EXHIBIT 10.G

                   SECOND AMENDED AND RESTATED LOAN AGREEMENT

       This  Second Amended and Restated Loan Agreement ("Agreement") dated
  as  of  December  12,  1998, by and between Chase Bank of Texas, National
  Association  ("Bank")  and  the Borrower described below.  This Agreement
  amends  and  restates  in  its  entirety  the  Amended  and Restated Loan
  Agreement  dated  as  of January 12, 1998, between Bank and Borrower (the
  "Prior Agreement").

       In  consideration  of  the  Loan  or  Loans  and  Letters  of Credit
  described below and the mutual covenants and agreements contained herein,
  and  intending  to  be  legally  bound hereby, Bank and Borrower agree as
  follows:

  1.   DEFINITIONS  AND  REFERENCE  TERMS.   In addition to any other terms
  defined herein, the following terms shall have the meaning set forth with
  respect thereto:

       Adjusted LIBOR Rate means, for any Interest Period, LIBOR plus 2%.

       Affiliate  of  any  Obligor  or  of  the  Bank means any Person that
  directly  or  indirectly  controls,  is controlled by, or is under common
  control  with  any Obligor or the Bank, respectively.  The term "control"
  means  to  possess,  directly  or  indirectly,  the  power  to direct the
  management  and  policies  of  a Person, whether through the ownership of
  voting  securities, by contract, or otherwise.  A Person that directly or
  indirectly  owns (legally or beneficially) or has the right to vote 5% or
  more  of  any  class  of  voting  stock of another Person "controls" that
  Person.  Bank is not under any circumstances an Affiliate of any Obligor.

       Borrower means, Peerless Mfg. Co., a Texas corporation.

       Borrower's  Address  means,  2819  Walnut  Hill Lane, Dallas, Texas
  75229.

       Borrowing means, a LIBOR Borrowing or a Prime Rate Borrowing.

       Business  Day  means, a day when the main office of Bank is open for
  the general conduct of commercial lending business.

       Collateral  Account  means, each deposit account in which Bank has a
  perfected,  first  priority  Lien,  not subject to any claim of any other
  Person.

       Compliance  Certificate  means,  a  certificate substantially in the
  form of Exhibit B.
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       Consequential  Loss  means,  any  loss,  expense, penalty or premium
  incurred  by the Bank, including any interest paid by the Bank to lenders
  of  funds  borrowed  by it to make or carry the Loans, resulting from any
  premature  payment  or  termination  of any Interest Period or Borrower's
  failure  to borrow or prepay any LIBOR Borrowing on the date specified by
  Borrower,  in  each  case  whether  voluntary  or involuntary.  Premature
  termination  of  an  Interest  Period includes termination resulting from
  acceleration of the Obligations.  "Consequential Loss" includes any loss,
  expense,  penalty  or  premium  incurred  by  the  Bank on account of any
  reduction  in the Bank's margins or spreads between its cost of funds and
  the interest earned on the principal of any LIBOR Borrowing terminated or
  canceled  pursuant  to  Section 2.G(ii), including an amount equal to the
  excess  (if  any)  of  (x)  interest that would have accrued on the LIBOR
  Borrowing  during  the remainder of the Interest Period had the borrowing
  not  been  terminated  or canceled before the end of the Interest Period,
  over  (y)  the  interest actually accrued on the principal amount of that
  terminated  or  canceled  borrowing  for  the  remainder  of the Interest
  Period.

       Current  Assets means, the aggregate amount of all the assets of the
  Borrower  and  its  Subsidiaries,  on  a consolidated basis, assets which
  would, in accordance with GAAP, properly be defined as current assets.

       Current  Liabilities  means,  the  aggregate  amount  of all current
  liabilities  of  the  Borrower  and  its  Subsidiaries, on a consolidated
  basis,  as  determined  in  accordance  with GAAP, but in any event shall
  include all liabilities except those having a maturity date which is more
  than  one  year from the date as of which such computation is being made,
  plus,  without  duplication,  the  amount  equal to the aggregate undrawn
  amount of all letters of credit issued for the account of Borrower or any
  of its Subsidiaries.

       Default  Rate  means,  at Bank's discretion up to the Highest Lawful
  Rate, or if none, 25% per annum.

       Event of Default means, as set forth in Section 6.

       Eurodollar  Reserve  Requirement  means,  on  any  day  the  maximum
  aggregate  rate at which Bank is required to maintain reserves (including
  basic,   supplemental,   marginal   and   emergency   reserves)   against
  "Eurocurrency  liabilities" (as defined in Federal Reserve Regulation D).
  The  Eurocurrency  Reserve  Requirement  will  be  expressed as a decimal
  rather  than  a percentage and will be rounded, if necessary, to the next
  highest  one hundredth of one percent (.0001).  Reserve requirements will
  be   calculated   as  required  by  any  Governmental  Authority.    Each
  determination  of  the  Eurodollar  Reserve  Requirement  by Bank will be
  conclusive and binding, absent obvious error.

       Governmental  Authority  means,  any foreign governmental authority,
  the  United  States  of  America,  any state of the United States and any
  political  subdivision   of  any   of  the  foregoing,  and  any  agency,
  department,  commission,  board,  bureau,  court or other tribunal having
  jurisdiction  over  Bank or any Obligor, or any Subsidiary of Borrower or
  their respective property.
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       Hazardous  Materials  means,  all  materials  defined  as  hazardous
  materials  or  substances under any local, state or federal environmental
  laws,  rules  or  regulations, and petroleum, petroleum products, oil and
  asbestos.

       Highest  Lawful  Rate   means, at any time and with respect to Bank,
  the  maximum  rate of nonusurious interest under applicable law that Bank
  may  charge the Borrower.  The Highest Lawful Rate shall be calculated in
  a  manner  that  takes into account any and all fees, payments, and other
  charges  contracted for, charged, or received in connection with the Loan
  Documents  that constitute interest under applicable law.  Each change in
  any  interest rate provided for herein based upon the Highest Lawful Rate
  resulting  from  a  change  in  the Highest Lawful Rate shall take effect
  without  notice to the Borrower at the time of such change in the Highest
  Lawful  Rate.   For purposes of determining the Highest Lawful Rate under
  Texas  law,  the applicable rate ceiling shall be the weekly rate ceiling
  described  in,  and  computed  in accordance with the Texas Finance Code,
  subject  to  the  Bank's  right to change such applicable rate ceiling in
  accordance with applicable law.

       Interest Option means, the Prime Rate or the Adjusted LIBOR Rate.

       Interest  Payment  Dates  means,  the  last  day    of each calendar
  quarter, beginning on December 31, 1998.

       Interest  Period means, the period of time during which a particular
  LIBOR  Borrowing  is  in  effect.  Each Interest Period will begin on the
  date  of the LIBOR Borrowing (which will be the last day of the preceding
  Interest  Period if the amount of the LIBOR Borrowing is a previous LIBOR
  Borrowing)  and  end on the same day of the month 1, 2 or 3 months later,
  as selected by Borrower.  The Interest Period is subject to the following
  limitations:  (1)  Any Interest Period which would otherwise end on a day
  which  is  not a LIBOR Business Day will end on the next succeeding LIBOR
  Business  Day,  unless  the  next  succeeding LIBOR Business Day falls in
  another calendar month, in which case the Interest Period will end on the
  next  preceding LIBOR Business Day.  (2) Any Interest Period which begins
  on the last LIBOR Business Day of a calendar month, or on a day for which
  there  is  no  corresponding day in the calendar month at the end of such
  Interest  Period,  will  end on the last LIBOR Business Day of a calendar
  month.  (3) Borrower will not select any Interest Period if the amount of
  the  Loans required to be repaid during that Interest Period would exceed
  the  amount  of  the  Loans  remaining in the Prime Rate Borrowing and in
  Interest  Periods  ending  prior  to  the  due date for any such required
  repayments.    (4)  No Interest Period will extend beyond the maturity of
  the Note.

