Document:

EXHIBIT 10.4 - SUBORDINATED PLEDGE AGREEMENT

                        SUBORDINATED PLEDGE AGREEMENT

This Subordinated Pledge Agreement (as the same may be amended, restated,
modified, or supplemented from time to time, the "AGREEMENT") dated as of June
30, 2000, is made by each of the entities set forth under the heading "Pledgors"
on the execution pages of this Agreement (collectively, the "PLEDGORS" and
individually, each a "PLEDGOR") whose addresses are set forth on the execution
pages hereof in favor of SJMB, L.P., a Delaware limited partnership ("SJMB") as
agent (herein so called) for itself and any other holder from time to time (SJMB
as Agent, the "SECURED PARTY").

                                 WITNESSETH:

      WHEREAS, Industrial Holdings, Inc. ("IHI"), and SJMB have entered into the
following agreements: (1) that certain Reimbursement Agreement dated as of June
16, 2000, between IHI, and SJMB (the "REIMBURSEMENT AGREEMENT"), pursuant to
which the Company is required to issue to SJMB certain promissory notes (the
"SUBORDINATED REIMBURSEMENT NOTES"); and (2) that certain Letter Agreement dated
as of June 30, 2000, among IHI, SJMB, OF Acquisition, L.P., St. James
Management, L.L.C. and Philform, Inc. (the "OF LETTER AGREEMENT"), pursuant to
which, among other things, IHI shall issue one or more promissory notes to SJMB
in the aggregate principal amount of $6,900,000 (whether one or more, the "OF
NOTE", and together with the Subordinated Reimbursement Notes, the "NOTES"); all
of the foregoing documents, together with all related documents referred to
herein as the "TRANSACTION DOCUMENTS";

      WHEREAS, pursuant to that certain Amended and Restated Credit Agreement
dated June 17, 1999, as amended (the "SENIOR CREDIT FACILITY"), among IHI as
Borrower and Comerica Bank-Texas, National Bank of Canada and Hibernia National
Bank as Lenders (the "SENIOR LENDERS"), IHI is indebted to the Senior Lenders as
provided therein;

      WHEREAS, pursuant to the Amended and Restated Pledge Agreement, Pledgors
have pledged shares of stock (the "PLEDGED SHARES") to secure the obligations
under the Senior Credit Facility;

      WHEREAS, SJMB have agreed to subordinate their right of payment by IHI
under the Transaction Documents, and any liens securing such obligations and the
right to exercise any remedy, to the rights and liens of the Senior Lenders
under the Senior Credit Facility (such liens referred to herein as the "SENIOR
LIENS") and the other agreements and documents referred to therein, all as more
fully described in that certain Subordination Agreement dated the date hereof
among IHI, SJMB, the Senior Lenders and the Agent (the "SUBORDINATION
AGREEMENT");

      WHEREAS, pursuant to the terms of the Transaction Documents, Pledgors have
agreed to grant to Secured Party a second lien on the Pledged Shares;

      WHEREAS, each of the Pledgors will benefit, directly or indirectly, from
the execution of this Agreement and the granting of a security interest in the
"Pledged Collateral" (hereinafter defined) in which each Pledgor, respectively,
has any right, title or interest as security for all of the "Secured
Obligations" (hereinafter defined);

      WHEREAS, it is a condition precedent to the obligations of SJMB under the
Transaction Documents that the Pledgors shall execute and deliver this Agreement
to the Secured Party; and

      WHEREAS, the Pledgors desire to execute this agreement in order to satisfy
such condition precedent and to secure the Obligations under the Loan Agreement.

      NOW THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

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Section 1.  DEFINED TERMS AND RELATED MATTERS.

            (a) Each capitalized term used herein (including, without
      limitation, in the introductory paragraph and recitals hereof) and not
      defined herein shall have the meaning assigned to such term in the
      Purchase Agreement.

            (b) "PERMITTED LIENS" has the meaning as ascribed in the Purchase
      Agreement.

            (c) "SECURED OBLIGATIONS" means the "Obligations" as defined in the
      Security Agreement.

            (d) "UCC" means the Uniform Commercial Code as in effect on the date
      hereof in the State of Texas; PROVIDED that if by mandatory provisions of
      law, the perfection or the effect of perfection or non-perfection of the
      security interests granted pursuant to SECTION 2 hereof, as well as all
      other security interests created or assigned as additional security for
      the Secured Obligations pursuant to the provisions of this Agreement is
      governed by the UCC as in effect in another jurisdiction, "UCC" means the
      UCC as in effect in such other jurisdiction for purposes of the provisions
      hereof relating to such perfection or effect of perfection or
      non-perfection.

Section 2. PLEDGES. Subject to the prior interests of the Senior Lenders and the
terms of the Subordination Agreement, the Pledgors hereby pledge to the Secured
Party and grant to the Secured Party, a lien and security interest in the
following collateral (collectively, the "PLEDGED COLLATERAL") as set forth
below:

            (i) One hundred percent (100%) of the Shares (collectively, the
      "PLEDGED SHARES") as evidenced by the stock certificates identified in
      SCHEDULE I hereto, and all dividends, cash, instruments and other property
      from time to time received, receivable or otherwise distributed in respect
      of, or in exchange for, any or all of the Pledged Shares;

            (ii) All additional shares of stock of the issuer of such stock from
      time to time acquired by any Pledgor in any manner, and the certificates,
      if any, representing such additional shares and/or ownership interests,
      and all dividends, cash, instruments and other property from time to time
      received, receivable or otherwise distributed in respect of or in exchange
      for any or all of such shares and/or ownership interests; and

            (iii) All proceeds of any of the foregoing.

            The inclusion of proceeds in this Agreement does not authorize the
      Pledgors to sell, dispose of or otherwise use the Pledged Collateral in
      any manner not specifically authorized hereby.

Section 3.  SECURITY FOR OBLIGATIONS. Subject to the prior interests of the
Senior Lenders and the terms of the Subordinated Agreement, this Agreement
secures the prompt and complete payment and performance of the Secured
Obligations owing to SJMB.

Section 4.  DELIVERY OF PLEDGED COLLATERAL. Subject to the terms of the
Subordination Agreement, all certificates, if any, representing or evidencing
the Pledged Collateral shall be delivered to and held by the Agent, and shall be
in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Secured Party. Subject to the rights of the Senior
Lenders, the Secured Party shall have the right at any time to exchange
certificates representing or evidencing the Pledged Collateral for certificates
of smaller or larger denominations.

Section 5.  REPRESENTATIONS  AND  WARRANTIES.  Each  of  the  Pledgors  hereby
            represents and warrants as follows:

            (a) This Agreement is a legal, valid and binding obligation of the
      Pledgors enforceable against the Pledgors in accordance with its terms,
      except as enforceability may be (i) limited by applicable liquidation,
      conservatorship, bankruptcy, moratorium, arrangement, receivership,
      insolvency, reorganization or similar laws and (ii) subject to the effect
      of general principles of equity (regardless of whether such enforceability
      is considered in a proceeding to be in equity or at law).

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            (b) The Pledged Shares have been duly authorized and validly issued
      and are fully paid and non-assessable.

            (c) The Pledgors are the legal and beneficial owners of the Pledged
      Collateral free and clear of any lien, security interest, option or other
      charge or encumbrance except for the Permitted Liens and the security
      interests created by this Agreement.

            (d) No authorization, approval, or other action by, and no notice to
      or filing with, any Governmental Authority is required either (i) for the
      pledge by the Pledgors of the Pledged Shares pursuant to this Agreement or
      for the execution, delivery or performance of this Agreement by the
      Pledgors or (ii) for the exercise by the Secured Party of the voting or
      other rights provided for in this Agreement (except as may be required in
      connection with such disposition by laws affecting the offering and sale
      of securities generally).

Section 6.  FURTHER ASSURANCES.

            (a) Each Pledgor agrees that from time to time, at the reasonable
      expense of the Pledgor, each Pledgor will promptly execute and deliver all
      further instruments and documents, and take all further action, that the
      Secured Party may reasonably request as being necessary or desirable, in
      order to perfect and protect any security interest granted or purported to
      be granted hereby or to enable the Secured Party to exercise and enforce
      its rights and remedies hereunder with respect to any Pledged Collateral.
      Without limiting the generality of the foregoing, each Pledgor will
      execute and file such financing or continuation statements, or amendments
      thereto, and such other instruments or notices as the Secured Party may
      reasonably request as being necessary or desirable in order to perfect and
      preserve the security interests granted or purported to be granted hereby.

            (b) Each Pledgor hereby authorizes the Secured Party to file one or
      more financing or continuation statements, and amendments thereto,
      relative to all or any part of the Pledged Collateral without the
      signature of such Pledgor, in each case where permitted by law. A carbon,
      photographic or other reproduction of any financing statement executed by
      each Pledgor covering the Pledged Collateral or any part thereof shall be
      sufficient as a financing statement where permitted by law.

            (c) Each Pledgor will furnish to the Secured Party from time to time
      statements and schedules further identifying and describing the Pledged
      Collateral and such other reports in connection with the Pledged
      Collateral as the Secured Party may reasonably request, all in reasonable
      detail.

