Herc, Jason, Iolaus, and Lilith are at Cora's when a messenger arrives for Jason with a birthday present. Jason opens it. It's his father's sword and shield.
Later at the Acamedy: During a training session, Iolaus accidently blinds Lilith, and Jason accidentily breaks Herc's sword. Hercules goes to Hephaestus and asks him for a sword and shield. Heph asks why, and Herc shows him his broken one. Heph gives Herc a shining magnetic shield and matching sword. If the sword is knocked out of his hand, the shield will draw it back. The shield can deflect anything even fire, the sword can cut through any metal. Herc is impressed, and returns to the academy with his shining new weapons. Everyone is impressed.
Herc goes to Cora's and a gang of thugs pick a fight with him. They demand his weapons. Herc fights the leader and wins. They leave. Later the guy's brother show up, Herc beats him to.
In his next training match with Jason, it is Jason's sword that winds up in two pieces. Herc say's he's sorry. Jason walks off. Herc returns the weapons to Heph saying he doesn't want them. Heph destroys them.
Later, back at the academy, The gang returns. This time the oldest brother wants Herc's weapons. Herc says he doesn't have them. A fight breaks out. Herc, Iolaus, Jason, and a blinded Lilith, take them on. Of course our guys win.
The episode ends with Lilith getting her sight back, and Hercules giving Jason a birthday present. Jason opens it and says "My father's sword. You fixed it?" to which Herc replies "Actually, Hephaestus fixed it."
So everyone is friends again.