       Investment means, any acquisition of all or substantially all assets
  of  any  Person,  or any direct or indirect purchase or other acquisition
  of, or a beneficial interest in, capital stock or other securities of any
  other  Person,  or  any  direct  or  indirect  loan,  advance (other than
  advances  to  employees for moving and travel expenses, drawing accounts,
  and  similar expenditures in the ordinary course of business), or capital
  contribution  to  or  investment  in  any other Person, including without
  limitation the incurrence or sufferance of debt or accounts receivable of
  any  other  Person that are not current assets or do not arise from sales
  to that other Person in the ordinary course of business.
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       Legal  Requirement  means,  any law, ordinance, decree, requirement,
  order,  judgment,  rule,  regulation,  zoning or land use requirement (or
  interpretation  of any of the foregoing) of, and the terms of any license
  or permit issued by, any Governmental Authority.

       LIBOR  means,  for  any  Interest  Period,  (1) the rate of interest
  quoted  by Bank as the rate offered by Bank (or any affiliate of Bank) to
  one or more prominent banks in the London interbank market for Applicable
  LIBOR  Deposits,  divided   by  (2)  1  minus   the   Eurodollar  Reserve
  Requirement.    "Applicable  LIBOR Deposits" means deposits with Bank (or
  any  affiliate of Bank) in its (or any affiliate's) London office in U.S.
  dollars for delivery on the first day of the Interest Period, maturing on
  the  last day of the Interest Period and in an amount equal (or as nearly
  equal as practicable) to the related LIBOR Borrowing.

       LIBOR  Borrowing  means,  a portion of the Loans bearing interest at
  the Adjusted LIBOR Rate at a given time.

       LIBOR  Business  Day  means,  a  Business  Day on which banks in the
  London  interbank   market   generally  are  open  to  conduct  interbank
  transactions in United States dollar deposits.

       Lien  means,  any  mortgage, pledge, security interest, encumbrance,
  lien,  or  charge of any kind, including without limitation any agreement
  to  give  or  not  to  give any of the foregoing, any conditional sale or
  other  title  retention agreement, and the filing of or agreement to give
  any  financing statement or other similar form of public notice under the
  laws of any jurisdiction.

       Loan  means,  any  loan described in Section 2 hereof (including any
  unreimbursed  draw under Letters of Credit) and any subsequent loan which
  states that it is subject to this Agreement.

       Loan  Documents  means,  this  Agreement  and any and all promissory
  notes  executed  by  Borrower  in  favor  of  Bank,  each application for
  issuance  of  a  Letter  of  Credit and all other documents, instruments,
  guarantees,  certificates  and  agreements  executed  and/or delivered by
  Borrower,  any  guarantor  or  third party in connection with any Loan or
  Letter of Credit.

       Material  Adverse  Effect  means,  any  material  adverse  effect on
  (a)  the property, business operations or financial prospects of Borrower
  and    its   Subsidiaries,  taken   as  a  whole,  (b)  the  validity  or
  enforceability  of  any  Loan  Document  or (c) the timely payment, after
  giving  effect  to  any  applicable  cure periods, of the principal of or
  interest  on  any  Loans  hereunder  or  any  other  amounts  payable  in
  connection herewith.

       NationsBank  Agreement  means,  the  Loan  Agreement  of  even  date
  herewith between Borrower and NationsBank of Texas, N.A.

       Net  Income  means,  net  profit after taxes of the Borrower and its
  Subsidiaries,  on  a  consolidated  basis,  determined in accordance with
  GAAP.

       Net  Loss  means,  net  loss  after  taxes  of  the Borrower and its
  Subsidiaries,  on  a  consolidated  basis,  determined in accordance with
  GAAP.
<PAGE>
       Obligor means, Borrower, any Subsidiary of Borrower, any indorser or
  guarantor  of any obligation under any Loan Document and any other Person
  liable for or the property of which secures any obligation under any Loan
  Document.
       
       Person   means,   an   individual,   partnership,   joint   venture,
  corporation,    trust,   tribunal,   unincorporated   organization,   and
  government, or any department, agency, or political subdivision thereof.

       Prime  Rate  means,  the fluctuating rate of interest established by
  Bank from time to time, at its discretion, whether or not such rate shall
  be  otherwise  published.    The  Prime Rate is established by Bank as an
  index  and  may or may not at any time be the best or lowest rate charged
  by Bank on any Loan.

       Prime  Rate  Borrowing  means,  any  portion  of  the  Loans bearing
  interest at the Prime Rate.

       Rate  Designation Date means, 10:00 a.m. Houston, Texas time 3 LIBOR
  Business Days before the first day of any proposed Interest Period.

       Rate Designation Notice is defined in Section 2.D(ii).

       Subsidiary  means,  as  to any Person, a corporation, partnership or
  other entity of which shares of stock or other ownership interests having
  ordinary  voting  power  (other  than  such stock or such other ownership
  interests  having  such  power  only  by  reason  of  the  happening of a
  contingency)  to  elect  a  majority  of  the board of directors or other
  managers  of  such  corporation,  partnership, or other entity are at the
  time  owned, or the management of which is otherwise controlled, directly
  or  indirectly,  through  one  or  more  intermediaries,  or both by such
  Person.

       Termination Date means, December 12, 1999.

       Accounting  Terms.  All accounting terms not specifically defined or
  specified  herein  shall  have  the meanings generally attributed to such
  terms  under  generally  accepted  accounting  principles ("GAAP"), as in
  effect  from  time  to  time,  consistently  applied, with respect to the
  financial statements referenced in Section 3.I hereof.

  2.   LOANS.

       A.   Loans.   Until the Termination Date, Bank hereby agrees to make
  (or  has  made)  one or more loans to Borrower in the aggregate principal
  face  amount  of  $3,500,000 (as such amount may be reduced, the "Line"),
  provided,  the  aggregate  unpaid principal of all loans shall not at any
  time  exceed  the difference between (i) the Line, minus (ii) the undrawn
  amount of all outstanding Letters of Credit.  The obligation to repay the
  loans  is  evidenced  by  the  promissory note of even date herewith (the
  promissory  note  or notes together with any and all renewals, extensions
  or rearrangements thereof being hereafter collectively referred to as the
  "Note") (a copy of which is attached as Exhibit A).

            i.   Revolving  Credit  Feature.    The  Note  provides  for  a
       revolving line of credit under which Borrower may from time to time,
       borrow, repay and re-borrow funds until the Termination Date.
<PAGE>
            ii.  Usage  Fee.   Borrower will pay a usage fee for the period
       from  and  including  the  date  the  Line  was  established  to and
       including  the maturity date of the Line at a rate per annum of .25%
       of  the  average daily unused portion of the Line (calculated on the
       basis  of  a  year  of 365 or 366 days as the case may be), with the
       accrued  and  unpaid usage fee being payable on the last day of each
       calendar   quarter   (beginning  December  31,  1998)   and  on  the
       Termination  Date.  The Borrower may at any time upon written notice
       to  the Bank permanently reduce the amount of the Line at which time
       the  obligation  of  the Borrower to pay a usage fee shall thereupon
       correspondingly be reduced.

