedule  C (such  rights as  licensor  or
licensee,  collectively,  the "Copyright  License Rights," and together with all
other interests described in this clause (3), the "Copyright Collateral");

                           f. "Secured  Obligations"  shall mean,  collectively,
the principal of and interest on the Loan, the Note, and all other amounts owing
to the  Lender  by Debtor  under,  the Loan  Agreement,  the Loan  Documents  or
hereunder; and

                           g. "Uniform  Commercial  Code" shall mean the Uniform
Commercial Code as in effect in the State of Utah from time to time.

                  2.       Security  Interest.  As  security  for  the  due  and
punctual  payment  and  full and  complete  performance  of each of the  Secured
Obligations, Debtor hereby grants to Lender for the benefit of the Secured Party
a security  interest in and general lien upon all of Debtor's  right,  title and
interest in and to all the Collateral and any part thereof.

                  3.       Representations and Warranties. Debtor represents and
warrants to Lender for the benefit of the Secured Party,  which  representations
and warranties shall be continuing  representations  and warranties until all of
the Secured Obligations are satisfied in full, as follows:

                           a. Locations.   The chief  place of  business,  chief
executive  offices and the office(s) where Debtor's  records are kept concerning

                                        5


<PAGE>


accounts,  contract rights and other similar Collateral, and the locations where
its inventories,  goods,  equipment,  fixtures and other similar  Collateral are
kept,  are as set  forth on  Schedule  D  attached  hereto,  and as set forth on
Schedule D, Borrower either owns such premises free and clear of any mortgage or
other  liens and  encumbrances,  except as set forth on Schedule D, or it leases
such premises from the record owner identified on Schedule D.

                           b. Trade  names.   It  conducts  business  under  and
through its legal name as set forth on the signature  page hereto,  and no other
names, except as set forth on Schedule D attached hereto.

                           c. Authority.   Debtor is duly  organized and validly
existing  and in good  standing  under  the  laws of the  State  of Utah  and is
qualified and licensed to do business in those  jurisdictions  where the conduct
of its business or  ownership of its  properties  requires  such  qualification.
Debtor  has the power and  authority  to own the  Collateral,  to enter into and
perform this Security Agreement and any other documents or instruments  executed
in connection herewith, and to incur the Secured Obligations.

                           d. Duly  Authorized;  Not in Violation  of Law.  This
Security Agreement and any other documents or instruments executed in connection
herewith have been duly authorized,  executed, and delivered, and constitute the
legal, valid, and binding  obligations of Debtor,  enforceable against Debtor in
accordance with their respective  terms.  This Security  Agreement and any other
documents and  instruments  executed in connection  herewith do not and will not
violate any law, the charter, organizational documents, or by-laws of Debtor, or
any other  agreement or instrument to which Debtor or any of its property may be
bound or subject.

                           e.       No Consents Necessary.
                                    ---------------------

                                    (1)  No consent or approval of any person or
entity, including,  without limitation,  any debt or equity holder of Debtor, or
of any public  authority,  is necessary  for the valid  execution,  delivery and
performance of this Security  Agreement by Debtor, or any document or instrument
executed in connection herewith.

                                    (2)  Except  for  the   recording   of  this
Security  Agreement  with the United States Patent and Trademark  Office and the
United States  Copyright Office (with respect to the Trademark  Collateral,  the
Patent  Collateral  and the  Copyright  Collateral)  and the  filing of  Uniform
Commercial  Code  financing  statements  naming Debtor as "debtor" and Lender as
"secured party" in the appropriate  filing offices,  no authorization,  consent,
approval or other action by, and no notice to or filing or recording  with,  any
governmental,  administrative  or  judicial  authority  or  regulatory  body  is
currently or is reasonably expected to be required either  (A)  for the grant by

                                        6


<PAGE>



Debtor of the liens and security  interests granted hereby or for the execution,
delivery or  performance  of this Security  Agreement by Debtor,  or (B) for the
perfection of or the exercise by Lender of its rights and remedies hereunder.

                           f.       Rights in Collateral.
                                    --------------------

                                    (1)  Debtor  has  the  right  to  grant  the
security  interests  created by this Security  Agreement.  The Collateral is not
subject to liens, claims or encumbrances,  licenses or similar interests except:
(A) as  otherwise  disclosed  on  Schedule  A  (with  respect  to the  Trademark
Collateral), Schedule B (with respect to Patent Collateral) and Schedule C (with
respect to the Copyright  Collateral);  (B) the liens and encumbrances of Lender
or as is otherwise set forth on Schedule E made a part hereto.

