Document:

Exhibit 10.1 - Trust Agreement

Exhibit 10.1

 

 

 

January 30, 2006

Henix Resources, Inc.

19 West 60th Avenue 

Vancouver, British Columbia

Canada V5X 1Z3

 

Ladies and Gentlemen:

RE:     HRI Mineral Claims

James Chih-Huan Shao holds in trust for Henix Resources, Inc. an undivided interest in the following claim:

	
Tenure No.
	
Claim Name
	
Record Date
	
Expiration Date

	
526668
	
HRI 
	
01-30-2006
	
01-30-2006

James Chih-Huan Shao will deliver full title on demand to Henix Resources, Inc.  for as long as the claims are in good standing with the Province of British Columbia.

 

 
Yours truly,

JAMES SHAO

James Chih-Huan Shao, MBA, CGA, CIAEXHIBIT 10.1

                                 LOAN AGREEMENT

                          Dated as of December 22, 2005

                                     between

                              DGSE COMPANIES, INC.

                                       and

                    TEXAS CAPITAL BANK, NATIONAL ASSOCIATION

<PAGE>

                                Table of Contents
                                -----------------
                                                                            Page
                                                                            ----

ARTICLE I Definitions..........................................................1
   Section 1.1    Definitions..................................................1
   Section 1.2    Accounting Matters..........................................10
   Section 1.3    Other Definitional Provisions...............................10

ARTICLE II Advances and Letters of Credit.....................................11
   Section 2.1    Advances....................................................11
   Section 2.2    General Provisions Regarding Interest; Etc..................12
   Section 2.3    Unused Facility Fee.........................................12
   Section 2.4    Use of Proceeds.............................................13
   Section 2.5    Letters of Credit...........................................13

ARTICLE III Payments..........................................................13
   Section 3.1    Method of Payment...........................................13
   Section 3.2    Prepayments.................................................13
   Section 3.3    Additional Costs in Respect of Letters of Credit............13

ARTICLE IV Security...........................................................14
   Section 4.1    Collateral..................................................14
   Section 4.2    Setoff......................................................14

ARTICLE V Conditions Precedent................................................14
   Section 5.1    Initial Extension of Credit.................................14
   Section 5.2    All Extensions of Credit....................................15

ARTICLE VI Representations and Warranties.....................................16
   Section 6.1    Corporate Existence.........................................16
   Section 6.2    Financial Statements; Etc...................................16
   Section 6.3    Action; No Breach...........................................16
   Section 6.4    Operation of Business.......................................17
   Section 6.5    Litigation and Judgments....................................17
   Section 6.6    Rights in Properties; Liens.................................17
   Section 6.7    Enforceability..............................................17
   Section 6.8    Approvals...................................................17
   Section 6.9    Debt........................................................17
   Section 6.10   Taxes.......................................................17
   Section 6.11   Use of Proceeds; Margin Securities..........................17
   Section 6.12   ERISA.......................................................17
   Section 6.13   Disclosure..................................................18
   Section 6.14   Subsidiaries, Ventures, Etc.................................18
   Section 6.15   Agreements..................................................18
   Section 6.16   Compliance with Laws........................................18
   Section 6.17   Inventory...................................................18
   Section 6.18   Investment Company Act......................................18
   Section 6.19   Public Utility Holding Company Act..........................18
   Section 6.20   Environmental Matters.......................................18
   Section 6.21   Intellectual Property.......................................19

                                       i

<PAGE>

ARTICLE VII Affirmative Covenants.............................................20
   Section 7.1    Reporting Requirements......................................20
   Section 7.2    Maintenance of Existence; Conduct of Business...............22
   Section 7.3    Maintenance of Properties...................................22
   Section 7.4    Taxes and Claims............................................22
   Section 7.5    Insurance...................................................22
   Section 7.6    Inspection Rights...........................................23
   Section 7.7    Keeping Books and Records...................................23
   Section 7.8    Compliance with Laws........................................23
   Section 7.9    Compliance with Agreements..................................23
   Section 7.10   Further Assurances..........................................23
   Section 7.11   ERISA.......................................................23

ARTICLE VIII Negative Covenants...............................................23
   Section 8.1    Debt........................................................23
   Section 8.2    Limitation on Liens.........................................24
   Section 8.3    Mergers, Etc................................................24
   Section 8.4    Restricted Payments.........................................24
   Section 8.5    Loans and Investments.......................................24
   Section 8.6    Limitation on Issuance of Equity............................25
   Section 8.7    Transactions With Affiliates................................25
   Section 8.8    Disposition of Assets.......................................25
   Section 8.9    Sale and Leaseback..........................................25
   Section 8.10   Prepayment of Debt..........................................25
   Section 8.11   Nature of Business..........................................25
   Section 8.12   Environmental Protection....................................25
   Section 8.13   Accounting..................................................25
   Section 8.14   No Negative Pledge..........................................25

ARTICLE IX Financial Covenants................................................26
   Section 9.1    Consolidated Tangible Net Worth.............................26
   Section 9.2    Leverage Ratio..............................................26
   Section 9.3    Fixed Charge Coverage Ratio.................................26

ARTICLE X Default.............................................................26
   Section 10.1   Events of Default...........................................26
   Section 10.2   Remedies Upon Default.......................................28
   Section 10.3   Performance by Lender.......................................28
   Section 10.4   Cash Collateral.............................................28

ARTICLE XI Miscellaneous......................................................28
   Section 11.1   Expenses....................................................28
   Section 11.2   INDEMNIFICATION.............................................29
   Section 11.3   Limitation of Liability.....................................29
   Section 11.4   No Duty.....................................................30
   Section 11.5   Lender Not Fiduciary........................................30
   Section 11.6   Equitable Relief............................................30
   Section 11.7   No Waiver; Cumulative Remedies..............................30
   Section 11.8   Successors and Assigns......................................30
   Section 11.9   Survival....................................................30

                                       ii

<PAGE>

   Section 11.10  ENTIRE AGREEMENT; AMENDMENT.................................30
   Section 11.11  Notices.....................................................30
   Section 11.12  Governing Law; Venue; Service of Process....................31
   Section 11.13  Counterparts................................................31
   Section 11.14  Severability................................................31
   Section 11.15  Headings....................................................31
   Section 11.16  Participations; Etc.........................................31
   Section 11.17  Construction................................................31
   Section 11.18  Independence of Covenants...................................31
   Section 11.19  WAIVER OF JURY TRIAL........................................32
   Section 11.20  Arbitration.................................................32
   Section 11.21  Additional Interest Provision...............................33
   Section 11.22  Ceiling Election............................................34

                                      iii

<PAGE>

                                 LOAN AGREEMENT
                                 --------------

THIS LOAN AGREEMENT (the "Agreement"), dated as of December 22, 2005, is between
DGSE COMPANIES, INC., a Nevada corporation ("Borrower"), and TEXAS CAPITAL BANK,
NATIONAL ASSOCIATION, a national banking association ("Lender").

                                R E C I T A L S:

         Borrower  has  requested  that Lender  extend  credit to Borrower in as
described in this Agreement.  Lender is willing to make such credit available to
Borrower upon and subject to the  provisions,  terms and conditions  hereinafter
set forth.

         NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
covenants herein contained, the parties hereto agree as follows:

                                    ARTICLE I

                                   Definitions
                                   -----------

         Section  1.1  Definitions.  As used in this  Agreement,  all  exhibits,
appendices and schedules  hereto and in any note,  certificate,  report or other
Loan Documents made or delivered pursuant to this Agreement, the following terms
will have the meanings  given such terms in this Section 1 or in the  provision,
section or recital referred to below:

         "AAA" has the meaning  for such term set forth in Section  11.20 of the
Agreement.

         "Advance" means an advance by Lender to Borrower pursuant to Article II
or any advance made by Lender to cover any drawing under any Letters of Credit.

         "Advance  Request  Form"  means a  certificate,  in a form  approved by
Lender,  properly completed and signed by Borrower requesting a Revolving Credit
Advance.

         "Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common  control with,  such Person;  (b) that directly or indirectly
beneficially  owns or holds  five  percent  (5%) or more of any  class of voting
stock of such  Person;  or (c) five  percent (5%) or more of the voting stock of
which is  directly  or  indirectly  beneficially  owned or held by the Person in
question.  The term "control" means the possession,  directly or indirectly,  of
the power to direct or cause  direction  of the  management  and  policies  of a
Person,  whether  through the ownership of voting  securities,  by contract,  or
otherwise; provided, however, in no event shall Lender be deemed an Affiliate of
Borrower or any of its Subsidiaries or Affiliates.

         "Agreement"  has the  meaning set forth in the  Introductory  Paragraph
hereto,  as the same may,  from time to time,  be amended,  modified,  restated,
renewed, waived, supplemented, or otherwise changed, and includes all schedules,
exhibits and appendices attached or otherwise identified therewith.

         "Borrower"  means the  Person  identified  as such in the  Introductory
Paragraph hereof, and its successors and assigns.

                                       1
<PAGE>

         "Borrowing  Base" means, at any time, an amount equal to the sum of (a)
seventy five  percent  (75%) of the value of Eligible  Accounts,  plus (b) fifty
percent (50%) of the value of Eligible  Inventory,  plus (c) fifty percent (50%)
of Eligible Pawn Loans.

         "Borrowing  Base  Report"  means,  as of any  date  of  preparation,  a
certificate  setting forth the Borrowing Base (in a form acceptable to Lender in
substantially  the form of Exhibit A attached  hereto) prepared by and certified
by the chief financial officer of Borrower.

         "Business Day" has the meaning assigned to it in the Notes.

         "Capital Expenditure" shall mean any expenditure by a Person for (a) an
asset which will be used in a year or years  subsequent to the year in which the
expenditure is made and which asset is properly classified in relevant financial
statements  of such  Person as  equipment,  real  property,  a fixed  asset or a
similar  type of  capitalized  asset  in  accordance  with  GAAP or (b) an asset
relating to or acquired in connection with an acquired business, and any and all
acquisition costs related to (a) or (b) above.

         "Capitalized  Lease  Obligation"  shall mean the amount of Debt under a
lease of Property  by a Person  that would be shown as a liability  on a balance
sheet of such Person  prepared for  financial  reporting  purposes in accordance
with GAAP.

         "Cash Taxes" means, for any Person for any period, any federal,  state,
local,  and  foreign  income  taxes  payable in cash  during such period by such
Person.

         "Code" means the Internal  Revenue  Code of 1986,  as amended,  and the
regulations promulgated and rulings issued thereunder.

         "Collateral"  has the meaning for such term set forth in Section 4.1 of
this Agreement.

         "Commitment"  means the obligation of Lender to make  Revolving  Credit
Advances  pursuant to Section 2.1 in an aggregate  principal  amount at any time
outstanding  up to but not exceeding two million five hundred  thousand  Dollars
($2,500,000), subject, however, to termination pursuant to Section 10.2.

         "Commitment Fee" means $35,000.

         "Compliance Certificate" means a certificate, substantially in the form
of Exhibit B attached  hereto,  prepared by and executed by the chief  financial
officer of Borrower.

         "Constituent  Documents"  means (i) in the case of a  corporation,  its
articles or  certificate  of  incorporation  and  bylaws;  (ii) in the case of a
general partnership,  its partnership agreement;  (iii) in the case of a limited
partnership,  its certificate of limited partnership and partnership  agreement;
(iv) in the case of a trust,  its  trust  agreement;  (v) in the case of a joint
venture,  its joint venture  agreement;  (vi) in the case of a limited liability
company,  its articles of organization  and operating  agreement or regulations;
and (vii) in the case of any other entity,  its  organizational  and  governance
documents and agreements.

         "Debt" means as to any Person at any time  (without  duplication):  (a)
all obligations of such Person for borrowed  money,  (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments,  (c)
all obligations of such Person to pay the deferred purchase price of property or
services,  except trade accounts  payable of such Person arising in the ordinary
course of business that are not past due by more than ninety (90) days,  (d) all
Capital Lease  Obligations of such Person,  (e) all Debt or other obligations of
others guaranteed by such Person, (f) all obligations secured by a Lien existing
on property owned by such Person, whether or not the obligations secured thereby

                                       2
<PAGE>

have been  assumed  by such  Person or are  non-recourse  to the  credit of such
Person,  (g)  any  other  obligation  for  borrowed  money  or  other  financial
accommodations  which in  accordance  with GAAP would be shown as a liability on
the balance sheet of such Person, (h) any repurchase  obligation or liability of
a Person with respect to accounts,  chattel  paper or notes  receivable  sold by
such Person,  (i) any liability under a sale and leaseback  transaction  that is
not a  Capital  Lease  Obligation,  (j)  any  obligation  under  any  so  called
"synthetic  leases",  (k) any  obligation  arising  with  respect  to any  other
transaction  that is the  functional  equivalent of borrowing but which does not
constitute a liability on the balance sheets of a Person,  (l) all reimbursement
obligations  of such Person  (whether  contingent  or  otherwise)  in respect of
letters of  credit,  bankers'  acceptances,  surety or other  bonds and  similar
instruments,  and (m) all  liabilities  of such  Person in respect  of  unfunded
vested benefits under any Plan.

         "Default"  means an Event of Default or the  occurrence  of an event or
condition  which with  notice or lapse of time or both would  become an Event of
Default.

         "Default Interest Rate" has the meaning assigned to it in the Notes.

         "Dispute" means any action,  dispute, claim or controversy of any kind,
whether in contract or tort,  statutory or common law,  legal or equitable,  now
existing  or  hereafter  arising  under  or in  connection  with,  or in any way
pertaining to, this Agreement and each other  document,  contract and instrument
required hereby or now or hereafter delivered to Lender in connection  herewith,
or any past,  present  or future  extensions  of  credit  and other  activities,
transactions or obligations of any kind related directly or indirectly to any of
the foregoing  documents,  including  without  limitation,  any of the foregoing
arising in  connection  with the exercise of any  self-help,  ancillary or other
remedies pursuant to any of the foregoing documents.

         "Dollars" and "$" mean lawful money of the United States of America.

         "EBITDA" means an amount equal to net income plus (b) interest  expense
deduction from net income,  plus (c) income taxes deducted from net income, plus
(d) depreciation, plus (e) amortization.

