8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        Date of report (Date of earliest event reported): January 2, 2003
                                                          ---------------

                           K-TRON INTERNATIONAL, INC.
                           ---------------------------
                 (Exact Name of Registrant Specified in Charter)

                                                      
  New Jersey                        0-9576                      22-1759452
- ---------------                ----------------              ----------------
(State or Other                (Commission File              (I.R.S. Employer
Jurisdiction of                     Number)                 Identification No.)
 Incorporation)



                                                                   
             Routes 55 & 553
              P.O. Box 888
           Pitman, New Jersey                                         08071-0888
- ----------------------------------------                              ----------
(Address of Principal Executive Offices)                              (Zip Code)




       Registrant's telephone number, including area code: (856) 589-0500
                                                           --------------

                                 Not Applicable
          -------------------------------------------------------------
          (Former Name or Former Address, if Changed Since Last Report)

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

(a) On January 2, 2003, K-Tron International, Inc. ("K-Tron"), through its
indirect, wholly-owned subsidiary PCC Acquisition Co., a Delaware corporation
("Acquisition Co."), acquired all of the outstanding capital stock (the "PCC
Stock") of Pennsylvania Crusher Corporation, a Delaware corporation ("PCC"),
from John D. Whalen, Donald J. Carrozzino, Frank Wallitsch, Jr. and Nancy S.
Hansen (the "Stockholders"). The acquisition of the PCC Stock was made pursuant
to a Stock Purchase Agreement (the "PCC Stock Purchase Agreement") dated January
2, 2003 by and among Acquisition Co. and the Stockholders. The PCC Stock
Purchase Agreement is attached hereto as Exhibit 2.1 and incorporated herein by
reference. On January 3, 2003, Acquisition Co. was merged with and into PCC,
with PCC being the surviving corporation.

      As a result of the purchase of the PCC Stock, PCC's wholly-owned
subsidiary, Jeffrey Specialty Equipment Corporation, a Delaware corporation
("Jeffrey"), is now also an indirect, wholly-owned subsidiary of K-Tron.

      The purchase price paid for the PCC Stock was $23.5 million, subject to a
post-closing adjustment based on PCC's consolidated stockholders' equity at
December 31, 2002. Of this amount, $19.5 million was paid in cash to the
Stockholders, and K-Tron issued an aggregate of $4 million in unsecured
promissory notes to the Stockholders (the "Stockholder Notes"). The principal of
the Stockholder Notes is payable in three equal, annual installments on the
second, third and fourth anniversaries of the closing date. With respect to the
payment of the cash portion of the purchase price and related acquisition
expenses, $15 million of this amount was financed through a secured credit
facility from National City Bank directly to PCC with no recourse to K-Tron.
This credit facility is secured by all of the real property, personal property
and other assets of PCC and Jeffrey, including a pledge by K-Tron Investment
Co., a direct, wholly-owned subsidiary of K-Tron, of the stock of PCC. The total
amount of the PCC facility with National City Bank is $17 million, leaving an
additional $2 million of availability under the revolving credit line, subject
to certain conditions, for working capital purposes. Additionally, K-Tron
America, Inc., another K-Tron indirect, wholly-owned subsidiary ("K-Tron
America"), borrowed $5 million from The Bank, a subsidiary of Fulton Financial
Corporation, which money was used to pay part of the purchase price for the PCC
Stock. This loan, which was combined with another $2.333 million
then-outstanding loan from The Bank to K-Tron America, is secured by the real
property, accounts receivable, inventory and equipment of K-Tron America (with
limited exceptions), and its repayment by K-Tron America is guaranteed by
K-Tron.

(b) PCC has its headquarters in Broomall, Pennsylvania, and a manufacturing
facility in Cuyahoga Falls, Ohio. It manufactures size reduction and related
equipment which is sold to electric utilities to crush coal for use in
coal-fired power generation plants and also to companies in other industries
such as quarries where the crushing of material is required. Jeffrey is located
in Woodruff, South Carolina, where it manufactures chip sizer mills, industrial
hammermills and other size reduction equipment for use in the paper and pulp
industries to crush wood in the production of paper and also in other industries
for crushing applications. Jeffrey also makes large-scale vibratory feeders for
coal, minerals,


                                       2

chemicals and other bulk materials. A significant portion of the revenues of
both PCC and Jeffrey comes from the sale of spare parts. Following the
acquisition, K-Tron will continue to operate both businesses.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(a) Financial statements for Pennsylvania Crusher Corporation have not been
prepared but will be filed not later than March 18, 2003 pursuant to the
instructions set forth in Item 7 of Form 8-K.

(b) Pro forma financial statements reflecting the acquisition of all of the
stock of Pennsylvania Crusher Corporation have not been prepared but will be
filed not later than March 18, 2003 pursuant to the instructions set forth in
Item 7 of Form 8-K.

(c)      Exhibit No.        Exhibit
         -----------        -------

         2.1                Stock Purchase Agreement dated January 2, 2003 by
                            and among John D. Whalen, Donald J. Carrozzino,
                            Frank Wallitsch, Jr. and Nancy S. Hansen and PCC
                            Acquisition Co. (1)

         10.1               Credit Agreement dated January 3, 2003 among
                            Pennsylvania Crusher Corporation, the Lenders party
                            to that Credit Agreement and National City Bank, as
                            Agent (1)

         10.2               Form of the Stockholder Note issued to each of the
                            individuals listed on Schedule 10.2, which notes are
                            identical in all material respects except for the
                            payee, the principal amount of the note and the
                            amount of the installments to be made thereunder

         10.3               Note dated December 20, 2002 from K-Tron America,
                            Inc. in favor of The Bank

         10.4               Loan Modification Agreement dated December 20, 2002
                            between K-Tron America, Inc. and The Bank

         99.1               Press Release dated January 6, 2003

(1) The exhibits and disclosure letters to the Stock Purchase Agreement and the
Credit Agreement have been omitted. Pursuant to Item 601(b)(2) of Regulation
S-K, the Company agrees to furnish a copy of the exhibits and disclosure letters
to the Securities and Exchange Commission upon request.


                                       3

                                    SIGNATURE

      Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                        K-TRON INTERNATIONAL, INC.


Date: January 15, 2003                  By: /s/ Edward B. Cloues, II
      ----------------                      -----------------------------------
                                            Edward B. Cloues, II
                                            Chairman of the Board and Chief
                                            Executive Officer


                                       4

                                  EXHIBIT INDEX



Exhibit No.       Exhibit
- -----------       -------
               
2.1               Stock Purchase Agreement dated January 2, 2003 by and among
                  John D. Whalen, Donald J. Carrozzino, Frank Wallitsch, Jr. and
                  Nancy S. Hansen and PCC Acquisition Co. (exhibits and
                  disclosure letter omitted)

10.1              Credit Agreement dated January 3, 2003 among Pennsylvania
                  Crusher Corporation, the Lenders party to that Credit
                  Agreement and National City Bank, as Agent (exhibits and
                  disclosure letter omitted)

10.2              Form of the Stockholder Note issued to each of the individuals
                  listed on Schedule 10.2, which notes are identical in all
                  material respects except for the payee, the principal amount
                  of the note and the amount of the installments to be made
                  thereunder

10.3              Note dated December 20, 2002 from K-Tron America, Inc. in
                  favor of The Bank

10.4              Loan Modification Agreement dated December 20, 2002 between
                  K-Tron America, Inc. and The Bank

99.1              Press Release dated January 6, 2003



                                       5

EX-2.1

                                                                     Exhibit 2.1


                            STOCK PURCHASE AGREEMENT

      This Stock Purchase Agreement (the "Agreement") is made and entered into
on the 2nd day of January, 2003 by and among John D. Whalen, Donald J.
Carrozzino, Frank Wallitsch, Jr. and Nancy S. Hansen (each of the foregoing,
individually, a "Seller"; and collectively, the "Sellers"), being the owners of
all of the issued and outstanding common stock of Pennsylvania Crusher
Corporation, a Delaware corporation (the "Company"), and PCC Acquisition Co., a
Delaware corporation (the "Buyer").

