Document:

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EXHIBIT 4.2

                     [FORM OF COMMON STOCK PURCHASE WARRANT]

         WARRANT NO. C-___

         THE SECURITIES REPRESENTED HEREBY 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.

                           EXCALIBUR INDUSTRIES, INC.

                        WARRANT TO PURCHASE COMMON STOCK
                        --------------------------------

Warrant No. C-___                                             ________ __, 200_

         THIS CERTIFIES THAT, ___________________, or any registered assigns
(the "HOLDER") having its principal residence at _____________________, is
entitled to subscribe for and purchase from Excalibur Industries, Inc., a
Delaware corporation (the "COMPANY"), at any time and from time to time on or
before the Expiration Date (as defined below), _________________ (______) fully
paid and nonassessable shares (the "SHARES") of the Company's Common Stock (the
"COMMON STOCK") at the Exercise Price (as defined below) on the terms and
conditions specified herein.

         This Warrant to Purchase Common Stock (the "WARRANT") is subject to the
following provisions, terms and conditions:

         1. EXPIRATION OF THE WARRANT. This Warrant shall be exercised, if at
all, on or prior to ______________ __, 200__.

         2. EXERCISE PRICE. Subject to the adjustments provided herein, the
Exercise Price of this Warrant shall be _____________ ($_____) per Share.

         3. EXERCISE OF THE WARRANT. The purchase rights under this Warrant may
be exercised, in whole or in part, at any time and from time to time on or after
the date hereof, by the Holder surrendering this Warrant with the form of notice
attached hereto duly executed by such Holder, to the Company at its principal
office, accompanied by payment, in cash, by wire transfer to an account of the
Company, or by check payable to the order of the Company, of the aggregate
Exercise Price payable in respect of the Shares of Common Stock being purchased.
As soon as practicable after the exercise of this Warrant and payment of the
aggregate Exercise Price, the Company will cause to be issued in the name of and

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delivered to the Holder hereof, or as such Holder may direct, a certificate or
certificates representing the Shares purchased upon exercise.

         The Company may require that such certificate or certificates contain
on the face thereof a legend substantially as follows:

         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.

         Prior to any such exercise, neither the Holder, nor any person entitled
to receive Shares issuable upon exercise of this Warrant, shall, in such
Holder's capacity as the Holder of this Warrant, be or have any rights of a
shareholder of the Company. In the event of the exercise or assignment hereof in
part only, the Company shall cause to be delivered to the Holder a new Warrant
of like tenor to this Warrant in the name of the Holder evidencing the right of
the Holder to purchase the number of shares of the Common Stock purchasable
hereunder as to which this Warrant has not been exercised or assigned.

         4. STOCK FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that this Warrant has been authorized by all necessary corporate action,
that all Shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable, free of preemptive rights, and
free from all liens. The Company covenants and agrees that, during the period
within which the rights represented by this Warrant may be exercised, it shall
reserve, for the purpose of the issuance upon exercise of the purchase rights
evidenced by this Warrant, sufficient Shares of Common Stock.

         5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, and the number of shares of Common Stock to be issued shall be
determined by rounding to the nearest whole share (a half share being treated as
a full share for this purpose). Such exercise shall be determined on the basis
of the total number of shares of Common Stock the Holder is at the time
purchasing upon exercise and such rounding shall apply to the number of shares
of Common Stock issuable upon such aggregate exercise.

         6. NEGOTIABILITY AND TRANSFER. This Warrant is issued upon the
following terms, to which the Holder consents and agrees:

                  (a) Title to this Warrant may be transferred in whole or in
                  part only by endorsement (by the Holder hereof executing the

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                  form of assignment attached hereto) and delivery in the same
                  manner as in the case of a negotiable instrument transferable
                  by endorsement and delivery;

                  (b) Until this Warrant is transferred on the books of the
                  Company, the Company may treat the registered holder of this
                  Warrant as absolute owner hereof for all purposes without
                  being affected by any notice to the contrary; and

                  (c) This Warrant may be sold or transferred only to an
                  affiliate of the Holder, if such assignee is an accredited
                  investor within the meaning of the Securities Act.

         7. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events as follows.