            iii. Letter  of  Credit  Subfeature.  As a subfeature under the
       Line,  Bank  may  from time to time up to and including December 11,
       1999, issue letters of credit for the account of Borrower (each such
       letter  of  credit  and each letter of credit issued by the Bank for
       the  account  of Borrower or one of its Subsidiaries under the Prior
       Agreement  which  is  outstanding  on  the date hereof, a "Letter of
       Credit"  and  collectively, "Letters of Credit"); provided, however,
       that  the  form  and  substance  of  each  Letter of Credit shall be
       subject  to  approval  by  Bank in its sole discretion; and provided
       further that the aggregate undrawn amount of all outstanding Letters
       of  Credit  shall  not  at  any  time  exceed the difference between
       (a) the Line, minus (b) the aggregate unpaid principal amount of all
       Loans,  minus  (c)  the  amount  of all drawings under any Letter of
       Credit  for which Bank has not been reimbursed.  No Letter of Credit
       shall  have an expiry subsequent to December 11, 2000 or 366 or more
       days  after  the  issuance  date; provided Borrower may request that
       Bank  issue  Letters  of  Credit having an expiry after December 11,
       2000  or  an  expiry  366  or  more  days  after  the  issuance date
       ("Extended  Expiry  LC"), if (a) the undrawn amount of such Extended
       Expiry  LC  plus  the aggregate undrawn amount of all other Extended
       Expiry  LCs does not exceed by more than $350,000 an amount equal to
       the  aggregate  amount on deposit in the Collateral Accounts (b) the
       undrawn  amount  of any single Extended Expiry LC does not exceed by
       more than $50,000 an amount equal to the aggregate amount on deposit
       in  the Collateral Accounts, and (c) the aggregate undrawn amount of
       all  Extended Expiry LCs having the same beneficiary does not exceed
       by  more  than  $50,000  an  amount equal to the aggregate amount on
       deposit  in the Collateral Accounts; provided further, however, that
       Bank,  in  its  sole  discretion,  reserves the right to require the
       Borrower  at  any  time  to  deliver  to  Bank,  for  deposit into a
       Collateral  Account, an amount in cash up to, but not to exceed, the
       amount  the  aggregate undrawn amount of all the Extended Expiry LCs
       exceeds  the  aggregate amount on deposit in the Collateral Accounts
       at  such  time.    Each  draft paid by Bank under a Letter of Credit
       shall  be  deemed  an  advance under the Line and shall be repaid in
       accordance  with  the  terms of the Line; provided, however, that if
       the Line is not available for any reason whatsoever, at the time any
       draft  is  paid  by Bank, or if advances are not available under the
       Line  in  such  amount  due to any limitation of borrowing set forth
       herein, then the full amount of such drafts shall be immediately due
       and  payable,  together  with  interest  thereon, from the date such
       amount  is  paid  by Bank to the date such amount is fully repaid by
       Borrower,  at that rate of interest applicable to advances under the
       Line.    In  such  event,  Borrower agrees that Bank, at Bank's sole
       discretion  may  debit  any Collateral Account or Borrower's deposit
<PAGE>
       accounts  with  Bank  for  the amount of such draft.  If at any time
       prior  to  the  Termination Date the sum of (a) the aggregate unpaid
       principal of the Loans, plus (b) the aggregate undrawn amount of all
       outstanding  Letters  of  Credit  exceeds  the  Line, Borrower shall
       immediately  pay  to  Bank  the amount of such excess, together with
       accrued,  unpaid  interest  on the amount of such excess.  If at any
       time  after the Termination Date the aggregate undrawn amount of all
       Extended  Expiry  LCs exceeds the aggregate amount on deposit in the
       Collateral  Accounts,  at Bank's request, Borrower shall immediately
       deliver to Bank, for deposit into a Collateral Account, an amount in
       cash  up  to,  but  not  to exceed, the amount the aggregate undrawn
       amount  of  all the Extended Expiry LCs exceeds the aggregate amount
       on  deposit  in  the  Collateral  Accounts at such time.  Letters of
       Credit  shall  be  priced  at  a rate of 1.00% per annum of the face
       amount  of  the  Letter  of  Credit, which fee is due and payable on
       issuance of the Letters of Credit. 

       B.   Conditions  to  Loans and Letters of Credit.  Before making any
  Loan or issuing any Letter of Credit Bank may require satisfaction of the
  following conditions precedent: (1) Bank has received the following, each
  duly executed and in form acceptable to Bank: (a) if requested by Bank, a
  Request  for Loan, substantially in the form of Exhibit C, not later than
  one (1) Business Day before the date (which shall also be a Business Day)
  of  the  proposed  Loan;  (b)  such  other  documents  as Bank reasonably
  requires;  and  (c) in the case of Letters of Credit, Banks standard form
  Application  for  the Issuance of an Irrevocable Standby Letter of Credit
  in  form  and  substance  acceptable  to Bank and its legal counsel, duly
  executed  and  delivered  by Borrower two (2) Business Days, prior to the
  date  on  which the Letter of Credit is to be issued; and (2) no Event of
  Default  has  occurred  and is continuing; and (3) making the Loan or the
  issuance of a Letter of Credit is not prohibited by, and will not subject
  Bank  to  any penalty or onerous condition under any legal requirement as
  determined by Bank.

       C.   Repayment  of Loans.  Borrower shall repay the unpaid principal
  amount  of all Loans which are outstanding on the Termination Date on the
  Termination  Date.   Accrued and unpaid interest on the outstanding Loans
  shall  be  due  and  payable  on  each  Interest  Payment Date and on the
  Termination Date.
<PAGE>
       D.   Interest.

            i.   Interest Rates.  The Loans will bear interest until due at
       the  lesser  of the Prime Rate or the Highest Lawful Rate.  However,
       Borrower  may  elect  to  have  all or any portion of the Loans bear
       interest  until  due at the lesser of the Adjusted LIBOR Rate or the
       Highest  Lawful  Rate,  subject to the provisions of this Section 2.
       If at any time the Prime Rate or the Adjusted LIBOR Rate exceeds the
       Highest  Lawful  Rate, and thereafter the Prime Rate or the Adjusted
       LIBOR Rate, as applicable, is less than the Highest Lawful Rate, the
       rate  of  interest  on  the  affected  Borrowing will be the Highest
       Lawful  Rate  until  the  amount of interest accrued on the affected
       Borrowing  equals  the amount of interest that would have accrued if
       the  Prime  Rate or the Adjusted LIBOR Rate, as applicable, had been
       in  effect at all times.  All amounts due to Bank in connection with
       the  Loan  Documents  will  bear  interest from their respective due
       dates  until  paid  at  the  Default Rate unless the applicable Loan
       Document  provides  otherwise.    Interest  at the Prime Rate or the
       Default Rate will be computed on the basis of a 360 day year for the
       actual  number of days elapsed, unless that calculation would result
       in  an  effective  rate  exceeding the Highest Lawful Rate, in which
       case  interest  will  be  computed  on the basis of a 365 or 366 day
       year,  as the case may be.  Interest at the Adjusted LIBOR Rate will
       be  computed on the basis of a 360 day year for the actual number of
       days  elapsed,  unless that calculation would result in an effective
       rate  exceeding the Highest Lawful Rate, in which case interest will
       be  computed  on the basis of a 365 or 366 day year, as the case may
       be. 

            ii.  Selection  of  Interest  Options.   If no Event of Default
       exists,  Borrower may elect to have the Adjusted LIBOR Rate apply or
       continue to apply to all or any part of the Loans for the applicable
       Interest  Period.   A change in Interest Option under this Section 2
       is a conversion of the interest rate on part of the Loans, not a new
       Loan.    In  order  to request a LIBOR Borrowing, Borrower must give
       Bank  written  or telecopy notice (the "Rate Designation Notice") in
       the  form  of  Exhibit  D,  specifying  the amount of the Loan to be
       included   in  the  LIBOR  Borrowing,  the  proposed  date  for  the
       conversion  and the Interest Period or Periods selected by Borrower.
       Bank  must  receive  the  Rate  Designation Notice no later than the
       applicable  Rate  Designation Date.  Each Rate Designation Notice is
       irrevocable  upon  receipt by Bank.  If a Rate Designation Notice is
       not  received by Bank before the Rate Designation Date to convert an
       expiring  Interest  Period into a new LIBOR Borrowing, the amount of
       the  expiring  LIBOR Borrowing will become a Prime Rate Borrowing on
       expiration  of the Interest Period.  No more than 5 Interest Periods
       may  be  in effect at any one time.  Each LIBOR Borrowing must be at
       least  $250,000.    Principal  included in any Borrowing must not be
       included in any other Borrowing which exists at the same time.  Each
       designation or conversion must occur on a LIBOR Business Day.
<PAGE>
       E.   Capital  Adequacy.    If Bank determines after the date of this
  Agreement  that  any  change  in  applicable  laws,  rules or regulations
  regarding  capital  adequacy,  or  any  change  in  the interpretation or
  administration   thereof  by  any  appropriate  governmental  agency,  or
  compliance  with  any  request  or  directive  to  Bank regarding capital
  adequacy  (whether  or  not  having the force of law) of any such agency,
  increases the capital required to be maintained with respect to the Loans
  or  Note and therefore reduces the rate of return on Bank's capital below
  the  level  Bank  could  have  achieved but for such change or compliance
  (taking  into  consideration  Bank's  policies  with  respect  to capital
  adequacy),  then  Borrower  will pay to Bank from time to time, within 15
  days of Bank's request, any additional amount required to compensate Bank
  for  such  reduction.    Bank  will  request  any  additional  amount  by
  delivering  to  Borrower  a  certificate of Bank setting forth the amount
  necessary to compensate Bank.  The certificate will be conclusive, absent
  obvious  error.    Bank  may  make  any  assumptions,  and  may  use  any
  allocations  of  costs  and  expenses  and  any averaging and attribution
  methods, which Bank in good faith finds reasonable.