      The Sellers own all of the issued and outstanding common stock of the
Company (the "Shares"), with each Seller owning the number of Shares set forth
after such Seller's name in column A of Exhibit A hereto. The Buyer desires to
purchase from the Sellers, and the Sellers desire to sell to the Buyer, all of
the Shares in accordance with the provisions of this Agreement.

      NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:

      1. Sale and Purchase of Shares. Subject to the terms and conditions of
this Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
defined in Section 2(a) hereof) each Seller shall sell to the Buyer and the
Buyer shall purchase from each Seller all of the Shares owned by such Seller in
exchange for a purchase price determined and payable as follows:

      (a) cash in the amount set forth after such Seller's name in column B of
Exhibit A hereto shall be paid by the Buyer to such Seller on the first business
day following the Closing Date (the "Payment Date") in the manner provided in
the last sentence of Section 2(b) hereof, with $19.5 million being the total
amount of cash to be paid to all of the Sellers on the Payment Date
(collectively, the "Closing Payments"). It is contemplated by the parties that
following the sale of the Shares (i) the Buyer will merge with and into the
Company, (ii) the Company will borrow funds from National City Bank and (iii)
the Company will, on the Payment Date, pay the Closing Payments in full by wire
transfer of immediately available funds as described in the last sentence of
Section 2(b);

      (b) cash in the amounts set forth after such Seller's name in columns C, D
and E of Exhibit A hereto shall be paid by the Buyer to such Seller on each of
the second, third and fourth anniversaries of the Closing Date, respectively,
(or if any such payment date is not a day on which banks in New Jersey and
Pennsylvania are open for business, the next succeeding day on which banks in
such states are so open), with $4.0 million being the total amount of cash to be
paid to all of the Sellers on these three anniversary dates, together in each
case with simple interest on the unpaid balance thereof from the Closing Date at
the rate of 6% per annum, payable on and for the periods ending each April 2,
July 2, October 2 and January 2 until such deferred purchase price obligation
has been satisfied, with the final interest payment to be on the date of such
satisfaction; all of the foregoing, with respect to each Seller, to be satisfied
by the Buyer's delivery on the Closing Date of a promissory note made by the
Buyer's ultimate parent, K-Tron International, Inc. ("K-Tron"), in favor of such
Seller in the form attached hereto as Exhibit B (individually with respect to
each Seller, a "Seller Note", and collectively, the "Seller Notes"); and

      (c) cash in an amount to be determined pursuant to Section 3 hereof shall
be paid by the Buyer to the Sellers, or by the Sellers to the Buyer, as the case
may be, in accordance with such Section 3.


                                       1

      2. Closing. (a) The closing (the "Closing") of the sale and purchase of
Shares described in Section 1 hereof shall take place at the offices of Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia, PA, commencing at 10:00
a.m., local time, on the date hereof and shall be deemed effective as of the
opening of business of the Company and its Subsidiary (as defined in Section 5.3
hereof) on that date. The date of the Closing is sometimes herein referred to as
the "Closing Date".

      (b) At the Closing, each Seller shall deliver to the Buyer, free and clear
of all pledges, liens, transfer and stamp tax obligations, encumbrances, claims
and other charges thereon of every kind, the certificates for the Shares to be
sold by such Seller in negotiable form, duly endorsed in blank, or with separate
stock transfer powers attached thereto and signed in blank, in exchange for the
delivery by the Buyer to such Seller (i) on the Payment Date, of the
consideration to be paid to such Seller pursuant to Section 1(a) hereof and (ii)
at the Closing, of the Seller Note to which such Seller is entitled pursuant to
Section 1(b) hereof. All cash payments pursuant to Section 1(a) hereof shall be
by wire transfer of immediately available funds to such accounts at such banks
as the Sellers or their counsel shall direct in writing delivered to the Buyer
no less than three business days prior to the Closing.

      (c) The allocations set forth in columns B, C, D and E of Exhibit A hereto
have been provided to the Buyer by the Sellers, were determined by the Sellers
alone, and have been agreed among the Sellers acting alone. The Buyer shall have
no responsibility whatsoever with respect to the determination of the
allocations set forth in columns B, C, D and E of Exhibit A hereto.

      (d) Immediately following the Closing, the Sellers shall make available to
the Buyer the written resignations of all the directors of the Company and its
Subsidiary effective as of the Closing, and shall cause to be made available to
the successor directors and to the officers of the Company and its Subsidiary,
including any new officers elected on the Closing Date (the "post-Closing
directors and officers"), all minute books, stock record books, books of
account, corporate seals, leases, contracts, agreements, securities, bank,
checking and money market accounts, other investments, deposits, customer and
subscriber lists, files and other documents, instruments and papers belonging to
the Company and its Subsidiary and shall cause full possession and control of
all of the assets and properties of every kind and nature, tangible and
intangible, of the Company and its Subsidiary and of all other things and
matters pertaining to the operation of the business of the Company and its
Subsidiary to be transferred and delivered to the post-Closing directors and
officers. At the Closing, the Sellers shall deliver to the Buyer, and the Buyer
shall deliver to the Sellers, the certificates, opinions and other instruments
and documents referred to in Sections 8 and 9 hereof, respectively.

      3. Post-Closing Adjustment to Purchase Price. (a) As soon as reasonably
practical following (but not more than 60 days after) the Closing Date, the
Company (in consultation with the Chief Financial Officer of K-Tron and also
with the Sellers' Representative (as defined in Section 11.1 hereof)) shall
prepare and deliver to the Sellers and K-Tron an audited consolidated balance
sheet of the Company and its Subsidiary as of the close of business on the last
business day immediately preceding the Closing Date (the "Closing Balance
Sheet"), together with the report thereon of KMPG LLP. The Closing Balance Sheet
shall be prepared in accordance with this Agreement and generally accepted
accounting principles consistent with past practice in the Company's preparation
of its fiscal year 2001 audited balance sheet (the "2001 Balance Sheet"), except
to the extent that there is any new generally accepted accounting principle(s)
that must be adopted. Further, the Closing Balance Sheet shall not take into
account any of the transactions contemplated by this Agreement, or any fees,
expenses and costs of the Sellers (unless paid for by the Company or its
Subsidiary prior to the Closing despite the provisions of Section 11.2(a)
hereof, in which case their payment would be taken into account on the Closing
Balance Sheet) in connection with the consideration, preparation, negotiation
and completion thereof, other than as set forth in Section 11.2(a) hereof. All
expenses incurred in connection with the preparation of the Closing Balance
Sheet shall be the responsibility of the Company.


                                       2

      (b) The Closing Balance Sheet shall become final and binding upon the
parties unless within 30 days following its submittal to the Sellers and K-Tron,
either all of the Sellers as a group notify K-Tron of their objection thereto,
or K-Tron notifies the Sellers of its objection thereto, which objection may
only be that the Closing Balance Sheet was not properly prepared under Section
3(a) hereof. Such 30-day period shall be extended for an additional 30 days at
the request of either all of the Sellers as a group, or K-Tron, should either
the Sellers or K-Tron reasonably require additional time to complete their
review of the Closing Balance Sheet. During such 30-day review period (or 60-day
review period, if so extended), the Company shall make reasonably available to
the Sellers, K-Tron and their respective representatives, and shall use
reasonable efforts to cause its representatives to make reasonably available to
the Sellers, K-Tron and their respective representatives, on a timely basis, all
books, records and appropriate personnel to provide the Sellers, K-Tron and
their respective representatives with such information regarding the Closing
Balance Sheet as the Sellers, K-Tron and their respective representatives may
reasonably request. If within 30 days following the receipt by the other party
of any notice of objection by K-Tron or the Sellers, any of such differences
have not been resolved, they shall be resolved by Ernst & Young LLP,
Philadelphia, Pennsylvania, whose decision thereon shall be final, binding and
not subject to any appeal. The fees and expenses of Ernst & Young LLP in
connection with any such resolution shall be allocated between (and paid by)
K-Tron and the Sellers in the same proportion that the aggregate amount of the
disputed items so submitted to Ernst & Young LLP that is unsuccessfully disputed
by each such party (as finally determined by Ernst & Young LLP) bears to the
total amount of such disputed items so submitted.