            (d) Each Pledgor will promptly notify the Secured Party of any
      change of its name, corporate structure, federal employer identification
      number or the address of its principal place of business or chief
      executive office where its books and records are maintained.

Section 7.  VOTING-RIGHTS.

            (a) So long as no Event of Default shall have occurred and be
      continuing, the Pledgors shall be entitled to exercise any and all voting
      and other rights pertaining to the Pledged Collateral or any part thereof
      for any purpose not inconsistent with the terms of this Agreement or the
      Transaction Documents.

            (b) Upon the occurrence and during the continuance of an Event of
      Default, and subject to the provisions of the Subordination Agreement all
      rights of the Pledgors to exercise the voting rights which they would
      otherwise be entitled to exercise pursuant to SECTION 7(A) hereof shall
      cease for so long as such Event of Default shall continue, and subject
      only to the rights of the Agent, the Secured Party shall thereupon have
      the right to exercise such voting rights.

Section 8.  DIVIDENDS AND OTHER DISTRIBUTIONS. Subject to the provisions of the
Subordination Agreement and subject to the rights of the Senior Lenders, if
dividends or other distributions and/or payments with respect to the Pledged
Collateral are received by the Pledgors other than in accordance with the terms
of the Transaction

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Documents, such dividends shall be received in trust for the benefit of the
Secured Party, shall be segregated from other funds of the Pledgors and shall be
forthwith paid over to the Secured Party as Pledged Collateral in the same form
as so received.

Section 9.  TRANSFERS AND OTHER LIENS: ADDITIONAL SHARES.

            (a) The Pledgors shall not: (i) sell, assign (by agreement,
      operation of law or otherwise) or otherwise dispose of, or grant any
      option with respect to, any of the Pledged Collateral or (ii) create or
      permit to exist any Lien upon or with respect to any of the Pledged
      Collateral, except for the Permitted Liens and for the security interest
      created by this Agreement.

            (b) The Pledgors agree that they will (i) cause the companies that
      issued the shares or ownership interests that constitute the Pledged
      Collateral not to issue any stock, other securities or ownership interests
      in addition to, or in substitution for, the Pledged Collateral, except to
      the Pledgor and (ii) subject to the rights of Agent, pledge to the Secured
      Party hereunder, immediately upon such acquisition (directly or
      indirectly) thereof, any and all additional shares of stock, other
      securities or other ownership interests of such companies, subject,
      however, to the proviso set forth in clause ii of SECTION 2 hereinabove.

Section 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Subject to the provisions
of the Subordination Agreement and subject to the rights of the Senior Lenders,
the Pledgors hereby irrevocably appoint the Secured Party as the Pledgors'
attorney-in-fact, with full authority in the place and stead of the Pledgors and
in the name of the Pledgors, from time to time in the Secured Party's sole
discretion after the occurrence of an Event of Default to take any action and to
execute any instrument which the Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all certificates made payable to the Pledgors
representing any dividend or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same. Subject
to the provisions of the Subordination Agreement and upon the occurrence and
during the continuance of an Event of Default, the Secured Party shall, subject
to the rights of the Senior Lenders, have the right, in its sole discretion and
without notice to the Pledgors, to transfer to or to register in the name of the
Secured Party or any of its nominees, for the benefit of the itself and the
Lenders, any or all of the Pledged Collateral.

Section 11. SECURED PARTY MAY PERFORM. Subject to the rights of the Senior
Lenders, if the Pledgors fail to perform any agreement contained herein, the
Secured Party may itself perform, or cause performance of, such agreement, and
the reasonable expenses of the Secured Party incurred in connection therewith
shall be payable upon demand (subject to the terms of the Loan Agreement) by
such Pledgor and if not paid shall bear interest at the Default Rate set forth
in the Loan Agreement.

Section 12. THE SECURED PARTY'S DUTIES. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose any duty upon it to exercise any such powers. In regard to any
Pledgor, except for reasonable care in the custody of any Pledged Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Secured Party shall have no duty as to any Pledged Collateral or as to the
taking of any reasonably necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral. The Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Pledged
Collateral is accorded treatment substantially equal to that which the Secured
Party accords its own property, it being understood that the Secured Party shall
not have any responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Collateral, whether or not the Secured Party has or is deemed to
have knowledge of such matters, or (b) taking any necessary steps to preserve
rights against any parties with respect to any Pledged Collateral.

Section 13. REMEDIES UPON DEFAULT. Subject to the provisions of the
Subordination Agreement, if any Event of Default shall have occurred and be
continuing:

            (a) Subject to the rights of the Senior Lenders, the Secured Party
      may exercise in respect of the Pledged Collateral, in addition to other
      rights and remedies provided for herein or otherwise available to

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      it, all the rights and remedies of a secured party under the UCC
      (whether or not the UCC applies to the affected Collateral), and the
      Secured Party may also, without notice except as specified below, sell the
      Pledged Collateral or any part thereof in one or more parcels at public or
      private sale, at any exchange, broker's board or at any of the Secured
      Party's offices or elsewhere, for cash, on credit or for future delivery,
      and upon such other terms as the Secured Party may deem commercially
      reasonable. Each Pledgor agrees that, to the extent notice of sale shall
      be required by applicable law, at least ten (10) days' notice to the
      Pledgors of the time and place of any public sale or of the time after
      which any private sale is to be made shall constitute reasonable
      notification thereof. Subject to the rights of the Senior Lenders, the
      Secured Party shall not be obligated to make any sale of Pledged
      Collateral regardless of notice of sale having been given. The Secured
      Party may adjourn any public or private sale from time to time by
      announcement at the time and place fixed therefor, and such sale may,
      without further notice, be made at the time and place to which it was so
      adjourned.

            (b) Any cash received by the Secured Party shall be applied first to
      repay the reasonable costs and expenses of the Secured Party and
      thereafter to repay the Secured Obligations. Any surplus of such cash or
      cash proceeds held by the Secured Party and remaining after payment in
      full of all the Secured Obligations shall be paid over to the Pledgors or
      to whomsoever may be lawfully entitled to receive such surplus.

            (c) In connection with the sale of any Pledged Collateral, the
      Secured Party, as applicable, is authorized, but not obligated, to limit
      prospective purchasers to the extent deemed necessary or desirable by the
      Secured Party to render such sale exempt from the registration
      requirements of the Securities Act of 1933, as amended (the "SECURITIES
      ACT"), and any applicable state laws and regulations, and no sale so made
      in good faith by the Secured Party shall be deemed not to be "commercially
      reasonable" because so made.

            (d) All rights and remedies of the Secured Party expressed herein
      are in addition to all other rights and remedies possessed by the Secured
      Party under the Loan Agreement and any other agreement or instrument
      relating to the Obligations.

Section 14. ADDITIONAL PROVISIONS CONCERNING ,SALES OF PLEDGED COLLATERAL.

            (a) The Pledgors recognize that the Secured Party may be unable to
      effect a public sale of any or all of the Pledged Collateral by reason of
      certain prohibitions contained in the laws of any jurisdiction outside the
      United States or in the Securities Act and applicable state securities
      laws, but may instead be compelled to resort to one or more private sales
      thereof to a restricted group of purchasers who shall be obligated to
      agree, among other things, to acquire such Pledged Collateral for their
      own account for investment and not with a view to the distribution or
      resale thereof. The Pledgors acknowledge and agree that any such private
      sale may result in prices and other terms less favorable to the seller
      than if such sale were a public sale arid, notwithstanding such
      circumstances, agree that any such private sale shall, to the extent
      permitted by law, be deemed to have been made in a commercially reasonable
      manner. The Secured Party shall not be under any obligation to delay sale
      of any of the Pledged Collateral for the period of time necessary to
      permit the Pledgors to register such securities under the laws of any
      jurisdiction outside the United States, under the Securities Act or under
      any applicable state securities laws, even if the Pledgors would agree to
      do so.

            (b) The Pledgors further agree to do or cause or be done, to the
      extent that the Pledgors may legally do so, all such other acts and things
      as may be necessary to make such sales or resales of any portion or all of
      the Pledged Collateral valid and binding and in compliance with any and
      all applicable laws, regulations, orders, writs, injunctions, decrees or
      awards of any and all courts, arbitrators or Governmental Authorities,
      domestic or foreign, having jurisdiction over any such sale or sales, all
      at the Pledgors' expense. The Pledgors further agree that a breach of any
      of the covenants contained in this Section shall cause irreparable injury
      to the Secured Party, and that the Secured Party has no adequate remedy at
      law in respect of such breach and, as a consequence, agrees that each and
      every covenant contained in this Section shall be specifically enforceable
      against the Pledgors, and, to the fullest extent permitted by law, the
      Pledgors hereby waive and agree not to assert as a defense against an
      action for specific performance of such covenants that (i) the Pledgors'
      failure to perform such covenants shall not

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      cause irreparable injury to the Secured Party or the Lenders or (ii)
      the Secured Party has an adequate remedy at law in respect of such breach.

Section 15. INDEMNITY AND EXPENSES.

