Document:

<PAGE>

                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered
into as of December 17, 2001, by and among Excalibur Holdings, Inc., a Texas
corporation (the "COMPANY"), Seneca Capital, L.P., a Delaware limited
partnership ("SENECA LP"), Seneca Capital International, Ltd., a corporation
organized under the laws of the Cayman Islands ("SENECA INTERNATIONAL") (who are
collectively referred to as "SENECA"), and such other persons who may execute
this Agreement and are listed on SCHEDULE 1.

                                    RECITALS

         WHEREAS, concurrently with the execution of this Agreement, the Company
has entered into a Series A Preferred Stock Purchase Agreement of even date
herewith (the "PURCHASE AGREEMENT"), pursuant to which the Company has agreed to
issue and sell shares of the Company's Series A Convertible Preferred Stock,
$.001 par value per share (the "SERIES A PREFERRED STOCK"), to the purchasers
signatory to the Purchase Agreement, to the extent and in such amounts as set
forth therein.

         WHEREAS, concurrently with the execution of this Agreement, the Holders
(as defined herein) will receive warrants (the "WARRANTS") to purchase an
aggregate of five hundred fifty thousand (550,000) shares of the Series A
Preferred Stock.

         WHEREAS, this Agreement is being entered into pursuant to Section 7.9
of the Purchase Agreement.

         WHEREAS, as a condition to the obligations of the Holders under the
Purchase Agreement, the Company has agreed to grant the registration rights with
respect to the Registrable Common (as defined herein) pursuant to this Agreement
on the terms and conditions set forth herein.

         WHEREAS, certain capitalized terms used herein without definition have
the meanings specified in the Purchase Agreement or Section 1 herein.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and the Holders hereby acknowledge and agree as
follows:

<PAGE>

SECTION 1. DEFINITIONS.

         As used in this Agreement, the following capitalized terms, not
otherwise defined in the Purchase Agreement, shall have the meanings as set
forth herein:

         1.1. "AFFILIATE" of any Person means any Person who controls, is
controlled by or is under common control with any other Person or Persons. For
the purposes of this definition, "control" has the meaning specified as of the
date of this Agreement for that word in Rule 405 promulgated by the Commission
under the Securities Act.

         1.2. "BOARD" means the Board of Directors of the Company.

         1.3. "COMMISSION" means the United States Securities and Exchange
Commission, and any successor thereto.

         1.4. "COMMON STOCK" means the Company's common stock, $.001 par value.

         1.5. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated from time to time thereunder.

         1.6. "HOLDERS" means (a) holders as of the date of this Agreement of
Series A Preferred Stock, each of whom is a party to this Agreement, (b) any
subsequent legal or beneficial owner of Series A Preferred Stock or Registrable
Common who has become a party to this Agreement in accordance with Section 11 of
this Agreement.

         1.7. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, prospects, assets, properties, or financial condition of the Company
(or the Public Company).

         1.8. "PERSON" includes all natural persons, corporations, business
trusts, associations, limited liability companies, partnerships, joint ventures,
governments, agencies, political subdivisions and other entities of whatever
nature.

         1.9. "PUBLIC COMPANY" shall mean a corporation (a) which issues
securities to the holders of outstanding shares of capital stock of the
Corporation in connection with (i) a merger, acquisition, or consolidation of
the Corporation into or with such corporation (or an Affiliate thereof), or (ii)
any sale, lease, license (on an exclusive basis) or transfer by the Corporation
of all or substantially all its assets to such corporation (or an Affiliate
thereof), and (b) whose business operations were dormant immediately before such
merger, acquisition, consolidation, sale, lease, license, or transfer.

         1.10. "PUBLIC COMPANY BOARD" means the Board of Directors of the Public
Company.

         1.11. "PUBLIC COMPANY COMMON STOCK" shall mean the common stock of the
Public Company.

         1.12. "PUBLIC COMPANY PREFERRED STOCK" shall have the meaning set forth
in the definition of "Reorganization" below.

                                       2
<PAGE>

         1.13. "PURCHASE AGREEMENT" has the meaning specified in the Recitals.

         1.14. "REGISTRABLE COMMON" means (a) any shares of Public Company
Common Stock which have been issued or are issuable upon the conversion of the
Public Company Preferred Stock, (b) any shares of Public Company Common Stock
which have been issued in the Reorganization in exchange for Series A Preferred
Stock or Common Stock which was issued upon the conversion of the Series A
Preferred Stock, (c) any shares of Public Company Common Stock held by any
Holder, and (d) any share of Public Company Common Stock issued as a dividend,
stock split, reclassification, recapitalization or other distribution with
respect to or in exchange for or replacement of any Registrable Common;
provided, however, that shares of Public Company Common Stock shall no longer be
Registrable Common (i) when they shall have been effectively registered under
the Securities Act and sold by the Holder thereof in accordance with such
registration or sold by the Holder pursuant to Section 4(1) of the Securities
Act or Rule 144, or (ii) when registration under the Securities Act would no
longer be required for the immediate public distribution of such shares of
Public Company Common Stock as a result of the provisions of Rule 144.

         1.15. "REGISTER," "REGISTERED" AND "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such Registration Statement.

         1.16. "REORGANIZATION" shall mean the merger, acquisition, or
consolidation of the Corporation into or with the Public Company (or an
Affiliate thereof), or any sale, lease, license (on an exclusive basis) or
transfer by the Corporation of all or substantially all its assets to the Public
Company (or an Affiliate thereof), in each case which results in (a) the
conversion or exchange of all shares of Series A Preferred Stock into or for all
shares of a series of preferred stock of the Public Company (the "PUBLIC COMPANY
PREFERRED STOCK") that has rights, preferences and privileges which are
substantially similar to those of the Series A Preferred Stock, (b) the exchange
of all other outstanding shares of capital stock of the Corporation for similar
capital stock of the Public Company, (c) the shareholders of the Corporation
(including the holders of Common Stock, the holders of Series A Preferred Stock
on an as-if converted basis, and the holders of Convertible Securities on an
fully diluted, as-if converted basis) immediately prior to the transaction own
at least eighty percent (80%) of the then outstanding shares of capital stock
(on a fully diluted, as-if converted basis) of the Public Company immediately
after the transaction, and (d) the Public Company becoming subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, with respect to the Public Company Common Stock.

         1.17. "RULE 144" means Rule 144 promulgated by the Commission under the
Securities Act, as such rule may be amended from time to time, or any successor
rule thereto.

         1.18. "SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated from time to time thereunder.

         1.19. "SERIES A PREFERRED STOCK" means the Company's Series A Preferred
Stock (which includes the shares of Series A Preferred Stock issued pursuant to
the Purchase Agreement and shares of Series A Preferred Stock which may be
issued upon exercise of the Warrants) and any shares of Series A Preferred Stock
issued in payment of a dividend upon any share of Series A Preferred Stock and
(b) any other capital stock issued as a dividend or other distribution with
respect to, or in replacement of, any Series A Preferred Stock.

                                       3
<PAGE>

         1.20. "WARRANTS" has the meaning specified in the Recitals.

SECTION 2. REGISTRATION RIGHTS.

         2.1. REQUIRED REGISTRATION.

                  2.1.1. Subject to the limitations and requirements set forth
         in this Section 2.1, as soon as practicable after the closing date of
         the Reorganization, but in no event more than forty-five (45) days
         after the closing date of the Reorganization, the Company (or the
         Public Company) shall prepare and file a Registration Statement under
         the Securities Act, covering the Registrable Common, and shall use its
         best efforts to cause such Registration Statement to become effective
         as soon as is practicable.

                  2.1.2. If the Company (or the Public Company) shall furnish to
         each Holder within thirty (30) days after the closing of the
         Reorganization a certificate signed by the President of the Company (or
         the Public Company) stating that, in the good faith judgment of the
         Board (or the Public Company Board) it would be seriously detrimental
         to, and have a Material Adverse Effect on, the Company (or the Public
         Company) and its shareholders for such Registration Statement to be
         filed as required in Section 2.1.1 and it is therefore essential to
         defer the filing of such Registration Statement, the Company (or the
         Public Company) shall have the right to defer such filing for a period
         ending not later than ninety (90) days from the date of such
         certification. Except in the event of a stop order contemplated by
         Section 3.9, the Company (or the Public Company) may delay the
         registration required by this Section 2.1 not more than once.

                  2.1.3. If the Holders intend to distribute the Registrable
         Common covered by the Registration Statement by means of an
         underwriting, a majority in interest of the Holders shall execute a
         notice indicating such intent and submit such notice to the Company (or
         the Public Company). The Company (or the Public Company) shall select
         the underwriter, with the approval of a majority in interest of the
         Holders, which approval shall not be unreasonably withheld.
         Notwithstanding any other provision of this Section 2, if the managing
         underwriter advises the Holders in writing that marketing factors
         require reducing the number of shares to be underwritten, then the
         number of shares of Registrable Common included in the underwriting
         shall be reduced pro rata among all participating Holders in proportion
         (as nearly as practicable) to the amount of Registrable Common owned by
         each Holder; provided, however that such reduction shall be made only
         if all other securities to be included (other than the Registrable
         Common) already have been entirely excluded from the underwriting.
         Nothing in this Section 2.1.3 shall prohibit a Holder whose shares have
         been reduced in such underwriting from reselling such Holder's shares
         outside of the underwriting if the Registration Statement is effective,
         no stop order contemplated by Section 3.9 has been issued, and such
         Holder has not received a notice to discontinue under Section 9.

                                       4
<PAGE>

                  2.1.4. The Holders acknowledge that the Registration Statement
         will cover any shares of Common Stock (or Public Company Common Stock)
         where the holder of such shares have previously been granted
         registration rights with respect to such shares.

         2.2. INCIDENTAL REGISTRATION.

                  2.2.1. Each time the Company (or the Public Company) shall
         determine to proceed with the actual preparation and filing of a
         Registration Statement under the Securities Act in connection with the
         proposed offer and sale for cash of any of its equity securities for
         its own account or the account of any of its security holders (other
         than pursuant to Section 2.1 or a registration on Form S-8 or Form S-4
         or their equivalents), the Company (or the Public Company) shall give
         written notice of its determination to all record Holders of
         Registrable Common not theretofore registered under the Securities Act
         and sold (a "PARTICIPATION NOTICE") at least twenty (20) days before
         the anticipated filing date of any such Registration Statement, and
         such notice shall offer to all Holders the opportunity to have any or
         all of the Registrable Common held by such Holders included in such
         Registration Statement (subject to an underwriter's cutback
         contemplated by Section 2.2.3). Upon the written request of a record
         Holder of any Registrable Common given within twenty (20) days after
         receipt of a Participation Notice, the Company (or the Public Company)
         will, except as herein provided, cause all such Registrable Common, the
         record Holders of which have so requested registration thereof, to be
         included in such Registration Statement on the same terms and
         conditions as the securities being registered by the Company, provided
         that the shares of Series A Preferred Stock (or Public Company
         Preferred Stock) submitted for registration shall be converted into
         Common Stock (or Public Company Common Stock) in such Registration
         Statement or such Holder shall deliver a written commitment to the
         Company (or the Public Company) to convert such Series A Preferred
         Stock (or Public Company Preferred Stock) into shares of Common Stock
         (or Public Company Common Stock) immediately prior to the effective
         time of such Registration Statement, all to the extent requisite to
         permit the sale or other disposition by the prospective seller or
         sellers of the Registrable Common to be so registered. Any Holder's
         request for such inclusion may be withdrawn, in whole or in part, at
         any time prior to the effective date of such Registration Statement, so
         long as such withdrawal does not delay, hinder, or otherwise adversely
         affect the proposed offering. If any registration pursuant to this
         Section 2.2 shall be underwritten in whole or in part, the Company (or
         the Public Company) may require that the Registrable Common requested
         for inclusion pursuant to this Section 2.2 be included in the
         underwriting on the same terms and conditions as the securities
         otherwise being sold through the underwriters.

                  2.2.2. Nothing contained in this Agreement shall prevent the
         Company (or the Public Company) from, at any time, abandoning or
         delaying any such registration initiated by it. If the Company (or the
         Public Company) determines not to proceed with a registration after the
         registration statement has been filed with the Commission and the
         Company's (or the Public Company's) decision not to proceed is
         primarily based upon the anticipated public offering price of the
         securities to be sold by the Company (or the Public Company), the
         Company (or the Public Company) shall promptly complete the

                                       5
<PAGE>

         registration for the benefit of those selling security Holders who wish
         to proceed with a public offering of their securities and who bear all
         expenses incurred by the Company (or the Public Company) thereafter as
         the result of such registration arising after the Company (or the
         Public Company) has decided not to proceed.

                  2.2.3. If in the good faith judgment of the managing
         underwriter of such public offering, the inclusion of all of the
         Registrable Common originally covered by a request for registration
         pursuant to this Section 2.2 would interfere with the successful
         marketing of the shares of stock offered by the Company (or the Public
         Company), the shares of stock otherwise to be included in the
         underwritten public offering shall be reduced pro rata among the
         Holders requesting such registration and may, in the managing
         underwriter's sole discretion, be reduced to no shares of Registrable
         Common included in the underwriting; provided, however, in such event
         only the Holders and the Company (or the Public Company) may sell
         shares of Registrable Common in such registration without the consent
         of the Holders of at least sixty-six percent (66%) of the then
         outstanding Registrable Common.

         2.3. UNDERWRITING ARRANGEMENTS APPLICABLE TO REQUIRED AND INCIDENTAL
REGISTRATIONS. The right of any Holder to include Registrable Common in any
underwritten registration pursuant to this Agreement shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Common in the underwriting. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company (or the Public Company)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected.