      (c) Within ten days following the final determination of the Closing
Balance Sheet in accordance with Section 3(b) hereof, either

            (i) if the consolidated stockholders' equity on the Closing Balance
      Sheet is less than $9 million, then the Sellers shall pay to the Buyer (or
      to the Company as its successor by merger), as a decrease in the purchase
      price for the Shares, the amount of such shortfall (together with simple
      interest thereon, from the Closing Date to the date of payment, at the
      rate of 6% per annum); or

            (ii) if the consolidated stockholders' equity on the Closing Balance
      Sheet is greater than $9 million, then the Buyer (or the Company as its
      successor by merger) shall pay to the Sellers, as an increase in the
      purchase price for the Shares, the amount of such excess (together with
      simple interest thereon, from the Closing Date to the date of payment, at
      the rate of 6% per annum).

In the case of any payment to or by the Sellers under this Section 3(c), each
Seller shall be paid or pay that part of the total payment due equal to such
total payment multiplied by the percentage set forth after such Seller's name in
column A of Exhibit A hereto, all of which percentages have been provided to the
Buyer by the Sellers, were determined by the Sellers alone, and have been agreed
among the Sellers acting alone. The Buyer shall have no responsibility
whatsoever with respect to the determination of the percentages set forth in
column A of Exhibit A hereto.

      (d) Nothing in this Section 3 shall preclude any party from exercising, or
shall adversely affect or otherwise limit in any respect the exercise of, any
right or remedy available to it hereunder or otherwise for any misrepresentation
or breach of warranty hereunder, but (i) neither the Buyer nor any Seller shall
have any right to dispute the Closing Balance Sheet or any portion thereof once
the Closing Balance Sheet has been finally determined in accordance with Section
3(b) hereof and (ii) the Buyer shall not have the right to be indemnified
hereunder for any breach of any representations or warranties contained in this
Agreement regarding the value of the accounts receivable, inventory or other
items classified as current assets on the Closing Balance Sheet.


                                       3

      4. Individual Representations and Warranties of the Sellers. Each Seller,
separately and individually, and not jointly, represents and warrants to the
Buyer as follows:

      4.1 Share and Interest Ownership; Authority. Each Seller is the lawful
owner of record and beneficially of the number of Shares set beside such
Seller's name in column A of Exhibit A hereto, free and clear of all pledges,
liens, encumbrances, claims and other charges and restrictions thereon of every
kind, including without limitation any agreements, subscriptions, options,
warrants, calls, commitments or rights (contingent or otherwise) of any
character granting to any person any interest in or right to acquire from such
Seller at any time, or upon the happening of any stated event, any Shares owned
by such Seller. Each Seller has full right, power and authority to execute,
deliver and perform this Agreement. This Agreement has been duly executed and
delivered by each Seller. This Agreement constitutes the legal, valid and
binding obligation of each Seller enforceable against each Seller in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and by general principles of
equity (whether considered in an action at law or in equity).

      4.2 Validity of Contemplated Transactions; Etc. The execution, delivery
and performance of this Agreement by each Seller will not contravene or violate
(a), any law, rule or regulation to which any Seller is subject or (b) any
judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
any Seller; nor will such execution, delivery or performance violate, be in
conflict with or result in the breach (with or without the giving of notice or
lapse of time, or both) of any term, condition or provision of, or require the
consent of any other party to, any contract, commitment, agreement, lease,
license, permit, authorization, document or other understanding, oral or
written, to or by which any Seller is a party or otherwise bound or affected. No
authorization, approval or consent of, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery and performance of this Agreement by any Seller.

      4.3 No Claims Against the Company or its Subsidiary. No Seller has any
claim, either accrued, absolute, contingent or otherwise and whether known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured, against the Company or its Subsidiary for any reason,
other than claims in the ordinary course, consistent with past practice, for the
payment of salary, bonuses, commissions, expense reimbursements or payments
arising from other employee benefits to the extent accrued but not yet paid (all
of which shall be fully reflected on the Closing Balance Sheet).

      5. Joint and Several Representations and Warranties of the Sellers. Each
Seller, jointly and severally, represents and warrants to the Buyer as follows:


      5.1 Corporate Existence. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and it has all requisite power and authority and all licenses, permits and
authorizations necessary to carry on its business as it has been and is now
being conducted and to own, lease and operate the properties used in connection
therewith. The Company is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required, except for those jurisdictions where the failure to
be so qualified would not be reasonably expected to have a material adverse
effect on the Company's business, operations, assets, properties or condition
(financial or otherwise). Schedule 5.1 hereto sets forth all of the
jurisdictions in which the Company is qualified to conduct business as a foreign
corporation.

      5.2 Capitalization. (a) The total authorized capital stock of the Company
consists of (i) 50,000 shares of Class A common voting stock, par value $.01 per
share, of which 12,826 shares and no others are issued and outstanding (all such
issued and outstanding shares have been previously defined as the "Shares") and
(ii) 50,000 shares of Class B common non-voting stock, par value $.01 per share,
none of


                                       4

which are issued and outstanding. All of the Shares have been duly authorized
and validly issued, are fully paid and non-assessable, were not issued in
violation of the terms of any agreement or other understanding binding upon the
Company and were issued in compliance with the Certificate of Incorporation and
By-Laws of the Company and all applicable federal, state and foreign securities
and other laws, rules and regulations. There are, and except as set forth on
Schedule 5.2 hereto have been, no preemptive rights with respect to the issuance
of the Shares or any other shares of capital stock of the Company, and there
have been no issuances in violation of any preemptive rights. All redemptions
and repurchases of shares of capital stock by the Company have been completed in
accordance with law and the terms thereof, and the Company has no liability or
obligation of any nature in connection therewith. Except for the agreements,
contracts and commitments listed on Schedule 5.2 hereto, the Company is not a
party to, and has not in the past five years entered into or made, any
agreement, contract or commitment in connection with any redemption or
repurchase of shares of its capital stock.

      (b) Except as set forth on Schedule 5.2 hereto, there are no outstanding
subscriptions, options, warrants, convertible securities, calls, commitments,
agreements or rights (contingent or otherwise) of any character to purchase or
otherwise acquire from the Company or any Seller any shares of, or any
securities convertible into shares of, the capital stock of the Company.

      5.3 Subsidiary; No Interest in Other Entities. (a) Jeffrey Specialty
Equipment Corporation (the "Subsidiary") is the only direct or indirect
subsidiary of the Company. The Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority and all licenses, permits and
authorizations necessary to carry on its business as it has been and is now
being conducted and to own, lease and operate the properties used in connection
therewith. The Subsidiary is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required, except for those jurisdictions where the failure to
be so qualified would not be reasonably expected to have a material adverse
effect on the Subsidiary's business, operations, assets, properties or condition
(financial or otherwise). Schedule 5.3 hereto sets forth all of the
jurisdictions in which the Subsidiary is qualified to conduct business as a
foreign corporation.