            (a) The Pledgors hereby agree to indemnify the Secured Party from
      and against any and all claims, losses and liabilities growing out of or
      resulting from enforcement of this Agreement, except claims, losses or
      liabilities, if any, resulting from the Secured Party's gross negligence
      or willful misconduct. SUBJECT TO THE FOREGOING, IT IS THE EXPRESS
      INTENTION OF THE PLEDGORS THAT THE SECURED PARTY SHALL BE INDEMNIFIED AND
      HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
      DEFICIENCIES, JUDGMENTS OR EXPENSES ARISING OUT OF OR RESULTING FROM THE
      ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY SUCH PERSON OR IMPOSED
      UPON ANY SUCH PERSON UNDER ANY THEORY OF STRICT LIABILITY.

            (b) The Pledgors shall, upon demand, but subject to the terms of the
      Loan Agreement, pay to the Secured Party the amount of any and all
      reasonable expenses, including the reasonable fees and expenses of the
      such party's counsel and of its experts, that the Secured Party may incur
      in connection with (i) administration of this Agreement, (ii) the
      evaluation, appraisal, custody or preservation of, or sale of, collection
      from, or other realization upon any of the Pledged Collateral, (iii) the
      exercise or enforcement of any of the rights of the Secured Party for
      itself and hereunder or (iv) the failure by the Pledgors to perform or
      observe any of the provisions of this Agreement. Each Pledgor agrees to
      pay interest on any sums payable to the Secured Party hereunder that are
      not paid when due at a rate per annum equal to the Default Rate set forth
      in the Loan Agreement.

Section 16. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Pledgors herefrom, shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party and the Pledgors, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose of which given.

Section 17. ADDRESSES FOR NOTICES. All notices and other communications provided
for hereunder shall be given in the manner and at the addresses for the Pledgors
and the Secured Party as set forth in the Loan Agreement, and shall become
effective as specified therein.

Section 18. WAIVER OF MARSHALING. All rights of marshaling of assets of the
Pledgors, including any such right with respect to the Pledged Collateral, are
hereby waived by the Pledgors.

Section 19. LIMITATION BY LAW. All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they shall not render this Agreement invalid, unenforceable, in whole or in
part, or not entitled to be recorded, registered or filed under the provisions
of any applicable law.

Section 20. SEVERABILITY. Should any clause, sentence, paragraph, subsection or
Section of this Agreement be judicially declared to be invalid, unenforceable or
void, such decision shall not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid or unenforceable shall be deemed to have
been stricken herefrom by the parties hereto, and the remainder of this
Agreement shall have the same force and effectiveness as if such stricken part
or parts had never been included herein.

Section 21. TERMINATION REINSTATEMENT.

            (a) Each Pledgor agrees that this Agreement and the Liens granted
      hereunder shall terminate when, but only when, all Secured Obligations
      have been fully and finally paid and performed, and all of the obligations
      of IHI under the Transaction Documents have expired or been terminated. At
      any time thereafter upon the Pledgor's request, the Secured Party shall
      promptly reassign and redeliver, including the

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      termination of any financing statements (or cause to be reassigned
      and redelivered) to the Pledgors, or to such Person or Persons as the
      Pledgors shall designate in writing, against receipt, such of the Pledged
      Collateral (if any) as shall not have been sold or otherwise applied by
      the Secured Party for the benefit of itself or the Lenders pursuant to the
      terms hereof and shall still be held by it hereunder. Any such
      reassignment shall be without recourse upon, or representation or warranty
      by, the Secured Party (other than that the Secured Party has not sold,
      encumbered or otherwise transferred any interest in the Collateral except
      as provided in this Agreement) and shall be at the sole reasonable cost
      and expense of the Pledgors.

            (b) This Agreement shall continue to be effective or be reinstated,
      as the case may be, if at any time any amount received by the Secured
      Party in respect of the Secured Obligations is rescinded or must otherwise
      be restored or returned by the Secured Party upon the filing of any
      bankruptcy proceeding by or of the Pledgors or upon the appointment of any
      intervenor or conservator of, or trustee or similar official for, the
      Pledgors or any substantial part of their assets, or otherwise, all as
      though such payments had not been made.

Section 22. NO WAIVER REMEDIES. No failure on the part of the Secured Party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by applicable law.

Section 23. CONTINUING SECURITY INTEREST: TRANSFER OF THE NOTE. This Agreement
creates a continuing security interest in the Pledged Collateral and shall (a)
remain in full force and effect until the full and final payment and performance
of the Secured Obligations after the Lender shall have no further obligation
under the Transaction Documents, (b) be binding upon each Pledgor, its
successors and assigns and (c) inure to the benefit of the Secured Party and its
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (d), the Lender may assign or otherwise transfer all or
a portion of its interests, rights and obligations in the Pledged Collateral
held by it pursuant to the Loan Agreement, the Loan Agreement, or any other
Transaction Document, to any other Person in accordance with the terms of such
agreement, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Secured Party herein or otherwise.
Upon the termination of the Secured Obligations, the Liens granted hereby in
accordance with the foregoing shall revert to Pledgors, and the Secured Party
will, at the Pledgors' sole cost and expense, promptly execute and deliver to
the Pledgor such documents as the Pledgor shall reasonably request to evidence
such termination.

Section 24. SECURITY INTEREST ABSOLUTE. All rights of the Secured Party and
security interests hereunder, and all obligations of the Pledgors hereunder,
shall be absolute and unconditional irrespective of:

            (a) any lack of validity or enforceability of the Loan Agreement,
      the Note, or any other Transaction Document;

            (b) any change in the time, manner or place or payment of, or in any
      other term of all or any of the Secured Obligations, or any other
      amendment or waiver of or any consent to any departure from the Loan
      Agreement, the Note or any other Transaction Documents;

            (c) any exchange, release or non-perfection of any other collateral,
      or any, release or amendment or waiver of or consent to departure from any
      guaranty for all or any of the Secured Obligations; or

            (d) any other circumstance which might otherwise constitute a
      defense available to, or a discharge of, the Pledgors or any other third
      party.

Section 25. GOVERNING LAW. 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 (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS),
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES

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HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.

Section 26. INCONSISTENCIES. In the event of any irreconcilable inconsistencies
between any provision of this Agreement and any provision of the Loan Agreement
and/or the Transaction Documents, the provisions of the Loan Agreement shall
control.

Section 27. INTERPRETATION.

            (a) In this Agreement, unless a clear contrary intention appears:

                  (i) the singular number includes the plural number and vice
            versa;

                  (ii) the words "herein," "hereof' and "hereunder" and other
            words of similar import refer to this Agreement as a whole and not
            to any particular Article, Section or other subdivision;

                  (iii) reference to any Person includes such Person's
            successors and assigns but, if applicable, only if such successors
            and assigns are permitted by this Agreement, and reference to a
            Person in a particular capacity excludes such Person in any other
            capacity or individually, provided that nothing in this clause (iii)
            is intended to authorize any assignment not otherwise permitted by
            this Agreement;

                  (iv) unless the context indicates otherwise, reference to any
            Article, Section, Schedule or Exhibit means such Article or Section
            hereof or such Schedule or Exhibit hereto;

                  (v) the words "including" (and with correlative meaning
            "include") means including, without limiting the generality of any
            description preceding such term;

                  (vi) with respect to the determination of any period of time,
            the word "from" means "from and including" and the word "to" means
            "to but excluding"; and

                  (vii) reference to any law means such as amended, modified,
            codified or reenacted, in whole or in part, and in effect from time
            to time.

            (b) The Section headings herein are for convenience only and shall
      not affect the construction hereof.

            (c) No provision of this Agreement shall be interpreted or construed
      against any Person solely because that Person or its legal representative
      drafted such provision.

Section 28. SUBMISSION TO JURISDICTION.

            (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
      AND THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT BY THE SECURED PARTY IN
      THE COURTS OF HARRIS COUNTY, STATE OF TEXAS, THE UNITED STATES FOR THE
      SOUTHERN DISTRICT OF TEXAS AT THE ELECTION OF THE SECURED PARTY, OR IN
      SUCH COURTS AS MAY BE REQUIRED BY MANDATORY PROVISIONS OF LAW. BY
      EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PLEDGOR HEREBY IRREVOCABLY
      ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE
      NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH
      ACTION OR PROCEEDING. EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE
      SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
      ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
      CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS PROVIDED FOR IHI IN
      SECTION 30 HEREOF. SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER
      SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SECURED PARTY
      OR ANY OF THE

                                      J-8
<PAGE>
      PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
      COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGORS IN
      ANY OTHER JURISDICTION.

            (b) EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
      MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
      ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
      BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER
      IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
      ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
      IN AN INCONVENIENT FORUM.

Section 29. WAIVER OF JURY TRIAL. Each Pledgor hereby waives, to the extent
permitted by applicable law, any right to a trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement or under any
amendment, instrument, document or agreement delivered or which may in the
future be delivered in connection herewith or arising from or relating to any
banking or financial relationship existing in connection with this Agreement.
And agrees, to the extent permitted by applicable law, that any such action or
proceeding shall be tried before a court and not before a jury.