                  (a) RECLASSIFICATION OR MERGER. While this Warrant remains
                  outstanding and unexpired, in case of any reclassification,
                  change or conversion of the Common Stock issuable upon
                  exercise of this Warrant (other than a change in par value, or
                  as a result of a subdivision or combination), or in case of
                  any merger or consolidation of the Company with or into
                  another corporation (other than a merger with another
                  corporation in which the Company is the surviving corporation
                  and which does not result in any reclassification or change of
                  outstanding securities issuable upon exercise of this
                  Warrant), or in case of any sale of all or substantially all
                  of the assets of the Company, the Company, or such successor
                  or purchasing corporation, as the case may be, shall execute
                  and deliver to the Holder a new Warrant (in form and substance
                  reasonably satisfactory to the Holder) providing that the
                  Holder shall have the right to exercise such new Warrant and
                  upon such exercise to receive, in lieu of the Shares of Common
                  Stock theretofore issuable upon exercise of this Warrant, the
                  kind and amount of shares of stock, other securities, money
                  and property receivable upon such reclassification, change or
                  merger had the Warrant been exercised immediately prior to
                  such event. Such new Warrant shall provide for adjustments
                  that shall be as nearly equivalent as may be practicable to
                  the adjustments provided for in this Section 7 to pursue the
                  economic benefit intended to be conferred upon the Holder by
                  this Warrant. The provisions of this Section 7(a) shall
                  similarly apply to any successive reclassification, changes,
                  mergers and transfers occurring while this Warrant remains
                  outstanding and unexpired.

                  (b) SUBDIVISIONS OR COMBINATION OF SHARES. If the Company, at
                  any time while this Warrant remains outstanding and unexpired,
                  shall subdivide or combine its Common Stock or in the event of
                  any dividend payable on the Common Stock in shares of Common
                  Stock, the number of shares of Common Stock issuable upon
                  exercise hereof shall be proportionately adjusted and the
                  Exercise Price shall be increased or decreased, as the case
                  may be, so that the aggregate Exercise Price of this Warrant
                  shall at all times remains unchanged.

                  (c) NO IMPAIRMENT. The Company will not, by amendment of its
                  Articles of Incorporation or through any reorganization,

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                  recapitalization, transfer of assets, consolidation, merger,
                  dissolution, issue or sale of securities or any other
                  voluntary action, avoid or seek to avoid the observance or
                  performance of any of the terms to be observed or performed
                  hereunder by the Company, but will at all times in good faith
                  assist in carrying out of all the provisions of this Section 7
                  and in the taking of all such action as may be necessary or
                  appropriate in order to protect the rights of the Holder as
                  the holder of this Warrant against impairment.

                  (d) NOTICES OF RECORD DATE. While this Warrant remains
                  outstanding and unexpired, in the event of any taking by the
                  Company of a record of its shareholders for the purpose of
                  determining shareholders who are entitled to receive payment
                  of any dividend (other than a cash dividend) or other
                  distribution, any right to subscribe for, purchase or
                  otherwise acquire any share of any class or any other
                  securities or property, or to receive any other right, or for
                  the purpose of determining shareholders who are entitled to
                  vote in connection with any proposed merger or consolidation
                  of the Company with or into any other corporation, or any
                  proposed sale, lease or conveyance of all of substantially all
                  of the assets of the Company, or any proposed liquidation,
                  dissolution or winding up of the Company, the Company shall
                  mail to the Holder, as the holder of the Warrant, at least
                  twenty (20) days prior to the date specified therein, a notice
                  specifying the date on which any such record is to be taken
                  for the purpose of such dividend, distribution or right, and
                  the amount and character of such dividend, distribution or
                  right.

                  (e) NOTICE OF ADJUSTMENTS. Whenever the Exercise Price shall
                  be adjusted pursuant to the provisions hereof, the Company
                  shall within thirty (30) days after such adjustment deliver a
                  certificate signed by its chief financial officer to the
                  Holder as the registered holder hereof setting forth, in
                  reasonable detail, the event requiring the adjustment, the
                  amount of the adjustment, the method by which such adjustment
                  was calculated, and the Exercise Price after giving effect to
                  such adjustment.

         8. NOTICES, ETC. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed, by first class mail, to such
address as may have been furnished to the Company in writing by such Holder, or,
until an address is so furnished, to and at the address of the last holder of
this Warrant who has so furnished an address to the Company. All communications
from the holder of this Warrant to the Company shall be mailed by first class
mail to the Company's principal office, or such other address as may have been
furnished to the holder in writing by the Company.

         9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and delivery a new warrant of like tenor and dated as of such cancellation
in lieu of this Warrant; PROVIDED, HOWEVER, if any Warrant of which the original
holder, its nominee, or any of its partners or affiliates is the registered
holder is lost, stolen or destroyed, the affidavit of the registered holder

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setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Warrant in replacement of such lost, stolen or destroyed
Warrant other than the registered holder's unsecured written agreement to
indemnify the Company.