       F.   Prepayments.   Borrower may prepay the Loans without premium or
  penalty,  in whole or in part, except as provided in this Section 2.  Any
  partial  prepayment  must  be at least $250,000.  Each partial prepayment
  will be applied first to accrued interest on the Note, and the balance to
  installments of principal in inverse order of their maturities.  Borrower
  may  make prepayments applied to any Prime Rate Borrowing or to any LIBOR
  Borrowing  on  the  last  day  of  the  applicable Interest Period on any
  Business  Day  if  Borrower gives Bank irrevocable written or telegraphic
  notice  of  the prepayment no later than 12:00 noon, Houston, Texas time,
  on  the  Business Day prior to the date of the prepayment, specifying the
  principal amount of the Note to be prepaid and the prepayment date.

       If Borrower intends to prepay all or any part of any LIBOR Borrowing
  on  a  day  other than the last day of the Interest Period for that LIBOR
  Borrowing,  Borrower must give Bank at least 3 LIBOR Business Days' prior
  irrevocable  written or telegraphic notice of such prepayment, specifying
  the  principal  amount  to  be prepaid, the particular LIBOR Borrowing to
  which  the prepayment is to be applied and the prepayment date.  Borrower
  must  also  pay  to  Bank,  on  the  last day of the Interest Period, the
  Consequential Loss of Bank resulting from the prepayment.  After Borrower
  gives  notice  of  prepayment  of a LIBOR Borrowing, the principal amount
  specified in the notice, together with interest on the LIBOR Borrowing to
  the  date  of  prepayment,  will  be  due  and  payable  on the specified
  prepayment  date.    No  prepayment  of  a LIBOR Borrowing may reduce the
  remaining balance of the LIBOR Borrowing to an amount less than $250,000.
<PAGE>
       G.   Special Provisions Applicable to LIBOR Borrowings.

            i.   Options  Unlawful.   If the adoption of, any change in, or
       any change in the interpretation or administration of any applicable
       Legal  Requirement,  or  compliance  by  Bank  with  any  request or
       directive   (whether  or  not  having  the  force  of  law)  of  any
       Governmental Authority (a "Regulatory Change"), makes it unlawful or
       impossible  for  Bank  to permit the establishment of or to maintain
       any   LIBOR  Borrowing,  then  Bank's  commitment  to  permit  LIBOR
       Borrowings  will  immediately  be  canceled;    if  required  by the
       Regulatory  Change, Bank will immediately convert any affected LIBOR
       Borrowing  to  a  Prime  Rate  Borrowing,  and Borrower will pay all
       accrued  and  unpaid  interest  to date on the amount converted; and
       Borrower  will  pay  Bank any amount required to compensate Bank for
       any  additional  cost  or  expense  Bank  incurs  as a result of the
       Regulatory  Change.   Thereafter, the Loans will bear interest until
       maturity at the Prime Rate.

            ii.  Increased  Cost of Borrowings.  If, because Bank maintains
       any LIBOR Borrowing, any Regulatory Change:

                 a.   subjects  Bank  (or  makes  it  apparent that Bank is
                      subject)  to  any  tax  (including  any United States
                      interest   equalization  tax),  levy,  impost,  duty,
                      charge  or fee, other than income and franchise taxes
                      of  the  United States and its political subdivisions
                      (collectively,   "Taxes"),   or   any   deduction  or
                      withholding  from  any  payment  due  under any LIBOR
                      Borrowing  or  other amounts due under this Section 2
                      for any Taxes;

                 b.   changes  the  basis  of taxation of payments due from
                      Borrower  to  Bank  under  any LIBOR Borrowing (other
                      than  by  a  change  in  the  rate of taxation of the
                      overall net income of Bank);

                 c.   imposes,  modifies,  increases  or  determines  to be
                      applicable  any  reserve  requirement (excluding that
                      portion  of  any  reserve requirement included in the
                      calculation  of  the Eurodollar Reserve Requirement),
                      special  deposit  requirement  or similar requirement
                      (including  state  law requirements and Regulation D)
                      imposed   or  determined  to  be  applicable  by  any
                      Governmental  Authority  against assets held by Bank,
                      or against deposits in or for the account of Bank, or
                      against  loans  made  by  Bank,  or against any other
                      funds, obligations or other property owned or held by
                      Bank; or
<PAGE>
                 d.   imposes  on  Bank  any  other condition regarding any
                      LIBOR Borrowing; and the Regulatory Change results in
                      an  increase  in  Bank's  cost of making, renewing or
                      maintaining  any  LIBOR  Borrowing, or a reduction in
                      the amount of principal or interest received by Bank,
                      then,  upon Bank's demand from time to time, Borrower
                      will  pay  to  Bank an additional amount specified by
                      Bank  to  compensate  Bank for the increased costs or
                      reduced  principal  and interest.  Bank will promptly
                      notify  Borrower of any event which will entitle Bank
                      to  additional  amounts under this paragraph.  Bank's
                      determination  of the amount of any increased cost or
                      reduced  principal  and  interest  will be conclusive
                      absent obvious error.

            iii. Inadequacy  of  Pricing  and  Rate Determination.  If Bank
       determines  in  good  faith  for  any  reason  that:  Bank is unable
       through   its  customary  practices  to  determine  LIBOR  based  on
       transactions  in the London interbank market, or  the Adjusted LIBOR
       Rate  will  not  adequately  and  fairly reflect the cost to Bank of
       making and maintaining the requested LIBOR Borrowing, then Bank will
       notify  Borrower  of  that circumstance and (1) any Rate Designation
       Notice previously given by Borrower that has not been implemented as
       of the date of Bank's notice will be ineffective, and (2) until Bank
       notifies  Borrower  that  the  circumstances  giving  rise to Bank's
       notice no longer exist, Bank's obligation to accept or implement any
       Rate  Designation Notices will be suspended.  If the last day of the
       Interest   Period  for  any  LIBOR  Borrowing  occurs  while  Bank's
       obligation  to  accept  or  implement  Rate  Designation  Notices is
       suspended,  that LIBOR Borrowing will be converted at the end of the
       Interest  Period  to a Prime Rate Borrowing without any notice to or
       from  Borrower.    Bank's  determination  of  the  unavailability or
       inadequacy of the Adjusted LIBOR Rate will be conclusive.

       If  Borrower  receives  from  Bank  the  notice  referred  to in the
  preceding  paragraph, Borrower may, upon 3 LIBOR Business Days' notice to
  Bank, either (i) repay in full (but not in part) any LIBOR Borrowing with
  respect to which the notice was given, together with any accrued interest
  on  the  affected  LIBOR  Borrowing,  or  (ii) convert the affected LIBOR
  Borrowing  to  a  Prime  Rate  Borrowing.  However, any such repayment or
  conversion  will  be accompanied by payment of (x) the amount required to
  compensate  Bank  for the increased cost or reduced amount referred to in
  the  preceding paragraph, (y) all accrued and unpaid interest to the date
  of prepayment on the amount repaid or converted and (z) any Consequential
  Loss resulting from the repayment or conversion.

            iv.  Indemnification.  Borrower will indemnify Bank against and
       hold Bank harmless from any Consequential Loss.  This paragraph will
       survive  payment of the Note.  Bank's written statement submitted to
       Borrower  as  to  any  additional  amounts  payable pursuant to this
       paragraph will be conclusive absent obvious error.
<PAGE>
            v.   Rate  Quotes  and  Lists  of  Business  Days.  If Borrower
       requests  quotes  of  the Adjusted LIBOR Rate for different Interest
       Periods  being  considered  for  election by Borrower, Bank will use
       reasonable  efforts  to  provide the requested quotes.  However, all
       quotes  provided will be representative only and will not bind Bank,
       nor  determine,  directly  or indirectly, the Adjusted LIBOR Rate or
       any component of the Adjusted LIBOR Rate.  Bank's failure to provide
       any  requested  quotes  will  not  (1) excuse or extend the time for
       performance  of  any  obligation  of Borrower or for exercise of any
       right,  option  or  election  of  Borrower or (2) impose any duty or
       liability on Bank.  If Borrower requests a list of the Business Days
       or  LIBOR  Business  Days  in  any  calendar  month,  Bank  will use
       reasonable efforts to provide the requested list promptly.  However,
       any  list provided will identify only those days which Bank believes
       in good faith at the time the list is prepared will be Business Days
       or LIBOR Business Days for the month in question.  Bank will have no
       liability  for  any failure to provide, delay in providing, error or
       mistake in or omission from, any such quote or list.

            vi.  Availability  of  Funds  for  Repayment.   If any required
       payment  of  the Loans exceeds the total of the Prime Rate Borrowing
       and  all  LIBOR  Borrowings for which an Interest Period ends on the
       date  for payment, Borrower must make the remaining required payment
       out  of  other LIBOR Borrowings, and Borrower will be liable for any
       Consequential  Loss  resulting  from  that  payment.    If  Borrower
       notifies Bank (in accordance with the procedures for prepayments) to
       which  outstanding  LIBOR  Borrowing  the payment should be applied,
       Bank  will  follow that instruction.  If Borrower does not so notify
       Bank, Bank will select in its discretion which outstanding Borrowing
       or Borrowings to pay.