         "Eligible  Accounts"  means,  at any time,  all accounts  receivable of
Borrower  created in the  ordinary  course of business  that are  acceptable  to
Lender, are subject to a perfected, first priority security interest in favor of
Lender, and satisfy the following conditions:

                  (a) The account complies with all applicable laws,  rules, and
         regulations,  including,  without  limitation,  usury laws, the Federal
         Truth in Lending Act, and Regulation Z of the Board of Governors of the
         Federal Reserve System;

                  (b) The account has not been  outstanding for more than ninety
         (90) days past the original date of invoice;

                  (c) The account is not due and payable within thirty (30) days
         of the date of invoice;

                  (d) The  account  does  not  represent  a  commission  and the
         account  was  created  in  connection  with  (i) the  sale of  goods by
         Borrower  in the  ordinary  course of  business  and such sale has been
         consummated and such goods have been shipped and delivered and received
         by the account debtor,  or (ii) the performance of services by Borrower
         in the  ordinary  course  of  business  and  such  services  have  been
         completed and accepted by the account debtor;

                  (e) The  account  arises  from an  enforceable  contract,  the
         performance of which has been completed by Borrower;

                                       3
<PAGE>

                  (f) The account  does not arise from the sale of any good that
         is  on  a  bill-and-hold,  guaranteed  sale,  sale-or-return,  sale  on
         approval, consignment, or any other repurchase or return basis;

                  (g)  Borrower has good and  indefeasible  title to the account
         and the  account is not  subject to any Lien  except  Liens in favor of
         Lender;

                  (h) The account does not arise out of a contract with or order
         from, an account debtor that, by its terms,  prohibits or makes void or
         unenforceable the grant of a security interest by Borrower to Lender in
         and to such account;

                  (i) The account is not  subject to any  setoff,  counterclaim,
         defense, dispute, recoupment, or adjustment other than normal discounts
         for prompt payment;

                  (j) The account  debtor is not insolvent or the subject of any
         bankruptcy or insolvency  proceeding and has not made an assignment for
         the  benefit  of  creditors,   suspended  normal  business  operations,
         dissolved,  liquidated,  terminated  its  existence,  ceased to pay its
         debts as they  become  due,  or  suffered a  receiver  or trustee to be
         appointed for any of its assets or affairs;

                  (k) The  account  is not  evidenced  by  chattel  paper  or an
         instrument;

                  (l) No default exists under the account by any party thereto;

                  (m) The account  debtor has not returned or refused to retain,
         or otherwise  notified Borrower of any dispute  concerning,  or claimed
         nonconformity  of, any of the goods from the sale of which the  account
         arose;

                  (n)  The  account  is  not  owed  by an  Affiliate,  employee,
         officer, director or shareholder of Borrower;

                  (o) The account is payable in Dollars by the account debtor;

                  (p)  The  account  is not  owed  by an  account  debtor  whose
         accounts  Lender in its sole  discretion  has  chosen to  exclude  from
         Eligible Accounts;

                  The account shall be ineligible:

                           (i) The account  shall be  ineligible  if the account
                  debtor is  domiciled  in any  country  other  than the  United
                  States of America and Canada;

                           (ii) The  account  shall be  ineligible  if more than
                  five percent (5%) of the aggregate  balances then  outstanding
                  on accounts owed by such account  debtor and its Affiliates to
                  Borrower  are more  than  ninety  (90)  days past the dates of
                  their original invoices;

                           (iii)  The  account  debtor is the  United  States of
                  America or any department, agency, or instrumentality thereof,
                  and the Federal  Assignment of Claims Act of 1940, as amended,
                  shall not have been complied with;

                           (iv) The account  shall be  ineligible  to the extent
                  the aggregate of all accounts  owed by the account  debtor and
                  its  Affiliates  to which  the  account  relates  exceeds  ten
                  percent  (10%)  of all  accounts  owed  by  all of  Borrower's
                  account debtors; and

                                       4
<PAGE>

                  (q) The account is otherwise acceptable in the sole discretion
         of  Lender;  provided  that  Lender  shall have the right to create and
         adjust eligibility  standards and related reserves from time to time in
         its good faith credit judgment.

The amount of the Eligible  Accounts owed by an account debtor to Borrower shall
be reduced by the amount of all "contra  accounts" and other obligations owed by
Borrower to such account debtor.

         "Eligible   Inventory"  means,  at  any  time,  all  Gross  Merchandise
Inventory  of raw  materials  and  finished  goods  then  owned  by  (and in the
possession or under the control of) Borrower and held for sale or disposition in
the ordinary  course of  Borrower's  business,  in which Lender has a perfected,
first  priority  security  interest,  valued at the lower of actual cost or fair
market value and determined by Lender.  Eligible Inventory shall not include (a)
inventory  that is  work-in-process,  (b)  inventory  that has been  shipped  or
delivered to a customer on consignment,  a sale-or-return basis, or on the basis
of any similar understanding, (c) inventory with respect to which a claim exists
disputing  Borrower's  title to or right to  possession of such  inventory,  (d)
inventory  that is not in good  condition or does not comply with any applicable
law, rule, or regulation or any standard imposed by any  Governmental  Authority
with respect to its  manufacture,  use, or sale,  (e) inventory that is damaged,
obsolete or otherwise not readily saleable,  (f) inventory covered by negotiable
warehouse or other  document of title  (unless the same is in the  possession of
Lender);  (g) inventory held for rental or lease, (h) inventory that Lender,  in
its sole discretion, has determined to be unmarketable, (i) inventory subject to
third-party  intellectual  property agreements,  and (j) inventory that requires
consent of a third-party for manufacture or sale. In addition,  no more than ten
percent  (10%) of the total value of all  inventory  shall  consist of Long Term
Inventory.  For purposes of this definition,  Eligible  Inventory  consisting of
inventory  obtained  from a Pawn  Loan  shall  be  valued  at the  lower  of the
defaulted loan value of the underlying Pawn Loan or market value.

         "Eligible Pawn Loans" means the  outstanding  principal loan balance of
Pawn  Loans or  ledger  amount  owing on all gross  Pawn  Loans  receivables  of
Borrower for Pawn Loans made by Borrower in the ordinary course of business,  in
which Lender has a perfected,  first priority  lien,  after  deducting  (without
duplication): (a) the amount of all discounts,  allowances, rebates, credits and
adjustments to such accounts;  (b) the amount of all contra  accounts,  setoffs,
defenses or counterclaims  asserted by or available to the account debtors;  (c)
all  accounts  owing by account  debtors for which there has been  instituted  a
proceeding in bankruptcy or  reorganization  under the United States  Bankruptcy
Code or other law,  whether  state or federal,  now or  hereafter  existing  for
relief of  debtors;  (d) the amount of all  accounts  which do not comply in all
material  respects with all applicable laws,  rules, and regulations,  including
without  limitation,  usury laws, the Federal Truth in Lending Act, Regulation Z
of the Board of Governors of the Federal  Reserve  System,  as  applicable,  the
provisions of the Texas Pawn Shop Act (Chapter 371 of the Texas  Finance  Code),
and similar laws  governing  the  operation of pawnshops in local  jurisdictions
where Borrower and any Subsidiaries conduct business,  and the provisions of the
Texas Finance Code; (e) the amount of all accounts  which have been  outstanding
beyond the date  applicable  state law permits  the pawned item  relative to the
subject  account to be sold by Borrower;  (f) all accounts with respect to which
the  account  does  not  arise  from an  enforceable  contract  with a  pawnshop
customer,  or with respect to which the  performance  has not been  completed by
Borrower; (g) all accounts to which Borrower does not have good and indefeasible
title;  (h) all  accounts  subject to any lien,  claim,  security  interest,  or
encumbrance,  except the security interest in favor of Lender;  (i) all accounts
evidenced  by chattel  paper,  unless such chattel  paper has been  delivered to
Lender or stamped or marked as collateral of Lender;  and (j) any other accounts
deemed unacceptable by Lender in its sole and absolute discretion.

         "Environmental Laws" means any and all federal,  state, and local laws,
regulations,   judicial  decisions,  orders,  decrees,  plans,  rules,  permits,
licenses,  and other  governmental  restrictions and requirements  pertaining to
health,  safety,  or  the  environment,   including,   without  limitation,  the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42

                                       5
<PAGE>

U.S.C. ss. 9601 et seq., the Resource  Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 et seq., the  Occupational  Safety and Health Act, 29 U.S.C. ss.
651 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean Water Act,
33 U.S.C. ss. 1251 et seq., and the Toxic Substances  Control Act, 15 U.S.C. ss.
2601 et seq., as the same may be amended or supplemented from time to time.

         "Environmental  Liabilities"  means, as to any Person, all liabilities,
obligations,  responsibilities,  Remedial  Actions,  losses,  damages,  punitive
damages, consequential damages, treble damages, costs, and expenses, (including,
without limitation,  all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility  studies),
fines, penalties,  sanctions,  and interest incurred as a result of any claim or
demand,  by any Person,  whether  based in  contract,  tort,  implied or express
warranty,   strict   liability,   criminal  or  civil  statute,   including  any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person,  arising from  environmental,  health or safety  conditions or the
Release or  threatened  Release of a Hazardous  Material  into the  environment,
resulting  from the past,  present,  or future  operations of such Person or its
Affiliates.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time,  and the  regulations  and published  interpretations
thereunder.

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

         "Event of Default" has the meaning specified in Section 10.1.

         "GAAP" means generally  accepted  accounting  principles,  applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American  Institute of Certified Public  Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective  successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent  basis" when the  accounting  principles
applied in a current  period are  comparable  in all material  respects to those
accounting principles applied in a preceding period.

         "Governmental  Authority" means any nation or government,  any state or
political subdivision thereof and any entity exercising executive,  legislative,
judicial,   regulatory,   or  administrative   functions  of  or  pertaining  to
government.

         "Gross  Merchandise  Inventory"  means (a) all used  personal  property
consisting of forfeited  collateral  items resulting from Pawn Loans made in the
ordinary  course of  Borrower's  pawn shop  business  and held in  inventory  of
Borrower,  and (b) all other inventory  purchased from the public,  or purchased
from  third-party  vendors,  and held in  inventory  of Borrower in the ordinary
course of business.

         "Guarantee"  by  any  Person  means  any   obligation,   contingent  or
otherwise,  of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person as well as any obligation or liability, direct or
indirect,  contingent  or  otherwise,  of such Person (a) to purchase or pay (or
advance  or supply  funds for the  purchase  or  payment  of) such Debt or other
obligation or liability (whether arising by virtue of partnership  arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
operate Property, to take-or-pay, or to maintain net worth or working capital or
other financial  statement  conditions or otherwise) or (b) entered into for the
purpose of indemnifying or assuring in any other manner the obligee of such Debt
or other  obligation  or  liability  of the  payment  thereof or to protect  the
obligee against loss in respect thereof (in whole or in part), provided that the
term Guarantee shall not include  endorsements  for collection or deposit in the
ordinary  course  of  business.  The  term  "Guarantee"  used  as a  verb  has a
corresponding meaning.

                                       6
<PAGE>

         "Guarantor"  means any Person who from time to time  guarantees  all or
any  part of the  Obligation,  including,  without  limitation,  the  Subsidiary
Guarantors and the Limited Guarantor.

         "Guaranty"  means a written  guaranty  of each  Guarantor  (other  than
Limited  Guarantor) in favor of Lender,  in form and substance  satisfactory  to
Lender,  as the same may be  amended,  modified,  restated,  renewed,  replaced,
extended, supplemented or otherwise changed from time to time.

         "Hazardous Material" means any substance,  product,  waste,  pollutant,
material,  chemical,  contaminant,  constituent,  or other  material which is or
becomes listed,  regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.

         "Letter of Credit"  means any letter of credit issued by Lender for the
account  of or at the  direction  of  Borrower  pursuant  to  Article II of this
Agreement.

         "Letter of Credit  Liabilities"  means, at any time, the aggregate face
amounts of all outstanding  Letters of Credit,  plus any amounts drawn under any
Letters of Credit for which  Lender has not been fully  reimbursed  by  Borrower
(unless Lender, in its sole discretion, has cleared the drawn amount by means of
an Advance under the Revolving Credit Note, in which case the drawn amount would
not constitute a Letter of Credit Liability).

         "Letter of Credit Request Form or  Application"  means a certificate or
agreement,  in a form  acceptable  to Lender,  properly  completed and signed by
Borrower requesting issuance of a Letter of Credit and containing provisions for
fees for the  issuance  of  Letters  of Credit,  repayment  of drawn  letters of
credit,  the interest rate applicable to drawn and unpaid Letters of Credit, and
such other matters as Lender may require.

         "Leverage   Ratio"  means,  at  any  particular   time,  the  ratio  of
Liabilities to Tangible Net Worth in each case for Borrower and its Subsidiaries
determined on a consolidated basis.

         "Liabilities"  means,  at any particular  time,  all amounts which,  in
conformity  with GAAP,  would be included as liabilities on a balance sheet of a
Person.

         "Lien" means any lien, mortgage,  security interest,  tax lien, pledge,
charge, hypothecation, assignment, preference, priority, or other encumbrance of
any kind or nature whatsoever  (including,  without limitation,  any conditional
sale or title retention  agreement),  whether arising by contract,  operation of
law, or otherwise.

         "Limited Guarantor" means L.S. Smith, as an individual.

         "Limited  Guaranty"  means the  Limited  Guaranty to be executed by the
Limited Guarantor in form and substance  satisfactory to Lender, as the same may
be amended, modified,  restated,  renewed, replaced,  extended,  supplemented or
otherwise changed from time to time.

         "Loan  Documents"  means  this  Agreement  and  all  promissory  notes,
security  agreements,  subordination  agreements,  deeds of trust,  assignments,
letters of credit, guaranties, and other instruments,  documents, and agreements
executed and delivered pursuant to or in connection with this Agreement, as such
instruments,  documents,  and  agreements  may be  amended,  modified,  renewed,
restated,  extended,  supplemented,  replaced,  consolidated,   substituted,  or
otherwise changed from time to time.

         "Long Term  Inventory"  means  inventory owned by the Borrower for more
than three (3) years.

                                       7
<PAGE>

         "Maximum  Lawful Rate" means, at any time, the maximum rate of interest
which may be charged,  contracted for, taken,  received or reserved by Lender in
accordance with applicable Texas law (or applicable United States federal law to
the extent  that such law permits  Lender to charge,  contract  for,  receive or
reserve a greater  amount of interest than under Texas law).  The Maximum Lawful
Rate shall be  calculated  in a manner that takes into account any and all fees,
payments,  and other charges in respect of the Loan  Documents  that  constitute
interest  under  applicable  law.  Each change in any interest rate provided for
herein based upon the Maximum Lawful Rate resulting from a change in the Maximum
Lawful  Rate shall take  effect  without  notice to Borrower at the time of such
change in the Maximum Lawful Rate.

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

         "Notes" means, collectively, all promissory notes (and "Note" means any
of such  Notes)  executed  at any time by  Borrower  and payable to the order of
Lender, as amended, renewed,  replaced,  extended,  supplemented,  consolidated,
restated, modified, otherwise changed and/or increased from time to time.

         "Obligated  Party"  means each  Guarantor or any other Person who is or
becomes  party  to  any  agreement  that   guarantees  or  secures  payment  and
performance of the Obligations or any part thereof.

         "Obligations" means all obligations,  indebtedness,  and liabilities of
Borrower,  each Guarantor and any other  Obligated Party to Lender or Affiliates
of Lender, or both, now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several,
or  joint  and  several,   including,   without  limitation,   the  obligations,
indebtedness, and liabilities under this Agreement, any Swap Contract, the other
Loan   Documents   (including,   without   limitation,   all  Letter  of  Credit
Liabilities),  any cash  management  or  treasury  services  agreements  and all
interest  accruing  thereon  (whether a claim for  post-filing or  post-petition
interest is allowed in any insolvency, reorganization or similar proceeding) and
all attorneys' fees and other expenses incurred in the enforcement or collection
thereof.