                                    (2)  Set forth on Schedule A, Schedule B and
Schedule C are complete and accurate  lists of all Trademark  License Rights and
other Trademark Collateral and Patent License Rights and other Patent Collateral
and  Copyright  Rights and other  Copyright  Collateral  respectively,  owned by
Debtor.

                           g.       Regarding the IP Collateral.
                                    ---------------------------

                                    (1)  Each  item  of   Trademark   Collateral
identified on Schedule A, each item of Patent Collateral  identified on Schedule
B, and each item of Copyright Collateral identified on Schedule C, is subsisting
and has not been adjudged  invalid or  unenforceable,  in whole or in part,  and
each such item is, to the best of  Debtor's  knowledge,  validly  registered  or
registerable  and enforceable  and subject to no claims or adverse  limitations.
Debtor has notified the Lender in writing of: (A) all prior uses of any material
item of  Trademark  Collateral  of which Debtor is aware that could lead to such
items becoming invalid or  unenforceable,  including prior  unauthorized uses by
third parties;  (B) any  infringement on any proprietary  right or default under
any IP Collateral; and (C) prior uses or publications of any material item of IP
Collateral  of which  Debtor is aware which  could lead to Debtor's  interest in
such item becoming  invalid or  unenforceable,  including any publication or use
which might place the work in the public domain.

                                    (2)  The Trademark  License  Rights  and the
Patent  License Rights are in full force and effect and Debtor is not in default
of any of the foregoing  License Rights and no event has occurred with notice or
the passage of time,  or both,  might  constitute  a material  default by Debtor
under the foregoing license rights.

                                        7


<PAGE>



                           h.       Materially Misleading Statements.
                                    ---------------------------------0

                                    No  representation,  warranty  or  statement
made herein, on any Schedule hereto or in any certificate or document  furnished
or to be furnished pursuant hereto contains or will contain any untrue statement
of  material  fact or omits  or will  omit  any  fact  necessary  to make it not
misleading in any material respect.

                                    (1)  No Fictitious  Names.  Debtor  does not
operate or issue invoices under any name other than the name(s) set forth on the
signature page hereof.

                  4.       Further Assurances; Filing.

                           a.       Delivery   of   Documents;   Inspection   of
Collateral. At any time and from time to time, upon the demand of Lender, Debtor
will, at Debtor's expense:  (i) immediately deliver and pledge to Lender for the
benefit of the Secured Party,  properly endorsed to Lender and/or accompanied by
such instruments of assignment and transfer in such form and substance as Lender
may request, any and all instruments,  documents, and/or chattel paper as Lender
may specify in demand;  (ii) give,  execute,  deliver,  file,  and/or record any
notice, statement, instrument,  assignment, document, agreement, or other papers
that may be necessary  or  desirable,  or that Lender may  request,  in order to
create,  preserve,  perfect,  or validate any security interest granted pursuant
hereto or intended to be granted  hereunder  or to enable  Lender to exercise or
enforce  for the  benefit  of the  Secured  Party its rights  hereunder  or with
respect to such security interest;  (iii) keep, stamp, or otherwise mark any and
all documents, Instruments, Chattel Paper, and its Books and Records relating to
the  Collateral  in such manner as Lender may  reasonably  require;  and/or (iv)
permit  representatives  and agents of Lender access to its premises at any time
reasonably  requested  by Lender to  inspect  the  Collateral  and the Books and
Records and to audit and make abstracts from the Books and Records.

                           b.       Filing of Financing  Statement.  At the sole
option of  Lender,  and  without  Debtor's  consent,  Lender  may file a carbon,
photographic or other  reproduction of this Security  Agreement or any financing
statement executed pursuant hereto as a financing  statement in any jurisdiction
so  permitting  or as a  registration  of Lender's  interest as to any of the IP
Collateral  in any office so  permitted.  Without the prior  written  consent of
Lender,  Debtor  will  not  file or  authorize  or  permit  to be  filed  in any
jurisdiction  any such  financing or like statement in which Lender is not named
as the sole secured party.