Section 30. NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or SJMB provided for herein or with reference to
this Reimbursement Agreement shall be deemed to have been sufficiently given or
served for all purposes on the third business day after being sent as certified
or registered mail, postage and charges prepaid, to the following addresses:

      If to The Company:      Industrial Holdings, Inc.
                              7135 Ardmore
                              Houston, Texas 77054
                              Attn: President
                              Telecopy: (713) 749-9646

or at any other address designated by the Company in writing to St. James;

      If to St. James:        SJMB, L.P.
                              777 Post Oak, Suite 950
                              Houston, Texas 77056
                              Attn: John L. Thompson
                              Telecopy: (713) 871-1028

or at any other address designated by St. James to the Company in writing.

Section 31. SECOND LIEN. Notwithstanding anything to the contrary contained
herein, the liens granted by Pledgors to Secured Party are secondary and
inferior to those certain liens granted by Pledgors to the Agent under the
Senior Credit Facility.

                                       J-9
<PAGE>
      IN WITNESS WHEREOF, the Pledgors have caused this Agreement to be duly
executed and delivered as of the date first above written.

                                    PLEDGORS:

                                    Industrial Holdings, Inc., a Texas
                                    corporation

                                    BY:________________________________________
                                    NAME:
                                    TITLE:

                                    The Rex Group, Inc., a Texas corporation

                                    BY:________________________________________
                                    NAME:
                                    TITLE:

                                    GHX, Incorporated, a Texas corporation

                                    BY:________________________________________
                                    NAME:
                                    TITLE:

                                    Pipeline Valve Specialty, Inc., a Texas
                                    corporation

                                    BY:________________________________________
                                    NAME:
                                    TITLE:

                                    LSS - Lone Star- Houston, Inc.

                                    BY:________________________________________
                                    NAME:
                                    TITLE:

                                      J-10
<PAGE>
                                    United Wellhead Service, Inc., a Texas
                                    corporation

                                    BY:________________________________________
                                    NAME:
                                    TITLE:

                                    SJMB, L.P.,
                                    a Delaware limited partnership, as Agent

                                    By:   SJMB, L.L.C., General Partner

                                          BY:
                                          NAME:
                                          TITLE:

                                      J-11EXHIBIT 10.5 - SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

            SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

       THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated as of June 30, 2000, is between INDUSTRIAL HOLDINGS, INC.
("Borrower"), COMERICA BANK-TEXAS ("Agent") and COMERICA BANK-TEXAS, NATIONAL
BANK OF CANADA and HIBERNIA NATIONAL BANK (the "Banks").

                                    RECITALS:

      A. Borrower, Banks and Agent have entered into that certain Amended and
Restated Credit Agreement (the "Agreement") dated as of June 17, 1999.

      B. Pursuant to the Agreement, Guarantors executed that certain Amended and
Restated Guaranty Agreement (the "Guaranty") dated as of June 17, 1999 which
guaranteed to Agent the payment and performance of the Obligations.

      C. Borrower, Banks and Agent having as of March 1, 2000 previously amended
the Agreement now desire to again amend the Agreement as herein set forth.

      NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      1.1 DEFINITIONS. Capitalized terms used in this Amendment, to the extent
not otherwise defined herein, shall have the same meanings as in the Agreement,
as amended hereby. Additionally the following terms defined in the Agreement are
here re-defined and from and after the following means:

      "APPLICABLE LENDING OFFICE" means for each Bank, the Lending Office of
such Bank (or of an Affiliate of such Bank) designated below its name on the
signature pages to the Second Amendment to Amended and Restated Credit Agreement
or such other office of such Bank (or of an Affiliate of such Bank) as such Bank
may from time to time specify to the Borrower and the Agent.

      "APPLICABLE MARGIN" means the Base Rate plus THREE (3%) PERCENT.

      "APPLICABLE RATE" means the Base Rate plus the Applicable Margin.

      "COMMITMENT" means, as to each Bank, the obligation of such Bank to make
Revolving Advances and issue Letters of Credit hereunder, in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set forth opposite the name of such Bank on the signature pages to the Second
Amendment to the Amended and Restated Credit Agreement under the heading
"Commitment," as the same may be reduced pursuant to Section 2.9 or terminated
pursuant to Section 2.9 or 11.2.

      "DEBT SERVICE" means the sum of (a) all aggregate scheduled (as the same
may be modified from time to time) principal payments owed by the Borrower and
its Subsidiaries other than payments owing to EnSerCo or Trinity Industries,
Inc. during the applicable period immediately preceding the date of calculation
plus (b) cash Interest Expense for the applicable period immediately preceding
the date of calculation, plus (c) all regularly scheduled (as the same may be
modified from time to time) payments on account of Capital Lease Obligations
that became due and owing during the applicable period immediately preceding the
date of calculation.

      "ELIGIBLE ACCOUNTS" means the aggregate of all accounts receivable of the
Borrower and the Guarantors that are acceptable to Agent in its sole discretion
and satisfy the following conditions: (i) are due and payable within thirty (30)
days; (ii) have been outstanding less than ninety (90) days past the original
date of invoice; (iii) have arisen in the ordinary course of business from
services performed by Borrower or any of the Guarantors to or for the

                                      K-1
<PAGE>
account debtor or the sale by Borrower or any of the Guarantors of goods in
which such Person had sole ownership where such goods have been shipped or
delivered to the account debtor; (iv) represent complete bona fide transactions
which require no further act under any circumstances on the part of Borrower or
any of the Guarantors to make such accounts receivable payable by the account
debtor; (v) the goods sold which gave rise to such accounts receivable were
shipped or delivered to the account debtor on an absolute sale basis and not on
a consignment, a sale or return basis, a guaranteed sale basis, a bill and hold
basis, or on the basis of any similar understanding; (vi) the goods sold which
gave rise to such accounts receivable were not, at the time of sale thereof,
subject to any Lien, except the security interest in favor of Agent created by
the Loan Documents; (vii) are not subject to any provision prohibiting
assignment or requiring notice of or consent to such assignment; (viii) are
subject to a perfected, first priority security interest in favor of Agent and
are not subject to any other Lien; (ix) are not subject to setoff, counterclaim,
defense, allowance, dispute, or adjustment other than normal discounts for
prompt payment, and the goods sold which gave rise to such accounts receivable
have not been returned, rejected, repossessed, lost, or damaged; (x) 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; (xi) are not evidenced
by chattel paper or an instrument of any kind; (xii) are owed by a Person or
Persons that are citizens of or organized under the laws of the United States or
any State and are not owed by any Person located outside of the United States of
America; (xiii) if any accounts receivable are owed by the United States of
America or any department, agency, or instrumentality thereof, the Federal
Assignment of Claims Act shall have been complied with; and (xiv) are not owed
by an Affiliate of Borrower. No account receivable owed by an account debtor to
Borrower shall be included as an Eligible Account if more than THIRTY-FIVE
PERCENT (35%) of the balances then outstanding on accounts receivable owed by
such account debtor and its Affiliates to Borrower and the Guarantors have
remained unpaid for more than eighty-nine (89) days from the dates of their
original invoices. The amount of any Eligible Accounts owed by an account debtor
to Borrower or the Guarantors shall be reduced by the amount of all "contra
accounts" and other obligations owed by such Person to such account debtor.

      "ENSERCO" shall mean EnSerCo, L.L.C., a Delaware limited liability
company.

      "LETTER OF CREDIT COMMITMENT" means the commitment of the Issuing Bank to
issue, and the commitment of the Banks severally to participate in Letters of
Credit from time to time issued or outstanding under Article II, in an aggregate
amount not to exceed on any date the amount of Ten Million and No/100 Dollars
($10,000,000.00); provided that the Letter of Credit Commitment is a part of the
combined Commitments, rather than a separate independent commitment.

      "LOAN DOCUMENTS" means this Agreement and all promissory notes, security
agreements, deeds of trust, assignments, guaranties, and other instruments,
documents, mortgages and agreements executed and delivered pursuant to or in
connection with this Agreement, including the Limited Guaranty Agreement, the
Subordination Agreement, the Registration Rights Agreement, the Collateral
Assignment of the $3,450,000 OrbitForm Note A and the $3,450,000 OrbitForm Note
B, the Collateral Assignment of the Martin and Massey Notes, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.

      "SUBORDINATED INDEBTEDNESS" means Debt of the Borrower, the repayment of
which is subordinated in a manner and method satisfactory to the Banks but, in
no event, shall it include the obligations of the Borrower to EnSerCo.

      "TERMINATION DATE" means 11:00 a.m. Houston, Texas time on January 31,
2001, or such earlier date and time on which the Commitments terminate as
provided in this Agreement.

      "TRINITY" means Trinity Industries, Inc., a Delaware corporation.

                                      K-2
<PAGE>
      Additionally, the following defined terms are hereby DELETED, without
replacement, from the Agreement.