       H.   Domicile  and Funding of Loans.  Bank may transfer to and carry
  the  Loans  or  any  Borrowing  for  the  account of any branch office or
  Affiliate  of  Bank.    However,  Borrower will deal solely with Bank and
  Borrower's  obligations will be solely to Bank, whether Bank is acting on
  its  own  behalf  or for the account of another branch or Affiliate.  All
  determinations  of  the  Adjusted  LIBOR Rate will be made as if Bank had
  actually  funded  each  LIBOR  Borrowing through purchasing corresponding
  deposits  in  the  London interbank market; however, Bank may fund all or
  part  of  the LIBOR Borrowings in any manner it chooses without affecting
  the Adjusted LIBOR Rate determination.

  3.   REPRESENTATIONS  AND  WARRANTIES.    Borrower  hereby represents and
  warrants to Bank as follows:

       A.   Good  Standing.    Borrower  is  a corporation, duly organized,
  validly existing and in good standing under the laws of Texas and has the
  power  and  authority to own its property and is qualified to conduct its
  business  in each jurisdiction in which Borrower does business, except to
  the  extent the failure to obtain such qualifications would not result in
  a Material Adverse Effect.  Each Subsidiary of Borrower is a corporation,
  duly  organized,  validly existing and in good standing under the laws of
  the  jurisdiction  in  which it is organized (as indicated on Schedule 1)
  and  has  the power and authority to own its property and is qualified to
  conduct  its  business  in  each  jurisdiction in which it does business,
  except  to the extent the failure to obtain such qualifications would not
  result in a Material Adverse Effect.
<PAGE>
       B.   Authority   and  Compliance.    Borrower  has  full  power  and
  authority  to  execute  and  deliver  the Loan Documents and to incur and
  perform the obligations provided for therein, all of which have been duly
  authorized  by all proper and necessary corporate action of Borrower.  No
  consent  or  approval  of  any  public  authority or other third party is
  required  as  a  condition  to  the  validity  of  any Loan Document, and
  Borrower and each Subsidiary of Borrower is in compliance in all material
  respects  with  all  laws  and  regulatory  requirements  to  which it is
  subject.

       C.   Binding Agreement.  This Agreement and the other Loan Documents
  executed  by Borrower constitute valid and legally binding obligations of
  Borrower, enforceable in accordance with their terms.

       D.   Litigation.    There is no proceeding involving Borrower or any
  Subsidiary  of  Borrower  pending  or,  to  the  knowledge  of  Borrower,
  threatened   before  any  court  or  governmental  authority,  agency  or
  arbitration  authority,  except  as  (i) disclosed to Bank in writing and
  acknowledged  by  Bank  prior to the date of this Agreement or (ii) would
  not result in a Material Adverse Effect if adversely determined.

       E.   No  Conflicting  Agreements.  There is no charter, bylaw, stock
  provision,  partnership  agreement  or  other  document pertaining to the
  organization,  power  or  authority  of  Borrower  or  any  Subsidiary of
  Borrower  and no provision of any existing agreement, mortgage, indenture
  or  contract  binding  on  Borrower  or  any  Subsidiary  of  Borrower or
  affecting  its  respective  property, which would conflict with or in any
  way  prevent the execution, delivery or carrying out of the terms of this
  Agreement and the other Loan Documents.

       F.   Ownership  of Assets.  Borrower and each Subsidiary of Borrower
  has  good  title  to its respective assets, and its respective assets are
  free and clear of Liens, except those granted to Bank and as disclosed to
  Bank in writing prior to the date of this Agreement.

       G.   Investments.    Neither Borrower nor any Subsidiary of Borrower
  has  any  Investments except as described on Schedule 1.  Schedule 1 is a
  complete  and  correct  description  of  the  name  and  jurisdiction  of
  organization of each Subsidiary of Borrower.

       H.   Taxes.    All taxes and assessments due and payable by Borrower
  and  each Subsidiary of Borrower have been paid or are being contested in
  good faith by appropriate proceedings and Borrower and each Subsidiary of
  Borrower have filed all tax returns which it is required to file.

       I.   Financial  Statements.    The  financial statements of Borrower
  heretofore  delivered  to Bank have been prepared in accordance with GAAP
  applied  on  a consistent basis throughout the period involved and fairly
  present  Borrower's financial  condition as of the date or dates thereof,
  and  there  has  been  no material adverse change in Borrower's financial
  condition  or   operations   since  September  30,  1998.    All  factual
  information  furnished  by  Borrower  to  Bank  in  connection  with this
  Agreement  and  the  other  Loan Documents, when taken as a whole, is and
  will be accurate and complete on the date as of which such information is
  delivered  to  Bank and is not and will not be incomplete by the omission
  of  any material fact necessary to make such information, in light of the
  circumstances under which they were made, not misleading.
<PAGE>
       J.   Place  of  Business.    Borrower's  chief  executive  office is
  located at:

            2819 Walnut Hill Lane
            Dallas, Texas  75229

       K.   Environmental.     The  conduct  of  Borrower's   and  each  of
  Borrower's  Subsidiary's  business   operations  and   the  condition  of
  Borrower's and each of Borrower's Subsidiary's property does not and will
  not  violate  any  federal  laws,  rules  or ordinances for environmental
  protection,  regulations  of  the  Environmental  Protection  Agency, any
  applicable  local or state law, rule, regulation or rule of common law or
  any judicial interpretation thereof relating primarily to the environment
  or Hazardous Materials.

       L.   NationsBank  Agreement.    Borrower  has  delivered  to  Bank a
  complete  and  correct  copy of the NationsBank Agreement and all related
  documents.

       M.   Continuation   of   Representations   and   Warranties.     All
  representations  and warranties made under this Agreement shall be deemed
  to  be made at and as of the date hereof and at and as of the date of any
  advance under any Loan and the issuance of any Letter of Credit.

  4.   AFFIRMATIVE COVENANTS.  Until full and final payment and performance
  of  all  obligations of Borrower under the Loan Documents, Borrower will,
  unless  Bank  consents  otherwise  in  writing  (and without limiting any
  requirement of any other Loan Document):

       A.   Financial  Statements and Other Information.  Maintain a system
  of accounting reasonably satisfactory to Bank and in accordance with GAAP
  applied  on  a  consistent  basis  throughout the period involved, permit
  Bank's  officers  or  authorized  representatives  to  visit  and inspect
  Borrower's  books   of account and other records at such reasonable times
  and  as  often  as  Bank  may  desire,  and  pay  the reasonable fees and
  disbursements of any accountants or other agents of Bank selected by Bank
  for the foregoing purposes.  Unless written notice of another location is
  given to Bank, Borrower's books and records will be located at Borrower's
  chief  executive office set forth above.  All financial statements called
  for  below shall be prepared in form and content reasonably acceptable to
  Bank  and by independent certified public accountants acceptable to Bank;
  provided,  however, Bank hereby (i) acknowledges the adequacy of the form
  and  content  of  Borrower's  financial statements delivered prior to the
  date hereof and (ii) unless the Bank provides the Borrower written notice
  otherwise,   the   Borrower's  current   independent   certified   public
  accountants are acceptable to the Bank.