SECTION 3. REGISTRATION PROCEDURES. When the Company (or the Public Company) is
required by the terms of this Agreement to effect the registration of
Registrable Common under the Securities Act, the Company (or the Public Company)
will do the following:

         3.1. FILING. Prepare and file with the Commission a Registration
Statement with respect to such securities, and use its best efforts to cause
such Registration Statement to become effective;

         3.2. PERIOD OF EFFECTIVENESS. Use its best efforts, which shall include
the filing and preparation with the Commission of amendments and supplements to
the Registration Statement and the prospectus contained therein, to cause such
Registration Statement to remain continuously effective from the date it becomes
effective for a period ending on the earlier of (i) when all Registrable Common
covered by the Registration Statement have been sold or (ii) when all
Registrable Common covered by the Registration Statement may be sold without
registration under the Securities Act pursuant to the exemptions provided by
Rule 144 under the Securities Act during any ninety (90) day period without
restriction on volume, or (b) (i) two (2) years following the date on which the
Registration Statement becomes effective under the Securities Act for any
Registration Statement pursuant to which any of the Registrable Common are being
offered exclusively or (ii) ninety (90) days for any Registration Statement
pursuant to which shares of Common Stock (or Public Company Common Stock) are
being offered for the account of the Company (or the Public Company) along with
any of the Registrable Common;

                                       6
<PAGE>

         3.3. COPIES. Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the Registration Statement, preliminary prospectus, final
prospectus and such other documents as such Holders or underwriters may
reasonably request in order to facilitate the public offering of such
securities;

         3.4. BLUE SKY. Use its best efforts to register or qualify the
securities covered by such Registration Statement under such state securities or
blue sky laws of such jurisdictions as such participating Holders may reasonably
request in writing, except that the Company (or the Public Company) shall not
for any purpose be required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified;

         3.5. NOTIFICATION. Notify the Holders participating in such
registration, promptly after it shall receive notice thereof, of any letter of
comments regarding the Registration Statement received from the Commission, the
time when such Registration Statement has become effective or an amendment or
supplement to any prospectus forming a part of such Registration Statement has
been filed, or the notice required by Section 9;

         3.6. AMENDMENT NOTICE. Notify such Holders promptly of any request by
the Commission for the amending or supplementing of such Registration Statement
or prospectus or for additional information;

         3.7. AMENDMENT. Prepare and file with the Commission, promptly upon the
request of any such Holders, any amendments, supplements, or post-effective
amendments to such Registration Statement or prospectus which, in the opinion of
counsel for such Holders (and concurred in by counsel for the Company (or the
Public Company)), is required under the Securities Act or the rules and
regulations thereunder is necessary to keep such Registration effective for the
time periods set forth in Section 3.2;

         3.8. UPDATE. Prepare and promptly file with the Commission and promptly
notify such Holders of the filing of such amendment or supplement to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event shall
have occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;

         3.9. STOP ORDERS. Advise such Holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such Registration Statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; and

                                       7
<PAGE>

         3.10. COMPLIANCE ISSUES. Not file any amendment or supplement to such
Registration Statement or prospectus to which a majority in interest of such
Holders shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations promulgated thereunder, after having
been furnished with a copy thereof at least three (3) business days prior to the
filing thereof (provided, however, that any reports filed pursuant to the
Exchange Act need not be reviewed nor approved by such Holders), unless, in the
opinion of counsel for the Company (or the Public Company), the filing of such
amendment or supplement is reasonably necessary to protect the Company (or the
Public Company) from any liabilities under any applicable federal or state law
and such filing will not violate applicable law.

SECTION 4. EXPENSES. With respect to the registration required pursuant to
Section 2.1 hereof (except as otherwise provided in such Section) and with
respect to each inclusion of Registrable Common in a Registration Statement
pursuant to Section 2.2 hereof (except as otherwise provided in such Section),
the Company (or the Public Company) shall bear the following fees, costs and
expenses: all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company (or the Public
Company), fees and disbursements of counsel for the underwriter or underwriters
of such securities (if the Company (or the Public Company) and or selling
security Holders are required to bear such fees and disbursements), all internal
Company (or the Public Company) expenses, all legal fees and disbursements and
other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, the reasonable fees and disbursements of one special counsel for the
selling security Holders and the premiums and other costs of policies of
insurance obtained by the Company (or the Public Company) against liability (if
any) arising out of such public offering. All other fees and disbursements of
any accountants or advisors for the selling security Holders, underwriting
discounts and commissions and transfer taxes relating to the shares included in
the offering by the selling security Holders, and any other expenses incurred by
the selling security Holders not expressly included above, shall be borne by the
selling security Holders.

SECTION 5. INDEMNIFICATION. In the event that any Registrable Common is included
in a Registration Statement under Section 2.1 or 2.2 hereof:

         5.1. INDEMNIFICATION BY COMPANY. To the fullest extent permitted by
law, the Company (or the Public Company) will indemnify and hold harmless each
Holder of Registrable Common which is included in a Registration Statement
pursuant to the provisions hereof, its directors, officers, employees, partners,
principals, equity holders, managed or advised accountants, advisors,
representatives, agents, and any underwriter (as defined in the Securities Act)
for such Holder and each Person, if any, who controls such Holder or such
underwriter within the meaning of the Securities Act, from and against, and will
reimburse such Holder and each such underwriter and controlling Person with
respect to, any and all loss, claim, damage, liability and expense
(collectively, "LOSSES") to which such Holder or any such underwriter or
controlling Person may become subject under the Securities Act, state securities
laws or otherwise, and the Company (or the Public Company) will pay to each such
Holder, underwriter or controlling person any legal or other costs or expenses
reasonably incurred by such person in connection with investigating or defending

                                       8
<PAGE>

any such Loss, insofar as such Losses are caused by or arise out of any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that neither the Company nor
the Public Company will be liable in any such case to the extent that any such
Loss arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Holder, such underwriter or such controlling Person in writing
specifically for use in the preparation thereof; provided however, that the
indemnity agreement in this Section 5.1 shall not apply to amounts paid in
settlement of any such Loss if such settlement is effected without the consent
of the Company (or the Public Company), which consent shall not be unreasonably
withheld, and that the foregoing indemnity obligation with respect to any
preliminary prospectus shall not inure to the benefit of any Holder on account
of any Loss whatsoever arising from the sale of any Registrable Common by such
Holder to any person if (A) a copy of the final prospectus (as amended or
supplemented if such amendments or supplements shall have been furnished to such
Holder prior to the confirmation of the sale involved) shall not have been sent
or given by or on behalf of such Holder to such person, if required by law, with
or prior to the written confirmation of the sale involved, and (B) the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such preliminary prospectus from which such Loss
arose was corrected in the final prospectus (as amended or supplemented if such
amendments or supplements thereto shall have been furnished as aforesaid).

         5.2. INDEMNIFICATION BY HOLDERS. To the fullest extent permitted by
law, each Holder of Registrable Common which is included in a Registration
Statement pursuant to the provisions hereof will indemnify and hold harmless the
Company, the Public Company, their respective its directors, officers,
employees, partners, principals, equity holders, managed or advised accountants,
advisors, representatives, agents, each Person, if any, who controls the Company
and the Public Company within the meaning of the Securities Act, any other
Holder selling securities pursuant to such Registration Statement, any
controlling Person of any such selling Holder, any underwriter and any
controlling Person of any such underwriter (including any broker or dealer
through whom such of the shares may be sold) (each, an "INDEMNITEE") from and
against, and will reimburse any Indemnitee with respect to, any and all Losses
to which such Indemnitee may become subject under the Securities Act, state
securities laws or otherwise, and such Holder will pay to any Indemnitee any
legal or other costs or expenses reasonably incurred by such person in
connection with investigating or defending any such Loss, insofar as such Losses
are caused by or arise out of any untrue or alleged untrue statement of any
material fact contained in such Registration Statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in conformity with written information furnished by such Holder specifically
for use in the preparation thereof; provided, however, that the indemnity
agreement in this Section 5.2 shall not apply to amounts paid in settlement of
any such Loss if such settlement is effected without the consent of the
indemnifying Holder, which consent shall not be unreasonably withheld; provided,
however, that such indemnifying Holder shall not, without approval of each party
being indemnified pursuant to this Section 5.2, which approval shall not be
unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to the parties being so indemnified of a release from all

                                       9
<PAGE>

liability with respect to such claim or litigation; and provided further, that
the foregoing indemnity obligation with respect to any preliminary prospectus
shall not inure to the benefit of either the Company or the Public Company on
account of any Loss whatsoever arising from the sale of any Registrable Common
by the Holder to any person if (A) a copy of the final prospectus (as amended or
supplemented if such amendments or supplements shall have been furnished to such
Holder prior to the confirmation of the sale involved) shall not have been sent
or given by or on behalf of such Holder to such person, if required by law, with
or prior to the written confirmation of the sale involved, and (B) the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such preliminary prospectus from which such Loss
arose was corrected in the final prospectus (as amended or supplemented if such
amendments or supplements thereto shall have been furnished as aforesaid);
provided, further that the obligations of each Holder under this Section 5.2
shall be limited to an amount equal to the proceeds actually received by such
Holder of Registrable Common sold as contemplated herein, unless such claim,
loss, damage, liability or action resulted from such Holder's fraudulent
misconduct.

         5.3. CONTRIBUTION. In any case in which either (i) any Holder of
Registrable Common which is included in a Registration Statement pursuant to the
provisions hereof, or its directors, officers, employees, partners, principals,
equity holders, managed or advised accountants, advisors, representatives,
agents, and any underwriter (as defined in the Securities Act) for such Holder
and each Person, if any, who controls such Holder or such underwriter within the
meaning of the Securities Act, makes a claim for indemnification pursuant to
this Section 5 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is required by this Section 5,
then, in each such case, the Company and such Holder will contribute to the
aggregate Losses to which they may be subject (after contribution from others)
in such proportions so that such holder is responsible for the portion
represented by the percentage that the proceeds actually received by such Holder
of Registrable Common sold as contemplated herein bears to the proceeds actually
received from the sale of all securities pursuant to the Registration Statement,
and the Company is responsible for the remaining portion; provided, however,
that, in any such case, (A) no such Holder will be required to contribute any
amount in excess of the proceeds actually received by such Holder of Registrable
Common sold as contemplated herein, and (B) no Person guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent representation.

         5.4. INDEMNIFICATION PROCEDURES. Promptly after receipt by a party
entitled to indemnification pursuant to this Section 5 (each, an "INDEMNIFIED
PARTY") of notice of the commencement of any action involving the subject matter
of the foregoing indemnity provisions such Indemnified Party will, if a claim is
to be made against the party obligated to provide indemnification pursuant to
this section (each, an "INDEMNIFYING PARTY"), promptly notify the Indemnifying
Party of the commencement thereof; but the omission to provide such notice will

                                       10
<PAGE>

not relieve the Indemnifying Party from any liability hereunder, except to the
extent that the delay in giving, or failing to give, such notice has a material
adverse effect upon the ability of the indemnifying party to defend against the
claim. In case such action is brought against an Indemnified Party, the
Indemnifying Party shall have the right to participate in and, at the
Indemnifying Party's option, to assume the defense thereof, singly or jointly
with any other Indemnifying Party similarly notified, with counsel reasonably
satisfactory to the Indemnified Party; provided, however, that if the defendants
in any action include both the Indemnified Party and the Indemnifying Party and
the Indemnified Party shall have reasonably concluded based on advice of counsel
that there may be legal defenses available to any Indemnified Parties that are
different from or additional to those available to the Indemnifying Party, or if
there is a conflict of interest which would prevent counsel for the Indemnifying
Party from also representing the Indemnified Party, the Indemnified Party shall
have the right to select counsel to participate in the defense of such action on
behalf of such Indemnified Party at the expense of the Indemnifying Party;
provided that the Indemnifying Party shall be responsible for the expense of
only one such special counsel selected jointly by the Indemnified Parties, if
there is more than one Indemnified Party. After notice from an Indemnifying
Party to any Indemnified Party of such Indemnifying Party's election to assume
the defense of the action, the Indemnifying Party will not be liable to such
Indemnified Party pursuant to this Section 5 for any legal or other expense
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the Indemnified
Party shall have employed counsel in accordance with the proviso of the
preceding sentence, or (ii) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after the notice of the commencement
of the action, or (iii) the Indemnifying Party has authorized the employment of
counsel for the Indemnified Party at the expense of the Indemnifying Party.

SECTION 6. TERMINATION OF REGISTRATION OBLIGATIONS. This Agreement, and the
registration rights set forth herein, shall terminate upon that time at which
each Holder is able to sell all of such Holder's Registrable Common under Rule
144 promulgated under the Securities Act during any ninety (90) day period.

SECTION 7. COOPERATION. Any Holder whose Registrable Common is to be included in
a Registration Statement either filed pursuant to Section 2.1 or as part of a
Company (or Public Company) registration agrees to cooperate with all reasonable
requests by the Company (or the Public Company) necessary to effectuate the
purposes of this Agreement, including by timely providing the Company (or the
Public Company) with all information necessary to file a Registration Statement.