         "Pawn  Loans"  means all  transactions  in which a customer of Borrower
pledges  with  Borrower  an item  of  goods  as  security  for a loan of  money,
including without limitation all  collateralized  pawn loans made by Borrower in
the  ordinary  course of its  business as a  pawnbroker,  and all  purchases  by
Borrower of goods on the condition that the goods may be redeemed or repurchased
by the seller for a fixed price within a fixed period.

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

         "Person" means any individual,  corporation, limited liability company,
business trust, association,  company, partnership,  joint venture, Governmental
Authority,   or  other  entity,   and  shall   include  such   Person's   heirs,
administrators, personal representatives, executors, successors and assigns.

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

         "Prime Rate" has the meaning assigned to it in the Notes.

                                       8
<PAGE>

         "Principal  Office"  means the  principal  office of Lender,  presently
located at 2100 McKinney Avenue, Suite 900, Dallas, Texas 75201.

         "Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.

         "Property"  of a  Person  means  any and all  property,  whether  real,
personal,  tangible,  intangible or mixed,  of such Person,  or any other assets
owned, operated or leased by such Person.

         "Related  Indebtedness"  has the meaning set forth in Section  11.21 of
this Agreement.

         "Release"  means,  as to any  Person,  any  release,  spill,  emission,
leaking,  pumping,  injection,  deposit,  disposal,  disbursement,  leaching, or
migration of Hazardous  Materials into the indoor or outdoor environment or into
or out of property  owned by such Person,  including,  without  limitation,  the
movement of Hazardous  Materials  through or in the air,  soil,  surface  water,
ground water, or property.

         "Remedial  Action" means all actions  required to (a) clean up, remove,
treat,  or  otherwise  address  Hazardous  Materials  in the  indoor or  outdoor
environment,  (b)  prevent  the  Release or threat of Release  or  minimize  the
further  Release of Hazardous  Materials so that they do not migrate or endanger
or  threaten  to  endanger  public  health or  welfare  or the indoor or outdoor
environment,   or  (c)  perform  pre-remedial  studies  and  investigations  and
post-remedial monitoring and care.

         "Reportable Event" means any of the events set forth in Section 4043 of
ERISA.

         "Revolving Credit Advance" means any Advance made by Lender to Borrower
pursuant to Section 2.1(a) of this Agreement.

         "Revolving  Credit Note" means the promissory note of Borrower  payable
to the order of Lender, in substantially  the form of Exhibit C hereto,  and all
amendments, extensions, renewals, replacements, and modifications thereof.

         "Security  Agreement" means the Security Agreement of Borrower in favor
of Lender,  in form and  substance  satisfactory  to Lender,  as the same may be
amended, restated, supplemented, modified, or changed from time to time.

         "Security Documents" means each and every Security Agreement, Guaranty,
pledge,  mortgage, deed of trust or other collateral security agreement required
by or  delivered  to Lender from time to time to secure the  Obligations  or any
portion thereof.

         "Subordinated  Debt"  means  any  Debt  of  Borrower  (other  than  the
Obligations) that has been subordinated to the Obligations by written agreement,
in form and content satisfactory to Lender.

         "Subsidiary"  means (a) any corporation of which at least a majority of
the  outstanding  shares of stock having by the terms  thereof  ordinary  voting
power  to  elect a  majority  of the  board  of  directors  of such  corporation
(irrespective  of whether or not at the time stock of any other class or classes
of such  corporation  shall  have or might  have  voting  power by reason of the
happening of any  contingency)  is at the time directly or  indirectly  owned or
controlled by Borrower or one or more of the Subsidiaries or by Borrower and one
or more of the  Subsidiaries;  and (b) any other  entity (i) of which at least a
majority of the ownership,  equity or voting interest is at the time directly or
indirectly  owned or controlled by one or more of Borrower and the  Subsidiaries
and (ii) which is treated as a subsidiary in accordance with GAAP.

                                       9
<PAGE>

         "Swap Contract" means any agreement  (including  related  confirmations
and  schedules)  between  Borrower  and  Lender or any  Affiliate  of Lender now
existing or hereafter  entered into which is, or relates to, a rate swap,  basis
swap,  forward rate  transaction,  cap transaction,  floor  transaction,  collar
transaction or any other similar transactions (including any option with respect
to any of these transactions) or any combination thereof.

         "Tangible Net Worth" means, at any particular  time, all amounts which,
in conformity with GAAP, would be included as stockholders'  equity on a balance
sheet of a Person plus all Subordinated Debt of such Person; provided,  however,
there  shall be excluded  therefrom:  (a) any amount at which the equity of such
Person  appears  as an asset  on such  Person's  balance  sheet,  (b)  goodwill,
including  any amounts,  however  designated,  that  represent the excess of the
purchase  price paid for assets or stock over the value  assigned  thereto,  (c)
patents,  trademarks,  trade names, and copyrights,  (d) deferred expenses,  (e)
loans and advances to any  stockholder,  director,  officer,  or employee of the
Person or any Affiliate of Person,  Borrower, and (f) all other assets which are
properly classified as intangible assets.

         "Term Loan" means at any time the aggregate, unpaid Term Note Advances.

         "Term Note" means the promissory note of Borrower  payable to the order
of Lender in  substantially  the form of Exhibit D hereto,  and all  amendments,
extensions, renewals, replacements, and modifications thereof.

         "Term  Note  Advance"  means any  Advance  made by  Lender to  Borrower
pursuant to Section 2.1(b) of this Agreement.

         "Termination  Date" means 11:00 A.M.  Dallas,  Texas time on November ,
2007,  or such earlier date on which the  Commitment  terminates  as provided in
this Agreement.

         "UCC"  means the  Chapters  1  through  11 of the  Texas  Business  and
Commerce Code, as amended from time to time.

         Section  1.2  Accounting  Matters.  Any  accounting  term  used in this
Agreement or the other Loan Documents shall have, unless otherwise  specifically
provided  therein,  the meaning  customarily  given such term in accordance with
GAAP,  and all  financial  computations  thereunder  shall be  computed,  unless
otherwise  specifically  provided therein,  in accordance with GAAP consistently
applied;  provided,  that all financial  covenants and  calculations in the Loan
Documents shall be made in accordance with GAAP as in effect on the date of this
Agreement  unless  Borrower and Lender  shall  otherwise  specifically  agree in
writing.  That certain  items or  computations  are  explicitly  modified by the
phrase "in  accordance  with  GAAP"  shall in no way be  construed  to limit the
foregoing.

         Section 1.3 Other Definitional Provisions. All definitions contained in
this  Agreement  are equally  applicable to the singular and plural forms of the
terms  defined.  The words  "hereof",  "herein",  and  "hereunder"  and words of
similar import  referring to this  Agreement  refer to this Agreement as a whole
and  not to  any  particular  provision  of  this  Agreement.  Unless  otherwise
specified,  all Article and Section references pertain to this Agreement.  Terms
used herein that are defined in the UCC, unless otherwise defined herein,  shall
have the meanings specified in the UCC.

                                       10
<PAGE>

                                   ARTICLE II

                         Advances and Letters of Credit
                         ------------------------------

         Section 2.1 Advances.

         (a) Revolving Credit  Advances.  Subject to the terms and conditions of
this Agreement,  Lender agrees to make one or more Revolving  Credit Advances to
Borrower from time to time from the date hereof to and including the Termination
Date in an  aggregate  principal  amount at any time  outstanding  up to but not
exceeding the amount of the  Commitment,  provided that the aggregate  amount of
all  Revolving  Credit  Advances  at any time  outstanding  shall not exceed the
lesser of (i) the  amount of the  Commitment  minus  all  outstanding  Letter of
Credit  Liabilities or (ii) the Borrowing Base minus (i) all outstanding  Letter
of  Credit  Liabilities  and  (ii)  the  Term  Loan.  Subject  to the  foregoing
limitations, and the other terms and provisions of this Agreement,  Borrower may
borrow, repay, and reborrow hereunder.

                  1. The Revolving  Credit Note.  The  obligation of Borrower to
         repay the  Revolving  Credit  Advances  and interest  thereon  shall be
         evidenced by the Revolving Credit Note executed by Borrower, payable to
         the order of  Lender,  in the  principal  amount of the  Commitment  as
         originally in effect, and dated the date hereof.

                  2.  Repayment of Revolving  Credit  Advances.  Borrower  shall
         repay the unpaid  principal  amount of all Advances on the  Termination
         Date, unless sooner due by reason of acceleration by Lender as provided
         in this Agreement.

                  3.  Interest.  The unpaid  principal  amount of the  Revolving
         Credit Note shall, subject to the following sentence,  bear interest as
         provided  in the  Revolving  Credit  Note.  If at any  time the rate of
         interest  specified  in the  Revolving  Credit  Note  would  exceed the
         Maximum Lawful Rate but for the provisions thereof limiting interest to
         the Maximum Lawful Rate, then any subsequent reduction shall not reduce
         the rate of interest on the Revolving Credit Advances below the Maximum
         Lawful  Rate  until the  aggregate  amount of  interest  accrued on the
         Revolving Credit Advances equals the aggregate amount of interest which
         would have  accrued on the  Revolving  Credit  Advances if the interest
         rate had not been  limited by the  Maximum  Lawful  Rate.  Accrued  and
         unpaid  interest on the Revolving  Credit  Advances shall be payable as
         provided in the Revolving Credit Note and on the Termination Date.

                  4. Borrowing  Procedure.  Borrower shall give Lender notice of
         each  Revolving  Credit  Advance  by means of an Advance  Request  Form
         containing the information  required  therein and delivered (by hand or
         by mechanically  confirmed facsimile) to Lender no later than 1:00 p.m.
         (Texas  time) on the day on  which  the  Revolving  Credit  Advance  is
         desired  to be  funded.  Advances  shall  be  in a  minimum  amount  of
         $250,000.  Lender at its option may accept telephonic requests for such
         Advances,  provided that such acceptance  shall not constitute a waiver
         of Lender's  right to require  delivery of an Advance  Request  Form in
         connection  with  subsequent  Advances.  Any  telephonic  request for a
         Revolving  Credit  Advance by Borrower  shall be promptly  confirmed by
         submission of a properly  completed Advance Request Form to Lender, but
         failure to deliver  an Advance  Request  Form shall not be a defense to
         payment of the Advance.  Lender shall have no liability to Borrower for
         any  loss or  damage  suffered  by  Borrower  as a result  of  Lender's
         honoring of any requests, execution of any instructions, authorizations
         or   agreements  or  reliance  on  any  reports   communicated   to  it
         telephonically,  by facsimile or electronically  and purporting to have
         been sent to Lender by Borrower and Lender shall have no duty to verify

                                       11
<PAGE>

         the origin of any such  communication  or the  identity or authority of
         the Person  sending  it.  Subject to the terms and  conditions  of this
         Agreement,  each  Revolving  Credit  Advance shall be made available to
         Borrower by depositing the same, in immediately  available funds, in an
         account of Borrower  designated by Borrower  maintained  with Lender at
         the Principal Office.

         (b) Term Loan.  Subject to the terms and conditions of this  Agreement,
Lender agrees to make, on or about the date of this  Agreement a single  Advance
Term  Loan  to  Borrower  in  the  principal   amount  of  One  Million  Dollars
($1,000,000).

                  1. The Term Note. The obligation of Borrower to repay the Term
         Loan and interest  thereon shall be evidenced by the Term Note executed
         by Borrower, payable to the order of Lender, in the principal amount of
         One Million Dollars ($1,000,000).

                  2.  Repayment  of  Principal  and  Interest.  Subject to prior
         acceleration  as  provided  in this  Agreement,  the  unpaid  principal
         balance of the Term Note shall be repaid as provided therein.

                  3.  Interest.  The  unpaid  principal  amount of the Term Note
         shall, subject to the following sentence,  bear interest as provided in
         the Term Note.  If at any time the rate of  interest  specified  in the
         Term Note shall exceed the Maximum  Lawful Rate but for the  provisions
         thereof  limiting  interest  to  the  Maximum  Lawful  Rate,  then  any
         subsequent  reduction shall not reduce the rate of interest on the Term
         Note Advances below the Maximum Lawful Rate until the aggregate  amount
         of  interest  accrued on the Term Note  Advances  equals the  aggregate
         amount of interest  which would have accrued on the Term Note  Advances
         if the interest  rate had not been limited by the Maximum  Lawful Rate.
         Accrued and unpaid  interest on the Term Note Advances shall be payable
         as provided in the Revolving Credit Note and on the Termination Date.

         Section 2.2 General Provisions Regarding Interest; Etc.

         (a) Default Interest Rate. Any outstanding principal of any Advance and
(to the fullest  extent  permitted by law) any other amount  payable by Borrower
under this  Agreement or any other Loan  Document  that is not paid in full when
due (whether at stated  maturity,  by  acceleration,  or  otherwise)  shall bear
interest at the Default  Interest Rate for the period from and including the due
date thereof to but excluding  the date the same is paid in full.  Additionally,
upon  the  occurrence  of an  Event  of  Default  (and  from  the  date  of such
occurrence)  all  outstanding  and  unpaid  principal  amounts  of  all  of  the
Obligations  shall, to the extent permitted by law, bear interest at the Default
Interest  Rate until such time as Lender shall waive in writing the  application
of the  Default  Interest  Rate to such  Event of  Default  situation.  Interest
payable at the  Default  Interest  Rate  shall be  payable  from time to time on
demand.

         (b)  Computation  of  Interest.  Interest on the Advances and all other
amounts  payable by Borrower  hereunder shall be computed on the basis of a year
of 360 days and the actual number of days elapsed  (including  the first day but
excluding the last day) unless such calculation would result in a usurious rate,
in which case interest  shall be calculated on the basis of a year of 365 or 366
days, as the case may be.

         Section 2.3 Unused  Facility Fee.  Borrower  agrees to pay to Lender an
unused facility fee on the daily average unused amount of the Commitment for the
period  from and  including  the date of this  Agreement  to and  including  the
Termination  Date,  at the rate of one half of one percent (1/2 of 1%) per annum
based on a 360 day year and the actual number of days  elapsed.  For the purpose
of calculating the unused facility fee hereunder, the Commitment shall be deemed
utilized  by the  amount  of all  outstanding  Advances  and  Letter  of  Credit
Liabilities.  Accrued  unused  fee shall be payable in arrears on each March 31,
June 30, September 30, December 31, and on the Termination Date.

                                       12
<PAGE>

         Section  2.4 Use of  Proceeds.  The  proceeds of the  Revolving  Credit
Advances shall be used by Borrower for working capital in the ordinary course of
business.  The proceeds of the Term Loan will be used for repay existing Debt of
Borrower.

         Section 2.5 Letters of Credit.  Subject to the terms and  conditions of
this  Agreement,  Lender  agrees to issue one or more  Letters of Credit for the
account of Borrower  from time to time from the date hereof to and including the
Termination  Date;  provided,  however,  that the  outstanding  Letter of Credit
Liabilities  shall not at any time  exceed the lesser of (a) Two  Hundred  Fifty
Thousand Dollars ($250,000), (b) an amount equal to the amount of the Commitment
minus  the  outstanding  Advances,  or (c)  the  Borrowing  Base  minus  (i) the
outstanding  Revolving  Credit  Advances and (ii) the Term Loan.  Each Letter of
Credit shall have an expiration date not to exceed twelve (12) months, shall not
have an  expiration  date  beyond  the  Termination  Date,  shall be  payable in
Dollars,  shall have a minimum face amount of Fifty Thousand Dollars  ($50,000),
must  support a  transaction  that is  entered  into in the  ordinary  course of
Borrower's business,  must be satisfactory in form and substance to Lender, will
be subject to the payment of such  Letter of Credit fees as Lender may  require,
and shall be issued  pursuant  to such  documents  and  instruments  executed by
Borrower (including,  without limitation, a Letter of Credit Application as then
in effect) as Lender may require.