                           c.       Lender  Collateral   Custody  Duties.   With
respect to the Collateral,  or any part thereof, which at any time may come into
the  possession,  custody or under the  control of Lender or any of its  agents,

                                        8


<PAGE>


associates or  correspondents,  Debtor hereby  acknowledges  and agrees that the
sole duty of Lender  with  respect  to the  custody,  safekeeping  and  physical
preservation  of such  Collateral,  whether  pursuant  to  Section  9-207 of the
Uniform  Commercial  Code or  otherwise,  shall  be to deal  with it in the same
manner as it deals with similar  property for its own account.  Neither  Lender,
nor any of its directors, officers, employees, affiliates, agents, associates or
correspondents  shall be liable for failure to demand,  collect or realize  upon
any of the Collateral or for any delay in doing so.

                  5.       Covenants.  Debtor  hereby  covenants and agrees that
for as long as any Secured Obligations are outstanding:

                           a. Defense of  Collateral.   Debtor  shall defend the
Collateral against all claims and demands of all persons or entities at any time
claiming any interest therein other than those of Lender.

                           b. Notice of Changes in  Location of Chief  Executive
Office, Residence,  Books and Records,  Collateral.  Debtor shall provide Lender
with immediate written notice of: (i) any intended change in the chief executive
office or residence of Debtor,  and/or the office  where  Debtor  maintains  its
Books and Records;  (ii) the location or movement of any  Collateral,  excluding
movement of motor  vehicles in the normal course of business to or at an address
other than Debtor's address as set forth on the signature page hereof; and (iii)
the creation or acquisition  of any  additional IP  Collateral.  If any such new
location is on leased or mortgaged  premises,  then Debtor will furnish  Lender,
prior to the effective date of any such change,  with  landlord's or mortgagee's
waivers pertaining to such premises in form and substance satisfactory to Lender
in its sole discretion.

                           c. Prompt   Payment of Taxes;  Delivery  to Lender of
Proof of Payment.  Debtor  shall  promptly  pay any and all taxes,  assessments,
and/or  governmental  charges  upon the  Collateral  on the  dates  such  taxes,
assessments,  and/or  governmental  charges are due and  payable,  except to the
extent that such taxes, assessments,  and/or charges are contested in good faith
by Debtor  by  appropriate  proceedings  and for  which  Debtor  is  maintaining
adequate reserves.  Upon request of Lender,  Debtor shall deliver to Lender such
receipts and other proofs of payment as Lender may reasonably request.

                           d. Delivery  of   Instruments,    Chattel  Paper  and
Documents of Title. Immediately upon receipt of any and all Instruments, Chattel
Paper,  and/or  documents  of title  (including  bills of lading  and  warehouse
receipts),  Debtor shall deliver such Collateral to Lender and shall execute any
form of assignment or  endorsement  reasonably  requested by Lender with respect
thereto.

                                        9


<PAGE>




                           e. Notice of  Adverse  Changes,   Events of  Default,
Seizures and Institution of Litigation.  Debtor shall immediately  notify Lender
of: (i) the occurrence of any event or circumstance that is reasonably likely to
result  in a  Material  Adverse  Change  (as  defined  in the  Loan  Agreement),
including, without limitation, any loss of or damage to any Collateral; (ii) the
occurrence of an Event of Default; (iii) any seizure of the Collateral; (iv) any
claim or alleged claim of third parties to the Collateral that, either singly or
in the  aggregate,  is  reasonably  likely  to have a  Material  Adverse  Change
(including,  without limitation,  any loss of or damage to any Collateral);  and
(v) the institution of any litigation,  arbitration,  governmental investigation
or  administrative  proceedings  against  or  affecting  Debtor  or  any  of the
Collateral that, if adversely determined, is reasonably likely, either singly or
in the aggregate, to result in an Event of Default or to have a Material Adverse
Change.

                           f. Insurance.  Debtor shall maintain insurance at all
times with respect to the  Collateral  (including  all  risk-extended  coverage)
against  the  risks of fire,  theft and such  other  risks,  including,  without
limitation, liability, errors and omissions and business interruption, as Lender
may require,  containing such terms, in such form and amounts,  for such periods
and written by such  companies  as are  acceptable  to Lender in its  reasonable
discretion.  All such policies of insurance shall name Lender for the benefit of
the Lender as lender/loss  payee and shall provide for not less than thirty (30)
days' prior written  notice to Lender of intended  cancellation  or reduction in
coverage.  Upon request of Lender, Debtor shall furnish Lender with certificates
or other  evidence  satisfactory  to Lender  of  compliance  with the  foregoing
insurance  provisions.  Lender  shall  have  the  right  (but  shall be under no
obligation)  to pay any of the premiums on such  insurance and all such payments
made by Lender shall become part of the Secured Obligations and be considered an
advance at the highest  rate of  interest  provided  for in the Loan  Documents.
Debtor  expressly  authorizes  its  insurance  carriers  to pay  proceeds of all
insurance  policies  covering  all or any  part of the  Collateral  directly  to
Lender.