SECTION 8. SELLER INFORMATION. The Company (or the Public Company) may require
each selling Holder of Registrable Common as to which any registration is being
effected to furnish to the Company (or the Public Company) such information
regarding such Holder, such Holder's Registrable Common and such Holder's
intended method of disposition as the Company (or the Public Company) may from
time to time reasonably request; provided that such information shall be used
only in connection with such registration. If the Registration Statement refers
to any Holder by name or otherwise as the Holder of any securities of the
Company (or the Public Company), then such Holder shall promptly (i) notify the
Company (or the Public Company) and its counsel of the existence of any fact of

                                       11
<PAGE>

which such Holder becomes aware and the happening of any event which relates to
Holder or the distribution of the securities owned by such Holder which results
in the Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein not misleading, or the prospectus included in such
Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) provide to the Company (or the Public Company)
such information which relates to Holder or the distribution of the securities
owned by such Holder as shall be necessary to enable the Company (or the Public
Company) to prepare a supplement or post-effective amendment to such
Registration Statement or related prospectus or any document incorporated
therein by reference or file any other documents required so that such
Registration Statement will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

SECTION 9. NOTICE TO DISCONTINUE. Each Holder acknowledges that the ability of
such Holder to resell the Registrable Common is subject to the Commission's
review of the Registration Statement and the Company's (and the Public
Company's) legal obligation to update the prospectus made part of the
Registration Statement from time to time as circumstances warrant. If the
Commission does not declare the Registration Statement effective, the Holders
will not be able to publicly resell the Registrable Common except pursuant to
Rule 144 under the Securities Act, which among other things, requires that the
Registrable Common be held for at least 12 months prior to any public resale. If
the Commission does not declare the Registration Statement effective, investors
will not be able to publicly resell the Registrable Common pursuant to the
Registration Statement during any periods that the prospectus made part of the
Registration Statement is materially out of date or otherwise requires
amendment. Each holder of Registrable Securities agrees that, upon receipt of
any notice from the Company (or the Public Company) of the happening of any
event which causes the prospectus relating to the Registrable Common to include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, such Holder shall forthwith discontinue
disposition of Registrable Common pursuant to the Registration Statement
covering such Registrable Common until such Holder's receipt of the copies of
the supplemented or amended prospectus required by Section 3.8 and, if so
directed by the Company, such Holder shall deliver to the Company (or the Public
Company) (at the Company's (or the Public Company's) expense) all copies, other
than permanent file copies, then in such Holder's possession of the prospectus
covering such Registrable Common which is current at the time of receipt of such
notice. If the Company (or the Public Company) shall give any such notice, the
Company (or the Public Company) shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days in excess of ten (10) business days during the period from
and including the date of the giving of such notice to and including the date
when the Holder shall have received the copies of the supplemented or amended
prospectus.

                                       12
<PAGE>

SECTION 10. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees as follows:

                  10.1.1. Following the effective date of the Reorganization,
         such Holder shall not, directly or indirectly, sell, offer to sell,
         contract to sell (including, without limitation, any short sale), grant
         any option to purchase or otherwise transfer or dispose of, other than
         for estate planning purposes, more than five percent (5%) of the
         Registrable Common held by the Holder as of the date of this Agreement,
         in any one-month period commencing on the effective date of the
         Reorganization, except for bona fide gifts to persons who agree in
         writing to be bound by the terms of this Agreement; provided however,
         that (i) the executive officers and directors of the Company and the
         Public Company, as well as each holder of at least one percent (1%) of
         the Company's Common Stock or the Public Company's Common Stock (both
         on an as-if-converted basis), shall have agreed to be bound by
         substantially the same terms and conditions, and (ii) the time period
         requested for such market stand-off shall not exceed two (2) years.

                  10.1.2. Following the effective date of the Reorganization, if
         the Company (or the Public Company) files a registration statement
         under the Securities Act in connection with the Company's (or the
         Public Company's) proposed offer and sale for cash of its securities,
         and in the good faith judgment of the managing underwriter of such
         public offering, the sale of the Registrable Common pursuant to the
         Registration Statement filed pursuant to Section 2.1 hereof would
         interfere with the successful marketing of the securities offered by
         the Company (or the Public Company) in such public offering, then such
         Holder shall not, directly or indirectly, sell, offer to sell, contract
         to sell (including, without limitation, any short sale), grant any
         option to purchase or otherwise transfer or dispose of, other than for
         estate planning purposes, any of the Registrable Common held by the
         Holder, except for (a) bona fide gifts to persons who agree in writing
         to be bound by the terms of this Agreement and (b) sales of Registrable
         Common pursuant to Section 2.2 hereof; provided however, that (i) the
         executive officers and directors of the Company and the Public Company,
         as well as each holder of at least one percent (1%) of the Company's
         Common Stock or the Public Company's Common Stock (both on an
         as-if-converted basis), shall have agreed to be bound by substantially
         the same terms and conditions, (ii) the time period requested for such
         market stand-off shall not exceed one-hundred eighty (180) days after
         the closing of such public offering, and (iii) the restriction shall
         not apply to a registration relating solely to employee, consultant or
         advisor benefit plans on Form S-1, Form SB-2 or Form S-8 (or similar
         forms promulgated after the date hereof) or a registration relating
         solely to a transaction pursuant to Rule 145 promulgated under the
         Securities Act on Form S-4 (or similar forms promulgated after the date
         hereof).

                  10.1.3. The Company and the Public Company may impose
         stop-transfer instructions during such stand-off period with respect to
         the securities of each Holder subject to this restriction if necessary
         to enforce such restrictions.

SECTION 11. LIMITATIONS ON ADDITIONAL REGISTRATION RIGHTS. From and after the
date of this Agreement, neither the Company nor the Public Company shall enter
into any agreement granting any holder or prospective holder of any securities
of the Company (or the Public Company) registration rights with respect to such
securities unless the prior approval of the Holders of sixty-six percent (66%)
of the then outstanding Registrable Common has been obtained and such new holder
is made a party to this Agreement.

                                       13
<PAGE>

SECTION 12. MISCELLANEOUS.

         12.1. WAIVERS, AMENDMENTS AND APPROVALS. In each case in which the
approval of the Holders is required by the terms of this Agreement, such
requirement shall be satisfied by a vote or the written action of Holders of at
least sixty-six percent (66%) of the Registrable Common, unless a lower
percentage is specifically required by the terms of this Agreement. Any term or
provision of this Agreement requiring performance by or binding upon the Company
(or the Public Company or Holders may be amended, and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by a writing signed by the
Company (or the Public Company) as approved by the Board (or the Public Company
Board) and the Holders of at least sixty-six percent (66%) of the then
outstanding Registrable Common. Any amendment or waiver effected in accordance
with this Section shall be binding upon the Holders (including permitted assigns
pursuant to Section 10 hereof). The waiver by a party of any breach hereof or
default in payment of any amount due hereunder or default in the performance
hereof shall not be deemed to constitute a waiver of any other default or
succeeding breach or default. Written notice of any such waiver, consent or
agreement of amendment, modification or supplement shall be given to the record
Holders of Registrable Common who did not give written consent thereto.
Notwithstanding the foregoing, any party to this Agreement may waive any of its
rights hereunder without the consent of any other party.

         12.2. WRITTEN CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, except to the extent
provided in Section 10.1.

         12.3. NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be personally
delivered or, mailed first-class postage prepaid, registered or certified mail
or dispatched by recognized delivery service or via facsimile, as follows:

                  12.3.1. to a Holder, addressed to such Holder at the
         address(es) set forth on SCHEDULE 1;

                           with a copy (which shall not constitute notice to a
                  Holder) to:

                                       14
<PAGE>

                                      Kramer Levin Naftalis & Frankel LLP
                                      919 Third Avenue
                                      New York, NY 10022-3852
                                      Attn:  Thomas T. Janover, Esq.
                                      Tel: (212) 715-9186
                                      Fax: (212) 715-8000

                  12.3.2. to the Company (or the Public Company), to:

                                      Excalibur Holdings, Inc.
                                      18614 Resica Falls Lane
                                      Houston, TX 77094
                                      Attn:  Matthew C. Flemming
                                      Tel: (281) 646-7009
                                      Fax: (281) 599-7453

                           with a copy (which shall not constitute notice to the
                           Company or the Public Company) to:

                                      Oppenheimer Wolff & Donnelly LLP
                                      840 Newport Center Drive, Suite 700
                                      Newport Beach, CA 92660
                                      Attn:  Marc A. Indeglia, Esq.
                                      Tel:  949-823-6000
                                      Fax:  949-823-6100

and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail delivery service or facsimile, when received.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.

         12.4. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS, ETC. All
representations, warranties, covenants and agreements contained herein or in any
certificate, document or instrument delivered pursuant to this Agreement (other
than any legal opinion) shall survive the execution and delivery of this
Agreement or such certificate, document or instrument, as the case may be. All
statements contained in any certificate, document or instrument prepared by or
on behalf of the Company and delivered by the Company (other than legal
opinions) shall constitute representations and warranties by the Company
hereunder.

         12.5. DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
under this Agreement shall impair any such right, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence thereto, or of a similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach or default under the Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.

                                       15
<PAGE>

         12.6. OTHER REMEDIES. Any and all remedies herein expressly conferred
upon a party shall be deemed cumulative with, and not exclusive of, any other
remedy conferred hereby or by law on such party, and the exercise of any one
remedy shall not preclude the exercise of any other.

         12.7. ATTORNEYS' FEES. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party shall be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including, without limitation, costs, expenses
and fees on any appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment. A party not entitled to recover its costs shall not be entitled to
recover attorneys' fees. No sum for attorneys' fees shall be counted in
calculating the amount of a judgment for purposes of determining if a party is
entitled to recover costs or attorneys' fees.

         12.8. ENTIRE AGREEMENT. This Agreement, the schedules hereto, the
documents referenced herein and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto, including without
limitation the Term Sheet. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.

         12.9. SEVERABILITY. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby. The parties
further agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of the void or unenforceable
provision.

         12.10. SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon and be enforceable
by the successors and assigns of the parties hereto, including the holder or
holders from time to time of any of the Registrable Common; provided, however,
that no holder of any of the Registrable Common shall be entitled to assign or
transfer any rights hereunder to any party or entity (including existing and
future customers of the Company or the Public Company) engaged in the same
industry that the Company or the Public Company is so engaged in as of the date
hereof. Whether a party or entity is engaged in the same industry as the Company
or the Public Company will be reasonably determined by the Board or the Public
Company Board. Notwithstanding the foregoing, a successor or assign of a Holder
shall not be regarded as an "HOLDER" for purposes of this Agreement, unless such
transferee is an Affiliate of the transferor or it acquires or is otherwise the
holder of at least 25,000 shares of Series A Preferred Stock or the Common
Stock, Public Company Preferred Stock, or Public Company Common Stock equivalent
(subject to appropriate adjustment for any stock dividends, stock splits,
subdivisions, reorganizations and other capitalization changes effected after
the Closing Date).

                                       16
<PAGE>

         12.11. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas without regard to its principles of
conflicts of laws.

         12.12. COUNTERPARTS. This Agreement may be executed concurrently in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

         12.13. AGGREGATION OF STOCK. All shares of Common Stock, Series A
Preferred Stock, Public Company Preferred Stock and/or Registrable Common held
or acquired by entities or persons controlled by, or under common control with,
an Investor shall be aggregated together for purposes of determining the
availability of rights under this Agreement.

                                       17
<PAGE>

IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first
written above.

COMPANY:                                    EXCALIBUR HOLDINGS, INC.

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

INVESTORS:

                                            SENECA CAPITAL, L.P.

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

                                            SENECA CAPITAL INTERNATIONAL, LTD.

                                            ------------------------------------
                                            By:
                                                --------------------------------

                                            Its:
                                                --------------------------------

                (SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT)

                                       18
<PAGE>

                                   SCHEDULE 1
                                 LIST OF HOLDERS
                                 ---------------

Seneca Capital, L.P.
 c/o Seneca Capital Investment Partnership
 527 Madison Avenue, 11th Floor
 New York, NY 10022
 Attn: Mr. Davis Parr
 Telephone: (212) 371-1300
Facsimile: (212) 758-6060

Seneca Capital International, Ltd.
 c/o Seneca Capital Investment Partnership
 830 Third Avenue, 14th Floor
 New York, NY 10022
 Attn: Mr. Davis Parr
 Telephone: (212) 371-1300
Facsimile: (212) 758-6060

                                   Sch. 1 - 2<PAGE>

                                                                    EXHIBIT 10.3

             SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

         THIS SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
("AGREEMENT") is made and entered into as of March 21, 2002, by and among
Excalibur Holdings, Inc., a Texas corporation (the "COMPANY"), Seneca Capital,
L.P., a Delaware limited partnership ("SENECA LP"), Seneca Capital
International, Ltd., a corporation organized under the laws of the Cayman
Islands ("SENECA INTERNATIONAL"), (Seneca LP and Seneca International being
collectively referred to as "SENECA"), and the other investors listed on
SCHEDULE 1 (who, together with Seneca are collectively referred to as the
"INVESTORS").

         NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors hereby
agree as follows:

1.       AUTHORIZATION OF SECURITIES.

         1.1. AUTHORIZATION OF SERIES B PREFERRED STOCK. The Company shall
         authorize the number of shares of Series B Convertible Preferred Stock,
         $.001 par value per share (the "SERIES B PREFERRED STOCK"), as provided
         herein, which shall be entitled to the preferences, rights and benefits
         set forth in the Company's Statement of Resolution Establishing a
         Series of Shares, which has been filed with the Secretary of State of
         the State of Texas in the form set forth in EXHIBIT A attached hereto
         (the "STATEMENT OF RESOLUTION"). The Series B Preferred Stock shall be
         convertible into shares of the Company's common stock, $.001 par value
         per share (the "COMMON STOCK"), as set forth in the Statement of
         Resolution.

         1.2. RESERVATION OF CONVERSION SHARES. The Company shall authorize and
         reserve a sufficient number of its previously authorized but unissued
         shares of Common Stock to satisfy the rights of conversion and purchase
         of the holders of the Series B Preferred Stock and the rights of
         exercise, conversion, and purchase of the holders of the Warrants (as
         defined herein). Any shares of Common Stock issuable upon conversion of
         the Series B Preferred Stock, when issued, shall be referred to as
         "CONVERSION SHARES," and any shares of Common Stock issuable upon
         exercise of the Warrants, when issued, shall be referred to as "WARRANT
         SHARES."