         10. ACKNOWLEDGMENT OF THE HOLDER. The Holder hereby represents and
warrants as follows:

                  (a) To the extent requested, it has provided the Company with
                  complete and accurate information concerning its knowledge,
                  experience and financial condition;

                  (b) As a sophisticated investor, the undersigned has such
                  knowledge and experience in financial business matters that
                  the undersigned believes it is capable of evaluating the
                  merits and risks of the prospective investment in this
                  Warrant;

                  (c) The undersigned recognizes that investment in this Warrant
                  may involve a high degree of risk, that transferability and
                  resale is restricted and that, in the event of disposition of
                  the underlying Common Stock, the undersigned could sustain a
                  loss;

                  (d) In connection with its purchase of this Warrant, the
                  undersigned represents and warrants that it intends to acquire
                  this Warrant for investment purposes and not with a view to or
                  for resale in connection with any distribution thereof, and
                  agrees that it will not sell or assign this Warrant without
                  registration under all applicable securities laws or
                  appropriate exemption therefrom. The undersigned understands
                  and acknowledges that this Warrant has not been registered
                  under the Securities Act of 1933, as amended, nor under
                  applicable Blue Sky laws, pursuant to exemptions therefrom,
                  which depend upon its investment intention. The undersigned
                  also understands and acknowledges that the underlying Common
                  Stock has not been, nor will be registered under applicable
                  securities laws and therefore will not be freely transferable
                  and that the shares of Common Stock will be marked with an
                  appropriate legend reciting the resale restrictions; and

                  (e) The undersigned represents that it qualifies as an
                  "Accredited Investor" for purposes of Regulation D promulgated
                  under the Securities Act.

         11. MISCELLANEOUS.

                  (a) The representations, warranties and agreements herein
                  contained shall survive the exercise of this Warrant.
                  References to the "Holder of" include the immediate holders of
                  shares purchased on the exercise of this Warrant, and this
                  word "Holder" shall include the plural thereof.

                  (b) This Warrant and any term hereof may be changed, waived,
                  discharged or terminated only by an instrument in writing
                  signed by the party against which enforcement of such change,
                  waiver, discharge or termination is sought.

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                  (c) This Warrant shall be construed and enforced in accordance
                  with and governed by the laws of the State of Delaware.

                  (d) The headings in this Warrant are for purposes of reference
                  only, and shall not limit or otherwise affect any of the terms
                  hereof.

                  (e) The invalidity or unenforceability of any provision hereof
                  shall in no way affect the validity or enforceability of any
                  other provision.

         IN WITNESS WHEREOF, this Warrant has been duly executed by the
undersigned, as of this ___th day of ___________, 200_.

                                      EXCALIBUR INDUSTRIES, INC.

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

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

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

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                                  EXERCISE FORM

                   To be signed only upon exercise of Warrant.

         The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase price right represented by such Warrant for, and
to purchase thereunder, of the shares of Common Stock of Excalibur Industries,
Inc. (the "COMPANY") to which such Warrant relates and herewith makes payment of
$___________ therefor in cash or by certified check and requests to be delivered
to the undersigned, the address for which is set forth below the signature of
the undersigned.

Dated:
      --------------------------------------

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

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

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                                 ASSIGNMENT FORM

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ("ASSIGNEE") the undersigned's entire right, title and interest in and to
the Warrant to Purchase ________ Shares of Common Stock of Excalibur Industries,
Inc. (the "COMPANY"), and hereby irrevocably appoints __________________________
as attorney-in-fact to transfer such Warrant on the books of the Company.

Dated:
      -------------------------

                                      ------------------------------------------
                                      Signature of Assignor

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

         The Assignee represents that this Warrant and the Shares issuable upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
Shares issuable upon exercise hereof or conversion thereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws. Further, the Assignee
acknowledges that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Shares so purchased are being acquired for investment and not
with a view toward distribution or resale.