      "Eurodollar Advance"
      "Eurodollar Rate"
      "Monthly Payment Date"
      "Reference Bank"

      Additionally, the following defined terms are hereby ADDED to the
Agreement:

      "AGREEMENT TO ACQUIRE OF ACQUISITION, L.P." means that certain Letter
Agreement by and between the Borrower and SJMB dated June 30, 2000 and any
subsequent agreement, including a partnership interest acquisition agreement
relating to the Borrower's acquisition of that portion of OF Acquisition, L.P.
it currently does not own.

      "COLLATERAL ASSIGNMENT OF MARTIN AND MASSEY NOTES" shall mean that certain
Collateral Assignment of Notes executed as of June 14, 2000 by the Borrower and
in favor of the Agent.

      "COLLATERAL ASSIGNMENT OF ORBITFORM NOTE" shall mean that certain
Collateral Assignment of Note dated as of June 14, 2000 between Philform, Inc.
and the Agent.

      "DEFERRED INTEREST" shall mean the incremental difference between the
interest rate that accrued on each Note from January 1, 2000 through the
effective date hereof.

      "EXIT FEE" shall mean $275,000.

      "EXTENSION FEE" shall mean $225,000.

      "LIMITED GUARANTY AGREEMENT" shall mean the Limited Guaranty executed by
SJMB dated June 15, 2000 and in favor of the Banks.

      "OF ACQUISITION, L.P." shall mean OF Acquisition, L.P., a Texas limited
partnership.

      "OPTIONAL CREDIT SUPPORT AGREEMENT" shall mean the Optional Credit Support
Agreement executed by SJMB of even date with the Second Amendment and Restated
Loan Agreement.

      "REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement by and between the Borrower and the Banks relating to the
Warrants and dated of even date with the issuance of the first Warrant under
Section 2.7 hereof.

      "REIMBURSEMENT AGREEMENT" means that certain Reimbursement Agreement
between the Borrower and SJMB dated on or about the date hereof and relating to
the Subordinated Note.

      "SJMB" means SJMB, L.P., a Delaware limited partnership.

      "SJCP" means St. James Capital Partners, L.P. a Delaware limited
partnership.

      "SUBORDINATED NOTE" means collectively all subordinated convertible
promissory notes issued, pursuant to the Reimbursement Agreement or issued
pursuant to the Optional Credit Support Agreement, by the Borrower and payable
to SJMB and, if issued, the $3,450,000.00 OrbitForm Note A and the $3,450,000.00
OrbitForm Note B.

      "SUBORDINATION AGREEMENT" means that certain Subordination Agreement
between the Borrower and SJMB and the Banks relating to the Subordinated Note
and dated of even date with the Second Amendment to the Amended and Restated
Loan Agreement.

      "SUBORDINATED PLEDGE AGREEMENT" means that certain Subordinated Pledge
Agreement between the Borrower and SJMB relating to the Subordinated Note and
dated of even date with the Second Amendment to the Amended and Restated Loan
Agreement.

                                      K-3

<PAGE>
      "SUBORDINATED SECURITY AGREEMENT" means that certain Subordinated Security
Agreement between the Borrower and SJMB relating to the Subordinated Note and
dated of even date with the Second Amendment to the Amended and Restated Loan
Agreement.

      "$3,450,000 ORBITFORM NOTE A" means that certain $3,450,000.00
Subordinated Convertible Promissory Note executed by Industrial Holdings, Inc.
and payable to the order of SJMB.

      "$3,450,000 ORBITFORM NOTE B" means that certain $3,450,000.00
Subordinated Convertible Promissory Note executed by Industrial Holdings, Inc.
and payable to the order of SJMB.

      "WARRANTS" shall mean the warrants to be issued pursuant to the Lenders
granting the holder thereof the right to purchase from the Borrower, and for a
period of up to five (5) years, fully paid and validly issued non-assessable
shares of the Borrower at a price of $1.40 per share.

      "WEEKLY PAYMENT DATE" shall mean the first Business Day of each calendar
week.

                                  ARTICLE II
                                  AMENDMENTS

      2.1 AMENDMENT RE: EURODOLLAR ADVANCES. As a result of the definitional
changes set forth above, the interest rate applicable to the current unpaid
balance of all Revolving Advances and all future Revolving Advances shall be,
until there occurs an Event of Default, the Base Rate plus THREE PERCENT (3%).
Accordingly, all references in the Agreement to EURODOLLAR ADVANCES to the
extent not otherwise as defined out of the Agreement, are hereby acknowledged by
the parties to be meaningless.

      2.2 AMENDMENT TO SECTION 2.4 - INTEREST. Section 2.4 of the Agreement is
hereby amended by deleting the following phrase:

      ACCRUED AND UNPAID INTEREST ON THE ADVANCES SHALL BE DUE AND PAYABLE AS
FOLLOWS:

            (a) IN THE CASE OF REVOLVING ADVANCES WHICH ARE BASE RATE ADVANCES,
      ON EACH MONTHLY PAYMENT DATE AND ON THE TERMINATION DATE;

            (b) IN THE CASE OF EACH REVOLVING ADVANCE WHICH IS AN EURODOLLAR
      ADVANCE, ON THE LAST DAY OF THE INTEREST PERIOD WITH RESPECT THERETO;

            (c) UPON THE PAYMENT OR PREPAYMENT OF ANY REVOLVING ADVANCE OR THE
      CONVERSION OF ANY REVOLVING ADVANCE TO A REVOLVING ADVANCE OF ANOTHER TYPE
      (BUT ONLY ON THE PRINCIPAL AMOUNT SO PAID, PREPAID, OR CONVERTED);

            (d) IN THE CASE OF EACH SWING LINE ADVANCE, ON THE DATE THE
      OUTSTANDING PRINCIPAL AMOUNT THEREOF IS REQUIRED TO BE REPAID; AND

            (e) ON THE TERMINATION DATE.

      The above phrase is REPLACED by the following:

      Accrued and non-paid interest on the Advances shall be due and payable on
the Weekly Payment Date.

      2.3 AMENDMENT TO SECTION 2.5 - BORROWING PROCEDURE. Effective as of the
date hereof, Section 2.5 is hereby amended in its entirety to read as follow:

            Section 2.5 BORROWING PROCEDURE . The Borrower shall give the Agent
      notice by means of an appropriate Advance Request Form for each Revolving
      Advance which is a Base Rate Advance by at least 12:00 p.m. and for each
      Swing Line Advance by at least 12:00 p.m., in both cases, Dallas, Texas
      time

                                      K-4

<PAGE>
      on the Business Day of such requested Base Rate Advances. The Agent
      at its option may accept telephonic requests for Advances, provided that
      such acceptance shall not constitute a waiver of the Agent's right to
      delivery of an Advance Request Form in connection with subsequent
      Advances. Any telephonic request for a Revolving Advance by the Borrower
      shall be promptly confirmed by submission of a properly completed Advance
      Request Form to the Agent. Each Revolving Advance shall be in a minimum
      principal amount of $50,000.00. Each Swing Line Advance shall be in a
      minimum principal amount of $50,000.00. The Agent shall promptly notify
      each Bank of the contents of each such notice. Not later than 2:00 p.m.
      Dallas, Texas time on the date specified for each Revolving Advance
      hereunder, each Bank will make available to the Agent at the Principal
      Office in immediately available funds, for the account of the Borrower,
      its pro rata share of each Revolving Advance. After the Agent's receipt of
      such funds and subject to the other terms and conditions of this
      Agreement, the Agent will make each Revolving Advance available to the
      Borrower by depositing the same, in immediately available funds, in an
      account of the Borrower (designated by the Borrower) maintained with the
      Agent at the Principal Office. The Swing Line Bank will make each Swing
      Line Advance available to the Borrower by depositing same, in immediately
      available funds, in such account referenced above. All notices under this
      Section required to be made by the Borrower shall be irrevocable and shall
      be given by the Borrower no later than 10:00 a.m. Dallas, Texas, time on
      the day which is not less than the number of Business Days specified above
      for such notice.

      2.4 AMENDMENT TO SECTION 2.6 - CONVERSIONS AND CONTINUATIONS. Section 2.6
of the Agreement entitled "Conversions and Continuations" is hereby deleted in
its entirety without replacement but without deletion of the heading "SECTION
2.6."

      2.5 AMENDMENT TO SECTION 2.8 - FEES. Section 2.8 - Fees is hereby amended
by adding a new Section (c) thereto to read as follows:

            (c) The Borrower hereby agrees to pay to the Agent for the account
      of each Bank the Extension Fee and the Exit Fee. The Extension Fee and the
      Exit Fee shall be payable all as more fully provided in Section 2.20.

      2.6 PAYMENT OF EXTENSION FEE, EXIT FEE AND DEFERRED INTEREST. A new
Section 2.20 entitled "Payment of Extension Fee and Deferred Interest" is added
to the Agreement to read as follows:

            Section 2.20 PAYMENT OF EXTENSION FEE, EXIT FEE AND DEFERRED
      INTEREST. The Borrower and the Banks hereby agree that the Deferred
      Interest and Extension Fee are currently due and owing. The Borrower and
      the Banks hereby agree that payment of the Extension Fee, Exit Fee and the
      Deferred Interest is hereby deferred until the earlier to occur of the
      following: (i) the sale or refinancing of the GHX Real Property, (ii) the
      sale by the Borrower or any Subsidiaries of other assets or (iii) the
      Termination Date. In the event that any sale or refinancing of the GHX
      Real Property, or the sale of any other asset, does not generate
      sufficient proceeds to pay the Extension Fee, Exit Fee plus the Deferred
      Interest in full such amounts received shall be received in partial
      payment of, at the election of the Banks, either the Extension Fee, Exit
      Fee or the Deferred Interest.