         Each payment by Lender  pursuant to a drawing  under a Letter of Credit
is due and payable ON DEMAND,  and at the sole option of Lender,  can be charged
by Lender as (and will be deemed to be) a Revolving  Credit Advance by Lender to
Borrower  under the Revolving  Credit Note and this  Agreement as of the day and
time such payment is made by Lender and in the amount of such payment.

                                   ARTICLE III

                                    Payments
                                    --------

         Section 3.1 Method of Payment. All payments of principal, interest, and
other  amounts to be made by Borrower  under this  Agreement  and the other Loan
Documents  shall be made to  Lender  at the  Principal  Office  in  Dollars  and
immediately  available funds, without setoff,  deduction,  or counterclaim,  and
free and clear of all taxes at the time and in the manner provided in the Notes.

         Section 3.2 Prepayments.

         (a)  Voluntary  Prepayments.  Borrower may prepay all or any portion of
the Notes to the extent  and in the manner  provided  for  therein.  Prepayments
shall be in a minimum of $10,000.

         (b)  Mandatory  Prepayment.  Borrower  must pay on DEMAND the amount by
which at any time the unpaid  principal  balance of the  Revolving  Credit Note,
plus the  aggregate  Letter  of Credit  Liabilities,  exceed  the  amount of the
Borrowing Base minus the Term Loan.

         Section 3.3 Additional  Costs in Respect of Letters of Credit.  If as a
result of any  Regulatory  Change  there shall be imposed,  modified,  or deemed
applicable any tax, reserve,  special deposit, or similar requirement against or
with respect to or measured by  reference  to Letters of Credit  issued or to be
issued  hereunder or Lender's  commitment to issue Letters of Credit  hereunder,
and the result shall be to increase the cost to Lender of issuing or maintaining
any Letter of Credit or its  commitment to issue Letters of Credit  hereunder or
reduce any amount  receivable  by Lender  hereunder  in respect of any Letter of
Credit (which increase in cost, or reduction in amount receivable,  shall be the
result of Lender's  reasonable  allocation of the aggregate of such increases or
reductions  resulting from such event),  then,  upon demand by Lender,  Borrower
agrees to pay Lender,  from time to time as specified by Lender, such additional

                                       13
<PAGE>

amounts as shall be sufficient to compensate  Lender for such increased costs or
reductions in amount.  A statement as to such  increased  costs or reductions in
amount incurred by Lender,  submitted by Lender to Borrower, shall be conclusive
as to the amount thereof,  provided that the determination  thereof is made on a
reasonable basis.

                                   ARTICLE IV

                                    Security
                                    --------

         Section  4.1  Collateral.  To  secure  full and  complete  payment  and
performance of the  Obligations,  Borrower shall execute and deliver or cause to
be executed  and  delivered  all of the  Security  Documents  required by Lender
covering the  Property  and  collateral  described  in such  Security  Documents
(which,  together  with any  other  Property  and  collateral  described  in the
Security Agreement, and any other property which may now or hereafter secure the
Obligations or any part thereof,  is sometimes herein called the  "Collateral").
Borrower  shall  execute and cause to be executed  such  further  documents  and
instruments,  including without  limitation,  Uniform  Commercial Code financing
statements,  as Lender, in its sole discretion,  deems necessary or desirable to
create, evidence,  preserve, and perfect its liens and security interests in the
Collateral.

         Section 4.2 Setoff.  If an Event of Default  shall have occurred and be
continuing,  Lender  shall  have the  right  to set off and  apply  against  the
Obligations  in such  manner as Lender may  determine,  at any time and  without
notice to Borrower,  any and all deposits  (general or special,  time or demand,
provisional or final) or other sums at any time credited by or owing from Lender
to Borrower whether or not the Obligations are then due. As further security for
the  Obligations,  Borrower  hereby grants to Lender a security  interest in all
money,  instruments,  and other  property of Borrower now or  hereafter  held by
Lender, including, without limitation, property held in safekeeping. In addition
to  Lender's  right of  setoff  and as  further  security  for the  Obligations,
Borrower hereby grants to Lender a security interest in all deposits (general or
special,  time or demand,  provisional  or final) and other accounts of Borrower
now or  hereafter  on  deposit  with or held by Lender and all other sums at any
time  credited by or owing from Lender to  Borrower.  The rights and remedies of
Lender  hereunder  are in  addition  to other  rights and  remedies  (including,
without limitation, other rights of setoff) which Lender may have.

                                    ARTICLE V

                              Conditions Precedent
                              --------------------

         Section 5.1 Initial  Extension of Credit.  The  obligation of Lender to
make the initial Advance under any Note or issue the initial Letter of Credit is
subject to the condition  precedent that Lender shall have received on or before
the day of such  Advance  or Letter of Credit all of the  following,  each dated
(unless otherwise indicated) the date hereof, in form and substance satisfactory
to Lender:

         (a)  Resolutions.  Resolutions  of the  Board of  Directors  (or  other
governing body) of Borrower certified by the Secretary or an Assistant Secretary
(or other  custodian  of records) of Borrower  which  authorize  the  execution,
delivery,  and  performance  by  Borrower of this  Agreement  and the other Loan
Documents to which Borrower is or is to be a party;

         (b) Incumbency Certificate. A certificate of incumbency certified by an
authorized officer or representative  certifying the names of the individuals or
other  Persons  authorized  to sign this  Agreement  and each of the other  Loan
Documents to which Borrower is or is to be a party  (including the  certificates
contemplated  herein) on behalf of Borrower together with specimen signatures of
such Persons;

                                       14
<PAGE>

         (c) Constituent  Documents.  The Constituent Documents for Borrower and
Guarantors as of a date acceptable to Lender;

         (d)   Governmental   Certificates.   Certificates  of  the  appropriate
government  officials of the state of  incorporation or organization of Borrower
as to the existence  and good  standing of Borrower,  each dated within ten (10)
days prior to the date of the initial Advance or Letter of Credit;

         (e) Notes. The Notes executed by Borrower;

         (f) Security Documents. The Security Documents executed by Borrower and
other Obligated Parties;

         (g) Financing Statements.  Uniform Commercial Code financing statements
executed by Borrower and covering such Collateral as Lender may request;

         (h) Guaranty. The Guaranty executed by the Subsidiary Guarantor;

         (i) Limited Guaranty. The Limited Guaranty executed by L.S. Smith;

         (k) Landlord/Mortgagee Waivers.  Landlord/Mortgagee waivers executed by
(i) Belle-Hall  Development  Phase III Limited  Partnership and (ii) Michael and
Marian Hall;

         (l) Insurance Matters.  Copies of insurance certificates describing all
insurance  policies  required by Section  7.5,  together  with loss  payable and
lender  endorsements  in favor of Lender with respect to all insurance  policies
covering Collateral;

         (m) UCC Search. The results of a Uniform Commercial Code search showing
all financing  statements  and other  documents or  instruments  on file against
Borrower and  Guarantors  the offices of the Secretary of State of Texas and the
Secretary  of State of South  Carolina,  such  search to be as of a date no more
than ten (10) days  prior to the date of the  initial  Advance  or the Letter of
Credit;

         (n) Attorneys' Fees and Expenses.  Evidence that the costs and expenses
(including  reasonable  attorneys'  fees)  referred to in Section  11.1,  to the
extent incurred, shall have been paid in full by Borrower;

         (o) Commitment Fee. Evidence that the Commitment Fee to Lender has been
paid in full by Borrower;

         (p) Payoff Letter.  Receipt of evidence satisfactory to Lender that the
outstanding loan from Bank of Texas, N.A. to Borrower will be repaid in full and
released upon its receipt of the proceeds of the Term Loan; and

         (q)  Additional  Items.  The  additional  items set  forth on  Schedule
5.1(n).

         Section 5.2 All Extensions of Credit.  The obligation of Lender to make
any Advance or issue any Letter of Credit (including the initial Advance and the
initial  Letter of Credit) is subject  to the  following  additional  conditions
precedent:

         (a) Request for Advance or Letter of Credit. Lender shall have received
in accordance with this  Agreement,  as the case may be, an Advance Request Form
or Letter of Credit  Request Form  pursuant to Lender's  requirements  dated the
date of such Advance or Letter of Credit and executed by an  authorized  officer
of Borrower;

                                       15
<PAGE>

         (b) No Default,  Etc. No Default or material  adverse  change or effect
shall have  occurred  and be  continuing,  or would  result from or after giving
effect to such Advance or Letter of Credit;

         (c)  Representations  and Warranties.  All of the  representations  and
warranties  contained in Article VI hereof and in the other Loan Documents shall
be true and  correct on and as of the date of such  Advance  with the same force
and effect as if such  representations and warranties had been made on and as of
such date; and

         (d)   Additional   Documentation.   Lender  shall  have  received  such
additional approvals,  opinions, or documents as Lender or its legal counsel may
reasonably request.

                                   ARTICLE VI

                         Representations and Warranties
                         ------------------------------

         To induce Lender to enter into this Agreement,  Borrower represents and
warrants to Lender that:

         Section 6.1 Corporate Existence.  Borrower and each of its Subsidiaries
(a) is a corporation  duly  organized,  validly  existing,  and in good standing
under the laws of the jurisdiction of its  incorporation;  (b) has all requisite
power and  authority to own its assets and carry on its business as now being or
as  proposed  to be  conducted;  and  (c) is  qualified  to do  business  in all
jurisdictions  in which the  nature of its  business  makes  such  qualification
necessary and where failure to so qualify would have a material  adverse  effect
on its business, condition (financial or otherwise),  operations,  prospects, or
properties.  Borrower  has the power and  authority  to  execute,  deliver,  and
perform its  obligations  under this  Agreement and the other Loan  Documents to
which it is or may become a party.

         Section 6.2 Financial Statements; Etc. Borrower has delivered to Lender
audited consolidated financial statements of Borrower and its Subsidiaries as at
and  for the  fiscal  year  ended  2004  and  unaudited  consolidated  financial
statements of Borrower and its  Subsidiaries for the six-month period ended June
30, 2005. Such financial statements are true and correct,  have been prepared in
accordance  with GAAP,  and fairly and  accurately  present,  on a  consolidated
basis,  the  financial  condition  of Borrower  and its  Subsidiaries  as of the
respective  dates  indicated  therein  and the  results  of  operations  for the
respective  periods  indicated   therein.   Neither  Borrower  nor  any  of  its
Subsidiaries  has any material  contingent  liabilities,  liabilities for taxes,
unusual forward or long-term  commitments,  or unrealized or anticipated  losses
from any  unfavorable  commitments  except as referred to or  reflected  in such
financial statements. There has been no material adverse change in the business,
condition  (financial or  otherwise),  operations,  prospects,  or properties of
Borrower or any of its Subsidiaries  since the effective date of the most recent
financial statements referred to in this Section.  All projections  delivered by
Borrower to Lender have been prepared in good faith, with care and diligence and
use assumptions  that are reasonable  under the  circumstances  at the time such
projections  were prepared and delivered to Lender and all such  assumptions are
disclosed in the projections.

         Section 6.3 Action; No Breach. The execution, delivery, and performance
by Borrower of this  Agreement and the other Loan Documents to which Borrower is
or may become a party and compliance  with the terms and  provisions  hereof and
thereof  have  been  duly  authorized  by all  requisite  action  on the part of
Borrower  and do not and will not (a) violate or conflict  with,  or result in a
breach of, or require any consent under (i) Constituent Documents of Borrower or
any of its  Subsidiaries,  (ii) any  applicable  law, rule, or regulation or any
order, writ, injunction,  or decree of any Governmental Authority or arbitrator,
or  (iii)  any  agreement  or  instrument  to  which  Borrower  or  any  of  its

                                       16
<PAGE>

Subsidiaries  is a party or by which any of them or any of their  Properties  is
bound or  subject,  or (b)  constitute  a default  under any such  agreement  or
instrument,  or result in the creation or imposition of any Lien upon any of the
revenues or assets of Borrower or any Subsidiary.

         Section  6.4   Operation  of   Business.   Borrower  and  each  of  its
Subsidiaries possess all licenses,  permits,  franchises,  patents,  copyrights,
trademarks,  and  tradenames,  or rights  thereto,  necessary  to conduct  their
respective  businesses  substantially as now conducted and as presently proposed
to be conducted,  and Borrower and each of its Subsidiaries are not in violation
of any valid rights of others with respect to any of the foregoing.

         Section  6.5  Litigation  and  Judgments.  There  is no  action,  suit,
investigation,  or  proceeding  before  or  by  any  Governmental  Authority  or
arbitrator  pending,  or to the  knowledge  of Borrower,  threatened  against or
affecting  Borrower  or  any of  its  Subsidiaries,  that  would,  if  adversely
determined, have a material adverse effect on the business, condition (financial
or otherwise),  operations,  prospects,  or properties of Borrower or any of its
Subsidiaries  or the ability of  Borrower  to pay and  perform the  Obligations.
There  are no  outstanding  judgments  against  Borrower  or any  Subsidiary  of
Borrower.

         Section  6.6  Rights in  Properties;  Liens.  Borrower  and each of its
Subsidiaries have good and indefeasible title to or valid leasehold interests in
their respective Properties, including the Properties reflected in the financial
statements  described in Section 6.2, and none of the  Properties of Borrower or
any Subsidiary is subject to any Lien, except as permitted by Section 8.2.

         Section 6.7 Enforceability.  This Agreement constitutes,  and the other
Loan  Documents to which Borrower is party,  when  delivered,  shall  constitute
legal, valid, and binding obligations of Borrower,  enforceable against Borrower
in accordance  with their  respective  terms,  except as limited by  bankruptcy,
insolvency,  or other laws of general application relating to the enforcement of
creditors' rights.

         Section 6.8 Approvals.  No authorization,  approval, or consent of, and
no filing or registration with, any Governmental  Authority or third party is or
will be necessary for the  execution,  delivery,  or  performance by Borrower of
this Agreement and the other Loan Documents to which Borrower is or may become a
party or the validity or enforceability thereof.

         Section 6.9 Debt. Borrower and its Subsidiaries have no Debt.

         Section  6.10 Taxes.  Borrower and each  Subsidiary  have filed all tax
returns (federal,  state, and local) required to be filed, including all income,
franchise,  employment,  property,  and sales tax returns,  and have paid all of
their respective liabilities for taxes,  assessments,  governmental charges, and
other  levies  that  are  due  and  payable.   Borrower   knows  of  no  pending
investigation  of Borrower or any  Subsidiary by any taxing  authority or of any
pending but unassessed tax liability of Borrower or any Subsidiary.