Dated:
      ----------------------------    ------------------------------------------
                                      Signature of Assignee

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                                                                    EXHIBIT 10.1

             SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

         THIS SERIES A PREFERRED STOCK AND WARRANT PURCHASE 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"
or 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 A PREFERRED STOCK. The Company shall
         authorize the number of shares of Series A Convertible Preferred Stock,
         $.001 par value per share (the "SERIES A 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 A 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 A 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 A Preferred Stock, when issued, shall be referred to as
         "CONVERSION 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 7.9 (the "REGISTRATION RIGHTS
         AGREEMENT"), a Co-Sale Agreement referred to in Section 7.10 (the
         "CO-SALE Agreement") and a Warrant Certificate referred to in Section
         2.2 (the "WARRANT CERTIFICATE"). The Registration Rights Agreement, the
         Co-Sale Agreement, and the Warrant Certificate are referred to
         collectively as the "COLLATERAL AGREEMENTS."

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

         2.1. SERIES A 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 A
         Preferred Stock set forth opposite such Investor's name on SCHEDULE 1
         under the column entitled "Series A Preferred Stock" at a purchase
         price of $0.75 per share (the "PURCHASE COMMITMENT"). The Company's
         agreement with each Investor is a separate agreement, and the sale of
         Series A Preferred Stock to each Investor is a separate sale.

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         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 Series A Preferred
         Stock set forth opposite such Investor's name on SCHEDULE 1 under the
         column entitled "Warrants" at an exercise price of $1.00 per share. The
         form of the Warrant Certificate is attached hereto as EXHIBIT F.

3. CLOSING.

         3.1. CLOSING DATE AND TIME. The closing of the purchase of the Series A
         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 December 17, 2001, 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)
         $750,000 of Series A 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 A 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"), after
giving effect to the provisions of Section 8.6 of this Agreement, regarding the
new member of 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 A Preferred
Stock and the Warrants set forth herein, the Company hereby represents and
warrants the following to each Investor as of the Closing Date:

         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.

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         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 A 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 9,445,000 shares are issued and outstanding; 1,650,000
         shares of Series A Preferred Stock, none of which are issued and
         outstanding, and 3,350,000 shares of 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.

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                  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 and Series A 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 A
                  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 A Preferred
         Stock, the Warrants, and the Conversion Shares. The Series A 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 A Preferred Stock and, when issued upon
         conversion of the Series A 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.

         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

                                       4
<PAGE>

         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, 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)
         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
<PAGE>

         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 A
         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 A 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 A 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:

                           (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;

                                       6
<PAGE>

                           (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
         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,

                                       7
<PAGE>

         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
         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.

                                       8
<PAGE>

         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. The holders of the Series A Preferred Stock shall be
         entitled to registration rights pursuant to the terms and conditions
         specified in the Registration Rights Agreement.

         5.23. 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 A Preferred Stock and the
         Conversion Shares into which such shares may be converted 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

                                       9
<PAGE>

         disposition, directly or indirectly of the Series A 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
         the shares of Series A Preferred Stock have not 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 the Series A
         Preferred Stock may not 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 and any shares of capital stock
         acquired by it pursuant to Section 8.7 hereof 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 A
         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 8.11) 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 A Preferred Stock 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

                                       10
<PAGE>

         the purpose of acquiring the Series A Preferred Stock or Conversion
         Shares, or (b) that if it has been organized solely for the purpose of
         acquiring the Series A Preferred Stock 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.

         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 A
         Preferred Stock 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 A Preferred Stock, and any
         Conversion Shares issued upon conversion thereof, 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 A Preferred Stock and any such Conversion Shares in its books

                                       11
<PAGE>

         and the Series A 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 A Preferred Stock 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.

         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, 7.3, 7.7 and 7.8.

         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 C 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 A 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 A Preferred Stock and the
                  Warrants to the Investors, such resolutions to be certified by
                  the Secretary of the Company;

                                       12
<PAGE>

                  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, including documentation effecting the election of the
                  new Board in accordance with Section 8.6 of this Agreement;
                  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 A 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.

         7.8. EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. As of
         the Closing Date, each of the Company's officers shall have entered
         into an employee non-competition, proprietary information and
         inventions assignment agreement with the Company in the form set forth
         in EXHIBIT B.

         7.9. 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 D.

         7.10. CO-SALE AGREEMENT. As of the Closing Date, the Co-Sale Agreement
         shall have been executed and delivered in the form attached hereto as
         EXHIBIT E.

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

         7.12. BOARD VACANCY FOR SERIES A PREFERRED DIRECTOR. As of the Closing
         Date, there shall be a vacancy on the Board to be filled by the Series
         A Preferred Director.