         1.3. COLLATERAL AGREEMENTS. The Company, the Investors and certain
         named shareholders of the Company will also enter into a Registration
         Rights Agreement referred to in Section 7.8 (the "REGISTRATION RIGHTS
         AGREEMENT") and a Warrant Certificate referred to in Section 2.2 (the
         "WARRANT CERTIFICATE"). The Registration Rights Agreement and the
         Warrant Certificate are referred to collectively as the "COLLATERAL
         AGREEMENTS."

2. SALE AND PURCHASE OF SHARES OF SERIES B PREFERRED STOCK AND WARRANTS.

                                  1

<PAGE>

         2.1. SERIES B PREFERRED STOCK. Subject to the terms and conditions
         hereof, the Company agrees to sell to the Investors, and each of the
         Investors severally agrees to purchase from the Company in accordance
         with this Agreement, for cash, the number of shares of Series B
         Preferred Stock set forth opposite such Investor's name on SCHEDULE 1
         under the column entitled "Series B Preferred Stock" at a purchase
         price of $1.25 per share (the "PURCHASE COMMITMENT"). The Company's
         agreement with each Investor is a separate agreement, and the sale of
         Series B Preferred Stock to each Investor is a separate sale.

         2.2. WARRANTS. Additionally, on the Closing Date, for no additional
         consideration, the Company will grant each Investor warrants (the
         "WARRANTS") to purchase the number of shares of Common Stock set forth
         opposite such Investor's name on SCHEDULE 1 under the column entitled
         "Warrants" at an exercise price of $1.35 per share. The form of the
         Warrant Certificate is attached hereto as EXHIBIT D.

3. CLOSING.

         3.1. CLOSING DATE AND TIME. The closing of the purchase of the Series B
         Preferred Stock described herein shall take place at the offices of
         Oppenheimer Wolff & Donnelly LLP, 840 Newport Center Drive, Suite 700,
         Newport Beach, California, 92660, at 10:00 a.m., California time, on or
         about March 22, 2002, or as soon as practicable thereafter (the
         "CLOSING"), or at such other place or different time or day as may be
         mutually acceptable to the Investors and the Company, provided that (a)
         $1,500,000 of Series B Preferred Stock is purchased by the Investors in
         the aggregate at the Closing and (b) all other conditions to the
         Closing, as provided in this Agreement, have been met to the reasonable
         satisfaction of, or waived by, the Investors. The date and time on
         which the Closing occurs shall be referred to as the "CLOSING DATE."

         3.2. DELIVERIES. On the Closing Date, the Company shall deliver to each
         of the Investors (i) stock certificate(s) for the number of shares of
         Series B Preferred Stock being purchased by such Investor, which shares
         shall be registered in the Investor's name or as otherwise designated
         by the Investor and (ii) Warrant Certificate(s) for the number of
         Warrants being purchased by such Investor. At the Closing, each
         Investor shall pay to the Company the purchase price for the Purchase
         Commitment set forth on SCHEDULE 1 by wire transfer in immediately
         available funds or any other payment method acceptable to the Company.

4. USE OF PROCEEDS. The Company shall use the proceeds from the transactions
contemplated hereby for working capital and other corporate purposes in a manner
duly authorized by the Board of Directors of the Company (the "BOARD").

5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. To induce each of the
Investors to enter into this Agreement and to purchase the Series B Preferred
Stock and the Warrants set forth herein, the Company hereby represents and
warrants the following to each Investor as of the Closing Date:

                                  2

<PAGE>

         5.1. ORGANIZATION, STANDING, ETC. The Company is a corporation duly
         organized, validly existing and in good standing under the laws of its
         state of incorporation and has the requisite corporate power and
         authority to own, lease or operate its properties and to carry on its
         business as it is now being conducted.

         5.2. GOVERNING INSTRUMENTS. The copies of the Articles of Incorporation
         (including the Statement of Resolution) and the Bylaws of the Company,
         and all amendments thereto (collectively, the "CHARTER DOCUMENTS"),
         delivered to legal counsel for the Investors prior to the execution of
         this Agreement, are true and complete copies of the duly and legally
         adopted Charter Documents in effect as of the date of this Agreement,
         and no action has been taken or authorized to (i) amend any Charter
         Document (other than in connection with the Statement of Resolution) or
         (ii) to liquidate the Company.

         5.3. SUBSIDIARIES, ETC. SCHEDULE 5.3 sets forth each corporation,
         partnership, limited liability company, joint venture, association or
         other business enterprise in which the Company has a direct or indirect
         equity or ownership interest, controlling or otherwise (each a
         "SUBSIDIARY"). Except as set forth on SCHEDULE 5.3, the Company does
         not have any direct or indirect equity or ownership interest,
         controlling or otherwise, in any corporation, partnership, limited
         liability company, joint venture, association or other business
         enterprise. The Company is the record holder of all outstanding shares
         of capital stock or other equity interests of each Subsidiary. The
         representations and warranties of this Section 5, except as to Sections
         5.5, 5.6, 5.7 and 5.8, shall apply to each Subsidiary.

         5.4. QUALIFICATION. The Company is duly qualified, licensed or
         domesticated as a foreign corporation in good standing in each
         jurisdiction listed on SCHEDULE 5.4. The Company has not failed to
         qualify or be licensed or domesticated in any jurisdiction in which the
         failure to so qualify or be licensed or domesticated would have a
         material adverse effect upon the business, prospects, assets,
         properties, or financial condition of the Company (a "MATERIAL ADVERSE
         EFFECT").

         5.5. CORPORATE ACTS AND PROCEEDINGS. This Agreement and the Collateral
         Agreements have been duly authorized by all necessary corporate action
         on behalf of the Company, have been duly executed and delivered by
         authorized officers of the Company, are legal, valid, and binding
         agreements on the part of the Company and are enforceable against the
         Company in accordance with their respective terms. All corporate
         actions necessary for the authorization, issuance and delivery of the
         Warrants and the authorization, creation, reservation and issuance of
         the Series B Preferred Stock and the Conversion Shares contemplated
         hereunder have been taken by the Company.

         5.6. CAPITAL STOCK. Immediately prior to the Closing, the authorized
         capital stock of the Company consists of 50,000,000 shares of Common
         Stock, of which 10,483,699 shares are issued and outstanding; 1,650,000
         shares of Series A Preferred Stock, of which 1,000,000 shares are
         issued and outstanding, 2,400,000 shares of Series B Preferred Stock,
         none of which are issued and outstanding, and 950,000 shares of

                                  3

<PAGE>

         undesignated preferred stock, par value $.001 per share. A list of
         shareholders by name, number of shares and percentage ownership (on an
         as-if converted to Common Stock basis), both before and after the
         Closing is completed, is set forth in SCHEDULE 5.6. All of the
         outstanding shares of capital stock of the Company were duly
         authorized, validly issued, are fully paid and nonassessable, and have
         been issued in compliance with an exemption or exemptions from the
         registration and prospectus delivery requirements of the Securities Act
         of 1933, as amended (the "SECURITIES ACT"), and from the registration
         and qualification requirements of all applicable state securities laws.

                  5.6.1. There are no outstanding subscriptions, options,
                  warrants, calls, contracts, demands, commitments, convertible
                  securities or other agreements or arrangements of any
                  character or nature whatever, other than as provided in this
                  Agreement, under which the Company is obligated to issue any
                  securities of any kind representing an ownership interest in
                  the Company, except as set forth in SCHEDULE 5.6. Sufficient
                  shares of Common Stock, Series A Preferred Stock, and Series B
                  Preferred Stock are reserved for issuance upon exercise,
                  conversion or otherwise, of the obligations set forth in
                  SCHEDULE 5.6 and the Warrants. Neither the offer nor the
                  issuance or sale of the Series B Preferred Stock constitutes
                  an event, under any anti-dilution provisions of any securities
                  issued (or issuable pursuant to outstanding rights, warrants
                  or options) by the Company or any agreements with respect to
                  the issuance of securities by the Company, which will either
                  increase the number of shares issuable pursuant to such
                  provisions or decrease the consideration per share to be
                  received by the Company pursuant to such provisions.

                  5.6.2. Except as set forth on SCHEDULE 5.6, this Agreement,
                  and the Collateral Agreements, no holder of any securities of
                  the Company is entitled to any preemptive or similar rights to
                  purchase any securities of the Company from the Company,
                  either as a result of this Agreement or any prior
                  transactions; provided, however, that nothing in this Section
                  5.6 shall affect, alter or diminish any right granted to the
                  Investors in this Agreement or the Collateral Agreements.

         5.7. VALID ISSUANCE. The Company has the requisite corporate power and
         authority to execute and deliver this Agreement and the Collateral
         Agreements and to perform its obligations hereunder, thereunder, and
         under the Statement of Resolution, and to issue the Series B Preferred
         Stock, the Warrants, and the Conversion Shares. The Series B Preferred
         Stock and the Warrants, when issued and paid for pursuant to the terms
         of this Agreement, will be duly authorized and validly issued and
         outstanding, fully paid, nonassessable and free and clear of all
         pledges, liens, encumbrances and restrictions, except as set forth in
         Sections 6.2 and 11 hereof, the Collateral Agreements and the Statement
         of Resolution. The Conversion Shares have been reserved for issuance
         upon conversion of the Series B Preferred Stock and, when issued upon
         conversion of the Series B Preferred Stock in accordance with the terms
         of this Agreement, will be duly authorized, validly issued and
         outstanding, fully paid, nonassessable and free and clear of all
         pledges, liens, encumbrances and restrictions, except as set forth in
         Sections 6.2 and 11, the Collateral Agreements and the Statement of
         Resolution.

                                  4

<PAGE>

         5.8. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.8 are complete
         and correct copies of the following financial statements (collectively,
         the "FINANCIAL STATEMENTS"): (a) the audited balance sheet as of
         December 31, 2000 of AeroWeld, Inc., an Oklahoma corporation
         ("AEROWELD") which sold substantially all of its assets to a Subsidiary
         of the Company and the related audited statements of income and cash
         flows for the fiscal year ended December 31, 2000, (b) the unaudited
         balance sheet as of September 30, 2001 (the "BALANCE SHEET DATE") of
         AeroWeld and the related unaudited statements of income and cash flows
         for the nine month period ended September 30, 2001, (c) the audited
         balance sheet as of December 31, 2000 of Excalibur Steel, Inc., an
         Oklahoma corporation ("EXCALIBUR STEEL") which merged with and into a
         Subsidiary of the Company and the related audited statements of income
         and cash flows for the fiscal year ended December 31, 2000, (d) the
         unaudited balance sheet as of the Balance Sheet Date of Excalibur Steel
         and the related unaudited statements of income and cash flows for the
         nine month period ended September 30, 2001 (AeroWeld and Excalibur
         Steel are collectively referred to as the "ACQUISITION COMPANIES"), and
         (e) the unaudited consolidated balance sheet of the Company as of
         November 25, 2001. The Financial Statements present fairly the
         financial position of each of the respective Acquisition Companies, as
         of such dates and the results of operations and statement of cash flows
         for the period covered thereby (subject, in the case of the internal
         financial statements, to year-end audit adjustments) and have been
         prepared in accordance with generally accepted accounting principles
         consistently applied ("GAAP"), except as to the interim financial
         statements, which are subject to normal year-end adjustments, and the
         absence of footnotes thereto. Except as disclosed in the Financial
         Statements and SCHEDULE 5.8, since the Balance Sheet Date, there has
         been no material adverse change in the business or condition, financial
         or otherwise, operations, or prospects of the Company.

         5.9. LITIGATION; GOVERNMENTAL PROCEEDINGS. Except as set forth on
         SCHEDULE 5.9, There are no legal actions, suits, arbitrations or other
         legal, administrative or governmental proceedings or investigations
         pending or, to the knowledge of the Company, threatened against the
         Company, its properties or business, or any officer or director of the
         Company in their capacity as such, which, if successful, would have a
         Material Adverse Effect, and the Company is not aware of any facts
         which are reasonably expected to result in or form the basis for any
         such action, suit, arbitration or other proceeding. The Company is not
         in default with respect to any judgment, order or decree of any court
         or any governmental agency or instrumentality, which default would have
         a Material Adverse Effect.

         5.10. COMPLIANCE WITH APPLICABLE LAWS AND OTHER INSTRUMENTS. The
         properties, business and operations of the Company have been and are
         being conducted in compliance with all applicable laws, rules,
         regulations, decrees, injunctions, judgments, orders, rulings, awards,
         settlements, and writs of all governmental authorities, except where
         the failure to comply therewith would not have a Material Adverse
         Effect. Neither the execution nor delivery of, nor the performance of
         or compliance with, this Agreement and the Collateral Agreements nor
         the consummation of the transactions contemplated hereby or thereby
         will, with or without the giving of notice or passage of time, (i)

                                  5

<PAGE>

         violate any applicable law, rule, regulation, judgment, injunction,
         order, or decree applicable to the Company, (ii) result in any breach
         of, or constitute a default under, or result in the imposition of any
         lien or encumbrance upon any asset or property of the Company pursuant
         to, any agreement or other instrument to which the Company is a party
         or by which it or any of its properties, assets or rights is bound or
         affected, or (iii) conflict with or violate the Charter Documents. The
         Company is not in violation of its Charter Documents nor is the Company
         in violation of, or in default under, any lien, indenture, mortgage,
         lease, agreement, instrument, commitment or arrangement, except for
         defaults that do not and will not have a Material Adverse Effect on the
         Company. The Company is not subject to any restriction which would
         prohibit it from entering into or performing its obligations under this
         Agreement or the Collateral Agreements.