         Section 6.11 Use of Proceeds;  Margin Securities.  Neither Borrower nor
any Subsidiary is engaged principally, or as one of its important activities, in
the  business  of  extending  credit for the purpose of  purchasing  or carrying
margin  stock  (within  the  meaning of  Regulations  T, U, or X of the Board of
Governors  of the Federal  Reserve  System),  and no part of the proceeds of any
Advance will be used to purchase or carry any margin  stock or to extend  credit
to others for the purpose of purchasing or carrying margin stock.

         Section 6.12 ERISA.  Borrower and each  Subsidiary are in compliance in
all  material  respects  with all  applicable  provisions  of  ERISA.  Neither a
Reportable  Event nor a Prohibited  Transaction  has occurred and is  continuing
with  respect  to any Plan.  No notice  of intent to  terminate  a Plan has been

                                       17
<PAGE>

filed, nor has any Plan been terminated. No circumstances exist which constitute
grounds entitling the PBGC to institute  proceedings to terminate,  or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings.
Neither  Borrower nor any ERISA Affiliate has completely or partially  withdrawn
from a  Multiemployer  Plan.  Borrower and each ERISA  Affiliate  have met their
minimum funding requirements under ERISA with respect to all of their Plans, and
the present value of all vested  benefits under each Plan do not exceed the fair
market value of all Plan assets allocable to such benefits, as determined on the
most recent  valuation  date of the Plan and in accordance  with ERISA.  Neither
Borrower nor any ERISA  Affiliate  has incurred any  liability to the PBGC under
ERISA.

         Section   6.13   Disclosure.   No   statement,   information,   report,
representation,  or warranty made by Borrower in this  Agreement or in any other
Loan Document or furnished to Lender in connection with this Agreement or any of
the transactions contemplated hereby contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or  therein  not  misleading.  There is no fact  known to  Borrower  which has a
material  adverse effect,  or which might in the future have a material  adverse
effect,  on  the  business,  condition  (financial  or  otherwise),  operations,
prospects,  or  properties  of  Borrower  or any  Subsidiary  that  has not been
disclosed in writing to Lender.

         Section 6.14 Subsidiaries, Ventures, Etc. Borrower has no Subsidiaries,
Affiliates or joint ventures or partnerships other than those listed on Schedule
6.14  and  Schedule  6.14  sets  forth  the  jurisdiction  of  incorporation  or
organization  of each such Person and the  percentage  of  Borrower's  ownership
interest in such Person. All of the outstanding capital stock or other ownership
interest of Person described in Schedule 6.14 has been validly issued,  is fully
paid, and is nonassessable.

         Section 6.15 Agreements. Neither Borrower nor any Subsidiary is a party
to any indenture,  loan, or credit agreement, or to any lease or other agreement
or  instrument,  or subject to any charter or corporate or other  organizational
restriction  which  could  have a  material  adverse  effect  on  the  business,
condition  (financial or  otherwise),  operations,  prospects,  or properties of
Borrower  or any  Subsidiary,  or the ability of Borrower to pay and perform its
obligations  under the Loan Documents to which it is a party.  Neither  Borrower
nor any Subsidiary is in default in any respect in the performance,  observance,
or fulfillment of any of the obligations,  covenants, or conditions contained in
any agreement or instrument material to its business to which it is a party.

         Section 6.16 Compliance with Laws.  Neither Borrower nor any Subsidiary
is in violation in any material respect of any law, rule, regulation,  order, or
decree of any Governmental Authority or arbitrator.

         Section  6.17  Inventory.  All  inventory of Borrower has been and will
hereafter  be  produced  in  compliance   with  all  applicable   laws,   rules,
regulations,  and governmental  standards,  including,  without limitation,  the
minimum wage and overtime provisions of the Fair Labor Standards Act, as amended
(29 U.S.C. ss.ss. 201-219), and the regulations promulgated thereunder.

         Section  6.18  Investment   Company  Act.   Neither  Borrower  nor  any
Subsidiary  is an  "investment  company"  within the  meaning of the  Investment
Company Act of 1940, as amended.

         Section 6.19 Public Utility Holding Company Act.  Neither  Borrower nor
any  Subsidiary is a "holding  company" or a "subsidiary  company" of a "holding
company" or an "affiliate" of a "holding  company" or a "public  utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

         Section 6.20 Environmental Matters.

                                       18
<PAGE>

         (a) Borrower, each Subsidiary,  and all of their respective properties,
assets,  and  operations are in full  compliance  with all  Environmental  Laws.
Borrower  is not  aware of,  nor has  Borrower  received  notice  of,  any past,
present, or future conditions, events, activities, practices, or incidents which
may interfere with or prevent the compliance or continued compliance of Borrower
and the Subsidiaries with all Environmental Laws;

         (b) Borrower and each Subsidiary  have obtained all permits,  licenses,
and authorizations  that are required under applicable  Environmental  Laws, and
all such permits are in good standing and Borrower and its  Subsidiaries  are in
compliance with all of the terms and conditions of such permits;

         (c) No  Hazardous  Materials  exist on,  about,  or within or have been
used, generated,  stored,  transported,  disposed of on, or Released from any of
the properties or assets of Borrower or any  Subsidiary.  The use which Borrower
and the Subsidiaries make and intend to make of their respective  properties and
assets  will  not  result  in  the  use,  generation,  storage,  transportation,
accumulation, disposal, or Release of any Hazardous Material on, in, or from any
of their properties or assets;

         (d)  Neither  Borrower  nor any of its  Subsidiaries  nor any of  their
respective  currently or previously owned or leased  properties or operations is
subject  to any  outstanding  or  threatened  order from or  agreement  with any
Governmental  Authority  or other  Person or subject to any judicial or docketed
administrative   proceeding   with   respect  to  (i)  failure  to  comply  with
Environmental Laws, (ii) Remedial Action, or (iii) any Environmental Liabilities
arising from a Release or threatened Release;

         (e)  There  are no  conditions  or  circumstances  associated  with the
currently or previously owned or leased  properties or operations of Borrower or
any of its  Subsidiaries  that could  reasonably be expected to give rise to any
Environmental Liabilities;

         (f)  Neither  Borrower  nor  any of its  Subsidiaries  is a  treatment,
storage, or disposal facility requiring a permit under the Resource Conservation
and Recovery  Act, 42 U.S.C.  ss. 6901 et seq.,  regulations  thereunder  or any
comparable  provision  of  state  law.  Borrower  and  its  Subsidiaries  are in
compliance  with all applicable  financial  responsibility  requirements  of all
Environmental Laws;

         (g) Neither Borrower nor any of its Subsidiaries has filed or failed to
file any notice required under applicable Environmental Law reporting a Release;
and

         (h) No Lien  arising  under any  Environmental  Law has attached to any
property or revenues of Borrower or its Subsidiaries.

         Section 6.21 Intellectual  Property. All material Intellectual Property
owned or used by Borrower,  any  Subsidiary  or any  Obligated  Party is listed,
together with application or registration numbers, where applicable, on Schedule
6.21.  Each Person  identified on Schedule 6.21 owns, or is licensed to use, all
Intellectual  Property necessary to conduct its business as currently  conducted
except for such  Intellectual  Property  the  failure of which to own or license
could not reasonably be expected to have a material adverse effect.  Each Person
identified on Schedule  6.21will  maintain the patenting and registration of all
Intellectual  Property with the United States Patent and Trademark  Office,  the
United States Copyright Office, or other appropriate  Governmental Authority and
each Person identified on Schedule 6.21will promptly patent or register,  as the
case may be, all new Intellectual Property and notify Lender in writing five (5)
Business Days prior to filing any such new patent or registration.

                                       19
<PAGE>

                                   ARTICLE VII

                              Affirmative Covenants
                              ---------------------

         Borrower  covenants and agrees that, as long as the  Obligations or any
part thereof are  outstanding or Lender has any Commitment  hereunder,  Borrower
will perform and observe the following positive  covenants,  unless Lender shall
otherwise consent in writing:

         Section 7.1 Reporting Requirements. Borrower will furnish to Lender:

         (a) Annual Financial Statements. As soon as available, and in any event
within ninety (90) days after the end of each fiscal year of Borrower, beginning
with the fiscal year ending  December 31,  2005,  (i) a copy of the annual audit
report of Borrower and the Subsidiaries  for such fiscal year  containing,  on a
consolidated and consolidating  basis,  balance sheets and statements of income,
retained  earnings,  and cash flow as at the end of such fiscal year and for the
12-month period then ended,  in each case setting forth in comparative  form the
figures for the preceding fiscal year, all in reasonable  detail and audited and
certified by an independent  certified public accountants of recognized standing
acceptable  to Lender,  to the effect  that such  report  has been  prepared  in
accordance with GAAP and containing no material qualifications or limitations on
scope; and (ii) a certificate of such independent  certified public  accountants
to Lender (A) stating  that to their  knowledge  no Default has  occurred and is
continuing,  or if in their opinion a Default has occurred and is continuing,  a
statement as to the nature  thereof,  and (B)  confirming the  calculations  set
forth in the officer's certificate delivered simultaneously therewith;

         (b) Quarterly Financial  Statements.  As soon as available,  and in any
event  within  thirty  (30) days after the end of each of the  quarters  of each
fiscal year of Borrower, a copy of an unaudited financial report of Borrower and
its Subsidiaries as of the end of such fiscal quarter and for the portion of the
fiscal year then ended,  containing,  on a consolidated and consolidating basis,
balance sheets and statements of income,  retained  earnings,  and cash flow, in
each case setting forth in  comparative  form the figures for the  corresponding
period of the preceding  fiscal year, all in reasonable  detail certified by the
chief  financial  officer of Borrower to have been prepared in  accordance  with
GAAP  and  to  fairly  and  accurately   present   (subject  to  year-end  audit
adjustments)  the financial  condition and results of operations of Borrower and
its Subsidiaries, on a consolidated and consolidating basis, at the date and for
the periods indicated therein;

         (c) Monthly  Financial  Statements.  As soon as  available,  and in any
event within thirty (30) days after the end of each month of each fiscal year of
Borrower,  a  copy  of  an  unaudited  financial  report  of  Borrower  and  the
Subsidiaries  as of the end of such month and for the portion of the fiscal year
then ended,  containing,  on a consolidated  and  consolidating  basis,  balance
sheets  and  statements  of income,  retained  earnings,  and cash flow,  all in
reasonable  detail certified by the chief financial  officer of Borrower to have
been  prepared  in  accordance  with GAAP and to fairly and  accurately  present
(subject to year-end audit  adjustments) the financial  condition and results of
operations of Borrower and the Subsidiaries, on a consolidated and consolidating
basis, at the date and for the periods indicated therein;

         (d)  Borrowing  Base  Report.  As soon as  available,  and in any event
within thirty (30) days after the end of each calendar  month,  a Borrowing Base
Report, in a form acceptable to Lender, certified by the chief financial officer
of Borrower;

         (e) Compliance  Certificate.  Concurrently with the delivery of each of
the  financial  statements  referred  to in  Subsections  7.1(a) and  7.1(b),  a
certificate of the chief  financial  officer of Borrower (i) stating that to the
best of such officer's knowledge, no Default has occurred and is continuing,  or
if a Default  has  occurred  and is  continuing,  a  statement  as to the nature

                                       20
<PAGE>

thereof and the action which is proposed to be taken with respect  thereto,  and
(ii) showing in reasonable detail the calculations demonstrating compliance with
Article IX;

         (f) Management  Letters.  Promptly upon receipt thereof,  a copy of any
management letter, regulatory reports, audits, or written other report submitted
to Borrower or any Subsidiary by independent  certified public  accountants with
respect  to  the  business,  condition  (financial  or  otherwise),  operations,
prospects, or properties of Borrower or any Subsidiary;

         (g) Notice of  Litigation.  Promptly  after the  commencement  thereof,
notice of all actions,  suits, and proceedings before any Governmental Authority
or  arbitrator  affecting  Borrower  or  any  Subsidiary  which,  if  determined
adversely to Borrower or such  Subsidiary,  could have a material adverse effect
on the business, condition (financial or otherwise),  operations,  prospects, or
properties of Borrower or such Subsidiary;

         (h) Notice of Default. As soon as possible and in any event within five
(5) days after the  occurrence of each Default,  a written  notice setting forth
the details of such Default and the action that  Borrower has taken and proposes
to take with respect thereto;

         (i) ERISA Reports. Promptly after the filing or receipt thereof, copies
of all reports,  including  annual  reports,  and notices which  Borrower or any
Subsidiary files with or receives from the PBGC or the U.S.  Department of Labor
under ERISA; and as soon as possible and in any event within five (5) days after
Borrower or any Subsidiary knows or has reason to know that any Reportable Event
or Prohibited Transaction has occurred with respect to any Plan or that the PBGC
or Borrower or any Subsidiary has instituted or will institute proceedings under
Title IV of ERISA to terminate  any Plan, a certificate  of the chief  financial
officer of Borrower  setting  forth the details as to such  Reportable  Event or
Prohibited Transaction or Plan termination and the action that Borrower proposes
to take with respect thereto;

         (j) Reports to Other Creditors.  Promptly after the furnishing thereof,
copies of any statement or report  furnished to any other party  pursuant to the
terms of any indenture,  loan, or credit or similar  agreement and not otherwise
required to be furnished to Lender pursuant to any other clause of this Section;

         (k) Notice of Material  Adverse Change.  As soon as possible and in any
event within five (5) days after the occurrence  thereof,  written notice of any
matter  that could have a material  adverse  effect on the  business,  condition
(financial or otherwise),  operations,  prospects,  or properties of Borrower or
any Subsidiary;

         (l) Accounts  Receivable Aging. As soon as available,  and in any event
within  thirty  (30)  days  after the end of each  calendar  month,  an  account
receivable aging, classifying Borrower's domestic and export accounts receivable
in categories of 0-30, 31-60,  61-90 and over 90 days from date of invoice,  and
in such form and detail as Lender shall require;

         (m) Inventory  Report.  As soon as  available,  and in any event within
thirty (30) days after the end of each calendar month, an inventory  report,  in
such form and detail as Lender shall reasonably  require  certified by the chief
financial officer of Borrower;

         (n) Long Term Inventory Report. As soon as available,  and in any event
within  thirty  (30) days after the end of each June 30 and  December 31 of each
calendar  year,  commencing  on  December  31,  2005,  a report of all Long Term
Inventory,  in such form and detail as Lender shall reasonably require certified
by the chief financial officer of Borrower;

                                       21
<PAGE>

         (o) Pawn Loan  Report.  As soon as  available,  and in any event within
thirty (30) days after the end of each calendar  month,  a report of Pawn Loans,
in such form and detail as Lender  shall  reasonably  require,  certified by the
chief financial officer of Borrower;

         (p) Guarantor  Financial  Statement.  Borrower  shall cause the Limited
Guarantor to provide an annual financial  statement,  in such form and detail as
Lender shall  reasonably  require,  within sixty (60) days after the end of each
calendar year, including, a balance sheet, cash flow statement, and statement of
contingent  liabilities,  in each case  setting  forth in  comparative  form the
figures for the corresponding period of the preceding fiscal year;

         (q)  Proxy  Statements,  Etc.  As soon as  available,  one copy of each
financial statement,  report,  notice or proxy statement sent by Borrower or any
Subsidiary to its stockholders generally and one copy of each regular,  periodic
or special report,  registration  statement,  or prospectus filed by Borrower or
any  Subsidiary  with any  securities  exchange or the  Securities  and Exchange
Commission or any successor agency;

         (q) Public Filings. As soon as available,  and in any event within five
(5) days after  filing,  true,  correct,  and  complete  copies of all  material
reports or filings  filed by or on behalf of any Company  with any  Governmental
Authority  (including copies of each Form 10-K, Form 10-Q, and Form S-8 filed by
or on behalf of any Company with the SEC);

         (r) Regulatory  Report.  As soon as available,  and in any event within
five (5) days  after  receipt  hereof  by  Borrower,  copies  of any  regulatory
reports; and

         (s) General Information.  Promptly,  such other information  concerning
Borrower or any Subsidiary as Lender may from time to time reasonably request.