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

                                       13
<PAGE>

         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 (a) selected by the Board who are "independent" within the meaning
         of the accounting regulations of the Commission and (b) approved by the
         Series A Preferred Director (as defined in and subject to the terms and
         conditions of Section 8.6 of this Agreement), which approval shall not
         be withheld unreasonably (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 A
                  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;

                  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;

                                       14
<PAGE>

                  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
         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. SERIES A PREFERRED DIRECTOR. The Holders shall appoint the initial
         Series A Preferred Director (as defined in the Statement of Resolution)
         as soon as practicable after the date of this Agreement. The Company
         shall pay for the reasonable out-of-pocket expenses incurred by the
         Series A Preferred Director when conducting the Company's business,
         including attending meetings of the Board and its committees.

                                       15
<PAGE>

         8.7. RIGHT OF FIRST REFUSAL. In the event that the Company proposes to
         issue any additional shares of its capital stock or other equity
         securities, other than through a registered public offering under the
         Securities Act, each holder of shares of Series A Preferred Stock
         (collectively, the "HOLDERS") shall have a right of first refusal on
         the terms and conditions specified herein. For purposes of this Section
         8.7, a Holder may, at any time, transfer or assign its right of first
         refusal to (i) any investment fund, partnership, limited liability
         company or entity managed or controlled by, or under common control
         with, or any other Affiliate of, such Holder or (ii) to any party
         acquiring at least twenty-five thousand (25,000) shares of the Series A
         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). Each Holder shall have a right of first refusal, for a
         period of thirty (30) days after notice from the Company, to purchase
         all or any portion of such additional shares of such capital stock or
         other equity securities to maintain such Holder's pro rata ownership in
         the Company. The purchase price for such additional shares of capital
         stock under this right of first refusal shall be the price offered to
         or proposed to be paid to the Company by any purchasers. Each Holder
         shall have the right to purchase its Pro Rata Share (as defined herein)
         of any additional shares of capital stock, subject to increase if any
         other Holder of such right of first refusal elects not to participate.
         "PRO RATA SHARE" shall be determined by multiplying the total number of
         additional shares of capital stock or other equity securities subject
         to this Section 8.7 by a fraction, the numerator of which shall be the
         number of shares of Series A Preferred Stock or Common Stock owned by
         such holder of the right of first refusal, assuming conversion or
         exercise, as the case may be, of all outstanding convertible
         securities, options and warrants then held by such holder of the right
         of first refusal; and the denominator of which shall be the total
         number of shares of capital stock of the Company outstanding, assuming
         conversion or exercise, as the case may be, of all outstanding
         convertible securities, options and warrants. Failure to respond in
         writing to the Company's written notice of such sale, within the thirty
         (30) day period shall be deemed to be a waiver of this right of first
         refusal.

         The above rights of first refusal shall not apply to any additional
         shares of capital stock (a) issuable upon conversion of any of the
         Company's outstanding convertible securities (including, without
         limitation, any class or series of Series A Preferred Stock), (b)
         issued to employees, directors, consultants, advisors or management of
         the Company, or issuable upon exercise of stock options granted to such
         employees, consultants, advisors and management in each case pursuant
         to stock-based compensation plans, all out of the Option Pool (as
         defined in the Statement of Resolution) or such other shares that are
         issued to employees and are approved by the Board and the Holders of a
         majority of the then outstanding Series A Preferred Stock, (c) issued
         or issuable by way of stock split or stock dividend or similar capital
         modification, (d) issued in connection with any merger, acquisition or
         other reorganization approved by the Board, (e) issued upon
         authorization of the Board in connection with strategic corporate
         partnering arrangements or pursuant to business conducted by the
         Company with customers, suppliers or lessors, as approved by the Board
         and the Series A Preferred Director, (f) in connection with financing
         transactions approved by the Board and the Holders of a majority of the
         then outstanding Series A Preferred Stock, or (g) with respect to which
         the Company has obtained a written waiver of the application of this

                                       16
<PAGE>

         Section 8.7 signed by the holders of at least seventy-five percent
         (75%) of the then outstanding shares of Series A Preferred Stock. For
         purposes of such right of first refusal, the issuance by the Company of
         any warrant or right to purchase or subscribe to another security, or
         the issuance of a security which gives the holder a present or future
         right or privilege to convert the security into another security, shall
         be deemed to include the issuance of the underlying security at the
         time of the issuance of the warrant or right or convertible security
         and subject to the right of first refusal, but the exercise of the
         right to purchase or subscribe or to convert shall not be deemed an
         additional "issuance" subject to such right of first refusal.

         8.8. KEY-MAN AND OTHER INSURANCE. The Company shall procure and
         maintain key-man life insurance, with the Company named as beneficiary
         on the life of each of William S. H. Stuart and Matthew C. Flemming, in
         the amount of $1 million and on such terms and conditions as determined
         by the Board.