                           g. Disposition  of  Collateral.    Debtor  shall  not
license,  sell,  offer to sell,  otherwise  assign  or  permit  the  involuntary
transfer of, or disposition of the Collateral or any interest  therein,  without
the prior written consent of Lender;  provided,  however, that unless, following
(i) a  demand  for  payment  under  the  Loan  Agreement  or  Note,  or (ii) the
occurrence of an Event of Default, or (iii) Lender or any Lender notifies Debtor
otherwise,  Debtor may sell its Inventory or grant nonexclusive  licenses in the
ordinary course of its business.

                           h. Security  Interests in  Collateral.   Debtor shall
keep the Collateral free from any lien,  security interest or encumbrance except

                                       10


<PAGE>


(i) those set forth on  Schedule E hereto and (ii) those in favor of Lender,  in
good order and repair,  reasonable wear and tear excepted, and will not waste or
destroy the Collateral or any part thereof.  If reasonably  requested by Lender,
Debtor shall give notice of Lender's security interests in the Collateral to any
third  person  with  whom  Debtor  has any  actual  or  prospective  contractual
relationship or other business dealings.

                           i. Collateral   Not to Be Used in  Violation of Laws.
Debtor shall not use the  Collateral  or any of its property in violation of any
law, statute, regulation, or ordinance.

                           j. Compliance with Laws.  Debtor shall continue to be
in compliance with all applicable laws, statutes, rules, and regulations.

                           k. Maintenance,  Inspection  of  Books  and  Records.
Debtor shall maintain complete and accurate Books and Records in accordance with
generally  accepted  accounting  principles  in effect in the United States from
time to time, and shall make all necessary entries therein to reflect the costs,
values and locations of its Inventory and Equipment and the transactions  giving
rise to its Accounts and all payments,  credits and adjustments thereto.  Debtor
shall  keep  Lender  fully  informed  as to the  location  of all such Books and
Records and shall permit Lender and its authorized agents to have full, complete
and unrestricted  access thereto at all reasonable  times to inspect,  audit and
make copies of any and all such Books and  Records,  at Lender's  sole  expense.
Lender's rights  hereunder shall be enforceable at law or in equity,  and Debtor
consents  to the entry of  judicial  orders or  injunctions  enforcing  specific
performance of such obligations hereunder.

                           l. Assignment of United States  Accounts.   If any of
the  Accounts  arise  out of  contracts  with the  United  States  or any of its
departments, agencies or instrumentalities,  Debtor shall immediately notify and
identify same to Lender,  and shall  promptly  execute and deliver to Lender for
the benefit of the Secured  Party an assignment of claims for such Accounts in a
form reasonably  acceptable to Lender, and shall take all steps deemed necessary
or desirable by Lender to protect  Lender's  interest  therein under the Federal
Assignment of Claims Act or any similar law or regulation.

                           m. Maintenance  and   Inspection  of   Equipment  and
Inventory.  With respect to Equipment  and  Inventory,  Debtor  shall:  (i) keep
accurate books and records with respect thereto, including,  without limitation,
maintenance  records and current  stock,  and cost and sales records  accurately
itemizing the types and quantities thereof; (ii) upon request, deliver to Lender
all evidence of ownership in such  Collateral,  including  certificates of title

                                       11


<PAGE>



with Lender's  interests  appropriately  noted on the certificate;  (iii) permit
Lender and its  authorized  agents to inspect  any or all of the  Inventory  and
Equipment at all reasonable times; and (iv) preserve the Inventory and Equipment
in good condition and repair, and pay the cost of all replacement parts, repairs
to and maintenance of the Inventory and Equipment.