         Section 7.2  Maintenance  of Existence;  Conduct of Business.  Borrower
will  preserve  and  maintain,  and will cause each  Subsidiary  to preserve and
maintain, its existence and all of its leases,  privileges,  licenses,  permits,
franchises,  qualifications,  and rights that are  necessary or desirable in the
ordinary  conduct of its business.  Borrower  will conduct,  and will cause each
Subsidiary  to  conduct,  its  business in an orderly  and  efficient  manner in
accordance with good business practices.  Without limitation,  Borrower will not
make (and will not permit any of its  Subsidiaries  to make) any material change
in its credit  collection  policies if such change would  materially  impair the
collectibility of any account, nor will it rescind, cancel or modify any account
except in the ordinary course of business.

         Section 7.3  Maintenance of Properties.  Borrower will maintain,  keep,
and preserve, and cause each Subsidiary to maintain,  keep, and preserve, all of
its  Properties  (tangible  and  intangible)  necessary  or useful in the proper
conduct of its business in good working order and condition.

         Section 7.4 Taxes and Claims. Borrower will pay or discharge,  and will
cause each  Subsidiary  to pay or  discharge,  at or before  maturity  or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed  on it or its  income or  profits  or any of its  property,  and (b) all
lawful claims for labor, material, and supplies,  which, if unpaid, might become
a Lien upon any of its property;  provided,  however,  that neither Borrower nor
any Subsidiary shall be required to pay or discharge any tax, levy,  assessment,
or  governmental  charge which is being  contested in good faith by  appropriate
proceedings  diligently  pursued,  and for  which  adequate  reserves  have been
established.

         Section 7.5 Insurance.  Borrower will maintain,  and will cause each of
the  Subsidiaries to maintain,  insurance with  financially  sound and reputable
insurance  companies  in such  amounts  and  covering  such  risks as is usually
carried  by  corporations  engaged  in similar  businesses  and  owning  similar

                                       22
<PAGE>

properties  in the same general  areas in which  Borrower  and the  Subsidiaries
operate,  provided  that in any event  Borrower  will  maintain  and cause  each
Subsidiary to maintain workmen's  compensation  insurance,  property  insurance,
comprehensive  general liability insurance,  reasonably  satisfactory to Lender.
Each insurance  policy covering  Collateral  shall name Lender as loss payee and
shall provide that such policy will not be cancelled or reduced  without  thirty
(30) days prior written notice to Lender.

         Section 7.6 Inspection  Rights. At any reasonable time and from time to
time,   Borrower  will  permit,  and  will  cause  each  Subsidiary  to  permit,
representatives  of Lender to examine  the  Collateral  and  conduct  Collateral
audits, to examine, copy, and make extracts from its books and records, to visit
and  inspect  its  properties,  and to discuss  its  business,  operations,  and
financial  condition with its officers,  employees,  and  independent  certified
public accountants.

         Section 7.7 Keeping Books and Records. Borrower will maintain, and will
cause each  Subsidiary to maintain,  proper books of record and account in which
full,  true,  and correct  entries in conformity  with GAAP shall be made of all
dealings and transactions in relation to its business and activities.

         Section 7.8 Compliance with Laws.  Borrower will comply, and will cause
each Subsidiary to comply,  in all material  respects with all applicable  laws,
rules,  regulations,  orders,  and  decrees  of any  Governmental  Authority  or
arbitrator.

         Section 7.9 Compliance with Agreements.  Borrower will comply, and will
cause each Subsidiary to comply,  in all material  respects with all agreements,
contracts,  and  instruments  binding  on  it or  affecting  its  properties  or
business.

         Section 7.10 Further  Assurances.  Borrower  will,  and will cause each
Subsidiary to, execute and deliver such further  agreements and  instruments and
take  such  further  action  as may be  requested  by  Lender  to carry  out the
provisions  and purposes of this  Agreement and the other Loan  Documents and to
create, preserve, and perfect the Liens of Lender in the Collateral.

         Section  7.11  ERISA.   Borrower  will  comply,  and  will  cause  each
Subsidiary  to comply,  with all  minimum  funding  requirements,  and all other
material  requirements,  of ERISA, if applicable,  so as not to give rise to any
liability thereunder.

                                  ARTICLE VIII

                               Negative Covenants
                               ------------------

         Borrower  covenants and agrees that, as long as the  Obligations or any
part thereof are  outstanding or Lender has any Commitment  hereunder,  Borrower
will perform and observe the following negative  covenants,  unless Lender shall
otherwise consent in writing:

         Section 8.1 Debt. Borrower will not incur, create, assume, or permit to
exist, and will not permit any Subsidiary to incur, create, assume, or permit to
exist, any Debt, except:

         (a) Debt to Lender;

         (b) Existing Debt described on Schedule 8.1 hereto; and

         (c)  Additional  Debt  not  to  exceed  One  Hundred  Thousand  Dollars
($100,000) in the aggregate.

                                       23
<PAGE>

         Section  8.2  Limitation  on Liens.  Borrower  will not incur,  create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume,  or permit  to exist,  any Lien  upon any of its  property,  assets,  or
revenues, whether now owned or hereafter acquired, except:

         (a) Liens disclosed on the Schedule 8.2 hereto;

         (b) Liens in favor of Lender;

         (c) Encumbrances consisting of minor easements, zoning restrictions, or
other  restrictions on the use of real property that do not  (individually or in
the aggregate)  materially affect the value of the assets encumbered  thereby or
materially impair the ability of Borrower or the Subsidiaries to use such assets
in their  respective  businesses,  and none of which is violated in any material
respect by existing or proposed structures or land use;

         (d) Liens for taxes,  assessments,  or other governmental charges which
are not  delinquent  or which are being  contested  in good  faith and for which
adequate reserves have been established;

         (e) Liens of mechanics, materialmen,  warehousemen,  carriers, or other
similar  statutory  Liens  securing  obligations  that  are  not yet due and are
incurred in the ordinary course of business;

         (f) Liens  resulting  from good faith  deposits  to secure  payments of
workmen's  compensation  or other  social  security  programs  or to secure  the
performance of tenders, statutory obligations, surety and appeal bonds, bids, or
contracts  (other  than for  payment of Debt),  or leases  made in the  ordinary
course of business; and

         (g)  Purchase  money Liens on specific  property to secure Debt used to
acquire such property to the extent permitted in Section 8.1(d).

         Section 8.3 Mergers,  Etc.  Borrower  will not, and will not permit any
Subsidiary  to,  become a party to a merger or  consolidation,  or  purchase  or
otherwise  acquire  all or any part of the assets of any Person or any shares or
other evidence of beneficial ownership of any Person, or wind-up,  dissolve,  or
liquidate.

         Section 8.4 Restricted  Payments.  Borrower will not declare or pay any
dividends  or make any other  payment or  distribution  (in cash,  property,  or
obligations) on account of its equity interests, or redeem, purchase, retire, or
otherwise acquire any of its equity interests, or permit any of its Subsidiaries
to purchase  or  otherwise  acquire  any equity  interest of Borrower or another
Subsidiary, or set apart any money for a sinking or other analogous fund for any
dividend or other  distribution  on its equity  interests or for any redemption,
purchase, retirement, or other acquisition of any of its equity interests.

         Section 8.5 Loans and Investments. Borrower will not make, and will not
permit any  Subsidiary  to make,  any advance,  loan,  extension  of credit,  or
capital contribution to or investment in, or purchase,  or permit any Subsidiary
to purchase,  any stock, bonds, notes,  debentures,  or other securities of, any
Person, except:

         (a)  readily  marketable  direct  obligations  of the United  States of
America or any agency thereof with  maturities of one year or less from the date
of acquisition;

         (b) loans made in the ordinary course of Borrower's business, including
Pawn Loans;

         (c) fully insured  certificates  of deposit with maturities of one year
or less from the date of  acquisition  issued by Lender or any  commercial  bank
operating in the United States of America; and

                                       24
<PAGE>

         (d)  commercial  paper of a domestic  issuer if at the time of purchase
such paper is rated in one of the two highest rating  categories of Standard and
Poor's Corporation or Moody's Investors Service.

         Section 8.6  Limitation  on Issuance of Equity.  Borrower will not, and
will not permit any of its Subsidiaries to, at any time issue,  sell, assign, or
otherwise  dispose  of (a)  any of its  equity  interests,  (b)  any  securities
exchangeable  for or  convertible  into or carrying any rights to acquire any of
its equity interests,  or (c) any option, warrant, or other right to acquire any
of its equity interests.

         Section 8.7 Transactions With Affiliates. Borrower will not enter into,
and will not permit any  Subsidiary to enter into, any  transaction,  including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate of Borrower or such Subsidiary, except in the
ordinary course of and pursuant to the reasonable  requirements of Borrower's or
such Subsidiary's  business and upon fair and reasonable terms no less favorable
to  Borrower  or  such  Subsidiary  than  would  be  obtained  in  a  comparable
arm's-length  transaction  with a Person not an  Affiliate  of  Borrower or such
Subsidiary.

         Section  8.8  Disposition  of Assets.  Borrower  will not sell,  lease,
assign,  transfer,  or  otherwise  dispose of any of its  assets,  or permit any
Subsidiary to do so with any of its assets, except (a) dispositions of inventory
in the  ordinary  course of business  or (b)  dispositions,  for fair value,  of
worn-out  and  obsolete  equipment  not  necessary  or useful to the  conduct of
business (the net proceeds of which shall be used to prepay Term Note Advances).

         Section 8.9 Sale and Leaseback.  Borrower will not enter into, and will
not  permit  any  Subsidiary  to enter  into,  any  arrangement  with any Person
pursuant to which it leases from such Person real or personal  property that has
been or is to be sold or  transferred,  directly  or  indirectly,  by it to such
Person.

         Section 8.10 Prepayment of Debt. Borrower will not prepay, and will not
permit any Subsidiary to prepay, any Debt, except the Obligations.

         Section 8.11 Nature of Business. Borrower will not, and will not permit
any  Subsidiary  to, engage in any business  other than the  businesses in which
they are engaged as of the date hereof.

         Section 8.12 Environmental Protection.  Borrower will not, and will not
permit any of its  Subsidiaries to, (a) use (or permit any tenant to use) any of
their  respective  properties or assets for the handling,  processing,  storage,
transportation,  or  disposal  of  any  Hazardous  Material,  (b)  generate  any
Hazardous  Material,  (c) conduct any activity that is likely to cause a Release
or threatened  Release of any Hazardous  Material,  or (d) otherwise conduct any
activity or use any of their respective  properties or assets in any manner that
is  likely  to  violate  any  Environmental  Law  or  create  any  Environmental
Liabilities for which Borrower or any of its Subsidiaries would be responsible.

         Section 8.13 Accounting.  Borrower will not, and will not permit any of
its Subsidiaries to, change its fiscal year or make any change (a) in accounting
treatment or reporting  practices,  except as required by GAAP and  disclosed to
Lender,  or (b) in tax  reporting  treatment,  except  as  required  by law  and
disclosed to Lender.

         Section 8.14 No Negative Pledge. Borrower will not, and will not permit
any Subsidiary  to, enter into or permit to exist any  arrangement or agreement,
other than pursuant to this  Agreement or any Loan  Document,  which directly or
indirectly  prohibits  Borrower or any  Subsidiary  from creating or incurring a
Lien on any of its assets.

                                       25
<PAGE>

                                   ARTICLE IX

                               Financial Covenants
                               -------------------

         Borrower  covenants and agrees that, as long as the  Obligations or any
part thereof are  outstanding or Lender has any Commitment  hereunder,  Borrower
will,  at all times,  observe  and perform the  following  financial  covenants,
unless Lender shall otherwise consent in writing.

         Section 9.1 Consolidated Tangible Net Worth. Borrower will at all times
maintain  on a  consolidated  basis  Tangible  Net Worth of Four  Million  Seven
Hundred Fifty Thousand Dollars ($4,750,000).

         Section 9.2 Leverage Ratio. Borrower will at all times maintain a ratio
of consolidated Liabilities minus Subordinated Debt to consolidated Tangible Net
Worth of 1.5 to 1.0.

         Section 9.3 Fixed Charge Coverage  Ratio.  Borrower and is Subsidiaries
shall  not,  as of the last  day of any  fiscal  quarter  during  the  following
periods,  permit  the ratio of (a)  EBITDA,  minus  Cash  Taxes,  minus  Capital
Expenditures not financed with  Indebtedness  permitted  hereunder,  to (b) Debt
Service,  in each case for the four (4)  fiscal  quarters  ending on the date of
determination,  to be less than 1.35 to 1.0.  This Section 9.3 shall be based on
the rolling four (4) quarter cash flow and debt service  obligations of Borrower
and its Subsidiaries.

                                    ARTICLE X

                                     Default
                                     -------

         Section 10.1 Events of Default.  Each of the following  shall be deemed
an "Event of Default":

         (a)  Borrower  shall fail to pay the  Obligations  or any part  thereof
shall not be paid when due or declared due.

         (b)  Borrower  shall  fail to  provide  to Lender  timely any notice of
Default as required by Section 7.1(f) of this Agreement or Borrower shall breach
any provision of Article VIII or Article IX of this Agreement.

         (c) Any  representation  or warranty made or deemed made by Borrower or
any Obligated Party (or any of their  respective  officers) in any Loan Document
or in any certificate,  report,  notice, or financial statement furnished at any
time in connection with this Agreement shall be false, misleading,  or erroneous
in any material respect when made or deemed to have been made.

         (d) Borrower or any Obligated Party shall fail to perform,  observe, or
comply with any covenant,  agreement, or term contained in this Agreement or any
other Loan  Document  (other than as covered by Section  10.1(a) and (b) above),
and such failure  continues  for more than fifteen (15) days  following the date
such failure first began.

         (e) Borrower,  any Subsidiary,  or any Obligated Party shall commence a
voluntary proceeding seeking liquidation,  reorganization,  or other relief with
respect  to itself  or its debts  under  any  bankruptcy,  insolvency,  or other
similar law now or hereafter in effect or seeking the  appointment of a trustee,
receiver,  liquidator,   custodian,  or  other  similar  official  of  it  or  a

                                       26
<PAGE>

substantial  part of its property or shall  consent to any such relief or to the
appointment of or taking  possession by any such official in an involuntary case
or other proceeding  commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as they become
due or shall take any corporate action to authorize any of the foregoing.