      (b) The authorized, issued and outstanding capital stock of the Subsidiary
is listed on Schedule 5.3 hereto. All of such issued and outstanding shares of
capital stock have been duly authorized and validly issued, are fully paid and
non-assessable, were not issued in violation of the terms of any agreement or
other understanding binding upon the Subsidiary and were issued in compliance
with the Certificate of Incorporation and By-Laws of the Subsidiary and all
applicable federal, state and foreign securities and other laws, rules and
regulations. There are no outstanding subscriptions, options, warrants,
convertible securities, calls, commitments, agreements or rights (contingent or
otherwise) of any character to purchase or otherwise acquire from the Subsidiary
or the Company any shares of, or any securities convertible into shares of, the
capital stock of the Subsidiary. There are, and except as set forth on Schedule
5.3 hereto have been, no preemptive rights with respect to the issuance of
shares of capital stock of the Subsidiary, and there have been no issuances in
violation of any preemptive rights.

      (c) The Company is the lawful owner of record and beneficially of all of
the issued and outstanding shares of capital stock of the Subsidiary, free and
clear of all pledges, liens, encumbrances, claims and other charges and
restrictions thereon of every kind, including without limitation any agreements,
subscriptions, options, warrants, calls, commitments or rights (contingent or
otherwise) of any character granting to any person any interest in or right to
acquire from the Company or the Subsidiary at any time, or upon the happening of
any stated event, any shares of capital stock of the Subsidiary.

      (d) Except as set forth on Schedule 5.3(d), neither the Company nor the
Subsidiary owns any shares of any corporation other than the Company's ownership
of the Subsidiary, and neither the


                                       5

Company nor the Subsidiary has any other ownership or other investment interest,
either of record, beneficially or equitably, in any association, partnership,
joint venture or legal entity, except for bank, checking and money market
accounts and other cash equivalent investments.

      5.4 Financial Statements. (a) The Sellers have delivered to the Buyer
prior to the date hereof (i) the consolidated balance sheets of the Company and
its Subsidiary as of December 31, 2001, 2000 and 1999 and the related
consolidated statements of income, stockholders' equity and cash flows for the
12-month periods then ended, reported on without qualification by Arthur
Andersen LLP, independent certified public accountants (the "Audited
Financials"), and (ii) the unaudited consolidated balance sheet of the Company
and its Subsidiary as of September 30, 2002 (the "September Balance Sheet") and
the related consolidated statements of income and stockholders' equity for the
nine-month period then ended (the "Unaudited Financials"; and together with the
Audited Financials, the "Company Financials"). The Company Financials (including
without limitation all notes, comments, schedules and supplemental data
contained in or annexed to such statements), true, correct and complete copies
of all of which are attached hereto as Schedule 5.4, are accurate, complete and
in accordance with the books and records of the Company and its Subsidiary in
all material respects and present fairly the consolidated financial position and
assets and liabilities of the Company and its Subsidiary as of their respective
dates and the results of their consolidated operations for the periods then
ended, in conformity with generally accepted accounting principles applied on a
consistent basis except, in the case of the Unaudited Financials, for the
omission of footnote information and normal year end adjustments (none of which
will be material).

      (b) The accounting books and records maintained by the Company and its
Subsidiary, and upon which all of the Company Financials are based, taken as a
whole, accurately reflect all of their items of income and expense, assets,
liabilities and businesses. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets.

      (c) The outstanding balance under the Loan Agreement, dated November 1,
1999, between the South Carolina Jobs-Economic Development Authority and the
Subsidiary, was paid in full on December 23,2002; the lender thereof has
terminated and released all rights and interests with respect thereto, and
neither the Company nor its Subsidiary has any remaining liability or obligation
in connection therewith.

      5.5 Accounts Receivable. To each Seller's knowledge, none of the accounts
receivable of the Company or its Subsidiary are subject to valid defenses,
set-offs or counterclaims other than normal returns and allowances and all of
such accounts receivable were generated only in the ordinary course of business.

      5.6 Inventory. All inventory of the Company and its Subsidiary consists of
items of a normal quality and quantity saleable in the ordinary course of their
businesses consistent with past practice.

      5.7 Absence of Undisclosed Liabilities. (a) Neither the Company nor its
Subsidiary is liable for or subject to any liability except for:

            (i) those liabilities and obligations reflected on the September
      Balance Sheet and not heretofore paid or discharged;

            (ii) those liabilities and obligations arising in the ordinary
      course of its business consistent with past practice under any contract,
      commitment or agreement specifically disclosed on any Schedule to this
      Agreement or not required to be disclosed thereon because of the term or
      amount involved or otherwise; and


                                       6

            (iii) those liabilities and obligations incurred, consistent with
      past practice, in the ordinary course of its business since September 30,
      2002, which liabilities and obligations in the aggregate are of a
      character and magnitude consistent with past practice.

For purposes of this Section 5.7, the term "liabilities" shall include without
limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent or otherwise.

      (b) The Company does not have any liability for any dividends or
distributions to any stockholder and, except as disclosed in Schedule 5.7 or
Schedule 5.18 hereto, since September 30, 2002 has not paid or delivered or
become committed to pay or deliver any dividend or payment, or made or become
committed to make any distribution or payment, to any stockholder in respect of
its capital stock. Since June 30, 2002, the Company has not redeemed, purchased
or otherwise acquired any of its capital stock.

      5.8 Existing Condition. Except as disclosed on Schedule 5.8 hereto, since
September 30, 2002, neither the Company nor its Subsidiary has:

      (a) sold, assigned or transferred any of its assets or properties except
in the ordinary course of its business consistent with past practice;

      (b) created, incurred, assumed or guaranteed any indebtedness for money
borrowed or incurred any other liabilities exceeding $10,000 in the aggregate
except for current liabilities incurred consistent with past practice;

      (c) suffered any damage, destruction or loss, whether or not covered by
insurance, (i) materially and adversely affecting its business, operations,
assets, properties or condition (financial or otherwise) or (ii) of any item
carried on its books of account at more than $10,000;

      (d) suffered any material adverse change in its business, operations,
assets, properties or condition (financial or otherwise);

      (e) made any capital expenditure or capital addition or betterment
exceeding $10,000 in the aggregate except for such as may be involved in the
ordinary repair, maintenance and replacement of its assets;

      (f) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or loan to,
any of its directors, officers or employees, or to any Seller, or made any
increase in, or any addition to, other benefits to which any of its directors,
officers or employees or any Seller may be entitled; or

      (g) entered into any transaction other than in the ordinary course of its
business consistent with past practice.

Except as disclosed on Schedule 5.8 hereto, since December 31, 2001, neither the
Company nor its Subsidiary has made or suffered any amendment to or termination
of any material contract or commitment to which it is or was a party or by which
it or any of its properties are bound.

      5.9 Assets and Properties. (a) Schedule 5.9 hereto contains a description
of each parcel of real property owned, leased or subleased by the Company or its
Subsidiary or in which the Company or its Subsidiary has any real estate
interest and each lease agreement under which the Company or its Subsidiary has
any direct or indirect leasehold interest in any real property (collectively,
"Real Property").


                                       7

Schedule 5.9 hereto also contains a list of all inventory, and all equipment
(having a value in excess of $10,000 individually on the books of the Company or
its Subsidiary), owned by the Company or its Subsidiary as of September 30,
2002. The Company and its Subsidiary own outright, have good, valid and
marketable title (and as to any owned Real Property, fee title) to and are in
possession of all of their Real Property and other owned properties and assets,
whether solely real, personal or mixed, including without limitation all of the
properties and assets reflected on the September Balance Sheet and those
acquired since September 30, 2002 (except in each case for properties and assets
sold or otherwise disposed of since September 30, 2002 in the ordinary course of
their businesses consistent with past practice), free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
other encumbrances and defects of title of any nature whatsoever, except liens
for current taxes not yet due and payable and items disclosed on Schedule 5.9
hereto. All leases or subleases in any manner related to the Real Property, or
any material assets, properties or businesses of the Company and its Subsidiary
and all other instruments, documents and agreements (other than the IP License
Agreements (as defined in Section 5.20 hereof)) pursuant to which the Company or
its Subsidiary has obtained the right to use any real or personal property are
in good standing, valid and effective in accordance with their respective terms,
and there is not under any of such leases, subleases, instruments, documents or
agreements any existing default by the Company or its Subsidiary or event which
with the giving of notice or lapse of time, or both, would constitute such a
default.