      2.7 RIGHT TO RECEIVE WARRANTS. A new Section 2.21 entitled "Warrants" is
added to the Agreement to read as follows:

            Section 2.21 WARRANTS. In the event that the Extension Fee, Exit Fee
      and the Deferred Interest are not all repaid in full prior to the date set
      forth below, the Banks shall be entitled to receive from the Borrower the
      indicated number of Warrants:

            (a) if not paid on or before August 31, 2000 - 75,000 Warrants;

            (b) if not paid on or before October 30, 2000 - an additional 25,000
      Warrants;

            (c) if not paid on or before the Termination Date - an additional
      50,000 Warrants.

                                      K-5
<PAGE>
      If Warrants accrue hereunder, they are to be issued and delivered in the
form attached hereto as EXHIBIT C without the necessity of demand by the Banks
and within ten (10) days of the date they accrue. Upon the issuance of the first
Warrant hereunder, Borrower will also execute and deliver the Registration
Rights Agreement in the form attached hereto as EXHIBIT B. Failure to so issue
and deliver the Warrants and Registration Rights Agreement shall constitute an
Event of Default.

      2.8 AMENDMENT TO SECTION 8.1(B). Effective as of the date hereof, Section
8.1(b) is hereby amended in its entirety to read as follows:

            (b) MONTHLY FINANCIAL STATEMENTS. As soon as available, and in any
      event within THIRTY (30) days after the end of each of the months of each
      fiscal year of the Borrower, a copy of an unaudited financial report of
      the Borrower and the 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 (consolidated only), and cash flow (consolidated
      only), 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 the Borrower to have
      been prepared in accordance with GAAP and to fairly and accurately present
      (subject to year-end audit adjustments and without the requirement that
      there be added such notes and other disclosures routinely added by an
      accountant preparing audited statements) the financial condition and
      results of operations of the Borrower and the Subsidiaries, on a
      consolidated and consolidating basis, at the date and for the periods
      indicated therein including a description, in such detail as the Banks
      shall reasonably require, of any variance from any budget previously
      submitted and such explanatory comments as may be needed to explain such
      variance;

      2.9 AMENDMENT TO SECTION 8.1(C). Effective as of the date hereof, Section
8.1(c) is hereby amended in its entirety to read as follows:

            Section 8.1(c) CERTIFICATE OF NO DEFAULT. Concurrently with the
      delivery of each of the financial statements referred to in Subsections
      8.1(a) and 8.1(b), a certificate of the chief executive or chief financial
      officer of the 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 thereof and the
      action that is proposed to be taken with respect thereto, and (ii) showing
      in reasonable detail the calculations demonstrating compliance with
      Article X;

      2.10 MENDMENT TO SECTION 8.1. Effective as of the date hereof, Section 8.1
is hereby amended by adding a new Section 8.1(n) to read as follows:

            Section 8.1(n) AUDITS. From time to time, at any time upon the
      request of the Agent, a report of an independent collateral field examiner
      (which may or may not be affiliated with the Banks), with respect to the
      Accounts and Inventory component included in the Borrowing Base. So long
      as no Event of Default exists hereunder, the Borrower will promptly
      reimburse the Banks for the lessor of (i) the actual cost of such audit or
      (ii) $5,000.00 per Subsidiary audited for up to four (4) audits of each
      Subsidiary during each twelve (12) month period. The Banks anticipate
      conducting their audits once a Fiscal Quarter. Morever, they reserve the
      right to cluster or spread out the audits during each twelve (12) month
      period. Upon the occurrence of an Event of Default, all such audits shall
      be conducted at the sole cost and expense of the Borrower.

      2.11 AMENDMENT CONCERNING BEST EFFORTS TO REFINANCE. A new Section 8.15
entitled "Best Efforts to Refinance" is added to the Agreement to read as
follows:

            Section 8.15 BEST EFFORTS TO REFINANCE. The Borrower agrees to use
      its best efforts to obtain refinancing of the Obligations by promptly
      initiating negotiations with more than one potential lender. Commencing
      July 17, 2000, and at the end of each calendar month and at the middle of
      each calendar month thereafter, the Borrower shall provide the Banks with
      a written report describing the status of its refinancing efforts.

                                      K-6
<PAGE>
      2.12 AMENDMENT CONCERNING BEST EFFORTS TO SELL AND/OR REFINANCE GHX REAL
PROPERTY. A new Section 8.16 entitled "Best Efforts to Sell and/or Refinance GHX
Real Property" is added to the Agreement to read as follows:

            Section 8.16 BEST EFFORTS TO SELL AND/OR REFINANCE GHX REAL
      PROPERTY. The Borrower agrees to use its best efforts to consummate and
      close the sale of the GHX Real Property by not later than August 31, 2000.
      Consistent with the provisions of the Deeds of Trust, the Banks have the
      right to approve the terms of any such sale. In the alternative, the
      Borrower agrees to use its best efforts to refinance the indebtedness
      owing to the Agent (not the Banks) which is secured by the GHX Real
      Property provided, however, the Agent does not need to approve or agree to
      such refinancing unless it produces sufficient funds to retire the
      indebtedness owing to the Agent and secured by the GHX Real Property and
      generate sufficient additional funds to pay the Extension Fee, Exit Fee
      and the Deferred Interest.

      2.13 AGREEMENT TO ACQUIRE OF ACQUISITION, L.P. A new Section 8.17 is added
to the Agreement to read as follows:

            Section 8.17 AGREEMENT TO ACQUIRE OF ACQUISITION, L.P. Upon the
      execution of the Second Amendment to the Amended and Restated Credit
      Agreement, the Borrower will establish the date for a shareholder vote to
      consider the approval of the Agreement to Acquire OF Acquisition, L.P. The
      Borrower will use its best efforts to promptly obtain shareholder approval
      of such agreement and will promptly and efficiently pursue all regulatory
      approvals. Once the Agreement to Acquire OF Acquisition, L.P. is entered
      into, the Borrower will not modify or amend such Agreement without the
      prior written approval of the Banks. The undertaking of this obligation by
      the Borrower does not represent the Bank's consent to the various terms
      and conditions of the Agreement to Acquire OF Acquisition, L.P.. As
      expressly set forth herein, certain payments and provisions of the
      Agreement to Acquire OF Acquisition, L.P. may not be made or performed
      without the prior written approval of the Banks.

      2.14 AMENDMENT TO SECTION 9.2 - LIMITATION ON LIENS. Effective as of the
date hereof, Section 9.2 - Limitation on Liens is hereby amended by adding the
following subsections (g) and (h) thereto to read as follows:

            (g) Liens in the form of the Subordinated Security Agreement and the
      Subordinated Pledge Agreement; and

            (h) Liens in the form of second liens on any of Borrower's or
      Subsidiary's real property (other than GHX Real Property located in
      Houston, Harris County, Texas) provided that the deeds of trust creating
      the second liens are in form and substance acceptable to the Banks.

      2.15 AMENDMENT TO ARTICLE IX. Article IX is amended by adding a new
Section 9.15 entitled "Limitation on Payment of Related Party Expenses" to read
as follows:

            Section 9.15. LIMITATION ON PAYMENT OF RELATED PARTY EXPENSES. The
      Borrower will not pay any of the expenses related to SJMB's purchase of
      Belleli Energy until the Exit Fee, the Extension Fee and the Deferred
      Interest have all been repaid in full and, even after each of those items
      have been repaid in full, the Borrower shall not make any payment of the
      expenses related to SJMB's purchase of Belleli Energy if, after taking
      into account such a payment, an Event of Default would arise hereunder.
      Additionally, the Borrower shall pay no cash, or any equivalent thereof,
      as an origination fee, breakup fee, points or other similar expense or
      consideration in connection with the Agreement to Acquire OF Acquisition,
      L.P. until the Extension Fee, Exit Fee and the Deferred Interest have been
      repaid in full. Additionally, no such origination fee, breakup fee, points
      or other similar expense shall be paid if the payment of the same; without
      the prior approval of the Banks, would result in an Event of Default
      hereunder.

      2.16 AMENDMENT TO ARTICLE X - FINANCIAL COVENANTS. The Borrower's
obligations to comply with the financial ratios set forth in the Agreement at
Article X is hereby suspended. From and after the date of the Second Amendment
to the Amended and Restated Credit Agreement, the Borrower shall be required to
comply with, and shall submit monthly financial covenant analysis and statements
certifying compliance with the following financial ratios which are here added
to Article X and reads as follows:

                                      K-7
<PAGE>
            Section 10.10. CONSOLIDATED TANGIBLE NET WORTH. The Borrower will
      maintain at all times Consolidated Tangible Net Worth in an amount equal
      to not less than ninety percent (90%) of the aggregate of its Consolidated
      Tangible Net Worth as it exists as of May 31, 2000 plus all consolidated
      monthly net income generated thereafter. Compliance with this ratio shall
      be tested monthly beginning June 30, 2000 and commencing with financial
      results for the month of May, 2000 and on a cumulative basis for the 2000
      year to date.