         (f) Borrower, any Subsidiary,  or any Obligated Party shall fail to pay
when due any principal of or interest on any Debt (other than the  Obligations),
or the maturity of any such Debt shall have been  accelerated,  or any such Debt
shall have been required to be prepaid prior to the stated maturity thereof,  or
any event shall have  occurred  that permits  (or,  with the giving of notice or
lapse of time or both,  would  permit) any holder or holders of such Debt or any
Person  acting on behalf of such holder or holders to  accelerate  the  maturity
thereof or require any such prepayment.

         (g) This Agreement or any other Loan Document shall cease to be in full
force  and  effect  or  shall be  declared  null  and  void or the  validity  or
enforceability  thereof  shall be  contested  or  challenged  by  Borrower,  any
Subsidiary,  any Obligated  Party or any of their  respective  shareholders,  or
Borrower or any Obligated Party shall deny that it has any further  liability or
obligation  under any of the Loan  Documents,  or any lien or security  interest
created by the Loan  Documents  shall for any reason cease to be a valid,  first
priority  perfected  security  interest  in and lien upon any of the  Collateral
purported to be covered thereby.

         (h) Any of the  following  events  shall occur or exist with respect to
Borrower or any ERISA Affiliate:  (i) any Prohibited  Transaction  involving any
Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing under
Section  4041 of  ERISA of a  notice  of  intent  to  terminate  any Plan or the
termination of any Plan;  (iv) any event or circumstance  that might  constitute
grounds entitling the PBGC to institute  proceedings under Section 4042 of ERISA
for the termination  of, or for the appointment of a trustee to administer,  any
Plan, or the institution by the PBGC of any such proceedings; or (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan
or the reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above,  such event or condition,  together with all other events or
conditions,  if any, have subjected or could in the reasonable opinion of Lender
subject  Borrower  to  any  tax,  penalty,  or  other  liability  to a  Plan,  a
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in
the  aggregate  exceed or could  reasonably  be expected  to exceed  Twenty-Five
Thousand Dollars ($25,000).

         (i) The Guarantor or any other  Obligated Party shall have died or have
been declared incompetent by a court of proper jurisdiction; or if the Guarantor
or any other Obligated Party is a corporation, partnership or other entity, such
Person shall be the subject of a bankruptcy or receivership  proceeding or shall
have dissolved, liquidated or otherwise ceased doing business.

         (j) Any change in the chairman,  chief executive officer,  president or
other executive office of Borrower shall occur,  when compared to the management
as of the date of this Agreement.

         (k) Borrower,  any of its Subsidiaries,  or any Obligated Party, or any
of their properties,  revenues,  or assets,  shall become subject to an order of
forfeiture,  seizure,  or divestiture  (whether under RICO or otherwise) and the
same shall not have been  discharged  within  thirty  (30) days from the date of
entry thereof.

         (l) An involuntary  proceeding shall be commenced against Borrower, any
Subsidiary, or any Obligated Party seeking liquidation, reorganization, or other
relief with  respect to it or its debts  under any  bankruptcy,  insolvency,  or
other  similar law now or  hereafter in effect or seeking the  appointment  of a
trustee, receiver, liquidator,  custodian, or other similar official for it or a
substantial part of its property,  and such involuntary  proceeding shall remain
undismissed and unstayed for a period of thirty (30) days.

                                       27
<PAGE>

         (m)  Borrower,  any  Subsidiary  or any  Obligated  Party shall fail to
discharge within a period of thirty (30) days after the commencement thereof any
attachment,  sequestration,  or similar  proceeding or proceedings  involving an
aggregate amount in excess of Twenty-Five Thousand Dollars ($25,000) against any
of its assets or properties.

         (n) A final judgment or judgments for the payment of money in excess of
Twenty-Five  Thousand Dollars  ($25,000) in the aggregate shall be rendered by a
court or courts  against  Borrower,  any of its  Subsidiaries,  or any Obligated
Party and the same shall not be discharged  (or provision  shall not be made for
such discharge),  or a stay of execution  thereof shall not be procured,  within
thirty  (30) days from the date of entry  thereof and  Borrower or the  relevant
Subsidiary or Obligated Party shall not, within said period of thirty (30) days,
or such longer period during which execution of the same shall have been stayed,
appeal  therefrom  and cause the  execution  thereof  to be stayed  during  such
appeal.

         Section 10.2 Remedies Upon Default. If any Event of Default shall occur
and be  continuing,  Lender may without  notice  terminate  the  Commitment  and
declare the  Obligations or any part thereof to be immediately  due and payable,
and the same shall thereupon become immediately due and payable, without notice,
demand,  presentment,  notice of  dishonor,  notice of  acceleration,  notice of
intent to accelerate,  notice of intent to demand, protest, or other formalities
of any kind,  all of which are hereby  expressly  waived by Borrower;  provided,
however,  that upon the occurrence of an Event of Default under Section  10.1(e)
or Section  10.1(m),  the  Commitment  shall  automatically  terminate,  and the
Obligations  shall become  immediately due and payable  without notice,  demand,
presentment,  notice of dishonor,  notice of  acceleration,  notice of intent to
accelerate,  notice of intent to demand,  protest,  or other  formalities of any
kind,  all of which are hereby  expressly  waived by  Borrower.  If any Event of
Default  shall  occur and be  continuing,  Lender  may  exercise  all rights and
remedies  available  to it in law or in  equity,  under the Loan  Documents,  or
otherwise.

         Section 10.3  Performance by Lender.  If Borrower shall fail to perform
any covenant or agreement  contained  in any of the Loan  Documents,  Lender may
perform or attempt to perform such  covenant or agreement on behalf of Borrower.
In such event, Borrower shall, at the request of Lender, promptly pay any amount
expended by Lender in connection with such performance or attempted  performance
to Lender,  together with interest thereon at the Default Interest Rate from and
including  the  date  of  such  expenditure  to  but  excluding  the  date  such
expenditure  is paid in full.  Notwithstanding  the  foregoing,  it is expressly
agreed  that  Lender  shall not have any  liability  or  responsibility  for the
performance of any obligation of Borrower under this Agreement or any other Loan
Document.

         Section 10.4 Cash  Collateral.  If any Event of Default shall occur and
be continuing or the  Termination  Date shall have occurred,  Borrower shall, if
requested by Lender,  immediately deposit with and pledge to Lender cash or cash
equivalent  investments in an amount equal to the  outstanding  Letter of Credit
Liabilities as security for the Obligations.

                                   ARTICLE XI

                                  Miscellaneous
                                  -------------

         Section 11.1 Expenses. Borrower hereby agrees to pay on demand: (a) all
costs and expenses of Lender in connection  with the  preparation,  negotiation,
execution,  and delivery of this  Agreement and the other Loan Documents and any
and all amendments, modifications, renewals, extensions, and supplements thereof
and thereto, including,  without limitation, the reasonable fees and expenses of
legal counsel, advisors, consultants, and auditors for Lender, (b) all costs and
expenses of Lender in connection  with any Default and the  enforcement  of this
Agreement or any other Loan Document,  including,  without limitation,  the fees

                                       28
<PAGE>

and expenses of legal counsel, advisors,  consultants,  and auditors for Lender,
(c) all transfer,  stamp, documentary,  or other similar taxes, assessments,  or
charges levied by any Governmental Authority in respect of this Agreement or any
of the other Loan Documents,  (d) all costs,  expenses,  assessments,  and other
charges  incurred in connection  with any filing,  registration,  recording,  or
perfection of any security  interest or Lien  contemplated  by this Agreement or
any other Loan Document, and (e) all other costs and expenses incurred by Lender
in connection  with this Agreement or any other Loan Document,  any  litigation,
dispute, suit, proceeding or action; the enforcement of its rights and remedies,
protection   of  its  interests  in   bankruptcy,   insolvency  or  other  legal
proceedings,  including,  without  limitation,  all costs,  expenses,  and other
charges  (including  Lender's  internal  charges)  incurred in  connection  with
evaluating,  observing,  collecting,  examining, auditing, appraising,  selling,
liquidating,  or  otherwise  disposing  of the  Collateral  or other  assets  of
Borrower.

         Section 11.2 INDEMNIFICATION.  BORROWER SHALL INDEMNIFY LENDER AND EACH
AFFILIATE  THEREOF  AND  THEIR  RESPECTIVE   OFFICERS,   DIRECTORS,   EMPLOYEES,
ATTORNEYS,  AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES,  LIABILITIES,  CLAIMS,  DAMAGES,  PENALTIES,  JUDGMENTS,  DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING  ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME
SUBJECT  WHICH  DIRECTLY  OR  INDIRECTLY   ARISE  FROM  OR  RELATE  TO  (A)  THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF
ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS  CONTEMPLATED BY THE LOAN
DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT,
OR OTHER  AGREEMENT  CONTAINED IN ANY OF THE LOAN  DOCUMENTS,  (D) THE PRESENCE,
RELEASE,  THREATENED  RELEASE,  DISPOSAL,  REMOVAL,  OR CLEANUP OF ANY HAZARDOUS
MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OR ASSETS
OF BORROWER  OR ANY  SUBSIDIARY,  (E) THE USE OR  PROPOSED  USE OF ANY LETTER OF
CREDIT, (F) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON LENDER
OR ANY OF LENDER'S CORRESPONDENTS IN RESPECT OF ANY LETTER OF CREDIT, OR (G) ANY
INVESTIGATION,  LITIGATION, OR OTHER PROCEEDING,  INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION,  LITIGATION, OR OTHER PROCEEDING,  RELATING TO ANY
OF THE  FOREGOING.  WITHOUT  LIMITING ANY PROVISION OF THIS  AGREEMENT OR OF ANY
OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH
PERSON TO BE INDEMNIFIED  UNDER THIS SECTION SHALL BE INDEMNIFIED  FROM AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES,  LIABILITIES,  CLAIMS, DAMAGES,  PENALTIES,
JUDGMENTS,  DISBURSEMENTS,  COSTS,  AND  EXPENSES  (INCLUDING  ATTORNEYS'  FEES)
ARISING OUT OF OR RESULTING FROM THE SOLE CONTRIBUTORY OR ORDINARY NEGLIGENCE OF
SUCH PERSON.

         Section 11.3 Limitation of Liability. Neither Lender nor any Affiliate,
officer,  director,  employee,  attorney,  or agent  of  Lender  shall  have any
liability with respect to, and Borrower hereby waives,  releases, and agrees not
to sue any of them upon,  any claim for any special,  indirect,  incidental,  or
consequential  damages  suffered or incurred  by  Borrower in  connection  with,
arising out of, or in any way related  to,  this  Agreement  or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Borrower hereby waives, releases, and agrees not to
sue  Lender  or any of  Lender's  Affiliates,  officers,  directors,  employees,
attorneys,  or agents for punitive damages in respect of any claim in connection
with,  arising out of, or in any way related  to, this  Agreement  or any of the
other Loan Documents, or any of the transactions  contemplated by this Agreement
or any of the other Loan Documents.

                                       29
<PAGE>

         Section 11.4 No Duty. All attorneys, accountants, appraisers, and other
professional  Persons and consultants retained by Lender shall have the right to
act  exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to Borrower or any of Borrower's shareholders or any other Person.

         Section 11.5 Lender Not Fiduciary.  The  relationship  between Borrower
and Lender is solely that of debtor and creditor, and Lender has no fiduciary or
other special relationship with Borrower, and no term or condition of any of the
Loan  Documents  shall  be  construed  so as to deem  the  relationship  between
Borrower and Lender to be other than that of debtor and creditor.

         Section 11.6 Equitable  Relief.  Borrower  recognizes that in the event
Borrower  fails  to  pay,  perform,  observe,  or  discharge  any  or all of the
Obligations,  any  remedy at law may prove to be  inadequate  relief to  Lender.
Borrower therefore agrees that Lender, if Lender so requests,  shall be entitled
to  temporary  and  permanent  injunctive  relief in any such case  without  the
necessity of proving actual damages.

         Section 11.7 No Waiver;  Cumulative Remedies. No failure on the part of
Lender to exercise  and no delay in  exercising,  and no course of dealing  with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof,  nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and remedies
provided for in this  Agreement and the other Loan  Documents are cumulative and
not exclusive of any rights and remedies provided by law.

         Section 11.8 Successors and Assigns. This Agreement is binding upon and
shall  inure  to the  benefit  of  Lender  and  Borrower  and  their  respective
successors  and assigns,  except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Lender.

         Section 11.9 Survival.  All representations and warranties made in this
Agreement  or  any  other  Loan  Document  or in  any  document,  statement,  or
certificate  furnished  in  connection  with this  Agreement  shall  survive the
execution and delivery of this  Agreement and the other Loan  Documents,  and no
investigation  by Lender or any closing  shall  affect the  representations  and
warranties  or the right of Lender to rely upon them.  Without  prejudice to the
survival of any other  obligation  of Borrower  hereunder,  the  obligations  of
Borrower under Sections 3.5, 11.1, and 11.2 shall survive  repayment of the Note
and termination of the Commitment and the Letters of Credit.

         Section 11.10 ENTIRE AGREEMENT;  AMENDMENT.  THIS AGREEMENT,  THE NOTE,
AND THE OTHER  LOAN  DOCUMENTS  REFERRED  TO HEREIN  EMBODY  THE  FINAL,  ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR  COMMITMENTS,
AGREEMENTS,  REPRESENTATIONS,  AND  UNDERSTANDINGS,  WHETHER  WRITTEN  OR  ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE  CONTRADICTED  OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO.  THERE ARE NO ORAL  AGREEMENTS  AMONG THE PARTIES HERETO.
The  provisions of this Agreement and the other Loan Documents to which Borrower
is a party may be amended or waived only by an instrument  in writing  signed by
the parties hereto.

         Section 11.11 Notices.  Unless otherwise expressly provided herein, all
notices and other  communications  provided  for  hereunder  shall be in writing
(including by facsimile  transmission)  and mailed,  faxed or delivered,  to the
address, facsimile number or subject to the last sentence hereof electronic mail
address  specified  for  notices  below the  signatures  hereon or to such other
address as shall be designated  by such party in a notice to the other  parties.
All such other  notices  and other  communications  shall be deemed to have been

                                       30
<PAGE>

given or made upon the  earliest to occur of (i) actual  receipt by the intended
recipient or (ii) (A) if delivered by hand or courier; (B) if delivered by mail,
four business days after deposit in the mail, postage prepaid;  (C) if delivered
by facsimile when sent and receipt has been  confirmed by telephone;  and (D) if
delivered  by  electronic  mail  (which  form  of  delivery  is  subject  to the
provisions of the last sentence below) when delivered;  provided,  however, that
notices and other  communications  pursuant to Article II shall not be effective
until actually received by Lender.  Electronic mail and intranet websites may be
used  only  to  distribute  only  routine  communications,   such  as  financial
statements and other information, and to distribute Loan Documents for execution
by the parties thereto, and may not be used for any other purpose.