      (b) All facilities, buildings, vehicles, equipment, furniture and
fixtures, leasehold improvements and other material items of tangible personal
property owned, leased or used by the Company or its Subsidiary are in good
operating condition and repair, subject to normal wear and tear and routine
maintenance, are useable in the regular and ordinary course of their businesses
and conform to all applicable laws, ordinances, codes, rules and regulations
relating thereto and to the construction, use, operation and maintenance
thereof. All of such facilities, buildings, vehicles, equipment, furniture and
fixtures, leasehold improvements and other material items of tangible personal
property have been maintained in accordance with the regular business practices
of the Company and its Subsidiary.

      (c) The Real Property includes without limitation all machinery,
equipment, appliances and fixtures necessary for the adequate supply of heat,
ventilation, air conditioning, electricity, water service, fire protection, gas
and lighting service to the buildings that are located on the Real Property.

      (d) Since January 1, 1997, no notice has been received by any Seller, the
Company or its Subsidiary from the holder of any mortgage or from any insurance
company that has issued a policy with respect to the Real Property or by any
Board of Fire Underwriters, or other body exercising similar functions, claiming
any defects or deficiencies with respect to any Real Property, or requesting
performance of any demolition, repairs, alterations or other work to any Real
Property.

      (e) No public or private nuisance condition currently exists, or to the
knowledge of any Seller, the Company or its Subsidiary has existed, on or with
respect to any Real Property.

      (f) The Real Property has connections to sanitary sewer, storm sewer,
water, electricity, gas, telephone and all other necessary utilities and
services, and there are no circumstances or conditions which exist which would
result in termination of such connections.

      (g) There is no present or, to the knowledge of the Sellers, threatened
ban, moratorium or other limitation of any kind on new connections or additional
flows to any sewage treatment plant serving or to serve the Real Property or the
conveyance facilities leading to any such sewage treatment plant.

      (h) No work has been or, as of the Closing Date, will be performed at, and
no materials have been or, as of the Closing Date, will be furnished to, any
Real Property which might give rise to any mechanics', materialmen's or other
lien against any Real Property.


                                       8

      5.10 Tax Matters. (a) Each of the Company and its Subsidiary has filed all
Tax Returns (as defined in Section 5.10(k) hereof) that it was required to file.
All such Tax Returns were true, correct and complete in all material respects.
All Taxes (as defined in Section 5.10(k) hereof) owed by the Company and its
Subsidiary (whether or not shown on any Tax Return) have been paid. Neither the
Company nor its Subsidiary currently is the beneficiary of any extension of time
within which to file any Tax Return.

      (b) There is no material dispute or claim concerning any Tax liability of
either the Company or its Subsidiary either (i) claimed or raised by any
authority in writing or (ii) as to which any of the Sellers, the Company or its
Subsidiary has knowledge.

      (c) Schedule 5.10(c) hereto lists all federal, state, local, and foreign
income Tax Returns filed with respect to either the Company or its Subsidiary
for taxable periods ended on or after December 31, 1998, indicates all Tax
Returns for such taxable periods that have been audited, and indicates all Tax
Returns for such taxable periods that currently are the subject of audit. The
Sellers have delivered to the Buyer true, correct and complete copies of all
federal income Tax Returns for all taxable periods ended on or after December
31, 1998, examination reports, and statements of deficiencies assessed against,
or agreed to by either the Company or its Subsidiary. Neither the Company nor
its Subsidiary has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.

      (d) Neither the Company nor its Subsidiary has filed a consent under
section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code")
concerning collapsible corporations. Neither the Company nor its Subsidiary has
made any material payments, is obligated to make any material payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any material payments that will not be deductible under section 280G of the
Code. Neither the Company nor its Subsidiary has been a United States real
property holding corporation within the meaning of section 897(c)(2) of the Code
during the applicable period specified in section 897(c)(1)(A)(ii) of the Code.
Neither the Company nor its Subsidiary is a party to any tax allocation or
sharing agreement. Neither the Company nor its Subsidiary (i) has been a member
of an affiliated group filing a consolidated federal income Tax Return or (ii)
has any liability for the Taxes of any person (other than either the Company or
its Subsidiary) under Treasury Regulations section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.

      (e) The unpaid Taxes of the Company and its Subsidiary (i) as of September
30, 2002 did not exceed the reserve for Tax liability (rather than any reserve
for deferred taxes established to reflect timing differences between book and
tax income), if any, set forth on the face of the September Balance Sheet
(rather than in any notes thereto) and (ii) on the Closing Date will not exceed
that reserve to be set forth on the Closing Balance Sheet.

      (f) Neither the Company nor its Subsidiary will be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any (i) change in method of accounting for a taxable period ending on or prior
to the Closing Date under section 481(c) of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in section 7121 of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (iii) deferred intercompany gain or any excess loss
account described in Treasury Regulations section 1.1502 (or any corresponding
or similar provision of state, local or foreign income Tax law); (iv)
installment sale or open transaction disposition made on or prior to the Closing
Date; (v) prepaid amount received on or prior to the Closing Date; or (vi)
position on a Tax Return that could give rise to a penalty under section 6662 of
the Code.


                                       9

      (g) Neither the Company nor its Subsidiary would be liable for any Tax
under section 1374 of the Code (or under any equivalent state tax provision) if
its assets were sold (or deemed sold pursuant to an election under Code
Section 338(h)(10)) for their fair market value on the Closing Date. Neither the
Company nor its Subsidiary has, in the past ten years, (i) acquired assets from
another corporation in a transaction in which the Tax basis for the acquired
assets was determined, in whole or in part, by reference to the Tax basis of the
acquired assets (or any other property) in the hands of the transferor or (ii)
acquired the stock of any corporation which is a qualified subchapter S
subsidiary within the meaning of section 1361(b)(3)(B) of the Code (other than
the stock of the Subsidiary acquired upon the Subsidiary's formation).

      (h) The Company (and any predecessor of the Company) is currently, and has
been since January 1, 1988, an S corporation within the meaning of sections 1361
and 1362 of the Code, and will be an S corporation at all times up to and
including the Closing Date. At all such times, the Company (and any predecessor
of the Company) has been an S corporation for all state tax purposes (in those
states recognizing S corporation status), including for Pennsylvania and
Delaware tax purposes. During its existence as an S corporation, the Company
(and any predecessor of the Company) has complied with all applicable federal,
state and local tax laws relating to election as an S corporation, including
without limitation provisions applicable to Pennsylvania law.

      (i) The Subsidiary has been at all times since its inception, a qualified
subchapter S subsidiary within the meaning of section 1361(b)(3)(B) of the Code,
and will be a qualified subchapter S subsidiary at all times up to and including
the Closing Date. At all such times, the Subsidiary (and any predecessor of the
Subsidiary) has been a qualified subchapter S subsidiary for all state tax
purposes (in those states recognizing qualified subchapter S subsidiary status),
including for Pennsylvania and Delaware tax purposes. During its existence, the
Subsidiary (and any predecessor of the Subsidiary) has complied with all
applicable federal, state and local tax laws relating to election as a qualified
subchapter S subsidiary, including without limitation provisions applicable to
Pennsylvania law.