                           n. Assignment of Accounts.   Following (i) demand for
payment under the Loan  Agreement or Note, or (ii) the occurrence of an Event of
Default,  and  upon  request  by  Lender,  Debtor  shall  promptly  give  Lender
assignments,  in a form acceptable to Lender, of all Accounts,  all original and
other documents evidencing a right to payment of Accounts, financial statements,
agings, reports, lists of account debtors, copies of purchase orders,  invoices,
contracts,  shipping and delivery  receipts and such other data  concerning  the
Accounts as Lender may  request.  Debtor  agrees that Lender and its  authorized
agents shall at all times have the right to confirm  orders and to verify any or
all of the Accounts in Lender's name, or in any  fictitious  name used by Lender
for verifications.

                           o.      Continuing of Perfected Status of Collateral.

                                   (1)   Debtor agrees to cooperate and join, at
its  expense,  with  Lender  in  taking  such  steps  as are  necessary,  in the
reasonable  judgment of Lender,  to perfect or continue the perfected  status of
the security  interests  granted  herein,  including,  without  limitation,  the
execution  and  delivery of any  financing  statements,  amendments  thereto and
continuation statements, the delivery of Chattel Paper, Documents or Instruments
to Lender,  the  obtaining of landlords'  and  mortgagees'  waivers  required by
Lender,  the  notation of  encumbrances  in favor of Lender on  certificates  of
title,  prompt  registration of all copyrights with the United States  Copyright
Office,  prompt registration of all trademarks with the United States Patent and
Trademark Office, and the execution and filing of any collateral assignments and
any other Instruments  requested by Lender to perfect its security  interests in
any and  all of  Debtor's  patents,  trademarks,  service  marks,  trade  names,
copyrights and other General Intangibles  including,  without  limitation,  with
respect to the  issuance  of any  patents  pursuant to any now pending or future
patent applications. Lender is expressly authorized to file financing statements
without Debtor's signature.

                                    (2)  Following indefeasible  payment in full
of all Secured  Obligations,  Lender  agrees to cooperate  and join, at Debtor's
expense, in executing and delivering all documents and taking all actions as are
necessary  to  release  and  terminate   Lender's  security   interests  in  and
assignments of the Collateral.

                                       12


<PAGE>



                           p. Joinder by  Subsidiaries.  Debtor  agrees to cause
any and all  subsidiaries  that may be  acquired  at any time during the term of
this Security Agreement to sign a joinder to this Security Agreement.

                  6.       General Authority.

                           a. Lender  as   Attorney-in-Fact.     Debtor   hereby
irrevocably appoints Lender (and any of its attorneys,  officers,  employees, or
agents) as its true and lawful attorney-in-fact,  said appointment being coupled
with an  interest,  with  full  power of  substitution,  in the name of  Debtor,
Lender,  or  otherwise,  for the  sole use and  benefit  of  Lender  in its sole
discretion,  but at Debtor's  expense,  to exercise,  to the extent permitted by
law,  in  Lender's  name or in the name of Debtor or  otherwise,  the powers set
forth  herein,  whether  or not any of the  Secured  Obligations  are due,  such
powers,  including,  but not limited to, the powers at any time following demand
for payment under the Loan  Agreement or Note, or the  occurrence of an Event of
Default:  (i) to endorse  the name of Debtor  upon any  instruments  of payment,
invoice, freight, or express bill, bill of lading, storage, or warehouse receipt
relating to the Collateral; (ii) to demand, collect, receive payment of, settle,
compromise or adjust all or any of the Collateral; (iii) to sign and file one or
more financing  statements  naming Debtor as debtor and Lender, as secured party
and indicating  therein the types or describing  the items of Collateral  herein
specified;  (iv) to correspond and negotiate directly with insurance carriers to
the extent  necessary to provide  Lender with the benefit of the rights  granted
pursuant to Section 5(f) hereof;  (v) to sign and record one or more assignments
or  other  instruments  in favor  of  Lender  to  transfer  ownership  of any IP
Collateral  to Lender;  and (vi) to execute any notice,  statement,  instrument,
agreement, or other paper that Lender may require to create, preserve,  perfect,
or validate any security interest granted pursuant hereto or to enable Lender to
exercise  or  enforce  its rights  hereunder  or with  respect to such  security
interest.