         5.11. SECURITIES LAWS. Subject to the accuracy of the representations
         of the Investors in Section 6, no consent, authorization, approval,
         permit or order of or filing with any governmental or regulatory
         authority is required under current laws and regulations in connection
         with the execution and delivery of this Agreement and the Collateral
         Agreements, the consummation of the transactions contemplated hereby or
         thereby, or the offer, issuance, sale or delivery of the Series B
         Preferred Stock and the Warrants, other than (i) the filing of a Form D
         pursuant to Regulation D under the Securities Act of 1933, as amended
         (the "SECURITIES ACT"), and the qualification thereof, if required,
         under applicable state securities laws which qualification has been or
         will be effected and (ii) with respect to the Registration Rights
         Agreement, the registration of the shares covered thereby with the
         Securities and Exchange Commission (the "COMMISSION") and filings
         pursuant to state securities laws. The Company has not, directly or
         through an agent, offered the Series B Preferred Stock, the Warrants,
         or any similar securities for sale to, or solicited any offers to
         acquire such securities from, persons other than the Investors and
         other accredited investors. Subject to the accuracy of the
         representations of the Investors in Section 6, under the circumstances
         contemplated by this Agreement, the offer, issuance, sale and delivery
         of the Series B Preferred Stock and the Warrants will not, under
         current laws and regulations, require compliance with the prospectus
         delivery or registration requirements of the Securities Act.

         5.12. OUTSTANDING INDEBTEDNESS. Except for the promissory notes and
         other indebtedness set forth on SCHEDULE 5.12, the Company does not
         have any indebtedness incurred as the result of any borrowing of money,
         including, but not limited to, indebtedness with respect to trade
         accounts, other than indebtedness incurred in the ordinary course and
         not exceeding $50,000 individually or in the aggregate. The Company is
         not in default in the payment of the principal of or interest or
         premium on any such indebtedness, and no event has occurred or is
         continuing under the provisions of any instrument, document or
         agreement evidencing or relating to any such indebtedness which with
         the lapse of time or the giving of notice, or both, would constitute an
         event of default thereunder.

         5.13. CONTRACTS.

                  5.13.1. Prior to the execution of this Agreement, the Company
                  has delivered to legal counsel for the Investors, SCHEDULE
                  5.13 containing a detailed list of the Company's material
                  contracts, specifically referring to this Section 5.13 and
                  identifying such contracts in accordance with the following
                  subsections:

                                  6

<PAGE>

                           (a) true and complete description of all real
                           properties owned by the Company;

                           (b) each indenture, lease, sublease, license or other
                           instrument under which the Company claims or holds a
                           leasehold interest in real property (including any
                           agreement related to the purchase or sale of such
                           assets);

                           (c) each lease of personal property involving
                           payments remaining to or from the Company in excess
                           of $50,000;

                           (d) each agreement granting voting rights,
                           registration rights, first negotiating rights or
                           preemptive rights to a third party; and

                           (e) any other agreement or group of related
                           agreements the performance of which involves
                           consideration greater than $50,000.

                  5.13.2. Prior to the Closing, the Company shall provide legal
                  counsel for the Investors with a true and complete copy of
                  each document referred to on such schedule which such counsel
                  requests to examine.

                  5.13.3. The Company is in compliance with all of its
                  obligations, has not defaulted, and is not in default under
                  any of the contracts, agreements, leases, documents,
                  commitments or other arrangements to which it is a party or by
                  which it or its property is otherwise bound, except to the
                  extent such default does not and will not a have a Material
                  Adverse Effect. All agreements referred to in SCHEDULE 5.13
                  are in effect and enforceable against the Company according to
                  their respective terms subject to applicable bankruptcy,
                  insolvency, fraudulent conveyance, moratorium, reorganization
                  and other similar laws affecting the enforcement of creditors'
                  rights generally and to judicial limitations on the
                  enforcement of the remedy of specific performance and other
                  equitable remedies. To the Company's knowledge, all parties
                  having material contractual arrangements with the Company are
                  in substantial compliance therewith and none are in material
                  default in any respect thereunder.

         5.14. ACCOUNTS RECEIVABLE. To the Company's knowledge, all accounts
         receivable of the Company referenced in the Financial Statements
         (except such accounts receivable as have been collected since such
         date) are valid and enforceable claims, except to the extent that they
         are included in the reserves for doubtful accounts, and the goods and
         services sold and delivered which gave rise to such accounts were sold
         and delivered in conformity with the applicable purchase orders,
         agreements and specifications. Such accounts receivable are subject to
         no valid defense or offsets except routine customer complaints or
         warranty demands of an immaterial nature. The Company does not believe
         that its uncollectible accounts will exceed the reserves for doubtful
         accounts.

         5.15. LICENSES. The Company possesses from the appropriate agency,
         commission, board and government body and authority, whether state,
         local or federal, all licenses, permits, authorizations, approvals,
         franchises and rights which (i) are necessary for it to engage in the
         business currently conducted by it, and (ii) if not possessed by the
         Company, would have a Material Adverse Effect. The Company has no

                                  7

<PAGE>

         knowledge that would lead it to believe that it will not be able to
         obtain all licenses, permits, authorizations, approvals, franchises and
         rights that may be required for any business the Company presently
         proposes to conduct. A list of all material licenses, permits,
         approvals and similar rights currently in effect is set forth in
         SCHEDULE 5.15.

         5.16. TITLE TO PROPERTIES AND ENCUMBRANCES. Except with respect to real
         and personal property leased pursuant to lease agreements, the Company
         has good and marketable title to all of its properties and assets,
         except for property disposed of in the ordinary course of business,
         which properties and assets are not subject to any mortgage, pledge,
         lease, lien, charge, security interest, encumbrance or restriction,
         except (i) liens for taxes and assessments or governmental charges or
         levies not at the time due or in respect of which the validity thereof
         shall currently be contested in good faith by appropriate proceedings
         or (ii) minor imperfections of title, if any, not material in nature or
         amount and not materially (x) detracting from the value or impairing
         the use of the property subject thereto or (y) impairing the operations
         or proposed operations of the Company and its subsidiaries, including,
         without limitation, the ability of the Company or its subsidiaries to
         secure financing using such properties and assets as collateral.

         5.17. TAX RETURNS AND AUDITS. The Company has accurately prepared and
         timely filed all federal, state and other tax returns required by law
         to be filed, has paid or made provision for the payment of all taxes
         shown to be due and all additional assessments where any nonpayment
         would result in a Material Adverse Effect. None of the federal income
         tax returns of the Company have been audited by the Internal Revenue
         Service. No additional assessments or adjustments are pending or
         threatened against the Company or its assets for any period, nor is
         there any basis for any such assessment or adjustment.

         5.18. RETIREMENT PLANS. Except as set forth in SCHEDULE 5.18, the
         Company does not have any retirement plan in which any employee of the
         Company participates that is subject to any provisions of the Employee
         Retirement Income Security Act of 1974, as amended, and of the
         regulations adopted pursuant thereto ("ERISA").

         5.19. ENVIRONMENTAL AND SAFETY LAWS. To the Company's knowledge, the
         Company is not in violation of any applicable statute, law or
         regulation relating to the environment or occupational health and
         safety, except violations which would not have a Material Adverse
         Effect, and no material expenditures are or are reasonably anticipated
         to be required in order to comply with any such existing statute, law
         or regulation. To the Company's knowledge, during the period that the
         Company has owned or leased its properties and facilities, (i) there
         have been no disposals, releases or threatened releases of Hazardous
         Materials (as defined below) on, from or under such properties or
         facilities, and (ii) other than normal office products and cleaning
         supplies, it has not used, generated, manufactured or stored on, under
         or about such properties or facilities or transported to or from such
         properties or facilities any Hazardous Materials. For purposes of this
         Agreement, the terms "disposal," "release" and "threatened release"
         shall have the definitions assigned thereto by the Comprehensive
         Environmental Response, Compensation and Liability Act of 1980, 42

                                  8

<PAGE>

         U.S.C. Section 9601, ET. SEQ. as amended ("CERCLA"). For the purposes
         of this Section, "Hazardous Materials" shall mean any hazardous or
         toxic substance, material or waste, which is regulated under, or
         defined as a "hazardous substance," "pollutant," "contaminant," "toxic
         chemical," "hazardous material," "toxic substance" or "hazardous
         chemical" under (1) CERCLA; (2) the Emergency Planning and Community
         Right-to-Know Act, 42 U.S.C. Section 11001, ET. SEQ.; (3) the Hazardous
         Materials Transportation Act, 49 U.S.C. Section 1801, ET. SEQ.; (4) the
         Toxic Substance Control Act, 15 U.S.C. Section 2601, ET. SEQ.; (5) the
         Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651, ET.
         SEQ.; (6) regulations promulgated under any of the above statutes; or
         (7) any applicable state or local statute, ordinance, rule or
         regulation that has a scope or purpose similar to those statutes
         identified above.

         5.20. TRANSACTIONS WITH AFFILIATES. Except as set forth in SCHEDULE
         5.20, no director, officer, employee or shareholder of the Company, or
         member of the family of any such person, or any corporation,
         partnership, trust or other entity in which any such person, or any
         member of the family of any such person, has a substantial interest or
         is an officer, director, trustee, partner or holder of more than 5% of
         the outstanding capital stock thereof, is a party to any transaction
         with the Company, including any contract, agreement or other
         arrangement providing for the employment of, furnishing of services by,
         rental or real or personal property from or otherwise requiring
         payments to any such person or firm, other than employment-at-will
         arrangements in the ordinary course of business.

         5.21. NO BROKERS OR FINDERS. Except as set forth on SCHEDULE 5.21, no
         person, firm or corporation has or will have, as a result of any
         contractual undertaking by the Company, any right, interest or valid
         claim against the Company or any Investor for any commission, fee or
         other compensation as a finder or broker, or in any similar capacity,
         in connection with the transactions contemplated by this Agreement or
         any of the Collateral Agreements. The Company will defend, indemnify
         and hold the Investors harmless against any and all liability with
         respect to any such commission, fee or other compensation which may be
         payable or determined to be payable, other than as set forth on
         SCHEDULE 5.21.

         5.22. REGISTRATION RIGHTS. Except as set forth in SCHEDULE 5.22 and as
         contemplated by this Agreement and the Collateral Agreements, the
         Company has not agreed to register any of its authorized or outstanding
         shares of its capital stock under the Securities Act other than the
         Conversion Shares and the Warrant Shares. The holders of the Series B
         Preferred Stock shall be entitled to registration rights pursuant to
         the terms and conditions specified in the Registration Rights
         Agreement.

         5.23. SHUMATE FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.23
         are complete and correct copies of the unaudited financial statements,
         including balance sheets and statements and income and cash flows, of
         Shumate Machine Works, Inc., a Texas corporation ("SHUMATE"), for the
         years ended December 31, 2001 and December 31, 2000 (the "SHUMATE
         UNAUDITED FINANCIAL STATEMENTS"). Shumate is currently having an
         accounting firm conduct an audit of the Shumate Financial Statements
         (as audited, the "SHUMATE AUDITED FINANCIAL STATEMENTS"). The Shumate
         Audited Financial Statements will not vary in any material respect from

                                  9

<PAGE>

         the Shumate Unaudited Financial Statements. Except as disclosed in the
         Shumate Unaudited Financial Statements and SCHEDULE 5.23, since
         December 31, 2001, there has been no material adverse change in the
         business or condition, financial or otherwise, operations, or prospects
         of Shumate, and, from the date hereof until the date of delivery of the
         Shumate Audited Financial Statements pursuant to Section 8.8, there
         will be no material adverse change in the business or condition,
         financial or otherwise, operations, or prospects of Shumate.

         5.24. DISCLOSURE. Neither this Agreement nor any Collateral Agreement
         nor any other agreement or schedule entered into or delivered pursuant
         to this Agreement or and Collateral Agreement contains any untrue
         statement of a material fact or omits to state any material fact
         required to be stated herein or therein or necessary to make the
         statements herein or therein not misleading.

6. REPRESENTATIONS OF THE INVESTORS. Each of the Investors severally represents
the following to the Company with respect to such Investor:

         6.1. INVESTMENT INTENT. The shares of Series B Preferred Stock, the
         Conversion Shares into which such shares may be converted, and the
         Warrants being acquired by such Investor are being purchased for
         investment for such Investor's own account and not with the view to, or
         for resale in connection with, any distribution or public offering
         thereof. Such Investor has no current plan or intention to engage in a
         sale, exchange, transfer, distribution, redemption, reduction in any
         way of such Investor's risk of ownership by short sale or otherwise, or
         other disposition, directly or indirectly of the Series B Preferred
         Stock or Warrants being acquired by such Investor pursuant to this
         Agreement or the Conversion Shares into which such shares may be
         converted. Such Investor is able to bear the economic risk of its
         investment and has the knowledge and experience in financial and
         business matters that it is capable of evaluating the merits and risks
         (including tax considerations) of its investment, including the high
         degree of risk of loss of such Investor's entire investment herein.

         6.2. RESTRICTIONS ON RESALE, RULE 144. Each Investor understands that
         neither the shares of Series B Preferred Stock nor the Warrants have
         been registered under the Securities Act or any state securities laws
         by reason of their contemplated issuance in transactions exempt from
         the registration requirements of the Securities Act pursuant to Section
         4(2) thereof and/or Rule 506 promulgated under the Securities Act and
         applicable state securities laws, and that the reliance of the Company
         and others upon these exemptions is predicated in part upon this
         representation by each Investor. Each Investor further understands that
         neither the Series B Preferred Stock nor the Warrants may be
         transferred or resold without (i) registration under the Securities Act
         and any applicable state securities laws or (ii) an exemption from the
         requirements of the Securities Act and applicable state securities
         laws. Each Investor also understands that the Conversion Shares will be
         issued without prior registration thereof under the Securities Act or
         applicable state securities laws in reliance upon Section 4(2) of the
         Securities Act and transactional exemptions from registration under
         applicable state securities laws based upon appropriate representations
         of each Investor. As such, the Conversion Shares will be subject to
         transfer restrictions similar to restrictions applicable to the Series

                                 10

<PAGE>

         B Preferred Stock. Each Investor understands (i) that an exemption from
         such registration is not presently available pursuant to Rule 144
         promulgated under the Securities Act by the Commission, (ii) that the
         Company has made no commitment to become eligible for Rule 144
         (although the Company is subject to the covenants in Section 8.7) and
         (iii) that in any event an Investor may not sell any securities
         acquired hereunder pursuant to Rule 144 prior to the expiration of a
         one-year period (or such shorter period as the Commission may hereafter
         adopt) after such Investor has acquired such securities. Each Investor
         understands that any sales pursuant to Rule 144 can be made only in
         full compliance with the provisions of Rule 144.