      (j) Neither the Company nor its Subsidiary has distributed stock of
another entity, or has had its stock distributed by another entity, in a
transaction that was purported or intended to be governed in whole or in part by
Sections 355 or 361 of the Code.

      (k) For purposes of this Agreement, "Taxes" means all taxes, charges,
fees, levies or other assessments, including without limitation income, gross
receipts, premium taxes, employment, excise, withholding, property, sales, use,
transfer, license, payroll, and franchise taxes, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto,
imposed by the United States, or any state, local, or foreign government or
subdivision or agency thereof; and "Tax Return" means any report, return, or
other information required to be supplied to a taxing authority in connection
with Taxes. All citations to provisions of the Code, or to the Treasury
Regulations promulgated thereunder, include any amendments thereto and any
substitute or successor provisions thereto.

      5.11 Legal Proceedings; Etc. Except as disclosed on Schedule 5.11 hereto,
there are no disputes, claims, actions, suits or proceedings (including without
limitation local zoning or building ordinance proceedings), arbitrations or
investigations, either administrative or judicial, pending or, to the knowledge
of any Seller, threatened or contemplated, by or against or affecting the
Company or its Subsidiary or their assets or businesses, before or by any court
or governmental or regulatory official, body or authority, or before an
arbitrator of any kind. Except as disclosed on Schedule 5.11 hereto, no Seller
has any knowledge of any condition or state of facts or the occurrence of any
event that might reasonably be expected to form the basis of any dispute, claim,
action, suit, proceeding or arbitration against or affecting the Company or its
Subsidiary. Neither the Company nor its Subsidiary is a party to the provisions
of any judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority.


                                       10

      5.12 Compliance with Law. The Company and its Subsidiary have complied in
all material respects with each, and are not in material violation of any, law,
rule or regulation to which they or their businesses are, or their operations,
assets or properties are, subject and have not failed to obtain or adhere in all
material respects to the requirements of any license, permit or other
authorization necessary to the ownership of their assets and properties or to
the conduct of their businesses. Without limiting the generality of the
foregoing, (a) none of the Sellers, the Company or its Subsidiary, or to the
knowledge of the Sellers any other director, officer, employee or agent of or
any consultant to the Company or its Subsidiary, or any other person authorized
to act on behalf of the Company or its Subsidiary, has unlawfully offered, paid
or agreed to pay, directly or indirectly, any money or anything of value to or
for the benefit of any individual who is or was an official or employee or
candidate for office of the government of any country or any political
subdivision, agency or instrumentality thereof or any employee or agent of any
customer or supplier of the Company or its Subsidiary other than in accordance
with applicable laws, rules and regulations, and (b) the Company and its
Subsidiary are in compliance in all material respects with all applicable
federal, state and local laws respecting employment and employment practices,
including without limitation laws relating to employment discrimination and
sexual harassment.

      5.13 Validity of Contemplated Transactions; Etc. The execution, delivery
and performance of this Agreement by the Sellers will not contravene or violate
(a) any law, rule or regulation to which the Company or its Subsidiary is
subject, (b) any judgment, order, writ, injunction or decree of any court,
arbitrator or governmental or regulatory official, body or authority which is
applicable to the Company or its Subsidiary or (c) the Certificate of
Incorporation or By-Laws of the Company or its Subsidiary; nor will such
execution, delivery or performance violate, be in conflict with or result in the
breach (with or without the giving of notice or lapse of time, or both) of any
term, condition or provision of, or require the consent of any other party to,
any contract, commitment, agreement, lease, license, permit, authorization,
document or other understanding, oral or written, to or by which the Company or
its Subsidiary is a party or otherwise bound or affected or by which any of the
assets or properties of the Company or its Subsidiary may be bound or affected
or give any party with rights thereunder the right to terminate, modify,
accelerate, renegotiate or otherwise change any of the existing rights or
obligations of the Company or its Subsidiary thereunder.

      5.14 Insurance. Schedule 5.14 hereto contains a true, correct and complete
description of the insurance coverage (including any deductible amounts) in
effect now or at any time during the past five years with respect to the Company
and its Subsidiary and their businesses and properties, together with a
description of each insurance claim in excess of $25,000 made by the Company or
its Subsidiary during the past five years. The Company and its Subsidiary have
at all times during the past five years maintained insurance coverage
substantially similar to the insurance coverage currently in effect. There has
been no default under any such coverage, nor has there been any failure to give
any notice or present any claim under any such coverage in a timely fashion or
in the manner or detail required by the policy or binder. There are no
outstanding unpaid premiums other than premiums accrued but not yet payable in
the ordinary course of business of the Company and its Subsidiary, and there are
no provisions in any insurance coverage of the Company or its Subsidiary for
retroactive or retrospective premium adjustments. No notice of cancellation or
nonrenewal with respect to, or disallowance of any claim under, any such
coverage has been received by the Company or its Subsidiary. All general
liability insurance policies maintained by the Company or its Subsidiary are and
historically have been occurrence policies. Except as disclosed on Schedule 5.14
hereto, there are no outstanding performance bonds or other surety arrangements
covering or issued for the benefit of either the Company or its Subsidiary or
their businesses or as to which the Company or its Subsidiary has or may incur
any liability.

      5.15 Contracts and Commitments. Except as listed and described on Schedule
5.15 hereto or, in the case of benefit plans and arrangements, Schedule 5.18
hereto, neither the Company nor its Subsidiary is a party to or otherwise bound
by any written or oral:


                                       11

      (a) agreement, contract or commitment with any present or former
stockholder, director, officer, employee or consultant or for the employment of
any person, including without limitation any consultant;

      (b) agreement, contract, commitment or arrangement with any labor union or
other representative of employees;

      (c) agreement, contract or commitment for the purchase of, or payment for,
supplies or products, or for the performance of services by a third party,
involving in any one case $25,000 or more;

      (d) agreement, contract or commitment to sell or supply products or to
perform services, involving in any one case $25,000 or more;

      (e) agreement, contract or commitment (i) providing for payments based
upon the revenues or profits of the Company, its Subsidiary or any other entity
or (ii) continuing over a period of more than six months from the date hereof or
exceeding $25,000 in value;

      (f) representative or sales agency agreement, contract or commitment;

      (g) lease under which it is either lessor or lessee, involving annual
payments of $10,000 or more;

      (h) note, debenture, bond, conditional sale agreement, equipment trust
agreement, letter of credit agreement, loan agreement or other agreement or
contract, commitment or arrangement for the borrowing or lending of money
(including without limitation loans to or from officers, directors, any Seller
or any member of any of their immediate families), agreement, contract,
commitment or arrangement for a line of credit or guarantee, pledge or
undertaking relating in any manner whatsoever of or to the indebtedness of any
other person;

      (i) agreement, contract or commitment with any governmental agency,
commission, department or other governmental body or for any political or
charitable contribution;

      (j) agreement, contract or commitment for any capital expenditure in
excess of $25,000;

      (k) agreement, contract or commitment limiting or restraining it from
engaging or competing in any lines of business with any person, nor is any
officer or, to the knowledge of any Seller, any employee of the Company or its
Subsidiary subject to any such agreement;

      (l) franchise, distributorship or other similar agreement; or

      (m) material agreement, contract or commitment not made in the ordinary
course of its business.

Except as may be disclosed on Schedule 5.15 hereto, each of the agreements,
contracts, commitments, arrangements, leases and other instruments, documents
and undertakings listed on Schedule 5.15 hereto or not required to be listed
thereon because of the term or amount involved is valid and enforceable in
accordance with its terms, and the Company or its Subsidiary and, to the
knowledge of the Sellers, the other parties thereto are in compliance in all
material respects with the provisions thereof, and no event has occurred which
with or without the giving of notice or lapse of time, or both, would constitute
a default thereunder by the Company or its Subsidiary or, to the knowledge of
any Seller, any other party thereto; furthermore, except as may be disclosed on
Schedule 5.15 hereto, no such agreement, contract, commitment, arrangement,
lease or other instrument, document or undertaking, in the reasonable opinion of
any Seller, contains any contractual requirement with which there is a
reasonable likelihood the Company, its Subsidiary or any other party thereto
will be unable to comply.