                           b. Liability of Lender as  Attorney-in-Fact.  Neither
Lender nor its  attorneys,  officers,  employees,  or agents shall be liable for
acts, omissions,  any error in judgment or mistake in fact in its/their capacity
as  attorney-in-fact.   Debtor  hereby  ratifies  all  acts  of  Lender  as  its
attorney-in-fact  other  than as a result of the  gross  negligence  or  willful
misconduct of Lender. This power, being coupled with an interest, is irrevocable
until the Secured  Obligations  have been fully  satisfied.  Lender shall not be
required  to take any steps  necessary  to  preserve  any rights  against  prior
parties with respect to any of the Collateral.

                           c. Effect of Extensions and Modifications. Lender may
extend the time of payment,  arrange for payment in  installments  or  otherwise


                                       13


<PAGE>



modify  the  terms  of,  or  release,  any of the  Collateral,  without  thereby
incurring responsibility to, or discharging or otherwise affecting any liability
of, Debtor.

                  7.       Remedies.

                           a. Acceleration  of  Secured  Obligations;    General
Rights of Lender.  Upon the occurrence of an Event of Default,  at Lender's sole
option,  all Secured  Obligations  shall  immediately  become due and payable in
full, all without protest, presentment,  demand or further notice of any kind to
Debtor,  all of which  are  expressly  waived.  Upon and  following  an Event of
Default,  Lender may, at its option, exercise any and all rights and remedies it
has under this Security  Agreement,  any other Credit Document and/or applicable
law, including,  without limitation, the right to charge and collect interest on
the principal portion of the Secured  Obligations at a rate equal to the highest
rate allowed by law, such rate of interest to apply to the Secured  Obligations,
at Lender's option, both before and after an Event of Default, maturity (whether
by acceleration or otherwise) and entry of a judgment in favor of Lender for the
benefit  of the  Secured  Party  with  respect  to  any  or  all of the  Secured
Obligations.

                           b. Right of Set-off.  Upon the occurrence of an Event
of Default, Lender shall have the right, without notice to Debtor and regardless
of the adequacy of the Collateral for the Secured  Obligations or other means of
obtaining repayment of the Secured Obligations,  and is specifically  authorized
hereby to apply toward and set-off  against and apply to the then unpaid balance
of the Secured Obligations any items or funds held by Lender including,  without
limitation,  any and all deposits  (whether general or special,  time or demand,
matured  or  unmatured)  or any other  property  of Debtor,  including,  without
limitation,  securities,  now or  hereafter  maintained  by  Debtor  for its own
account  with  Lender  and any other  indebtedness  at any time held or owing by
Lender to or for the credit or the  account of Debtor,  even if  effecting  such
set-off  results in a loss or  reduction  of  interest  or the  imposition  of a
penalty  applicable to the early withdrawal of time deposits.  For such purpose,
Lender  shall  have,  and Debtor  hereby  grants to Lender,  a first lien on and
security  interest  in such  deposits,  property,  funds  and  accounts  and the
proceeds thereof. Such right of set- off shall exist whether or not Lender shall
have made any demand under any Credit Document,  or any other document  executed
in connection therewith,  and whether or not the Secured Obligations are matured
or unmatured.

                           c. Additional Rights and Remedies. In addition to the
rights and remedies  available to Lender as set forth above and any other rights
or remedies  available to Lender under applicable law, upon the occurrence of an
Event of Default hereunder, or at any time thereafter, Lender may at its option,
immediately and without notice, do any or all of the following, which rights and

                                       14


<PAGE>


remedies are cumulative, may be exercised from time to time, and are in addition
to any rights and  remedies  available  to Lender  under any other  agreement or
instrument by and between Debtor and Lender:

                                    (1)  Exercise  any and all of the rights and
remedies  of a secured  party  under the  Uniform  Commercial  Code,  including,
without  limitation,  the right to require Debtor to assemble the Collateral and
make it available to Lender at a place reasonably convenient to the parties;

                                    (2)  Operate,  utilize,  recondition  and/or
refurbish any of the  Collateral  for the purpose of enhancing or preserving the
value  thereof by any means  deemed  appropriate  by Lender,  in its  reasonable
discretion,  including,  without  limitation,  converting  raw materials  and/or
work-in-process into finished goods;

                                    (3)  Notify the account  debtors  for any of
the Accounts to make payment  directly to Lender,  or to such post office box as
Lender may direct;

                                    (4)  Demand, sue for,collect or retrieve any
money or property at any time  payable,  receivable on account of or in exchange
for, or make any compromise,  or settlement deemed desirable with respect to any
of the Collateral;