            Section 10.11 CAPITAL EXPENDITURES. The Borrower shall not make or
      incur, and will not permit any Subsidiary to make or incur, Capital
      Expenditures, including Capital Lease Obligations, in excess of $3,500,000
      for the calendar year 2000. In calculating Capital Expenditures, the
      Borrower shall not include Capital Expenditures made by its subsidiary
      Blastco Services Company.

            Section 10.12 EBITDA TO DEBT SERVICE. The Borrower will maintain, in
      the manner described below, a ratio of EBITDA to Debt Service of not less
      than 1.25 to 1.0, tested monthly, and calculated in the following manner:

            (i)   EBITDA for the month of June, 2000 shall be compared to Debt
                  Service for the month of June, 2000.

            (ii)  EBITDA for the months of June and July, 2000 shall be added
                  together and divided by two (2) and compared to Debt Service
                  for the month of July, 2000.

            (iii) EBITDA for the months of June, July and August, 2000 shall be
                  combined and divided by three (3) and compared to Debt Service
                  for the month of August, 2000.

            (iv)  Beginning with August, 2000 and thereafter, EBITDA for the
                  preceding three months shall be added together and divided by
                  three (3) and compared to Debt Service for the most recent
                  month for which the ratio is to be calculated.

In the event Borrower fails to comply with any requirements of this Section
10.12, such non-compliance shall not constitute an Event of Default hereunder,
if, within ten (10) days after being notified by the Bank of such
non-compliance, SJMB makes a capital contribution or loans Subordinated
Indebtedness to Borrower that in each case is in an amount which, if added to
EBITDA for the period in question, would be sufficient to cure such
non-compliance.

            Section 10.13 REVISIONS TO SECTIONS 10.10 THROUGH 10.12 OF THE
      AGREEMENT. In the event the Banks hereinafter consent to the terms of any
      sale of Beaird Industries, and after taking into account the effect of any
      such sale, the Borrower believes future defaults will occur under Section
      10.10, 10.11, or 10.12 of the Agreement solely as the result of such sale,
      the Borrower may request that the Banks reset one or more of those
      financial ratios. The Banks may condition their consent to any such sale
      to the Borrower's agreement to the reset of one or more of such ratios.

      2.17 AMENDMENTS TO ARTICLE XI. The following subsections are added to
Section 11.1 which is entitled "Events of Default":

            (p) The Borrower fails to obtain prior to August 15, 2000 new equity
      and/or debt in form and substance acceptable to the Banks and if debt,
      subordinate in a fashion acceptable to the Banks, in an aggregate minimum
      amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
      ($1,500,000.00).

            (q) If prior to August 31, 2000 a sufficient majority of the
      shareholders of the Borrower fail to approve the Agreement to Acquire OF
      Acquisition, L.P.

            (r) If prior to September 1, 2000 the Borrower has failed to
      complete the acquisition, on terms acceptable to the Banks, of all of OF
      Acquisition, L.P.

                                      K-8
<PAGE>
            (s) Should EnSerCo initiate any legal proceedings in an effort to
      collect the indebtedness evidenced by the EnSerCo Loan Documents.

            (t) Should the Borrower pay any of the indebtedness evidenced by the
      EnSerCo Loan Documents or owing to Trinity.

            (u) Should Heller Financial, Inc. declare a default against the
      Borrower.

            (v) Should the Borrower fail to obtain within 45 days from the date
      hereof a default waiver from Heller Financial, Inc., in form and substance
      acceptable to the Banks, waiving all current defaults by the Borrower to
      Heller Financial, Inc..

      2.18 EVENTS OF DEFAULT WAIVED. The Borrower has disclosed the existence of
the Defaults described on EXHIBIT A. As set forth in Section 2.16 hereof the
Banks have revised Section 10.10 through 10.12 of the Agreement. The Banks
hereby waive their right to pursue remedies for the prior Defaults arising as a
result of the Borrower's prior failure to comply with Section 10.1 through 10.6
of the Agreement. The Banks also hereby waive their right to pursue remedies
arising as a result of the Borrower's prior failure to comply with the disclosed
Defaults under Sections 8.1(a), 8.1(b), 8.1(c), 8.1(f) and 8.14. Furthermore,
the Banks waive their right to pursue remedies arising as a result of Borrower's
current defaults in the covenants, payment and cross-default provisions of the
EnSerCo Loan Documents. Finally, the Banks hereby waive their right to pursue
remedies arising as a result of the Borrower's (i) current defaults in the
financial covenants and cross-default provisions of the loan documents with
Heller Financial, Inc.; and (ii) failure to make payment to Trinity on the
Trinity Promissory Note.

                                   ARTICLE III
                              CONDITIONS PRECEDENT

      3.1 CONDITIONS. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent:

      (a) Agent shall have received all of the following, each dated (unless
      otherwise indicated) the date of this Amendment, in form and substance
      satisfactory to Agent:

            (1) RESOLUTIONS. Resolutions of the Board of Directors of Borrower
      certified by its Secretary or an Assistant Secretary which authorize the
      execution, delivery, and performance by Borrower and each Guarantor of
      this Amendment and the other Loan Documents to which Borrower and each
      Guarantor is or is to be a party hereunder;

            (2) INCUMBENCY CERTIFICATE. A certificate of incumbency certified by
      the Secretary or an Assistant Secretary of Borrower and each Guarantor
      certifying the names of the officers of Borrower and each Guarantor
      authorized to sign this Amendment and each of the other Loan Documents to
      which Borrower and each Guarantor is or is to be a party hereunder
      (including the certificates contemplated herein) together with specimen
      signatures of such officers;

            (3) BYLAWS. The bylaws of Borrower certified by the Secretary or an
      Assistant Secretary of Borrower;

            (4) GOVERNMENTAL CERTIFICATES. Certificates of the appropriate
      government officials of the state of incorporation of Borrower and each
      Guarantor as to the existence and good standing of Borrower and each
      Guarantor, each dated within ten (10) days prior to the date of this
      Amendment;

            (5) OPINIONS OF COUNSEL. Opinions of counsel to the Borrower and
      SJMB in form acceptable to and from counsel to the Banks;

            (6) ADDITIONAL AGREEMENTS. The Banks shall have received and
      approved executed copies of the Registration Rights Agreement, the
      Reimbursement Agreement, the Optional Credit Support Agreement and the
      Agreement to Acquire OF Acquisition, L.P., and the Subordination Agreement
      and the

                                      K-9
<PAGE>
      Subordinated Note, all of which shall be satisfactory to the Banks in the
      exercise of their sole but reasonable discretion;

            (7) ADDITIONAL INFORMATION. Agent shall have received such
      additional documents, instruments and information as Agent or its legal
      counsel, Winstead Sechrest & Minick P.C., may request.

      (b) The representations and warranties contained herein and in all other
Loan Documents, as amended hereby, shall be true and correct as of the date
hereof as if made on the date hereof;

      (c) Except for as described on EXHIBIT A hereto no Event of Default shall
have occurred and be continuing and no event or condition shall have occurred
that with the giving of notice or lapse of time or both would be an Event of
Default.

      (d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments, and other legal
matters incident thereto shall be satisfactory to Agent and its legal counsel,
Winstead Sechrest & Minick P.C.

                                   ARTICLE IV
                  RATIFICATIONS, REPRESENTATIONS AND WARRANTIES

      4.1 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Agreement and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Agreement are ratified and confirmed and shall
continue in full force and effect. Borrower and Agent agree that the Agreement
as amended hereby shall continue to be legal, valid, binding and enforceable in
accordance with its terms.

      4.2 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Agent that (i) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the articles of incorporation or
bylaws of Borrower, (ii) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and correct
on and as of the date hereof as though made on and as of the date hereof, (iii)
no Event of Default, other than those listed on EXHIBIT A, has occurred and is
continuing and no event or condition has occurred that with the giving of notice
or lapse of time or both would be an Event of Default, and (iv) other than as
set forth on EXHIBIT A, Borrower is in full compliance with all covenants and
agreements contained in the Agreement as amended hereby.

                                    ARTICLE V
                                  MISCELLANEOUS

      5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Amendment or any other Loan Document including any Loan
Document furnished in connection with this Amendment shall survive the execution
and delivery of this Amendment and the other Loan Documents, and no
investigation by any Bank or any closing shall affect the representations and
warranties or the right of Banks to rely upon them.

      5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents, including the
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.

      5.3 EXPENSES OF AGENT. As provided in the Agreement, Borrower agrees to
pay on demand all costs and expenses incurred by Agent in connection with the
preparation, negotiation, and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including without limitation the costs and fees of
Agent's legal counsel, and all costs and expenses incurred by Agent in
connection with the enforcement or preservation of any rights under the
Agreement,

                                      K-10
<PAGE>
as amended hereby, or any other Loan Document, including without limitation the
costs and fees of Agent's legal counsel.