                                       12


      5.16 Additional Information. Schedule 5.16 hereto contains, to the extent
not described in some other Schedule hereto, accurate lists and summary
descriptions of the following:

      (a) all vehicles, equipment, furniture and fixtures, leasehold
improvements and other items of personal property owned or leased by the Company
or its Subsidiary, specifying which are owned and which are leased and, with
respect to leased property, specifying the identity of the lessor, the rental
rate and the unexpired term of the lease, and also specifying serial numbers
(where appropriate) and location, except for such vehicles, equipment, furniture
and fixtures, leasehold improvements and other items of personal property which
have a value individually on the books of the Company or its Subsidiary of, or
for which the aggregate of any remaining lease payments amount to, less than
$10,000.;

      (b) all real property and interests in real property owned, leased or
otherwise held by the Company or its Subsidiary, specifying which are owned,
leased or otherwise held and, with respect to leased property, specifying the
identity of the lessor, the rental rate and the unexpired term of the lease;

      (c) the names of all present directors of the Company and its Subsidiary;

      (d) the names and current annual salaries or hourly rates of all present
officers and employees of the Company and its Subsidiary together with a
statement of the full amount of any bonuses, profit sharing or other
remuneration paid to each such person and to any director during the current or
the last fiscal year or payable to each such person in the future and the basis
therefor;

      (e) the names and addresses of each bank and other financial institution
or fund in which the Company or its Subsidiary maintains an account (whether
checking, savings, money market or otherwise), lock box or safe deposit box, and
the account numbers and names of persons having signing authority or other
access with respect thereto;

      (f) a listing and description of all cash equivalent items held by the
Company or its Subsidiary;

      (g) all licenses, permits and other governmental authorizations issued to
or otherwise held by the Company or its Subsidiary;

      (h) the names of all persons authorized to borrow money or incur or
guarantee indebtedness on behalf of the Company or its Subsidiary;

      (i) the names of all persons holding powers of attorney from the Company
or its Subsidiary and a summary statement of the terms thereof; and

      (j) a listing of any current liabilities of the Company or its Subsidiary
not incurred in the ordinary course of business consistent with the past
practice.

      5.17 Labor Matters. There are no labor controversies, grievances, troubles
or disputes, in any manner or form whatsoever, pending or threatened against the
Company or its Subsidiary, and no Seller has knowledge of any facts that would
be likely to give rise to such a controversy, trouble, grievance or dispute.
There is no union representing the interests of any employees of the Company or
its Subsidiary, there are no employees of the Company or its Subsidiary
currently seeking union representation, there is no union seeking to represent
such employees and, within the past five years, neither the Company nor its
Subsidiary has committed any unfair labor practice, as defined in the National
Labor Relations Act, as amended. The relations of the Company and its Subsidiary
with their employees are good (routine individual grievances excepted), and no
Seller has knowledge of any facts that would be likely to affect adversely such
relations.


                                       13

      5.18 Benefit Plans and Arrangements. (a) Schedule 5.18 hereto lists all
employee benefit plans (within the meaning of section 3(3) of ERISA), and other
funds, policies, arrangements, practices, customs and understandings or programs
relating to one or more employees of the Company or a Benefits Affiliate (as
defined in this Section 5.18), whether or not they are or are intended to be (i)
covered or qualified under the Code, ERISA or any other applicable law, (ii)
written or oral, (iii) funded or unfunded or (iv) generally available to any or
all employees (or former employees) of the Company and/or one or more of its
Benefits Affiliates (and/or their beneficiaries or dependents), which were or
are established, contributed to or maintained by the Company and/or one or more
of its Benefits Affiliates, including without limitation welfare, fringe
benefit, pension, profit sharing, retirement, stock purchase, stock option,
stock bonus, disability or wage continuation, sick pay or vacation pay,
supplemental unemployment, severance or deferred compensation plans (the
"Plans"). For purposes of this Section 5.18 only, the term "Benefits Affiliate"
shall include (i) any corporation which is a member of a controlled group of
corporations (as defined in section 414(b) of the Code) which includes the
Company or its Subsidiary, (ii) any trade or business (whether or not
incorporated) which is under common control (as defined in section 414(c) of
Code) with the Company or its Subsidiary, (iii) any organization (whether or not
incorporated) which is a member of an affiliated service group (as defined in
section 414(m) of the Code) which includes the Company or its Subsidiary and
(iv) any other entity required to be aggregated with the Company or its
Subsidiary pursuant to the regulations issued under section 414(o) of the Code.

      (b) The Sellers have delivered or made available to the Buyer true,
correct and complete copies of (i) all documents governing the Plans, and all
amendments thereto, (ii) all reports filed, with respect to any portion of the
period beginning on January 1, 1999 and ending on the Closing Date, by the
Company, a Benefits Affiliate or a Plan official with the United States
Department of Labor, the Internal Revenue Service (the "IRS") or any other
federal or state regulatory agency with respect to a Plan, (iii) all summary
plan descriptions, notices and other reporting and disclosure material furnished
to participants in any of the Plans, (iv) all actuarial, accounting and
financial reports, if any, prepared with respect to any of the Plans and (v) all
currently effective IRS ruling or determination letters on any of the Plans.

      (c) Except as disclosed on Schedule 5.18(c) hereto, the Plans and
provisions thereof, the trusts created thereby, and the operation of the Plans
are (and at all times have been) in material compliance with and materially
conform to (and at all times have been in material compliance with and
materially conformed to) the applicable provisions of the Code, ERISA, and all
other applicable statutes and governmental rules and regulations.

      (d) Except as disclosed on Schedule 5.18(d) hereto, the Plans marked on
Schedule 5.18(d) hereto as "Qualified Plans" are the only Plans that are
intended to meet the requirements of section 401(a) of the Code (a "Qualified
Plan"). The Company and its Benefits Affiliates have never maintained or
contributed to any other Qualified Plan. Each of the Qualified Plans has been
determined by the IRS to be qualified under section 401(a) of the Code and
exempt from tax under section 501(a) of the Code, and no such determination has
been revoked. Except as disclosed on Schedule 5.18(d) hereto, nothing has
occurred with respect to the design or operation of any Qualified Plan that
could cause the loss of such qualification or exemption or the imposition of any
liability, lien, penalty, or tax under ERISA or the Code, and the Qualified
Plans have been timely amended to comply with current law.

      (e) With respect to each Plan, there has not occurred any non-exempt
"prohibited transaction" (within the meaning of section 4975 of the Code or
section 406 of ERISA) or breach of any fiduciary duty described in section 404
of ERISA that could result in any liability, direct or indirect, for the Company
or a Benefits Affiliate or any stockholder, officer, director, or employee of
the Company or a Benefits Affiliate. The Company and its Benefits Affiliates
have paid all amounts that the Company and its Benefits Affiliates are required
to pay as contributions to the Plans as of the last day of the most recent
fiscal year of each of the Plans; all benefits accrued under any funded or
unfunded Plan will have been paid, accrued, or otherwise adequately reserved in
accordance with generally accepted accounting


                                       14

principles as of September 30, 2002 and on the Closing Balance Sheet; and all
monies withheld from employee paychecks with respect to Plans have been
transferred to the appropriate Plan in a timely manner as required by applicable
law.