         6.3. LOCATION OF PRINCIPAL OFFICE, QUALIFICATION AS AN ACCREDITED
         INVESTOR, ETC. The state in which each Investor's principal office (or
         domicile, if such Investor is an individual) is located is the state
         set forth in such Investor's address on SCHEDULE 1. Each Investor by
         execution of this Agreement hereby represents that he, she or it
         qualifies as an "accredited investor" for purposes of Regulation D
         promulgated under the Securities Act. Each Investor (i) is an investor
         in securities of companies in the development stage and acknowledges
         that it is able to fend for itself, and bear the loss of its entire
         investment in the Series B Preferred Stock, the Warrants, and the
         Conversion Shares and (ii) has such knowledge and experience in
         financial and business matters that it is capable of evaluating the
         merits and risks of the investment to be made by it pursuant to this
         Agreement. If other than an individual, each Investor also represents
         either (a) that it has not been organized solely for the purpose of
         acquiring the Series B Preferred Stock, the Warrants, or Conversion
         Shares, or (b) that if it has been organized solely for the purpose of
         acquiring the Series B Preferred Stock, the Warrants, or Conversion
         Shares, all of its holders of equity interests are "accredited
         investors" for purposes of Regulation D promulgated under the
         Securities Act.

         6.4. ACTS AND PROCEEDINGS. Each Investor has full power and authority
         to enter into and perform under this Agreement and all Collateral
         Agreements in accordance with their respective terms. This Agreement
         and all Collateral Agreements have been duly authorized by all
         necessary action on the part of each Investor, have been duly executed
         and delivered by each such Investor, and are valid and binding
         agreements of each such Investor and enforceable against each such
         Investor in accordance with their respective terms, except as
         enforceability may be limited by bankruptcy, insolvency, moratorium,
         reorganization or other similar laws affecting the enforcement of
         creditors' rights generally and to judicial limitations on the remedy
         of specific enforcement and other equitable remedies. The execution of
         and performance of the transactions contemplated by this Agreement and
         the Collateral Agreements to be executed by each Investor and
         compliance with their provisions by each Investor will not violate any
         provision of law by which such Investor is bound and will not conflict
         with or result in any breach of any of the terms, conditions or
         provisions of, or constitute a default under, or require a consent or
         waiver under, its organizational documents (each as amended to date) or
         any indenture, lease, agreement or other instrument to which the
         Investor is a party or by which it or any of its properties is bound,
         or any decree, judgment, order, statute, rule or regulation applicable
         to the Investor.

                                 11

<PAGE>

         6.5. EXCULPATION AMONG INVESTORS. Each Investor acknowledges that in
         making the decision to invest in the Company, such Investor is not
         relying on any other Investor or upon any person, firm or company,
         other than the Company and its officers, employees and/or directors.
         Each Investor agrees that no other Investor, nor the partners,
         employees, officers or controlling persons of any other Investor, shall
         be liable for any actions taken by such Investor, or omitted to be
         taken by such Investor, in connection with such investment.

         6.6. DISCLOSURE OF INFORMATION. The Investor represents that the
         Company has made available to such Investor at a reasonable time prior
         to the execution of this Agreement sufficient and satisfactory
         opportunity to ask questions and receive answers from the Company's
         management concerning the Company's business, management and financial
         affairs, the terms and conditions of the offering of the Series B
         Preferred Stock, the Warrants, and the Conversion Shares and to obtain
         any additional information (which the Company possesses or can acquire
         without unreasonable effort or expense) as may be necessary to verify
         the accuracy of information furnished to such Investor. The Investor
         has reviewed the representations concerning the Company contained in
         this Agreement and the Collateral Agreements. The foregoing, however,
         does not limit or modify the representations and warranties of the
         Company in this Agreement or the right of the Investors to rely
         thereon.

         6.7. LEGEND; STOP TRANSFER. The Series B Preferred Stock, the Warrants,
         and any Conversion Shares issued upon conversion of the Series B
         Preferred Stock, shall bear a legend substantially similar to that set
         forth in Section 11.3. The Company shall make a notation regarding the
         restrictions on transfer of the Series B Preferred Stock and any such
         Conversion Shares in its books and the Series B Preferred Stock and any
         such Conversion Shares shall be transferred on the books of the Company
         only if transferred or sold pursuant to an effective registration
         statement under the Securities Act covering the securities to be
         transferred or an opinion of counsel satisfactory to the Company that
         such registration is not required.

         6.8. NO BROKERS OR FINDERS. Except as set forth on SCHEDULE 5.21, no
         person, firm or corporation has or will have, as a result of any
         contractual undertaking by any Investor, any right, interest or valid
         claim against such Investor or the Company for any commission, fee or
         other compensation as a finder or broker, or in any similar capacity,
         in connection with the transactions contemplated by this Agreement.
         Each responsible Investor will indemnify and hold the Company harmless
         against any and all liability with respect to any such commission, fee
         or other compensation which may be payable or determined to be payable,
         except those disclosed on SCHEDULE 5.21.

7. CONDITIONS OF EACH INVESTOR'S OBLIGATION. The obligation of each Investor to
purchase the Series B Preferred Stock and the Warrants on the Closing Date is
subject to the fulfillment or waiver by such Investor prior to or on such
Closing Date of the conditions set forth in this Section 7. In the event that
any such condition is not satisfied to the reasonable satisfaction of any
Investor, then such non-satisfied Investor shall not be obligated to proceed
with the purchase of such securities.

                                 12

<PAGE>

         7.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
         of the Company under this Agreement shall be true in all material
         respects as of the Closing Date with the same effect as though made on
         and as of such date.

         7.2. STATEMENT OF RESOLUTION. As of the Closing Date, the Statement of
         Resolution, as adopted by the Board, shall have been filed with the
         Secretary of State of the State of Texas in the form set forth in
         EXHIBIT A, with evidence of such filing tendered on the Closing Date.

         7.3. COMPLIANCE WITH AGREEMENTS. The Company shall have performed and
         complied in all material respects with all agreements or conditions
         required by this Agreement and the Collateral Agreements to be
         performed and complied with by it prior to or as of the Closing Date.

         7.4. CERTIFICATE OF OFFICERS. The Company shall have delivered to the
         Investors a certificate, dated as of the Closing Date, executed by the
         Secretary of the Company, certifying to the satisfaction of the
         conditions specified in Sections 7.1, 7.2, and 7.3.

         7.5. OPINION OF COMPANY COUNSEL. The Company shall have delivered to
         each Investor an opinion, satisfactory to each of the Investors, from
         counsel for the Company, dated as of the Closing Date, substantially in
         the form attached as EXHIBIT B hereto.

         7.6. SUPPORTING DOCUMENTS. Legal counsel for the Investors shall have
         received the following:

                  7.6.1. a copy of resolutions of the Board authorizing and
                  approving the Series B Preferred Stock and the Warrants, and
                  authorizing and approving the execution, delivery and
                  performance of this Agreement and the Collateral Agreements,
                  including the issuance of the Series B Preferred Stock and the
                  Warrants to the Investors, such resolutions to be certified by
                  the Secretary of the Company;

                  7.6.2. a Certificate of Incumbency executed by the Treasurer
                  of the Company certifying the names, titles and signatures of
                  the officers authorized to execute this Agreement and further
                  certifying that the Charter Documents of the Company delivered
                  to legal counsel for the Investors at the time of the
                  execution of this Agreement have been validly adopted and have
                  not been amended or modified;

                  7.6.3. such additional supporting documentation and other
                  information with respect to the transactions contemplated
                  hereby as legal counsel for the Investors may reasonably
                  request; and

                  7.6.4. a good standing certificate for the Company, issued by
                  the Secretary of State of the State of Texas within five (5)
                  days of the Closing.

         7.7. QUALIFICATION UNDER STATE SECURITIES LAWS. All registrations,
         qualifications, permits and approvals required, if any, under state
         securities laws for the lawful execution and delivery of this Agreement
         and the offer, sale, issuance and delivery of the Series B Preferred
         Stock and the Warrants to the Investors at the Closing shall have been
         obtained or will be obtained by the Company in compliance with such
         laws.

                                 13

<PAGE>

         7.8. REGISTRATION RIGHTS AGREEMENT. As of the Closing Date, the
         Registration Rights Agreement shall have been executed and delivered in
         the form attached hereto as EXHIBIT C.

         7.9. DELIVERY OF SECURITIES. As of the Closing Date, the Investors
         shall have received certificates evidencing the Series B Preferred
         Stock and the Warrants issued pursuant to this Agreement.

8. AFFIRMATIVE COVENANTS OF THE COMPANY. Subject to the provisions of Section
12, the Company covenants and agrees as follows:

         8.1. CORPORATE EXISTENCE. The Company will maintain its corporate
         existence in good standing and comply with all applicable laws and
         regulations of the United States or of any state or political
         subdivision thereof and of any government authority where failure to so
         comply would have a Material Adverse Effect on the Company or its
         business or operations.

         8.2. BOOKS OF ACCOUNT AND RESERVES. The Company will keep books of
         record and account in which full, true and correct entries are made of
         all of its dealings, business and affairs, in accordance with GAAP. The
         Company will employ certified public accountants from a national firm
         as selected by the Board who are "independent" within the meaning of
         the accounting regulations of the Commission (the "ACCOUNTANTS").
         Commencing with the year ending December 31, 2001, the Company will
         have annual audits made by such Accountants in the course of which such
         Accountants shall make such examinations, in accordance with generally
         accepted auditing standards, as will enable them to give such reports
         or opinions with respect to the financial statements of the Company as
         will satisfy the requirements of the Commission in effect at such time
         with respect to reports or opinions of accountants.

         8.3. FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The Company
         will:

                  8.3.1. deliver the following quarterly financial statements to
                  each Investor continuing to own 200,000 shares of Series B
                  Preferred Stock (or equivalent number of Conversion Shares,
                  subject to appropriate adjustment to reflect stock splits,
                  stock dividends, reorganizations and other capitalization
                  changes effected after the Closing Date) (each such Investor a
                  "MAJOR INVESTOR") as soon as available but in any event within
                  forty-five (45) days after the end of each of the first three
                  (3) quarters of each fiscal year of the Company: an unaudited
                  balance sheet of the Company, together with the related
                  statements of operations, retained earnings and cash flow
                  statements for such quarter (provided, however, that such
                  statements need not include footnotes, but otherwise shall
                  comply with GAAP), which financial statements shall compare
                  the financial information contained therein with the Company's
                  annual operating plan and budget for such period;

                                 14

<PAGE>

                  8.3.2. deliver the following audited annual financial
                  statements to each Major Investor as soon as available but in
                  any event within one-hundred five (105) days after the end of
                  each fiscal year: a balance sheet of the Company, as of the
                  end of such fiscal year, together with the related statements
                  of operations, retained earnings and cash flow statements for
                  such fiscal year, all in reasonable detail and duly certified
                  by the Accountants, who shall have given the Company an
                  opinion, unqualified as to the scope of the audit, regarding
                  such statements;

                  8.3.3. upon the reasonable request of any Major Investor,
                  deliver the following monthly financial statements to such
                  Major Investor, as soon as available, but in any event within
                  thirty (30) days after the close of each month: an unaudited
                  balance sheet of the Company as of the end of such month,
                  together with the related statements of operations for each
                  such month, and on a year to date basis (provided, however,
                  that such statements need not comply with GAAP), which balance
                  sheets and statements of operations shall compare the
                  financial information contained therein with the Company's
                  annual operating plan and budget for such period;

                  8.3.4. upon the reasonable request of any Major Investor,
                  deliver the following: (a) an operating plan and budget for
                  the current or upcoming fiscal year, and (b) an update on the
                  Company's actual performance against the plan and budget for
                  any month or fiscal quarter;

                  8.3.5. deliver to each Major Investor, with reasonable
                  promptness, such other financial information and projections
                  relating to the business, affairs and financial condition of
                  the Company as is available to the Company and as from time to
                  time any such Major Investor may reasonably request; and

                  8.3.6. deliver to each Major Investor within seven (7) days
                  after the Company learns of the commencement or written
                  threats of the commencement of any lawsuit, legal or
                  equitable, or of any administrative, arbitration or other
                  proceeding against the Company or its business, assets or
                  properties, written notice of the nature and extent of such
                  suit or proceeding.

         8.4. INSPECTION. The Company will permit each Major Investor, or any
         other representative designated by each such Major Investor and
         reasonably satisfactory to the Company, to visit and inspect, at such
         Major Investor's expense, any of the properties of the Company,
         including its books and records (and to make photocopies thereof or
         make extracts therefrom), and to discuss its affairs, finances and
         accounts with its officers, lawyers and accountants, all to such
         reasonable extent and at such reasonable times and intervals as such
         Major Investor may reasonably request; provided, however, that each
         Major Investor's foregoing rights are limited to exercising such rights
         only for purposes related to such Major Investor's stock ownership in
         the Company and nothing herein will require the Company to take action
         or provide information (i) that is subject to attorney-client
         privilege, (ii) for or to a party with which the Company is at the time
         engaged in a dispute or litigation, (iii) that would cause the Company
         to breach a confidentiality agreement with a third party or (iv) for or

                                 15

<PAGE>

         to any party that the Company reasonably deems to be a competitor of
         the Company. Each Major Investor shall maintain, and shall require its
         representatives to maintain, all confidential information obtained from
         the Company on a confidential basis. The Company shall cause each Major
         Investor and its representatives who have obtained confidential
         information from the Company to execute the Company's standard form of
         nondisclosure agreement

         8.5. SUBSIDIARIES. The Company shall cause each Subsidiary to comply
         with the applicable covenants set forth in this Section 8.