      5.4 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

      5.5 APPLICABLE LAW. This Amendment and all other Loan Documents executed
pursuant hereto shall be deemed to have been made and to be performable in
Dallas, Dallas County, Texas and shall be governed by and construed in
accordance with the laws of the State of Texas.

      5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure
to the benefit of the Banks and Borrower and their respective successors and
assigns, except Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Banks.

      5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.

      5.8 EFFECT OF WAIVER. No consent or waiver, express or implied, by the
Banks to or for any breach of or deviation from any covenant, condition or duty
by Borrower or Guarantor shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.

      5.9 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.

      5.10 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The provisions
of Chapter 346 of the Texas Finance Code are specifically declared by the
parties hereto not to be applicable to this Agreement or any of the other Loan
Documents or to the transactions contemplated hereby.

      5.11 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS
AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT 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 THIS AMENDMENT, 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.

                                      K-11
<PAGE>
Executed as of the date first written above.

                                    BORROWER:

                                    INDUSTRIAL HOLDINGS, INC., a
                                    Texas corporation

                                    By: __________________________
                                          Michael N. Marsh
                                          President and Chief Financial Officer

                                    ADDRESS FOR NOTICES:

                                    Industrial Holdings, Inc.
                                    7135 Ardmore
                                    Houston, Texas 77054
                                    Fax No.: 713-749-9642
                                    Telephone No.: 713-747-1025
                                    Attention: Mr. Robert E. Cone

                                    AGENT:

                                    COMERICA BANK-TEXAS

                                    By: __________________________
                                          Robin M. Kain
                                          Vice President

                                    ADDRESS FOR NOTICES:

                                    Comerica Bank - Texas
                                    P.O. Box 650282
                                    Dallas, Texas 75265-0282
                                    Fax No.: (214) 969-6416
                                    Telephone No.: (214) 969-6472
                                    Attention: Mr. Gary Orr

                                    WITH A COPY TO:

                                    Comerica Bank - Texas
                                    P.O. Box 650282
                                    Mail Code 6510
                                    Dallas, Texas 75265-0282
                                    Fax No.: (214) 589-4708
                                    Telephone No.: (214) 589-4724
                                    Attention:  Robin M. Kain

                                    BANKS:

Commitment:                         COMERICA BANK-TEXAS
$27,250,000.00

                                    By: __________________________
                                          Robin M. Kain
                                          Vice President

                                      K-12
<PAGE>
                                    ADDRESS FOR NOTICES:

                                    Comerica Bank - Texas
                                    P.O. Box 650-282
                                    Dallas, Texas 75265-0282
                                    Fax No.: (214) 969-6416
                                    Telephone No.: (214) 969-6472
                                    Attention: Mr. Gary Orr

                                    WITH A COPY TO:

                                    Comerica Bank - Texas
                                    P.O. Box 650282
                                    Mail Code 6510
                                    Dallas, Texas 75265-0282
                                    Fax No.: (214) 589-4708
                                    Telephone No.: (214) 589-4724
                                    Attention:  Robin M. Kain

                                    LENDING OFFICE FOR ADVANCES:

                                    Comerica Bank - Texas
                                    P.O. Box 650282
                                    Mail Code 6510
                                    Dallas, Texas 75265-0282
                                    Fax No.: (214) 589-4708
                                    Telephone No.: (214) 589-4724
                                    Attention:  Robin M. Kain

Commitment:                         NATIONAL BANK OF CANADA, a
$13,650,000.00                      Canadian Chartered Bank

                                    By: __________________________
                                    Name: ________________________
                                    Title: _______________________

                                    ADDRESS FOR NOTICES:

                                    National Bank of Canada
                                    2121 San Jacinto, Suite 1850
                                    Dallas, Texas  75201
                                    Fax No.: (214) 871-2015
                                    Telephone No.: (214) 871-1260
                                    Attention: Mr. Randy Wilhoit

                                    WITH A COPY TO:

                                    National Bank of Canada
                                    125 W. 55th Street
                                    New York, New York  10019
                                    Fax No.: (212) 632-8775
                                    Telephone No.: (212) 632-8711
                                    Attention: Mr. Charles Grant

                                      K-13
<PAGE>
                                    LENDING OFFICE FOR ADVANCES:

                                    National Bank of Canada
                                    2121 San Jacinto, Suite 1850
                                    Dallas, Texas  75201
                                    Fax No.: (214) 871-2015
                                    Telephone No.: (214) 871-1264
                                    Attention:  Ms. Vickie Leon

Commitment:                         HIBERNIA NATIONAL BANK
$9,100,000.00

                                    By: __________________________
                                            Tammy Angelety
                                            Vice President

                                    ADDRESS FOR NOTICES:

                                    Hibernia National Bank
                                    225 Baronne Street., 10th Fl.
                                    New Orleans, Louisiana 70112
                                    Fax No.: (504) 533-5099
                                    Telephone No.: (504) 533-2045
                                    Attention: Ms. Tammy Angelety

                                    LENDING OFFICE FOR ADVANCES:

                                    Hibernia National Bank
                                    225 Baronne Street., 10th Fl.
                                    New Orleans, Louisiana 70112
                                    Fax No.: (504) 533-5099
                                    Telephone No.: (504) 533-2035
                                    Attention: Ms. Randi Boudreaux

                                      K-14
<PAGE>
    Guarantors hereby consent and agree to this Amendment and agree that the
Guaranty shall remain in full force and effect and shall continue to be the
legal, valid and binding obligation of Guarantors enforceable against Guarantors
in accordance with its terms.

       Guarantor:
A & B Bolt and Supply, Inc., a Louisiana corporation
The Rex Group, Inc., a Texas corporation
Rex Machinery Sales, Inc., a Texas corporation d/b/a
  Rex/Paul's Machine/Sales
Rex Machinery Movers, Inc., a Texas corporation
  d/b/a Ideal Products
U.S. Crating, Inc., a Texas corporation (f/k/a Rex
  Export Crating, Inc.)
First Texas Credit Corporation, a Texas corporation
Landreth Engineering Company, a Texas corporation
Pipeline Valve Specialty, Inc., a Texas corporation
  (f/k/a Industrial Municipal Supply Company)
Bolt Manufacturing Co., Inc., a Texas corporation,
  d/b/a Walker Bolt Manufacturing Co., Inc.
LSS-Lone Star-Houston, Inc., a Texas corporation
American Rivet Company, Inc., an Illinois corporation
Manifold Valve Services, Inc., a Delaware
  corporation, d/b/a Rogers Equipment & Supply Company
Philform, Inc., a Michigan corporation
GHX, Incorporated, a Texas corporation
Regal Machine Tool, Inc., a Texas corporation, f/k/a
  Rex Machine Tool, Inc.
WHIR Acquisition, Inc., a Texas corporation, d/b/a Ameritech Fastener
  Manufacturing
Moores Pump and Supply, Inc., a Louisiana
 corporation
GHX, Incorporated of Louisiana, a Louisiana
  corporation
Beaird Industries, Inc., a Delaware corporation
United Wellhead Services, Inc., a Texas corporation

By: ___________________________
Name:    Christine Smith
Title:   Vice President

                                      K-15
<PAGE>
                                    EXHIBIT A

                           EXISTING EVENTS OF DEFAULT

      The Borrower warrants that it is presently in default of only the
following provisions of the Credit Agreement:

 1.   Section 10.1 - CURRENT RATIO

 2.   Section 10.2 - CONSOLIDATED NET WORTH

 3.   Section 10.3 - FUNDED DEBT/EBITDA RATIO

 4.   Section 10.4 - CASH FLOW COVERAGE RATIO

 5.   Section 10.5 - LEVERAGE RATIO

 6.   Section 10.6 - SENIOR SECURED FUNDED DEBT TO EBITDA RATIO

 7.   Section  8.1(a) - AUDITED ANNUAL FINANCIAL STATEMENT to be delivered
      within 90 days of year-end.  (1999 calendar year-end only)

 8.   Section 8.1(c) - CERTIFICATE OF NO DEFAULT (1999 calendar year-end only)

 9.   Section  8.14 -  REPAYMENT OF OTHER EXISTING DEBT.  Borrower has not
      repaid the funded debt of $15,000,000.00 plus accrued interest owed to
      EnSerCo.

10.   Section  8.1(f) - OBLIGATION TO NOTIFY  DEFAULTS.  Borrower may not have
      notified Banks of each of the above defaults within five (5) days.

11.   Defaults in the covenants,  payment and cross-default  provisions of the
      EnSerCo Loan Documents.

12.   Defaults in the financial covenants and cross-default  provisions of the
      loan documents with Heller Financial, Inc.

13.   Default  in the  payment to Trinity  on the  promissory  note  issued to
      Trinity (the "Trinity Promissory Note").

14.   Section  8.1(b) -  QUARTERLY  FINANCIAL  STATEMENTS.  Failure to provide
      March 31, 2000 financial statements within 45 days of quarter end.

                                      K-16

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