SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT

         This  Amendment,  dated as of November 30, 2000, is made by and between
NACO  INDUSTRIES,  INC., a Utah corporation  (the  "Borrower"),  and WELLS FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").

                                    Recitals
                                    --------

         The  Borrower  and the Lender have  entered  into a Credit and Security
Agreement  dated as of April  22,  1999,  as  previously  amended  (the  "Credit
Agreement"). Capitalized terms used in these recitals have the meanings given to
them in the Credit Agreement unless otherwise specified.

         The  Borrower has  requested  that  certain  amendments  be made to the
Credit Agreement,  which the Lender is willing to make pursuant to the terms and
conditions set forth herein.

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:

         1. Defined Terms.  Capitalized  terms used in this Amendment  which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless  otherwise  defined  herein.  In  addition,  Section  1.1 of  the  Credit
Agreement  is amended by adding or amending,  as the case may be, the  following
definitions:

                  "Interest  Rate  Margin"  means  three  and  one-half  percent
         (3.5%);  provided,  however,  that if no Default Period then exists and
         the Borrower's  audited financial  statements for the Borrower's fiscal
         year ending  November 30, 2000,  demonstrate  that the  Borrower's  Net
         Income  equals or exceeds  $100,000,  the Interest Rate Margin shall be
         reduced by one-half of one percent (0.5%) on the first day of the month
         following  the month  such  financial  statements  are  delivered;  and
         provided  further  that  if no  Default  Period  then  exists  and  the
         Borrower's audited financial  statements for the Borrower's fiscal year
         ending  November 30, 2001,  demonstrate  that the Borrower's Net Income
         equals or exceeds  $150,000,  the Interest Rate Margin shall be reduced
         by  one-half  of one  percent  (0.5%)  on the  first  day of the  month
         following the month such financial statements are delivered.

                  "Inventory Advance Rate" means, from December 1, 2000, through
         May 31, 2001, 70%; from June 1, 2001,  through  November 30, 2001, 65%;
         and at all other times, 60%.

                  "Maturity Date" means April 30, 2003.


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<PAGE>


         2.  Section 6.13 of the Credit  Agreement is hereby  amended to read in
its entirety as follows:

                  "Section  6.13  Minimum  Book Net  Worth.  The  Borrower  will
         maintain,  as of each date  described  below,  its Book Net Worth at an
         amount not less than the amount set forth opposite such date:
<TABLE>
<CAPTION>

                           Date                                             Minimum Book Net Worth
                           ----                                             ----------------------
<S>                                                                                <C>
                    November 30, 2000                                              $703,000

                    February 28, 2001                                              $633,000

                       May 31, 2001                                                $838,000

                     August 31, 2001                                               $833,000

                November 30, 2001 and the
           last day of each quarter thereafter                                     $768,000"

         3.  Section 6.14 of the Credit  Agreement is hereby  amended to read in
its entirety as follows;

                  "Section 6.14 Minimum Net Income. The Borrower will achieve as
         of each date  described  below,  cumulative Net Income of not less that
         the amount set forth  opposite such date (amounts  shown in parentheses
         are negative);

                           Date                                             Minimum YTD Net Income
                           ----                                             ----------------------
                    November 30, 2000                                              $(20,000)

                    December 31, 2000                                             $(114,000)

                     January 31, 2001                                             $(130,000)

                    February 29, 2001                                             $(110,000)

                      March 31, 2001                                               $(45,000)

                      April 30, 2001                                                $40,000

                       May 31, 2001                                                 $95,000

                      June 30, 2001                                                $140,000

                      July 31, 2001                                                $140,000

                     August 31, 2001                                                $90,000

                    September 30, 2001                                              $75,000

                     October 31, 2001                                               $50,000

                    November 30, 2001                                               $25,000"

</TABLE>

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<PAGE>


         4.  Section 6.15 of the Credit  Agreement is hereby  amended to read in
its entirety as follows:

                  "Section 6.15 New  Covenants.  On or before  October 31, 2001,
         the  Borrower  and the Lender  shall agree on new  covenant  levels for
         Sections  6.13,  6.14 and 7.10 for periods after November 30, 2001. The
         new covenant  levels will be based on the  Borrower's  projections  for
         such periods and shall be no less stringent than the present levels."

         5.  Section 7.10 of the Credit  Agreement is hereby  amended to read in
its entirety as follows:

                  "Section  7.10 Capital  Expenditures.  The  Borrower  will not
         incur or contract to incur Capital  Expenditures  of more than $200,000
         in the aggregate during any fiscal year."

         6.  No Other Changes. Except as explicitly  amended by this  Amendment,
all of the terms and  conditions  of the Credit  Agreement  shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.

         7.  Waiver of Defaults.  The  Borrower is in default of Section 6.13 of
the Credit  Agreement  as of August 31,  2000,  and  Section  6.14 of the Credit
Agreement as of May 31, 2000, (collectively,  the "Default"). Upon the terms and
subject to the conditions set forth in this Amendment,  the Lender hereby waives
the Defaults.  This waiver shall be effective only in this specific instance and
for the  specific  purpose  for which it is  given,  and this  waiver  shall not
entitle  the  Borrower  to any other or further  waiver in any  similar or other
circumstances.

         8.  Amendment  Fee.  The  Borrower  shall pay the Lender as of the date
hereof  a  fully  earned,   non-refundable  fee  in  the  amount  of  $5,000  in
consideration of the Lender's execution of this Amendment.

         9. Conditions  Precedent.  This Amendment,  and the waiver set forth in
Paragraph 7 hereof,  shall be effective  when the Lender shall have  received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:

                  (a) The Acknowledgment and Agreement of Guarantor set forth at
         the end of this Amendment, dully executed by the Guarantor.