         8.6. PAYMENT OF TAXES. The Company will pay all taxes (other than taxes
         based upon income) and other governmental charges that may be imposed
         with respect to the issue or delivery of Conversion Shares, other than
         any tax or other charge imposed in connection with any transfer
         involved in the issue and delivery of shares of Common Stock in a name
         other than that in which the shares of Series B Preferred Stock so
         converted were registered.

         8.7. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
         making available to the Investors the benefits of Rule 144 promulgated
         under the Securities Act and any other rule or regulation of the
         Commission that may at any time permit an Investor to sell securities
         of the Company to the public without registration or pursuant to a
         registration on Form S-3, the Company agrees to do the following and to
         cause the Public Company (as defined in the Statement of Resolution) to
         do the following:

                  8.7.1. make and keep public information available, as those
                  terms are understood and defined in Commission Rule 144, at
                  all times after ninety (90) days after the Reorganization (as
                  defined in the Statement of Resolution) or the effective date
                  of as Qualified Public Offering (as defined in the Statement
                  of Resolution);

                  8.7.2. take such action, including the voluntary registration
                  of its Common Stock (or the Public Company Common Stock) under
                  Section 11 of the Securities Exchange Act of 1934, as amended
                  (the "1934 ACT"), as is necessary to enable the Investors to
                  utilize Form S-3 for the sale of their Registrable Securities
                  (as defined in the Registration Rights Agreement), such action
                  to be taken as soon as practicable after the end of the fiscal
                  year in which the Reorganization occurs or a Qualified Public
                  Offering is declared effective, whichever occurs first;

                  8.7.3. file with the Commission in a timely manner all reports
                  and other documents required of the Company (or the Public
                  Company) under the Securities Act and the 1934 Act; and

                  8.7.4. furnish to any Investor, so long as the Investor owns
                  any Registrable Securities (as defined in the Registration
                  Rights Agreement), forthwith upon request (i) a written
                  statement by the Company (or the Public Company) that it has
                  complied with the reporting requirements of Commission Rule
                  144 (at any time after ninety (90) days after the
                  Reorganization or the effective date of a Qualified Public
                  Offering, whichever occurs first), the Securities Act and the
                  1934 Act (at any time after it has become subject to such
                  reporting requirements), or that it qualifies as a registrant
                  whose securities may be resold pursuant to Form S-3 (at any

                                 16

<PAGE>

                  time after it so qualifies), (ii) a copy of the most recent
                  annual or quarterly report of the Company (or the Public
                  Company) and such other reports and documents so filed by the
                  Company (or the Public Company), and (iii) such other
                  information as may be reasonably requested in availing any
                  Holder of any rule or regulation of the Commission which
                  permits the selling of any such securities without
                  registration or pursuant to such form.

         8.8. DELIVERY OF SHUMATE AUDITED FINANCIAL STATEMENTS. Within thirty
         (30) days of the Closing Date, the Company will deliver to the
         Investors the Shumate Audited Financial Statements.

9. RESERVATION OF CONVERSION SHARES. The Company further covenants and agrees
that the Company will at all times have and maintain authorized and reserved a
sufficient number of its shares of Common Stock for the purpose of issuance upon
the conversion of the Series B Preferred Stock in accordance with the Statement
of Resolution and for the purpose of issue upon the exercise of the Warrants.

10. COVENANT BREACHES.

         10.1. COVENANT BREACHES. Each of the following events shall be a breach
         of covenant (a "COVENANT BREACH") for purposes of this Agreement:

                  10.1.1. if any representation or warranty made by or on behalf
                  of the Company in this Agreement (other than the
                  representations and warranties in Section 5.23), in any
                  Collateral Agreement, or in any certificate, report or other
                  document delivered under or pursuant to any term hereof or
                  thereof shall prove to have been untrue or incorrect in any
                  material respect as of such date made; provided, however, that
                  a Covenant Breach shall be deemed not to have occurred only
                  with respect to such facts or circumstances that are
                  susceptible of correction by the Company without causing a
                  Material Adverse Effect on the Company or a material adverse
                  effect on the value of the Series B Preferred Stock, the
                  Warrants or the Conversion Shares or the rights and remedies
                  of the Investors in connection with any of the foregoing or
                  under this Agreement or any of the Collateral Agreements, if
                  such facts or circumstances are corrected within thirty (30)
                  days after written demand for correction made to the Company
                  by the holder of any Series B Preferred Stock; or

                  10.1.2. if the Company breaches in the due and punctual
                  performance or observance of any covenant or agreement
                  contained in this Agreement (other than the covenants set
                  forth in Section 8.8) or the Statement of Resolution and such
                  breach continues for a period of fifteen (15) days after
                  written notice thereof to the Company by the holder of any
                  Series B Preferred Stock; provided, however, that a Covenant
                  Breach shall not be deemed to have occurred if, (a) at the end

                                 17

<PAGE>

                  of such 15-day period, the Company advises each Investor in
                  writing that (i) the Company is diligently attempting to cure
                  such breach, (ii) the existence of such breach is not causing
                  and will not cause a Material Adverse Effect on the Company or
                  the Investors' rights under the Registration Rights Agreement,
                  and (iii) such breach is curable within the next thirty (30)
                  days and (b) such breach is cured within such thirty (30) day
                  period.

         10.2. REMEDIES UPON COVENANT BREACHES. Upon the occurrence of a
         Covenant Breach, unless such Covenant Breach shall have been waived in
         the manner provided in Section 13.1 or cured prior to the exercise of
         the remedies set forth in this Section, then unless this Agreement or
         an applicable Collateral Agreement provides that the aggrieved party
         may seek injunctive, judicial or other relief, the parties agree to
         negotiate in good faith for a period of thirty (30) days commencing on
         the date such Covenant Breach is deemed to have occurred pursuant to
         Section 10.1 to resolve any dispute arising out of or relating to this
         Agreement or the formation, breach, termination or validity thereof (a
         "DISPUTE"). If the parties cannot timely resolve the Dispute, the
         parties agree that it will be resolved in federal or New York state
         courts located in New York, New York. Each party agrees that all
         actions which arise out of or relate to this Agreement shall be
         brought, and each party irrevocably consents to exclusive jurisdiction
         in, federal or New York state courts located in New York, New York.
         Each party hereby waives all rights to a trial by jury in any action
         arising our of or relating to this Agreement.

         10.3. NOTICE OF COVENANT BREACHES. If any Investor shall give any
         notice in respect of a claimed Covenant Breach, the Company shall
         forthwith give written notice thereof to all other holders of shares of
         the Series B Preferred Stock at the time outstanding, describing such
         notice and the nature of the claimed Covenant Breach.

         10.4. SHUMATE FINANCIAL STATEMENT BREACH. Each of the following events
         shall be a Shumate Financial Statement breach (a "SHUMATE FINANCIAL
         STATEMENT BREACH") for purposes of this Agreement: (a) a breach of the
         representations and warranties set forth in Section 5.23, or (b) a
         breach of the covenants set forth in Section 8.8. Upon the occurrence
         of a Shumate Financial Statement Breach, unless such Covenant Breach
         shall have been waived in the manner provided in Section 13.1, then,
         upon the terms and subject to the conditions of this Section 10.4, each
         Investor shall have the right to require the Company to purchase from
         such Investor all of the shares of Series B Preferred Stock purchased
         by such Investor pursuant to this Agreement (the "PUT SHARES") at a
         price per share of $1.25 per share (the "PUT OPTION").

                  10.4.1. To exercise the Put Option, an Investor must notify
                  the Company in writing he wishes to exercise the Put Option
                  during the period commencing on the date of the Shumate
                  Financial Statement Breach and ending ten (10) days thereafter
                  (the "OPTION PERIOD"). The Company shall have ten (10) days
                  after the receipt of notice to complete the purchase of the
                  Put Shares by delivering to such Investor a wire transfer or a
                  certified check in the amount of the price per share
                  multiplied by the number of Put Shares. After providing the
                  Company with such notice, an Investor may withdraw the
                  exercise of the Put Option in a signed writing delivered to
                  the Company at any time prior to payment.

                                 18

<PAGE>

                  10.4.2. In the event that an Investor does not exercise the
                  Put Option in accordance with the terms hereof on or before
                  the 10th day following the date of the Shumate Financial
                  Statement Breach, the Put Option shall expire automatically at
                  12:01 a.m. on the following day, without any further action.

                  10.4.3. Each Investor will execute and deliver such
                  instruments and take such other actions as the Company may
                  reasonably require in order to carry out the intent of this
                  Section 10.4 and upon exercise of the Put Option and payment
                  by the Company, to vest in the Company good and marketable
                  title to the Put Shares.

                  10.4.4. Upon payment for the Put Shares, such Investor will
                  deliver to the Company one or more stock certificates
                  representing the Put Shares, together with executed stock
                  powers. On and after the date on which payment for the Put
                  Shares is received, such Investor hereby grants the Company
                  full power and authority, without any further act or deed of
                  such Investor, to cause the Company to cancel the stock
                  certificate(s) in such Investor's name and substitute therefor
                  any one or more stock certificates evidencing the Company's
                  ownership of the Put Shares as of the date payment was
                  received.

                  10.4.5. In the event that an Investor exercises the Put Option
                  in accordance with the terms hereof on or before the 10th day
                  following the date of the Shumate Financial Statement Breach,
                  upon payment for the Put Shares by the Company, the Warrants
                  issued to such Investor pursuant to this Agreement which have
                  not already been exercised shall be immediately cancelled and
                  have no further force or effect, without any further action on
                  the part of the Company or the Investor. Upon payment for the
                  Put Shares, such Investor will deliver to the Company the
                  Warrant Certificate evidencing the Warrants.

11. RESTRICTIONS ON TRANSFER OF SECURITIES.

         11.1. RESTRICTIONS. The Series B Preferred Stock, the Warrants, and,
         upon conversion of the Series B Preferred Stock, the Conversion Shares
         are transferable only pursuant to (i) a public offering registered
         under the Securities Act; (ii) Rule 144 of the Commission (or any
         similar rule then in effect) if such rule is available (although the
         Company has no current obligation to make Rule 144 available, the
         Company is subject to the covenants in Section 8.11); and (iii) subject
         to the conditions specified elsewhere in this Section 11, any other
         legally available means of transfer under applicable federal and state
         securities laws; provided, however, that in the case of (ii) and (iii),
         the Company first shall have received an opinion of legal counsel,
         reasonably satisfactory to the Company, to the effect that such sale or
         transfer is exempt from the registration requirements of the Securities
         Act.

         11.2. RESTRICTIONS OF BYLAWS. In addition to the restrictions set forth
         in Section 11.1 above, the Company's Bylaws, as amended, prohibits the
         sale, pledge, encumbrance, transfer or other disposition (collectively,
         a "TRANSFER") of the Series B Preferred Stock, and upon conversion of
         the Series B Preferred Stock, the Conversion Shares in any way, except
         under the terms of the Bylaws, as amended.

                                 19

<PAGE>

         11.3. LEGEND. Each certificate representing Series B Preferred Stock
         shall be endorsed with a legend substantially similar to the following:

                  THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED
                  (THE "ACT"), OR APPLICABLE BLUE SKY LAWS, AND ARE SUBJECT TO
                  CERTAIN INVESTMENT REPRESENTATIONS. THESE SECURITIES MAY NOT
                  BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION UNDER THE ACT AND SUCH APPLICABLE BLUE
                  SKY LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
                  THAT SUCH REGISTRATION IS NOT REQUIRED.

                  SALE, TRANSFER, HYPOTHECATION, ENCUMBRANCE, OR DISPOSITION OF
                  THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED
                  BY THE PROVISIONS OF THE BYLAWS OF THE CORPORATION, AS
                  AMENDED. ALL PROVISIONS OF THE BYLAWS, AS AMENDED,
                  INCORPORATED BY REFERENCE IN THIS CERTIFICATE. A COPY OF THE
                  BYLAWS, AS AMENDED, MAY BE INSPECTED AT THE PRINCIPAL OFFICE
                  OF THE CORPORATION.

                  ADDITIONALLY, THE ARTICLES OF INCORPORATION, AS AMENDED, WHICH
                  ARE ON FILE IN THE OFFICE OF THE SECRETARY OF STATE OF THE
                  STATE OF TEXAS AND A COPY OF WHICH THE CORPORATION WILL
                  FURNISH ANY SHAREHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST,
                  DENY PRE-EMPTIVE RIGHTS OF SHAREHOLDERS AND THE RIGHT OF
                  SHAREHOLDERS TO CUMULATE VOTES IN THE ELECTION OF DIRECTORS,
                  AND SET FORTH THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
                  RELATIVE RIGHTS OF EACH CLASS OF STOCK THE CORPORATION IS
                  AUTHORIZED TO ISSUE.

         Upon the conversion of the Series B Preferred Stock, unless the Company
         receives an opinion of counsel satisfactory to the Company to the
         effect that a transfer of the Conversion Shares may be made without
         registration or further restriction on transfer, or unless such
         Conversion Shares are being disposed of pursuant to a registration
         under the Securities Act, the same legend shall be endorsed on the
         certificate evidencing such Conversion Shares.