                                    (5)  Notify the post  office authorities  to
change the address for  delivery of Debtor's  mail to an address  designated  by
Lender and to  receive,  open,  and  distribute  all mail  addressed  to Debtor,
retaining all mail relating to the  Collateral  and forwarding all other mail to
Debtor; and/or

                                    (6)  Upon  seven (7)  calendar  days'  prior
written  notice to Debtor or one (1) day's notice by  telephone  with respect to
Collateral  that is perishable or threatens to decline  rapidly in value,  which
Debtor hereby acknowledges to be sufficient, commercially reasonable and proper,
Lender may sell,  lease or otherwise  dispose of any or all of the Collateral at
any time and from  time to time at  public  or  private  sale,  with or  without
advertisement thereof, and apply the proceeds of any such sale first to Lender's
expenses in preparing the Collateral for sale (including  reasonable  attorneys'
fees) and second to the complete  satisfaction of the Secured Obligations in any
order deemed  appropriate  by Lender in its sole  discretion.  Debtor waives the
benefit of any  marshaling  doctrine  with  respect to Lender's  exercise of its
rights  hereunder.  Lender or anyone else may be the  purchaser of any or all of
the Collateral so sold and thereafter hold such Collateral absolutely, free from
any claim or right of  whatsoever  kind,  including  any equity of redemption of
Debtor any such notice, right and/or equity of redemption being hereby expressly
waived and released.

                                       15


<PAGE>



                  8.       Grant of License to Use  Intangibles.  In addition to
the grant of a security interest in the IP Collateral hereinbefore provided, for
the purposes of enabling Lender to exercise its rights and remedies hereunder at
such  time as  Lender,  without  regard to this  Section  8,  shall be  lawfully
entitled  to exercise  such rights and  remedies,  the Debtor  hereby  grants to
Lender an irrevocable,  non-exclusive  license  (exercisable  without payment of
royalty or other  compensation to the Debtor,  provided that the actual proceeds
received  by Lender of any use or sale of  Lender's  rights  under such  license
shall be applied to the Secured Obligations) to use, assign or sublicense any of
the IP Collateral,  now owned or hereafter  acquired by Debtor, and wherever the
same may be located, including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored, all computer software
and  programs  and all source  code and object code  relating  to such  computer
software and programs.

                  9.       Miscellaneous.

                           a. Remedies Cumulative; No Waiver. The rights, powers
and remedies of Lender provided in this Security  Agreement and any of the other
Loan Documents are  cumulative  and not exclusive of any right,  power or remedy
provided  by law or equity.  No failure or delay on the part of Lender or either
of them in the exercise of any right,  power or remedy shall operate as a waiver
thereof,  nor shall any single or partial exercise of any right, power or remedy
preclude  any other or further  exercise  thereof,  or the exercise of any other
right, power or remedy.

                           b. Notices. All notices,  requests, demands and other
communications  which are required or permitted to be given under this Agreement
will be in writing  and will be deemed to have been duly given if (i)  delivered
in person,  or (ii) mailed,  first class certified,  registered or express mail,
return  receipt  requested  and  postage  prepaid,  or (iii) sent by  recognized
overnight courier, with proof of delivery requested and charges prepaid, to:

                  If to Debtor:

                           NACO Industries, Inc.
                           395 West 1400 North
                           Logan, Utah  84341


                                       16


<PAGE>



                  If to Lender:

                           WebBank Corporation
                           136 Heber Avenue, Suite 209
                           P.O. Box 1831
                           Park City, Utah  84060-1831

                  with a copy to:

                           Douglas C. Waddoups

                           Parr Waddoups Brown Gee & Loveless
                           185 South State, Suite 1300
                           Salt Lake City, Utah  84111
                           Facsimile:  (801) 532-7750

or to such other  address as a party may specify by written  notice to the other
parties.