                  (b) Payment of the fee described in Paragraph 8.

                  (c) Such other matters as the Lender may require.


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<PAGE>


         10. Representations and Warranties.  The Borrower hereby represents and
warrants to the Lender as follows:

                  (a) The  Borrower  has all  requisite  power and  authority to
         execute this Amendment and to perform all of its obligation  hereunder,
         and this Amendment has been duly executed and delivered by the Borrower
         and  constitutes  the  legal,  valid  and  binding  obligation  of  the
         Borrower, enforceable in accordance with its terms.

                  (b) The execution, delivery and performance by the Borrower of
         this  Amendment  have been duly  authorized by all necessary  corporate
         action and do not (i) require any authorization, consent or approval by
         any  governmental  department,  commission,  board,  bureau,  agency or
         instrumentality, domestic or foreign, (ii) violate any provision of any
         law,  rule or regulation  or of any order,  writ,  injunction or decree
         presently  in effect,  having  applicability  to the  Borrower,  or the
         articles of incorporation  or by-laws of the Borrower,  or (iii) 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 party or by which it or its  properties may be bound or
         affected.

                  (c) All of the  representations  and  warranties  contained in
         Article V of the  Credit  Agreement  are  correct on and as of the date
         hereof as though made on and as of such date, except to the extent that
         such representations and warranties relate solely to an earlier date.

         11. References.   All  references  in the  Credit  Agreement  to  "this
Agreement"  shall be deemed to refer to the Credit  Agreement as amended hereby;
and any and all  references  in the Security  Documents to the Credit  Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.

         12. No Other  Waiver.  Except as set forth in  Paragraph 7 hereof,  the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach,  default or event of default under any Security Document or
other  document  held by the  Lender,  whether  or not known to the  Lender  and
whether or not existing on the date of this Amendment.

         13. Release.     The  Borrower,   and  the  Guarantor  by  signing  the
Acknowledgment   and  Agreement  of  Guarantor  set  forth  below,  each  hereby
absolutely and  unconditionally  releases and forever discharges the Lender, and
any  and  all  participant,   parent  corporations,   subsidiary   corporations,
affiliated corporations,  insurers, indemnitors, successors and assigns thereof,
together  with all of the present  and former  directors,  officers,  agents and
employees of any of the foregoing, from any and all claims, demands or causes of


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<PAGE>


action of any kind,  nature or description,  whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise,  which the
Borrower or such  Guarantor  has had,  now has or has made claim to have against
any such person for or by reason of any act,  omission,  matter,  cause or thing
whatsoever  arising from the beginning of time to and including the date of this
Amendment,  whether  such  claims,  demands  and causes of action are matured or
unmatured or known or unknown.

         14. Costs and  Expenses.  The Borrower  hereby  reaffirms its agreement
under the  Credit  Agreement  to pay or  reimburse  the Lender on demand for all
costs  and  expenses  incurred  by the  Lender  in  connection  with the  Credit
Agreement,  the Security Documents and all other documents contemplated thereby,
including  without  limitation all reasonable  fees and  disbursements  of legal
counsel.  Without  limiting  the  generality  of  the  foregoing,  the  Borrower
specifically  agrees to pay all fees and  disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby  agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement,  or apply the proceeds of any loan, for the
purpose of paying any such fees,  disbursements,  costs and expenses and the fee
required under Paragraph 8 hereof.

         15. Miscellaneous.  This Amendment and the Acknowledgment and Agreement
of Guarantor may be executed in any number of  counterparts,  each of which when
so  executed  and  delivered  shall  be  deemed  an  original  and all of  which
counterparts, taken together, shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.

WELLS FARGO BUSINESS CREDIT, INC.      NACO INDUSTRIES, INC.

By:                                    By:
   --------------------------------       ------------------------------------
   Its:                                   Its:
       ----------------------------           --------------------------------


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<PAGE>


                    ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

         The  undersigned,  a guarantor of the  indebtedness of Naco Industries,
Inc. (the  "Borrower")  to Wells Fargo  Business  Credit,  Inc.  (the  "Lender")
pursuant to a Guaranty dated as of April 22, 1999 (the  "Guaranty"),  hereby (i)
acknowledges  receipt of the  foregoing  Amendment;  (ii)  consents to the terms
(including  without  limitation  the  release set forth in  Paragraph  13 of the
Amendment) and execution thereof;  (iii) reaffirms his obligations to the Lender
pursuant to the terms of his Guaranty; and (iv) acknowledges that the Lender may
amend,  restate,  extend, renew or otherwise modify the Credit Agreement and any
indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit  accommodations,  without  notifying or obtaining the
consent  of  the  undersigned  and  without   impairing  the  liability  of  the
undersigned  under his  Guaranty  for all of the  Borrower's  present and future
indebtedness to the Lender.


                                           -------------------------------------
                                           Verne Bray


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<PAGE>


                      SUPPLEMENTAL SECRETARY'S CERTIFICATE

         I, Verne E. Bray, the secretary of Naco Industries, Inc., a corporation
formed under the laws of the State of Utah,  hereby  certify that the  following
person presently is duly constituted, appointed and acting as an officer of said
corporation  and is duly  authorized  to sign and to act  generally on behalf of
said  corporation  and that the signature  appearing  below is the authentic and
official signature of said officer:

                 Name                 Title                     Sample Signature
                 ----                 -----                     ----------------
            Michael Hopkins         President
                                                        ------------------------

         The  officer  named  herein is  designated  in  addition to any and all
persons previously  designated as authorized to sign or to act on behalf of said
corporation.

         IN WITNESS WHEREOF, I have hereunto subscribed by name this ____ day of
November, 2000.


                                             -----------------------------------
                                             Secretary


Attest by One Other Officer


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


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