         11.4. REMOVAL OF LEGEND. Any legend endorsed on a certificate pursuant
         to Section 11.3 hereof shall be removed, and the Company shall issue a
         certificate without such legend to the holder of such security, if such
         security is being disposed of pursuant to a registration under the
         Securities Act or pursuant to Rule 144 or any similar rule then in
         effect or if such holder provides the Company with an opinion of

                                 20

<PAGE>

         counsel satisfactory to the Company to the effect that a transfer of
         such securities may be made without registration. In addition, if the
         holder of such securities delivers to the Company an opinion of such
         counsel, reasonably satisfactory to the Company, to the effect that no
         subsequent transfer of such securities will require registration
         pursuant to Rule 144(k) under the Securities Act, the Company will
         promptly upon such contemplated transfer deliver new certificates
         evidencing such security that do not bear the legend set forth in
         Section 11.3.

12. TERMINATION OF CERTAIN COVENANTS. The obligations of the Company under
Sections 8 and 10 of this Agreement, notwithstanding any provisions hereof to
the contrary, shall terminate and shall be of no further force or effect on the
closing date of a Qualified Public Offering.

13. MISCELLANEOUS.

         13.1. WAIVERS, AMENDMENTS AND APPROVALS. In each case in which approval
         of the Investors is required by the terms of this Agreement, such
         requirement shall be satisfied by a vote or the written action of
         Investors owning sixty percent (60%) in interest of the then
         outstanding shares of Series B Preferred Stock, voting together as a
         single class, then owned by the Investors, unless a different
         percentage is specifically required pursuant to this Agreement. With
         the written consent of Investors owning sixty percent (60%) in interest
         of the then outstanding shares of Series B Preferred Stock, voting
         together as a single class, the obligations of the Company under this
         Agreement may be waived (either generally or in a particular instance
         and either retroactively or prospectively) and with the written
         approval of Investors owning sixty percent (60%) in interest of the
         then outstanding shares of Series B Preferred Stock, voting together as
         a single class, then owned by the Investors, the Company may enter into
         a supplementary agreement for the purpose of adding any provisions to
         or changing in any manner or eliminating any of the provisions of this
         Agreement or of any supplemental agreement or modifying in any manner
         the rights and obligations of the holders of the Series B Preferred
         Stock; provided, however, that no such waiver or supplemental agreement
         shall (i) amend the terms of the shares of Series B Preferred Stock as
         set forth in the Statement of Resolution (any such amendment to the
         terms of the shares of Series B Preferred Stock shall require the vote
         of the holders of shares of Series B Preferred Stock called for by the
         Statement of Resolution), (ii) amend the provisions of this Agreement
         granting specific rights to the holders of the Series B Preferred Stock
         without the written consent of the holders of sixty percent (60%) of
         the Series B Preferred Stock, or (iii) reduce the aforesaid proportions
         of shares the holders of which are required to consent to any waiver or
         supplemental agreement without the consent of all of the record holders
         of shares whose rights would be adversely affected by such reduction.
         Written notice of any such waiver, consent or agreement of amendment,
         modification or supplement shall be given to the record holders of the
         Series B Preferred Stock who have not previously consented thereto in
         writing.

         13.2. ORAL CHANGES, WAIVERS, ETC. Neither this Agreement nor any
         provision hereof may be changed, waived, discharged or terminated
         orally, but only by a statement in writing signed by the party against
         which enforcement of the change, waiver, discharge or termination is
         sought, except to the extent provided in Section 13.1.

                                 21

<PAGE>

         13.3. NOTICES. All notices, requests, consents and other communications
         required or permitted hereunder shall be in writing and shall be
         delivered, or mailed first-class postage prepaid, registered or
         certified mail, as follows:

                  13.3.1. to any Investor, to the address listed on SCHEDULE 1,
                  with a copy (which shall not constitute notice to any
                  Investor) to:

                                    Kramer Levin Naftalis & Frankel LLP
                                    919 Third Avenue
                                    New York, NY 10022-3852
                                    Attn:  Thomas T. Janover, Esq.
                                    Tel: (212) 715-9186
                                    Fax: (212) 715-8000

                  13.3.2. to the Company, to:

                                    Excalibur Holdings, Inc.
                                    16825 Northchase Drive, Suite 630
                                    Houston, TX 77060
                                    Attention:  Matthew C. Flemming
                                    Tel: (281) 877-9700
                                    Fax: (281) 877-9701

                           with a copy (which shall not constitute notice to the
                           Company) to:

                                    Oppenheimer Wolff & Donnelly LLP
                                    840 Newport Center Drive, Suite 700
                                    Newport Beach, CA 92660
                                    Attn:  Marc A. Indeglia, Esq.
                                    Tel:  (949) 823-6000
                                    Fax:  (949) 823-6100

         and such notices and other communications shall for all purposes of
         this Agreement be treated as being effective or having been given if
         delivered personally, or, if sent by mail, when received. Any party may
         change its address for such communications by giving notice thereof to
         the other parties in conformity with this Section.

         13.4. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC. Except as specified
         in Section 12 herein, all representations, warranties, covenants and
         agreements contained herein or in any other agreement or schedule
         delivered pursuant to this Agreement shall survive the execution and
         delivery of this Agreement or such other agreement or schedule, as the
         case may be, for a period of two (2) years.

         13.5. DELAYS OR OMISSIONS. Except as expressly provided herein, no
         delay or omission to exercise any right, power or remedy accruing to
         any party under this Agreement shall impair any such right, power or
         remedy of such party nor shall it be construed to be a waiver of any
         such breach or default, or an acquiescence thereto, or of a similar
         breach or default thereafter occurring; nor shall any waiver of any
         single breach or default be deemed a waiver of any other breach or

                                 22

<PAGE>

         default theretofore or thereafter occurring. Any waiver, permit,
         consent or approval of any kind or character on the part of any party
         hereto of any breach or default under this Agreement, or any waiver on
         the part of any party of any provisions or conditions of this
         Agreement, must be in writing and shall be effective only to the extent
         specifically set forth in such writing.

         13.6. OTHER REMEDIES. Any and all remedies herein expressly conferred
         upon a party shall be deemed cumulative with, and not exclusive of, any
         other remedy conferred hereby or by law on such party, and the exercise
         of any one remedy shall not preclude the exercise of any other. Subject
         to the dispute resolution provisions of Section 10.2, the parties may
         seek enforcement of the terms of this Agreement by suit in equity or
         action at law to protect the rights granted under this Agreement.

         13.7. ATTORNEYS' FEES. Should suit be brought to enforce or interpret
         any part of this Agreement, the prevailing party shall be entitled to
         recover, as an element of the costs of suit and not as damages,
         reasonable attorneys' fees to be fixed by the court (including, without
         limitation, costs, expenses and fees on any appeal). The prevailing
         party shall be the party entitled to recover its costs of suit,
         regardless of whether such suit proceeds to final judgment. A party not
         entitled to recover its costs shall not be entitled to recover
         attorneys' fees. No sum for attorneys' fees shall be counted in
         calculating the amount of a judgment for purposes of determining if a
         party is entitled to recover costs or attorneys' fees.

         13.8. ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the
         documents referenced herein and the exhibits thereto, constitute the
         entire understanding and agreement of the parties hereto with respect
         to the subject matter hereof and thereof and supersede all prior and
         contemporaneous agreements or understandings, inducements or
         conditions, express or implied, written or oral, between the parties
         with respect hereto and thereto, including without limitation the
         confidential information memorandum dated October 1, 2001 (the
         "INFORMATION MEMORANDUM") and the term sheet executed between the
         parties (the "TERM SHEET"). The express terms hereof control and
         supersede any course of performance or usage of the trade inconsistent
         with any of the terms hereof.

         13.9. SEVERABILITY. Should any one or more of the provisions of this
         Agreement or of any agreement entered into pursuant to this Agreement
         be determined to be illegal or unenforceable, all other provisions of
         this Agreement and of each other agreement entered into pursuant to
         this Agreement, shall be given effect separately from the provision or
         provisions determined to be illegal or unenforceable and shall not be
         affected thereby. The parties further agree to replace such void or
         unenforceable provision of this Agreement with a valid and enforceable
         provision which will achieve, to the extent possible, the economic,
         business and other purposes of the void or unenforceable provision.

         13.10. SUCCESSORS AND ASSIGNS.

                                 23

<PAGE>

                  13.10.1. The terms and conditions of this Agreement shall
                  inure to the benefit of and be binding upon and be enforceable
                  by the successors and assigns of the parties hereto, including
                  the holder or holders from time to time of any of the Series B
                  Preferred Stock, the Warrants, or the Conversion Shares;
                  provided, however, that no holder of any of the Series B
                  Preferred Stock, the Warrants, or the Conversion Shares shall
                  be entitled to assign or transfer such securities to any party
                  or entity (including existing and future customers of the
                  Company) engaged in the same industry that the Company is so
                  engaged in as of the date hereof. Such restriction on
                  assignment and transfer shall terminate and shall be of no
                  further force or effect on the closing date of a Qualified
                  Public Offering (as defined in the Statement of Resolution).
                  Whether a party or entity is engaged in the same industry as
                  the Company will be reasonably determined by the Board.
                  Nothing in this Section 13.10, however, shall prevent any
                  transfer or assignment of the Series B Preferred Stock, the
                  Warrants, or the Conversion Shares to any institutional
                  investor. Notwithstanding the foregoing, a successor or assign
                  of an Investor shall not be regarded as an "INVESTOR," unless
                  such transferee is an Affiliate of the transferor or it
                  acquires at least 50,000 shares of Series B Preferred Stock or
                  the Common Stock equivalent (subject to appropriate adjustment
                  for any stock dividends, stock splits, subdivisions,
                  reorganizations and other capitalization changes effected
                  after the Closing Date).

                  13.10.2. Any successor or assign of an Investor (other than an
                  Affiliate of an Investor) that is regarded as an "Investor"
                  pursuant to this Section 13.10 shall not be entitled to, on
                  its own behalf, seek enforcement of the representations and
                  warranties contained herein by suit in equity or action at
                  law. Such successor or assign may, however, join any suit in
                  equity or action at law brought by any party hereto to enforce
                  the representations and warranties contained herein.

         13.11. GOVERNING LAW. This Agreement shall be governed by and construed
         under the laws of the State of Texas without regard to its principles
         of conflicts of laws.

         13.12. COUNTERPARTS. This Agreement may be executed concurrently in two
         (2) or more counterparts, each of which shall be deemed an original,
         but all of which together shall constitute one and the same instrument.

         13.13. PAYMENT OF FEES AND EXPENSES OF THE INVESTORS. Provided the
         Closing occurs, (a) the Company will promptly reimburse the Investors
         for reasonable legal expenses incurred by the firm of Kramer, Levin,
         Naftalis & Frankel LLP, incurred in connection with the transactions
         contemplated by this Agreement, plus out-of-pocket expenses incurred;
         (b) the firm of Kramer Levin Naftalis & Frankel LLP will bill the
         Company at the address provided in Section 13.3 of this Agreement; and
         (c) the Company will pay such invoices within ten (10) days after
         submission of such invoices. The Company will be solely responsible for
         its own legal costs incurred in performing its obligations in this
         transaction.

         13.14. RIGHTS OF INVESTORS INTER SE. Except as provided for in Section
         13.1 regarding actions under the Agreement requiring a vote or consent
         of sixty percent (60%) in interest of the outstanding shares of Series
         B Preferred Stock, each Investor shall have the absolute right to
         exercise or refrain from exercising any right or rights which such
         Investors may have by reason of this Agreement or any security,

                                 24

<PAGE>

         including, without limitation, the right to consent to the waiver of
         any obligation of the Company under this Agreement and to enter into an
         agreement with the Company for the purpose of modifying this Agreement
         or any agreement effecting any such modification, and such Investors
         shall not incur any liability to any other or with respect to
         exercising or refraining from exercising any such right or rights.

         13.15. CONFIDENTIALITY. Each party hereto agrees that, except with the
         prior written consent of the other party or as otherwise required by
         law, it shall at all times keep confidential and not divulge, furnish
         or make accessible to anyone, any confidential information, knowledge
         or data concerning or relating to the business or financial affairs of
         the other parties to which such party has been or shall become privy by
         reason of this Agreement or the Collateral Agreements, discussions or
         negotiations relating to this Agreement or the Collateral Agreements,
         the performance of its obligations hereunder or the ownership of the
         Series B Preferred Stock purchased hereunder or the Conversion Shares.
         The provisions of this Section 13.15 shall be in addition to, and not
         in substitution for, the provisions of any separate nondisclosure
         agreement executed by the parties hereto.

         13.16. AGGREGATION OF STOCK. All shares of Series B Preferred Stock or
         the Conversion Shares held or acquired by entities or persons
         controlled by, or under common control with, an Investor shall be
         aggregated together for purposes of determining the availability of
         rights under this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                 25

<PAGE>

IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first
written above.

COMPANY:                                    EXCALIBUR HOLDINGS, INC.

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

INVESTORS:

                                            SENECA CAPITAL, L.P.

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

                                            SENECA CAPITAL INTERNATIONAL, LTD.

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

                                            PERFORMANCE PETROLEUM, INC.

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

       (SIGNATURE PAGE 1 TO SERIES B STOCK PURCHASE AND WARRANT AGREEMENT)

                                 26

<PAGE>

                                             IRA FBO FRANK X. MARSHIK GRUNTAL &
                                             CO. LLC CUSTODIAN

                                             -------------------------------
                                             Frank X. Marshik

                                             -------------------------------
                                             DANIEL FORREST

       (SIGNATURE PAGE 2 TO SERIES B STOCK PURCHASE AND WARRANT AGREEMENT)

                                 27

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00043-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00043-of-00352.parquet"}]]