                           c. Costs   and   Expenses.     Whether   or  not  the
transactions  contemplated  by  this  Security  Agreement  and  the  other  Loan
Documents are fully  consummated,  Debtor shall promptly pay (or  reimburse,  as
Lender may elect) all costs and  expenses  that  Lender may  hereafter  incur in
connection  with the  perfection  and  enforcement  of the Loan  Documents,  the
collection  of all amounts  due under the Loan  Documents,  and all  amendments,
modifications,  consents or waivers,  if any, to the Loan Documents.  Such costs
and  expenses  shall  include,  without  limitation,  the  reasonable  fees  and
disbursements of counsel to Lender, the costs of appraisals,  searches of public
records,  costs of filing and recording documents with public offices,  internal
and/or external audit and/or examination fees and costs, stamp, excise and other
taxes,  the  reasonable  fees of  Lender's  accountants,  consultants  or  other
professionals,  costs and expenses  from any actual or attempted  sale of all or
any  part  of  the  Collateral,  or  any  exchange,   enforcement,   collection,
compromise,  or settlement  of any of the  Collateral or receipt of the proceeds
thereof, and for the care and preparation for sale of the Collateral  (including
insurance  costs) and defending and asserting the rights and claims of Lender in
respect thereof, by litigation or otherwise.  Debtor's reimbursement obligations
under this Section 9 shall survive any termination of the Loan Documents.

                           d. Governing Law.  This Security  Agreement  shall be
construed in accordance with and governed by the  substantive  laws of the State
of Utah without  reference to conflict of laws  principles  provided  that as to
Collateral  located in any  jurisdiction  other than Utah, the Lender shall have
all the rights to which a secured party under the laws of such  jurisdiction  is
entitled.

                                       17


<PAGE>



                           e. Integration. This Security Agreement and the other
Loan Documents  constitute the sole agreement of the parties with respect to the
subject matter hereof and thereof and supersede all oral  negotiations and prior
writings with respect to the subject matter hereof and thereof.

                           f. Amendment;  Waiver.  No amendment of this Security
Agreement,  and no waiver of any one or more of the  provisions  hereof shall be
effective unless set forth in writing and signed by the parties hereto.

                           g.  Successors and Assigns.  This Security  Agreement
(i) shall be binding  upon  Debtor  and  Lender  and,  where  applicable,  their
respective heirs, executors,  administrators,  successors and permitted assigns,
and (ii) shall inure to the benefit of Debtor and Lender and, where  applicable,
their  respective  heirs,  executors,  administrators,  successors and permitted
assigns;  provided,  however, that Debtor may not assign its rights hereunder or
any interest  herein  without the prior written  consent of Lender,  in its sole
discretion,  and any such assignment or attempted  assignment by Debtor shall be
void and of no effect with respect to Lender.

                           h. Severability.  The illegality or  unenforceability
of any  provision  of this  Security  Agreement or any  instrument  or agreement
required  hereunder  shall  not in any way  affect  or impair  the  legality  or
enforceability  of the remaining  provisions  of this Security  Agreement or any
instrument  or  agreement  required  hereunder.   In  lieu  of  any  illegal  or
unenforceable  provision  in this  Security  Agreement,  there  shall  be  added
automatically  as a part of this  Security  Agreement  a legal  and  enforceable
provision as similar in terms to such illegal or unenforceable  provision as may
be possible.

                           i. Headings.  The headings of sections and paragraphs
have been included  herein for  convenience  only and shall not be considered in
interpreting this Security Agreement.

                  [Remainder of Page Left Blank Intentionally]



                                       18


<PAGE>



         IN WITNESS  WHEREOF,  the parties  hereto have  executed  this Security
Agreement on this date above first written.

                                               NACO INDUSTRIES, INC.,
                                               a Utah corporation

                                               --------------------------------

                                               By:

                                               Its:


                                               WEBBANK CORPORATION,
                                               a Utah Corporation

                                               --------------------------------

                                               By:

                                               Its:




                                       19


<PAGE>



                                   Schedule A
                                   ----------

             Trademarks, Service Marks or Service Mark Applications

                                       20


<PAGE>



                                   Schedule B
                                   ----------

                         Patents and Patent Applications

                                       21


<PAGE>



                                   Schedule C
                                   ----------

                     Copyrights and Copyright Registrations

                                                 22


<PAGE>



                                   Schedule D
                                   ----------

              Debtor Places of Business and Location of Collateral


NACO Industries, Inc.
395 West 1400 North
Logan, Utah  84321

NACO Industries, Inc.
3445 West Jones Avenue
Garden City, Kansas  67846

NACO Industries, Inc.
2395 Maggio Circle
Lodi, California  95240






                                       23


<PAGE>


                                   Schedule E
                                   ----------

                       Liens or Encumbrances on Collateral

                                       24