  In addition, Borrower will:

            i.   Furnish  to  Bank consolidated and consolidating financial
       statements  of Borrower for each fiscal year of Borrower, within 120
       days after the close of each such fiscal year.

            ii.  Furnish  to  Bank consolidated and consolidating financial
       statements (including a balance sheet and profit and loss statement)
       of Borrower for each quarter of each fiscal year of Borrower, within
       45 days after the close of each such period.
<PAGE>
            iii. Furnish to Bank a Compliance Certificate for (and executed
       by  an  authorized representative of) Borrower concurrently with and
       dated as of the date of delivery of each of the financial statements
       as  required  in  paragraphs  i  and  ii  above,  containing  (a)  a
       certification  that  the financial statements of even date therewith
       are  true  and correct and that the Borrower is not in default under
       the  terms  of this Agreement, and (b) computations and conclusions,
       in  such  reasonable  detail  as  Bank  may request, with respect to
       compliance  with  this  Agreement,  and  the  other  Loan Documents,
       including computations of all quantitative covenants.

            iv.  Furnish  to  Bank  promptly  such  additional information,
       reports  and  statements  respecting  the  business  operations  and
       financial  condition  of Borrower and its Subsidiaries, from time to
       time, as Bank may reasonably request.

       B.   Insurance.   Maintain, and cause each Subsidiary of Borrower to
  maintain,  insurance  with responsible insurance companies on such of its
  properties,  in  such  amounts  and  against such risks as is customarily
  maintained   by  similar  businesses  operating  in  the  same  vicinity.
  Satisfactory evidence of such insurance will be supplied to Bank prior to
  funding  under  the Loan(s) or issuance of the first Letter of Credit and
  15 days prior to each policy renewal.

       C.   Existence  and Compliance.  Maintain, and cause each Subsidiary
  of  Borrower  to maintain, its existence, good standing and qualification
  to  do  business, where required, except in the case of good standing and
  qualification,  where the failure of Borrower or such Subsidiary to be so
  qualified  or  in  good  standing  would not result in a Material Adverse
  Effect,  and  comply  in all material respects with all laws, regulations
  and     governmental    requirements   including,   without   limitation,
  environmental  laws  applicable to it or to any of its property, business
  operations and transactions.

       D.   Adverse  Conditions or Events.  Promptly advise Bank in writing
  of  (i)  any  condition,  event  or act which comes to its attention that
  would  reasonably  be  expected  to  result in a Material Adverse Effect,
  (ii)  any  litigation  filed  by or against Borrower or any Subsidiary of
  Borrower,  which  would  reasonably  be  expected to result in a Material
  Adverse  Effect,  if  adversely  determined,  (iii)  any  event  that has
  occurred  that  would  constitute  an  event  of  default  under any Loan
  Documents,  and  (iv)  any actual or potential contingent liability which
  singly  or in the aggregate with all other actual or potential contingent
  liabilities could equal or exceed $500,000.

       E.   Taxes and Other Obligations.  Pay, and cause each Subsidiary of
  Borrower  to  pay,  all  of  its  taxes,  assessments  and other material
  obligations, including, but not limited to taxes, costs or other expenses
  arising  out  of  this  transaction,  as the same become due and payable,
  except  to  the  extent  the  same  are  being contested in good faith by
  appropriate proceedings in a diligent manner.
<PAGE>
       F.   Environmental.    Immediately advise Bank in writing of (i) any
  material  enforcement,  cleanup, remedial, removal, or other governmental
  or regulatory actions instituted, completed or threatened pursuant to any
  applicable  federal,  state,  or  local  laws,  ordinances or regulations
  relating  to  any  Hazardous  Materials  affecting  Borrower's  or any of
  Borrower's  Subsidiary's business operations; and (ii) all claims made or
  threatened  by  any  third  party  against  Borrower or any Subsidiary of
  Borrower  relating to damages, contribution, cost recovery, compensation,
  loss or injury resulting from any Hazardous Materials.  Borrower will not
  use  or  permit, and will cause each Subsidiary of Borrower to not use or
  permit,  any  other  party  to  use  any  Hazardous  Materials  at any of
  Borrower's or any of Borrower's Subsidiary's places of business or at any
  other  property  owned  by  Borrower or any Subsidiary of Borrower except
  such  materials  as  are  incidental  to  Borrower's or any of Borrower's
  Subsidiary's normal course of business, maintenance and repairs and which
  are  handled  in  material  compliance  with all applicable environmental
  laws.    Borrower  agrees  to  permit  Bank,  its agents, contractors and
  employees  to  enter  and  inspect any of Borrower's or any of Borrower's
  Subsidiary's   places  of  business or any other property of Borrower and
  each  Subsidiary  of Borrower at any reasonable times upon three (3) days
  prior   notice   for   the   purposes   of  conducting  an  environmental
  investigation  and  audit  (including  taking physical samples) to insure
  that  Borrower  and  each  Subsidiary of Borrower are complying with this
  covenant  and  Borrower shall reimburse Bank on demand for the reasonable
  costs  of any such environmental investigation and audit.  Borrower shall
  provide,  and  shall  cause each Subsidiary of Borrower to provide, Bank,
  its agents, contractors, employees and representatives with access to and
  copies  of any and all data and documents relating to or dealing with any
  Hazardous  Materials used, generated, manufactured, stored or disposed of
  by  Borrower's  and  each   Subsidiary's  of Borrower business operations
  within five (5) days of the written request therefore.

  5.   NEGATIVE COVENANTS.  Until full and final payment and performance of
  all  obligations of Borrower under the Loan Documents, Borrower will not,
  and  will  not  permit  any  Subsidiary of Borrower to, without the prior
  written  consent  of  Bank  (and  without limiting any requirement of any
  other Loan Documents):

       A.   Financial Condition. 

            i.   Borrower  shall not permit the ratio of (a) Current Assets
       divided  by (b) Current Liabilities to be less than 1.0 to 1.0 as at
       the last day of each calendar quarter.

            ii.  Borrower shall not permit

                 a.   Net  Income  to be less than or equal to $100,000 for
                      the six months ending on December 31, 1998.

                 b.   Net  Income  to be less than or equal to $500,000 for
                      the nine months ending on March 31, 1999.

                 c.   Net  Income  to be less than or equal to $750,000 for
                      the twelve months ending on June 30, 1999.

                 d.   Net  Income  to  be  less than or equal to $1 for the
                      three months ending September 30, 1999.
<PAGE>
       B.   Investments.  Make an Investment in or to any Person; provided,
  Borrower  may  make  investments in the existing Subsidiaries of Borrower
  identified  on  Schedule  1  if  the aggregate of all Investments in such
  Subsidiaries  (as  disclosed  on  Schedule 1) does not exceed at any time
  $2,500,000.

       C.   Extensions  of Credit.  Make any loan or advance to any Person;
  provided  Borrower  may  (i)  make  loans and/or advances to Subsidiaries
  under  the  terms  specified  in  Section "B. Investments" above and (ii)
  advances (not to exceed $50,000 in the aggregate) to employees for moving
  and  travel  expenses,  drawing accounts, and similar expenditures in the
  ordinary course of Borrower's or its Subsidiary's business.

       D.   Transfer  of  Assets  or  Control.    Sell,  lease,  assign  or
  otherwise  dispose of or transfer any assets, except in the normal course
  of  its  business,  or  enter into any merger or consolidation; provided,
  however,  any Subsidiary of Borrower may dissolve or merge or consolidate
  with or into any other Subsidiary of Borrower.

       E.   Liens.   Grant, suffer or permit any contractual Lien on any of
  its  assets  (other than Liens granted under the NationsBank Agreement or
  related  agreements  to  assure  performance  of  obligations  related to
  letters  of  credit  issued  for  the  account  of Borrower or any of its
  Subsidiaries)  except Liens granted under the terms of this Agreement and
  the  NationsBank  Agreement.    Fail  to promptly pay when due all lawful
  claims,  whether  for labor, materials or otherwise, except to the extent
  the  failure  to  pay  such claims would not result in a Material Adverse
  Effect.    Agree  with  any  Person  to  not grant any Lien on any of its
  assets, except as set forth in the NationsBank Agreement.

       F.   Borrowings.    Create,  incur,  assume  or become liable in any
  manner for any indebtedness (for borrowed money, deferred payment for the
  purchase  of  assets, as surety or guarantor for the debt for another, or
  otherwise)  other than to Bank, except for normal trade debts incurred in
  the  ordinary  course  of  Borrower's and each of Borrower's Subsidiary's
  business,  and  except for (i) existing indebtedness disclosed to Bank in
  writing  and acknowledged by Bank prior to the date of this Agreement and
  (ii) indebtedness under or evidenced by the NationsBank Agreement and any
  related promissory notes.