         8.9. 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 A Preferred Stock so
         converted were registered.

         8.10. NONDISCLOSURE AND DEVELOPMENTS AGREEMENT. The Company shall
         obtain, and shall cause its Subsidiaries to obtain, a nondisclosure and
         inventions developments agreement containing terms substantially
         similar to the form of EXHIBIT B, from all future officers, directors,
         employees and consultants who will have access to confidential
         information of the Company or any of its Subsidiaries, upon
         commencement of their association with the Company or any of its
         Subsidiaries.

         8.11. 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:

                  8.11.1. 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);

                  8.11.2. 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;

                                       17
<PAGE>

                  8.11.3. 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

                  8.11.4. 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
                  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.

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 A Preferred Stock in accordance with the Statement
of Resolution.

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, 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 A 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 A 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 or the Statement of Resolution and
                  such breach continues for a period of fifteen (15) days after

                                       18
<PAGE>

                  written notice thereof to the Company by the holder of any
                  Series A Preferred Stock; provided, however, that a Covenant
                  Breach shall not be deemed to have occurred if, (a) at the end
                  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 A Preferred Stock at the time outstanding, describing such
         notice and the nature of the claimed Covenant Breach.

11. RESTRICTIONS ON TRANSFER OF SECURITIES.

         11.1. RESTRICTIONS. The Series A Preferred Stock, and upon conversion
         of the Series A 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 A Preferred Stock, and upon conversion of
         the Series A 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 A 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 A 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-six percent (66%) in interest of the then
         outstanding shares of Series A 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-six percent (66%) in
         interest of the then outstanding shares of Series A 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-six percent (66%) in
         interest of the then outstanding shares of Series A 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 A Preferred Stock; provided, however, that no such waiver or
         supplemental agreement shall (i) amend the terms of the shares of
         Series A Preferred Stock as set forth in the Statement of Resolution
         (any such amendment to the terms of the shares of Series A Preferred
         Stock shall require the vote of the holders of shares of Series A
         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 A Preferred Stock without the written consent of
         the holders of sixty-six percent (66%) of the Series A Preferred Stock,
         (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 or (iv) cause the Series A
         Preferred Director to be removed from the Board without the written
         consent of Seneca. Written notice of any such waiver, consent or
         agreement of amendment, modification or supplement shall be given to
         the record holders of the Series A Preferred Stock who have not
         previously consented thereto in writing.

                                       21
<PAGE>

         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.

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

                           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.

                                       22
<PAGE>

         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
         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.

                                       23
<PAGE>

         13.10. SUCCESSORS AND ASSIGNS.

                  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 A
                  Preferred Stock, the Warrants, or the Conversion Shares;
                  provided, however, that no holder of any of the Series A
                  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 A 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 A 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 not to exceed $20,000, 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.

                                       24
<PAGE>

         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-six percent (66%) in interest of the outstanding shares of
         Series A 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,
         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 A 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 A 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.

                                       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:
                                                --------------------------------

              (SIGNATURE PAGE TO SERIES A STOCK PURCHASE AGREEMENT)

                                       26
<PAGE>

                                LIST OF SCHEDULES

SCHEDULE 1        List of Investors and Investor Amounts

SCHEDULE 5.3      List of Subsidiaries

SCHEDULE 5.4      States in which the Company is Qualified to do Business

SCHEDULE 5.6      List of Shareholders, Option Holders and Other Securities
                  Owners

SCHEDULE 5.8      Financial Statements

SCHEDULE 5.9      Litigation

SCHEDULE 5.12     Outstanding Indebtedness

SCHEDULE 5.13     List of Assets and Contracts

SCHEDULE 5.15 List of Licenses, Permits and Approvals, etc.

SCHEDULE 5.18     Retirement Plans

SCHEDULE 5.20     Transactions with Affiliates

SCHEDULE 5.21     List of Brokers and Finders

SCHEDULE 5.22     Registration Rights

                                LIST OF EXHIBITS

EXHIBIT A         Form of Statement of Resolution Establishing a Series of
                  Shares

EXHIBIT B         Form of Non-Disclosure and Restrictions on Use Agreement

EXHIBIT C         Form of Opinion of Company Counsel

EXHIBIT D         Form of Registration Rights Agreement

EXHIBIT E         Form of Co-Sale Agreement

EXHIBIT F         Form of Warrant Certificate

                                       27

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