         Section 11.12 Governing Law; Venue; Service of Process.  This Agreement
shall be governed by and construed in  accordance  with the laws of the State of
Texas and the  applicable  laws of the United States of America.  This Agreement
has been entered into in Dallas County,  Texas,  and it shall be performable for
all purposes in Dallas County,  Texas. Any action or proceeding against Borrower
under or in  connection  with any of the Loan  Documents  may be  brought in any
state or federal court in Dallas County,  Texas. Borrower hereby irrevocably (a)
submits to the  nonexclusive  jurisdiction  of such  courts,  and (b) waives any
objection  it may now or  hereafter  have as to the venue of any such  action or
proceeding  brought in any such court or that any such court is an  inconvenient
forum.  Borrower agrees that service of process upon it may be made by certified
or  registered  mail,  return  receipt  requested,  at its address  specified or
determined in accordance with the provisions of Section 11.12. Nothing herein or
in any of the other  Loan  Documents  shall  affect the right of Lender to serve
process in any other manner  permitted by law or shall limit the right of Lender
to bring any action or proceeding against Borrower or with respect to any of its
property in courts in other jurisdictions.  Any action or proceeding by Borrower
against Lender shall be brought only in a court located in Dallas County, Texas.

         Section 11.13  Counterparts.  This  Agreement may be executed in one or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same instrument.

         Section 11.14  Severability.  Any provision of this Agreement held by a
court of competent  jurisdiction to be invalid or unenforceable shall not impair
or invalidate  the remainder of this  Agreement and the effect  thereof shall be
confined to the provision held to be invalid or illegal.

         Section 11.15 Headings.  The headings,  captions, and arrangements used
in  this  Agreement  are  for   convenience   only  and  shall  not  affect  the
interpretation of this Agreement.

         Section 11.16  Participations;  Etc. Lender shall have the right at any
time and from time to time to grant  participations  in, and sell and  transfer,
the Obligations and any Loan Documents.  Each actual or proposed  participant or
assignee,  as the case may be,  shall be  entitled  to receive  all  information
received by Lender regarding Borrower and its Subsidiaries,  including,  without
limitation,  information  required to be disclosed to a participant  or assignee
pursuant  to  Banking  Circular  181  (Rev.,  August  2,  1984),  issued  by the
Comptroller  of the  Currency  (whether  the actual or proposed  participant  or
assignee is subject to the circular or not).

         Section 11.17  Construction.  Borrower and Lender acknowledge that each
of them has had the  benefit  of legal  counsel  of its own  choice and has been
afforded an  opportunity  to review this  Agreement and the other Loan Documents
with its legal  counsel  and that this  Agreement  and the other Loan  Documents
shall be construed as if jointly drafted by Borrower and Lender.

         Section 11.18 Independence of Covenants.  All covenants hereunder shall
be given  independent  effect so that if a particular action or condition is not

                                       31
<PAGE>

permitted  by any of such  covenants,  the fact that it would be permitted by an
exception to, or be otherwise  within the limitations of, another covenant shall
not avoid the  occurrence of a Default if such action is taken or such condition
exists.

         Section 11.19 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT  PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY  IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION,  PROCEEDING,  OR  COUNTERCLAIM  (WHETHER BASED UPON
CONTRACT,  TORT,  OR  OTHERWISE)  ARISING  OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS  CONTEMPLATED  THEREBY OR THE ACTIONS OF LENDER IN
THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.

         Section 11.20 Arbitration.

         (a) Upon the demand of any party,  any  dispute  shall be  resolved  by
binding  arbitration  (except  as  set  forth  in  Section  11.20(e)  below)  in
accordance  with the terms of this  Agreement or the other Loan  Documents.  Any
party may by summary  proceedings bring an action in court to compel arbitration
of a Dispute. Any party who fails or refuses to submit to arbitration  following
a lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.

         (b)  Arbitration  proceedings  shall be  administered  by the  American
Arbitration Association ("AAA") or such other administrator as the parties shall
mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All
Disputes  submitted  to  arbitration  shall be resolved in  accordance  with the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting  choice of law  provision  in any of the  foregoing  documents.  The
arbitration  shall be  conducted  at a location in Texas  selected by the AAA or
other administrator.  If there is any inconsistency between the terms hereof and
any such rules,  the terms and procedures set forth herein shall  control..  All
statutes of limitation  applicable to any Dispute shall apply to any arbitration
proceeding.  All  discovery  activities  shall be  expressly  limited to matters
directly  relevant  to the Dispute  being  arbitrated.  Judgment  upon any award
rendered  in an  arbitration  may be entered in any court  having  jurisdiction;
provided  however,  that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the  protections  afforded to it under Section 91
of Title 12 of the United States Code or any similar applicable state law.

         (c) No provision  hereof shall limit the right of any party to exercise
self-help  remedies such as setoff,  foreclosure  against or sale of any real or
personal property collateral or security,  or to obtain provisional or ancillary
remedies,  including  without  limitation,   injunctive  relief,  sequestration,
attachment,  garnishment  or the  appointment  of a  receiver  from a  court  of
competent  jurisdiction  before, after or during the pendency of any arbitration
or other  proceeding.  The exercise of any such remedy shall not waive the right
of any party to compel arbitration hereunder.

         (d)  Arbitrators  must be active  members  of the Texas  State Bar with
expertise  in the  substantive  law  applicable  to the  subject  matter  of the
Dispute.  Arbitrators  are empowered to resolve  Disputes by summary  rulings in
response to motions filed prior to the final  arbitration  hearing.  Arbitrators
(i) shall resolve all Disputes in  accordance  with the  substantive  law of the
State of Texas, (ii) may grant any remedy or relief that a court of the State of
Texas could order or grant within the scope hereof and such ancillary  relief as
is  necessary  to make  effective  any award,  and (iii) shall have the power to
award recovery of all costs and fees, to impose sanctions and to take such other
actions as they deem  necessary to the same extent a judge could pursuant to the
Federal Rules of Civil  Procedure,  the Texas Rules of Civil  Procedure or other
applicable  law. Any Dispute in which the amount in controversy is $5,000,000 or
less shall be decided  by a single  arbitrator  who shall not render an award of
greater than  $5,000,000  (including  damages,  costs,  fees and  expenses).  By
submission  to a single  arbitrator,  each party  expressly  waives any right or

                                       32
<PAGE>

claim to  recover  more than  $5,000,000.  Any  Dispute  in which the  amount in
controversy  exceeds  $5,000,000 shall be decided by majority vote of a panel of
three  arbitrators;  provided however,  that all three arbitrators must actively
participate in all hearings and deliberations.

         (e) Notwithstanding anything herein to the contrary, in any arbitration
in which the amount in controversy exceeds $25,000,000, the arbitrators shall be
required to make specific,  written  findings of fact and conclusions of law. In
such arbitrations (i) the arbitrators shall not have the power to make any award
which is not supported by substantial evidence or which is based on legal error,
(ii) an award shall not be binding upon the parties  unless the findings of fact
are  supported  by  substantial  evidence  and  the  conclusions  of law are not
erroneous under the substantive law of the State of Texas, and (iii) the parties
shall have in addition to the grounds referred to in the Federal Arbitration Act
for vacating,  modifying or correcting an award the right to judicial  review of
(1) whether the findings of fact  rendered by the  arbitrators  are supported by
substantial evidence, and (2) whether the conclusions of law are erroneous under
the substantive law of the State of Texas.  Judgment confirming an award in such
a proceeding may be entered only if a court determines the award is supported by
substantial  evidence and not based on legal error under the  substantive law of
the State of Texas.

         (f) To the maximum extent practicable, the AAA, the arbitrators and the
parties shall take all action  required to conclude any  arbitration  proceeding
within 180 days of the filing of the  Dispute  with the AAA.  No  arbitrator  or
other party to an arbitration proceeding may disclose the existence,  content or
results  thereof,  except for  disclosures of information by a party required in
the ordinary course of its business, by applicable law or regulation,  or to the
extent  necessary to exercise any judicial  review rights set forth  herein.  If
more than one agreement for  arbitration  by or between the parties  potentially
applies to a Dispute,  the  arbitration  provision most directly  related to the
foregoing  documents or the subject matter of the Dispute shall control.  If any
provision of this  Agreement  shall be held to be prohibited by or invalid under
applicable law, such provision  shall be ineffective  only to the extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or any remaining provisions of this Agreement.  This arbitration provision shall
survive  termination,  amendment or expiration of any of the foregoing documents
or any relationship between the parties.

         (g)  Lender  and  Borrower  hereby  agree  to  keep  all  Disputes  and
arbitration  proceedings strictly confidential,  provided,  however, that Lender
and Borrower may disclose such  confidential  information as is necessary in any
litigation  between Lender and Borrower or as required by applicable law and, on
a confidential  basis,  to accountants,  attorneys and other  consultants in the
ordinary course of business.

         Section 11.21 Additional Interest Provision. It is expressly stipulated
and  agreed  to be the  intent  of  Borrower  and  Lender at all times to comply
strictly with the  applicable  Texas law governing the maximum rate or amount of
interest payable on the  indebtedness  evidenced by any Note, any Loan Document,
and the Related  Indebtedness  (or  applicable  United States federal law to the
extent that it permits Lender to contract for, charge,  take, reserve or receive
a greater  amount of interest  than under Texas law). If the  applicable  law is
ever  judicially  interpreted so as to render usurious any amount (i) contracted
for, charged, taken, reserved or received pursuant to any Note, any of the other
Loan Documents or any other  communication or writing by or between Borrower and
Lender related to the transaction or transactions that are the subject matter of
the Loan Documents, (ii) contracted for, charged, taken, reserved or received by
reason of Lender's exercise of the option to accelerate the maturity of any Note
and/or any and all  indebtedness  paid or payable by Borrower to Lender pursuant
to any Loan Document other than any Note (such other indebtedness being referred
to in this Section as the "Related  Indebtedness"),  or (iii) Borrower will have
paid or Lender  will have  received  by reason of any  voluntary  prepayment  by
Borrower of any Note and/or the Related Indebtedness,  then it is Borrower's and
Lender's express intent that all amounts charged in excess of the Maximum Lawful
Rate shall be automatically  canceled,  ab initio,  and all amounts in excess of
the Maximum Lawful Rate theretofore collected by Lender shall be credited on the
principal  balance of any Note and/or the Related  Indebtedness (or, if any Note

                                       33
<PAGE>

and all  Related  Indebtedness  have  been or  would  thereby  be paid in  full,
refunded  to  Borrower),  and the  provisions  of any  Note and the  other  Loan
Documents  shall  immediately  be deemed  reformed  and the  amounts  thereafter
collectible  hereunder  and  thereunder  reduced,  without the  necessity of the
execution of any new document,  so as to comply with the applicable  law, but so
as to permit the recovery of the fullest amount  otherwise  called for hereunder
and thereunder;  provided, however, if any Note has been paid in full before the
end of the stated term of any such Note,  then  Borrower  and Lender  agree that
Lender shall, with reasonable promptness after Lender discovers or is advised by
Borrower that interest was received in an amount in excess of the Maximum Lawful
Rate,  either refund such excess  interest to Borrower and/or credit such excess
interest  against  such Note  and/or  any  Related  Indebtedness  then  owing by
Borrower to Lender.  Borrower hereby agrees that as a condition precedent to any
claim seeking usury  penalties  against  Lender,  Borrower will provide  written
notice to Lender,  advising Lender in reasonable detail of the nature and amount
of the  violation,  and Lender shall have sixty (60) days after  receipt of such
notice in which to correct  such usury  violation,  if any, by either  refunding
such excess interest to Borrower or crediting such excess  interest  against the
Note to which the alleged violation relates and/or the Related Indebtedness then
owing by Borrower to Lender. All sums contracted for, charged,  taken,  reserved
or  received  by  Lender  for the  use,  forbearance  or  detention  of any debt
evidenced  by any Note  and/or the  Related  Indebtedness  shall,  to the extent
permitted by applicable law, be amortized or spread, using the actuarial method,
throughout  the  stated  term of  such  Note  and/or  the  Related  Indebtedness
(including  any and all renewal and extension  periods) until payment in full so
that the rate or amount of  interest  on account of any Note  and/or the Related
Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect
and applicable to such Note and/or the Related  Indebtedness for so long as debt
is  outstanding.  In no event shall the  provisions  of Chapter 346 of the Texas
Finance  Code  (which  regulates  certain  revolving  credit loan  accounts  and
revolving  triparty  accounts)  apply to this  Note  and/or  any of the  Related
Indebtedness.  Notwithstanding  anything to the contrary  contained herein or in
any of the other Loan Documents, it is not the intention of Lender to accelerate
the  maturity  of any  interest  that  has  not  accrued  at the  time  of  such
acceleration or to collect unearned interest at the time of such acceleration.

         Section 11.22 Ceiling Election. To the extent that Lender is relying on
Chapter 303 of the Texas  Finance  Code to  determine  the  Maximum  Lawful Rate
payable on any such Note and/or any other  portion of the Related  Indebtedness,
Lender will  utilize the weekly  ceiling from time to time in effect as provided
in such Chapter 303, as amended. To the extent United States federal law permits
Lender to contract for,  charge,  take,  receive or reserve a greater  amount of
interest  than under Texas law,  Lender will rely on United  States  federal law
instead of such Chapter 303 for the purpose of  determining  the Maximum  Lawful
Rate.  Additionally,  to the extent permitted by applicable law now or hereafter
in effect,  Lender may,  at its option and from time to time,  utilize any other
method of  establishing  the Maximum Lawful Rate under such Chapter 303 or under
other applicable law by giving notice,  if required,  to Borrower as provided by
applicable law now or hereafter in effect.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
                            SIGNATURE PAGE FOLLOWS.]

                                       34
<PAGE>

IN WITNESS  WHEREOF,  the parties hereto have duly executed this Agreement as of
the day and year first above written.

                                        BORROWER:

                                        DGSE COMPANIES, INC

                                        By: s/ William H. Oyster
                                           -------------------------------------
                                        Name: William H. Oyster
                                             -----------------------------------
                                        Title:   President
                                              ----------------------------------

                                        Address for Notices:

                                        DGSE Companies, Inc.
                                        14001 Dallas Parkway, Ste. 800
                                        Dallas, Texas 75240
                                        Attention: L.S. Smith

                                        Fax No.: 972-241-0646
                                                --------------------------------
                                        Telex No.:
                                                  ------------------------------
                                        Telephone No.: 972-484-3662
                                                      --------------------------
                                        e-mail: lssmith@dgse.com
                                               --------------------------

                                        LENDER:

                                        TEXAS CAPITAL BANK, NATIONAL
                                        ASSOCIATION

                                        By: s/ Paul Howell
                                           -------------------------------------
                                           Paul Howell, Senior Vice President

                                        Address for Notices:
                                        Texas Capital Bank, National Association
                                        2100 McKinney Avenue, Suite 900
                                        Dallas, Texas  75201
                                        Attention:  Paul Howell
                                        Telecopier No.:  214.932.6607

<PAGE>

                   INDEX TO SCHEDULES
                   ------------------
               Description of Schedules       Article/Section
               ------------------------       ---------------

                Additional Closing Items            5.1(h)

             Subsidiaries and Joint Ventures         6.14

                  Intellectual Property              6.21

                      Existing Debt                  8.1

                     Existing Liens                  8.2

                    INDEX TO EXHIBITS
                    -----------------
 Exhibit         Description of Exhibit            Section
 -------         ----------------------            -------
    A             Borrowing Base Report              1.1

    B            Compliance Certificate              1.1

    C             Revolving Credit Note              2.1

    D                   Term Note                    2.1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}]]