       G.   NationsBank   Agreement.     Amend,   modify   or  restate  the
  NationsBank   Agreement,  or   any  related  agreement  and  any  related
  promissory notes as they exist the date hereof.

       H.   Character  of  Business.    Change  the  general  character  of
  business  as  conducted  at  the  date  hereof,  or engage in any type of
  business not reasonably related to its business as presently conducted.

  6.   DEFAULT.    Borrower  shall  be  in default under this Agreement and
  under  each  of  the  other  Loan  Documents  if  any  one or more of the
  following  (an "Event of Default") shall occur for any reason whatsoever,
  whether voluntary or involuntary, by operation of law, or otherwise:

       A.   Borrower  shall fail to pay any interest, fees or other amounts
  payable  under any of the Loan Documents within three days after date due
  or  Borrower  shall  fail  to  pay  any  principal  under any of the Loan
  Documents when due;
<PAGE>
       B.   Any  representation  or  warranty  made  or  deemed made by any
  Obligor  (or  any  of  its  officers  or  representatives)  under  or  in
  connection  with  any  of  the  Loan  Documents  shall prove to have been
  incorrect or misleading in any material respect when made or deemed made;

       C.   Borrower  or any other Obligor shall fail to perform or observe
  any term or covenant contained in any of the Loan Documents;

       D.   Any  of  the Loan Documents or provision thereof shall, for any
  reason,  not  be valid and binding on any Obligor or not be in full force
  and  effect,  or  shall  be declared to be null and void; the validity or
  enforceability  of  any  of  the Loan Documents shall be contested by any
  Obligor,  or  any Obligor shall deny that it has any or further liability
  or obligation under any of the Loan Documents;

       E.   The occurrence of any event described in Section 8(b) or (c) of
  the Note with respect to Borrower or any Subsidiary of Borrower;

       F.   Any  Obligor  shall fail to pay any debt (other than debt under
  the  Loan  Documents)  or  obligations in respect of capital leases in an
  aggregate  amount  of $50,000 or more when due; or any Obligor shall fail
  to  perform or observe any term or covenant contained in any agreement or
  instrument  relating  to  any  such debt when required to be performed or
  observed,  including,  without limitation, any term or covenant contained
  in the NationsBank Loan Agreement;

       G.   Any  Obligor  shall  have  any  final  judgment(s)  outstanding
  against it for the payment of $50,000 or more, and such judgment(s) shall
  remain unstayed, in effect, and unpaid for the period of time after which
  the  judgment  holder  may and may cause the creation of Liens against or
  seizure of any of its property;

       H.   Any  Obligor  shall be required under any environmental law (i)
  to  implement  any  remedial, neutralization, or stabilization process or
  program,  the  cost of which exceeds $50,000, or (ii) to pay any penalty,
  fine, or damages in an aggregate amount of $50,000 or more;

       I.   Other  than  with  respect  to  any  of the Loan Documents, any
  Obligor  shall  fail  to timely and properly observe, keep or perform any
  term,  covenant,  agreement  or  condition  in  any other loan agreement,
  promissory  note, security agreement, deed of trust, deed to secure debt,
  mortgage,  assignment or other contract securing or evidencing payment of
  any indebtedness of any Obligor to Bank or any affiliate or subsidiary of
  the Bank;

       J.   The withdrawal of any material owner of Borrower, as determined
  by Bank in its sole discretion;

       K.   The  commencement  of  a  proceeding  against  any  Obligor for
  dissolution  or  liquidation, the voluntary or involuntary termination or
  dissolution  of any Obligor or the merger or consolidation of any Obligor
  with or into another entity (except as permitted by Section 5.D);
<PAGE>
       L.   The  insolvency of, the business failure of, the appointment of
  a  custodian,  trustee,  liquidator  or  receiver  for  or for any of the
  property  of,  the  assignment  for  the  benefit of creditors by, or the
  filing  of a petition under bankruptcy, insolvency or debtor's relief law
  or  the  filing  of  a  petition  for  any  adjustment  of  indebtedness,
  composition or extension by or against any Obligor;

       M.   The  failure  of  any  Obligor to timely deliver such financial
  statements, including tax returns, other statements of condition or other
  information, as Bank shall request from time to time;

       N.   The entry of a judgment against any Obligor which Bank deems to
  be of a material nature, in Bank's sole discretion;

       O.   The  seizure  or  forfeiture of, or the issuance of any writ of
  possession,  garnishment  or  attachment,  or  any turnover order for any
  material property of any Obligor; or

       P.   The  determination  by  Bank that a material adverse change has
  occurred in the financial condition of any Obligor.


  7.   REMEDIES  UPON  DEFAULT.    If an Event of Default shall occur, Bank
  shall  have  all  rights, powers and remedies available under each of the
  Loan  Documents (including Section 11) as well as all rights and remedies
  available at law or in equity.

  8.   NOTICES.    All  notices,  requests  or  demands  which any party is
  required  or may desire to give to any other party under any provision of
  this  Agreement  must  be  in writing delivered to the other party at the
  following address:

            Borrower:

            Peerless Mfg. Co.
            2819 Walnut Hill Lane
            Dallas, Texas  75229
            Attn:  Paul Willey

            Bank:

            Chase Bank of Texas,
            National Association
            12875 Josey Lane
            Dallas, Texas  75234-6398
            Attn:  David L. Howard

  or  to such other address as any party may designate by written notice to
  the  other  party.   Each such notice, request and demand shall be deemed
  given or made as follows:

       A.   If  sent  by  mail,  upon the earlier of the date of receipt or
  five  (5)  days  after  deposit  in  the  U.S.  Mail, first class postage
  prepaid;

       B.   If sent by any other means, upon delivery.
<PAGE>
  9.   COSTS,  EXPENSES AND ATTORNEYS' FEES.  Borrower shall pay to Bank on
  demand  the  full  amount of all costs and expenses, including reasonable
  attorneys'  fees (to include outside counsel fees and all allocated costs
  of  Bank's  in-house counsel if permitted by applicable law), incurred by
  Bank in connection with (a) negotiation and preparation of this Agreement
  and  each  of  the Loan Documents, and (b) all other costs and attorneys'
  fees  incurred  by Bank for which Borrower is obligated to reimburse Bank
  in accordance with the terms of the Loan Documents.

  10.  MISCELLANEOUS.    Borrower  and  Bank  further covenant and agree as
  follows, without limiting any requirement of any other Loan Document:

       A.   Cumulative  Rights and No Waiver.  Each and every right granted
  to  Bank under any Loan Document, or allowed it by law or equity shall be
  cumulative  of each other and may be exercised in addition to any and all
  other  rights of Bank, and no delay in exercising any right shall operate
  as  a waiver thereof, nor shall any single or partial exercise by Bank of
  any  right  preclude any other or future exercise thereof or the exercise
  of  any  other right.  Borrower expressly waives any presentment, demand,
  protest  or other notice of any kind, including but not limited to notice
  of  intent  to  accelerate  and  notice of acceleration.  No notice to or
  demand  on Borrower in any case shall, of itself, entitle Borrower to any
  other or future notice or demand in similar or other circumstances.

       B.   Applicable  Law.  This Agreement and the rights and obligations
  of  the  parties  hereunder  shall  be  governed  by  and  interpreted in
  accordance  with  the  laws of Texas and applicable United States federal
  law.

       C.   Amendment.    No  modification, consent, amendment or waiver of
  any provision of this Agreement, nor consent to any departure by Borrower
  therefrom,  shall  be  effective  unless the same shall be in writing and
  signed  by  an  officer  of Bank, and then shall be effective only in the
  specified  instance  and for the purpose for which given.  This Agreement
  is  binding  upon Borrower, its successors and assigns, and inures to the
  benefit  of  Bank,  its successors and assigns; however, no assignment or
  other  transfer  of  Borrower's  rights or obligations hereunder shall be
  made  or  be effective without Bank's prior written consent, nor shall it
  relieve  Borrower  of any obligations hereunder.  There is no third party
  beneficiary of this Agreement.

       D.   Documents.     All  documents,  certificates  and  other  items
  required  under  this  Agreement  to be executed and/or delivered to Bank
  shall be in form and content satisfactory to Bank and its counsel.

       E.   Partial  Invalidity.  The unenforceability or invalidity of any
  provision  of  this  Agreement  shall  not  affect  the enforceability or
  validity   of   any   other  provision   herein  and  the  invalidity  or
  unenforceability  of  any provision of any Loan Document to any person or
  circumstance  shall  not  affect  the  enforceability or validity of such
  provision as it may apply to other persons or circumstances.
<PAGE>
       F.   Indemnification.    NOTWITHSTANDING  ANYTHING  TO  THE CONTRARY
  CONTAINED  IN  SECTION  10(G),  BORROWER SHALL INDEMNIFY, DEFEND AND HOLD
  BANK AND ITS SUCCESSORS AND ASSIGNS HARMLESS FROM AND AGAINST ANY AND ALL
  CLAIMS,  DEMANDS,  SUITS, LOSSES, DAMAGES, ASSESSMENTS, FINES, PENALTIES,
  COSTS  OR  OTHER EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES AND COURT
  COSTS)  ARISING  FROM  OR  IN  ANY WAY RELATED TO ANY OF THE TRANSACTIONS
  CONTEMPLATED  HEREBY,  INCLUDING  BUT NOT LIMITED TO ACTUAL OR THREATENED
  DAMAGE TO THE ENVIRONMENT, AGENCY COSTS OF INVESTIGATION, PERSONAL INJURY
  OR  DEATH,  OR  PROPERTY  DAMAGE,  DUE TO A RELEASE OR ALLEGED RELEASE OF
  HAZARDOUS  MATERIALS,  ARISING  FROM  BORROWER'S  OR  ANY  OF  BORROWER'S
  SUBSIDIARY'S BUSINESS OPERATIONS, ANY OTHER PROPERTY OWNED BY BORROWER OR
  ANY SUBSIDIARY OF BORROWER OR IN THE SURFACE OR GROUND WATER ARISING FROM
  BORROWER'S  OR  ANY  OF  BORROWER'S  SUBSIDIARY'S BUSINESS OPERATIONS, OR
  GASEOUS   EMISSIONS   ARISING   FROM  BORROWER'S  OR  ANY  OF  BORROWER'S
  SUBSIDIARY'S  BUSINESS  OPERATIONS  OR  ANY  OTHER  CONDITION EXISTING OR
  ARISING  FROM  BORROWER'S  OR  ANY  OF  BORROWER'S  SUBSIDIARY'S BUSINESS
  OPERATIONS  RESULTING  FROM  THE USE OR EXISTENCE OF HAZARDOUS MATERIALS,
  WHETHER  SUCH  CLAIM PROVES TO BE TRUE OR FALSE.  BORROWER FURTHER AGREES
  THAT  ITS  INDEMNITY  OBLIGATIONS  SHALL INCLUDE, BUT ARE NOT LIMITED TO,
  LIABILITY  FOR  DAMAGES RESULTING FROM THE PERSONAL INJURY OR DEATH OF AN
  EMPLOYEE OF BORROWER OR ANY SUBSIDIARY OF BORROWER, REGARDLESS OF WHETHER
  BORROWER  OR  SUCH SUBSIDIARY OF BORROWER HAS PAID THE EMPLOYEE UNDER THE
  WORKMEN'S  COMPENSATION  LAWS  OF  ANY  STATE OR OTHER SIMILAR FEDERAL OR
  STATE  LEGISLATION  FOR  THE PROTECTION OF EMPLOYEES.  THE TERM "PROPERTY
  DAMAGE" AS USED IN THIS PARAGRAPH INCLUDES, BUT IS NOT LIMITED TO, DAMAGE
  TO  ANY  REAL  OR  PERSONAL  PROPERTY  OF  BORROWER  OR ANY SUBSIDIARY OF
  BORROWER,  BANK,  AND OF ANY THIRD PARTIES.  BORROWER'S OBLIGATIONS UNDER
  THIS PARAGRAPH SHALL SURVIVE THE REPAYMENT OF THE OBLIGATIONS OF BORROWER
  UNDER  THE  LOAN  DOCUMENTS  AND  ANY  DEED  IN  LIEU  OF  FORECLOSURE OR
  FORECLOSURE OF ANY DEED TO SECURE DEBT, DEED OF TRUST, SECURITY AGREEMENT
  OR   MORTGAGE  SECURING  THE  OBLIGATIONS  OF  BORROWER  UNDER  THE  LOAN
  DOCUMENTS.

       G.   Survivability.   All covenants, agreements, representations and
  warranties  made  herein or in the other Loan Documents shall survive the
  making  of  the Loans and the issuance of each Letter of Credit and shall
  continue  in  full force and effect so long as the Loans or any Letter of
  Credit  is  outstanding  or  the  obligation of Bank to make any advances
  under the Line or issue any Letter of Credit or honor any draft under any
  Letter of Credit shall not have expired.

  11.  ARBITRATION.   ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
  HERETO  INCLUDING  BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
  THIS,  INSTRUMENT,  AGREEMENT  OR  DOCUMENT  OR  ANY RELATED INSTRUMENTS,
  AGREEMENTS  OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
  ALLEGED  TORT,  SHALL  BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE
  WITH  THE  FEDERAL  ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE
  STATE  LAW),  THE  RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF
  COMMERCIAL  DISPUTES  OF  J.A.M.S./  ENDISPUTE  OR  ANY SUCCESSOR THEREOF
  ("J.A.M.S."),  AND  THE "SPECIAL RULES" SET FORTH BELOW.  IN THE EVENT OF
  ANY  INCONSISTENCY,  THE  SPECIAL RULES SHALL CONTROL.  JUDGMENT UPON ANY
  ARBITRATION  AWARD  MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.  ANY
  PARTY  TO  THIS  AGREEMENT  MAY  BRING  AN ACTION, INCLUDING A SUMMARY OR
  EXPEDITED  PROCEEDING,  TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM
  TO  WHICH  THIS  AGREEMENT  APPLIES IN ANY COURT HAVING JURISDICTION OVER
  SUCH ACTION.
<PAGE>
       A.   SPECIAL  RULES.  THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
  OF  THE  BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT,
  AGREEMENT  OR  DOCUMENT  AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
  ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING
  THE  ARBITRATION,  THEN  THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE.
  ALL  ARBITRATION  HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND
  FOR  ARBITRATION;  FURTHER,  THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF
  CAUSE,  BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO
  AN ADDITIONAL 60 DAYS.

       B.   RESERVATION  OF  RIGHTS.  NOTHING IN THIS ARBITRATION PROVISION
  SHALL  BE  DEEMED  TO  (I)  LIMIT  THE  APPLICABILITY  OF  ANY  OTHERWISE
  APPLICABLE  STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN
  THIS  ARBITRATION  PROVISION;  OR  (II)  BE  A  WAIVER BY THE BANK OF THE
  PROTECTION  AFFORDED  TO  IT  BY  12  U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
  EQUIVALENT  STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO
  EXERCISE  SELF  HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B)
  TO  FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
  OBTAIN  FROM  A  COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
  LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
  RECEIVER.    THE  BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON
  SUCH  PROPERTY,  OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE,
  DURING  OR  AFTER  THE  PENDENCY  OF  ANY  ARBITRATION PROCEEDING BROUGHT
  PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT, NEITHER THIS EXERCISE
  OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
  FORECLOSURE  OR  PROVISIONAL  OR  ANCILLARY  REMEDIES  SHALL CONSTITUTE A
  WAIVER  OF  THE  RIGHT  OF  ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH
  ACTION,  TO  ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
  RESORT TO SUCH REMEDIES.

  12.  NO  ORAL  AGREEMENT.  THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
  DOCUMENTS  REPRESENT  THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
  BE  CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
  AGREEMENTS  OF  THE  PARTIES.    THERE ARE NO ORAL AGREEMENTS BETWEEN THE
  PARTIES.

  13.  TEXAS  FINANCE  CODE.    Chapter  346  of  the Texas Finance Code is
  specifically  declared  by the parties hereto not to be applicable to any
  Loan Documents or the transactions contemplated thereby.

       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
  be  duly  executed under seal by their duly authorized representatives as
  of the date first above written.

  BORROWER:                          BANK:

  PEERLESS MFG. CO.                  CHASE BANK OF TEXAS 
                                     NATIONAL ASSOCIATION


  By:                                By:                                   
  Name:     Paul Willey              Name:     David L. Howard
  Title:    Chief Financial Officer  Title:    Vice President