      (f) The Company and its Benefits Affiliates have not incurred any
liability for any excise, income or other taxes or penalties with respect to any
Plan, and no event has occurred and no circumstance exists or has existed that
could give rise to any such liability. There are no pending or threatened claims
by or on behalf of any Plans, or by or on behalf of any participants in or
beneficiaries of any Plans or other persons, alleging any breach of fiduciary
duty on the part of the Company or any Benefits Affiliate or any of their
officers, directors or employees under ERISA or any applicable law, or claiming
benefit payments other than those made in the ordinary operation of such Plans,
nor is there any basis for any such claim. No Plan is presently under audit or
examination (nor has notice been received of a potential audit or examination)
by the IRS, the Department of Labor, or any other governmental entity, and no
matters are pending with respect to any Plan under any IRS program.

      (g) No Plan contains any provision or is subject to any law that would
prohibit the transactions contemplated by this Agreement or that would give rise
to any vesting of benefits, severance, termination, or other payments or
liabilities as a result of the transactions contemplated by this Agreement, and
no payments or benefits under any Plan or other agreement of the Company or its
Benefits Affiliates will be considered "excess parachute payments" under section
280G of the Code. Except as disclosed by letter dated January 2, 2003 from the
Company to the Buyer, neither the Company nor any Benefits Affiliate has
declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement, and no payments or benefits referred to in such
letter will be "excess parachute payments" under section 280G of the Code.

      (h) The Company and its Benefits Affiliates have made no plan or
commitment, whether or not legally binding, to create any additional Plan or to
modify or change any existing Plan. No statement, either written or oral, has
been made by the Company or its Benefits Affiliates to any person with regard to
any Plan that was not in accordance with the Plan and that could have an adverse
economic consequence to the Company or its Benefits Affiliates. All Plans may be
amended or terminated without penalty by the Company or its Benefits Affiliates
at any time on or after the Closing.

      (i) All persons classified by the Company or its Benefits Affiliates as
independent contractors satisfy and have at all times satisfied the requirements
of applicable law to be so classified; the Company and its Benefits Affiliates
have fully and accurately reported their compensation on IRS Forms 1099 when
required to do so; and the Company and its Benefits Affiliates have no
obligations to provide benefits with respect to such persons under Plans or
otherwise. No individuals are currently providing, or have ever provided,
services to the Company or its Benefits Affiliates pursuant to a leasing
agreement or similar type of arrangement, nor has the Company or its Benefits
Affiliates entered into any arrangement whereby such services will be provided.

      (j) No Plan is, and neither the Company nor any Benefits Affiliate has any
liability, actual or contingent, with respect to any Plan that is (i) a defined
benefit pension plan subject to Title IV of ERISA, (ii) a multiemployer pension
plan, as that term is defined in sections 4001(a)(3) and 3(37) of ERISA or (iii)
a plan providing life, health or medical benefits to retired or terminated
employees (other than as required by sections 601-608 of ERISA).

      (k) With respect to any Plan that is an employee welfare benefit plan
(within the meaning of section 3(1) of ERISA) (a "Welfare Plan"), (i) each
Welfare Plan for which contributions are claimed as deductions under any
provision of the Code is in compliance with all applicable requirements
pertaining to such deductions and (ii) any Plan that is a group health plan
(within the meaning of section 5000(b)(1)


                                       15

of the Code) materially complies, and in each and every case has materially
complied, with all of the requirements of ERISA and section 4980B of the Code.

      5.19 Environmental Matters. Except as disclosed on Schedule 5.19 hereto,
(a) no releases of Hazardous Materials (as defined in this Section 5.19) have
occurred at or from any property which is now owned, operated, leased or
otherwise used by the Company or its Subsidiary or which was owned, operated,
leased or otherwise used at any prior time by the Company or its Subsidiary or
any of their predecessors, (b) there are no past, pending or, to the knowledge
of the Company, its Subsidiary or any Seller threatened, Environmental Claims
(as defined in this Section 5.19) against the Company or its Subsidiary, (c)
there are no underground storage tanks owned by the Company or its Subsidiary,
or located at any facility owned, operated, leased or otherwise used by the
Company or its Subsidiary or any of their predecessors, (d) there are no facts,
circumstances, or conditions that could reasonably be expected to restrict,
under any applicable Environmental Law or Environmental Permit (each as defined
in this Section 5.19) in effect prior to or at the Closing Date, the ownership,
occupancy, use or transferability of any property owned, operated, leased or
otherwise used by the Company or its Subsidiary, or to give rise to any legal
liability of the Company or its Subsidiary under the Environmental Laws
pertaining to any property now or at any time owned, operated, leased or
otherwise used by the Company or its Subsidiary or any of their predecessors,
(e) neither any Seller, the Company nor its Subsidiary has received a request
under any of the Environmental Laws for information relating to any property now
or at any time owned, operated, leased or otherwise used by the Company or its
Subsidiary or any of their predecessors, (f) there are no unsatisfied financial
assurance or closure requirements under the Environmental Laws pertaining to any
property now or at any time owned, operated, leased or otherwise used by the
Company or its Subsidiary or any of their predecessors, (g) none of the
properties owned, operated, leased or otherwise used by the Company or its
Subsidiary or any of their predecessors, are now or have in the past been listed
on the National Priorities List of sites under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended (42 U.S.C. Section 9601 et
seq.) ("CERCLA"), the CERCLA Information System, or any comparable state or
local environmental database, (h) there is no asbestos-containing material,
lead-based paint or equipment containing polychlorinated biphenyls located at
any of the facilities or properties now or at any time owned, operated, leased
or otherwise used by the Company or its Subsidiary or any of their predecessors,
(i) neither any Seller, the Company nor its Subsidiary has provided information
to any governmental authority of any actual, threatened or suspected releases of
Hazardous Materials or any violation of an Environmental Permit or other
requirement of Environmental Laws and (j) neither any Seller, the Company nor
its Subsidiary has any liability with respect to the cleanup or investigation at
any facility or property at which the Company or its Subsidiary or any of their
predecessors disposed or arranged for the disposal or treatment (with a
transporter or otherwise) of Hazardous Materials. As used in this Agreement:

            (i) "Environmental Claims" means any and all administrative or
      judicial actions, suits, orders, claims, liens, notices, investigations,
      violations or proceedings related to any applicable Environmental Law or
      any Environmental Permit brought, issued or asserted by a governmental
      authority or third party for compliance, damages, penalties, removal,
      response, remedial or other action pursuant to any applicable
      Environmental Law or for personal injury or property damage resulting from
      the release of a Hazardous Material at, to or from any facility or
      property owned, operated, leased or otherwise used by the Company or its
      Subsidiary or any of their predecessors, or any facility or property at
      which the Company or its Subsidiary or any of their predecessors disposed
      or arranged for the disposal or treatment (with a transporter or
      otherwise) of Hazardous Materials, including without limitation employees
      of the Company or its Subsidiary, seeking damages for exposure to
      Hazardous Materials;

            (ii) "Environmental Laws" means all federal, state and local laws,
      statutes, ordinances, codes, rules and regulations related to protection
      of the environment, natural


                                       16

      resources, safety or health or the handling, use, recycle, generation,
      treatment, storage, transportation or disposal of Hazardous Materials, and
      any common law cause of action relating to the environment, natural
      resources, safety, health or the management of or exposure to Hazardous
      Materials;

            (iii) "Environmental Permit" means all permits, licenses, approvals,
      authorizations and consents required by any governmental authority under
      any applicable Environmental Laws and includes any and all orders, consent
      orders or binding agreements issued or entered into by a governmental
      authority under any applicable Environmental Law; and

            (iv) "Hazardous Material" means any hazardous, toxic or radioactive
      substance, material or waste which is regulated by any state or local
      governmental authority or the United States of America, including without
      limitation any material or substance that is: (A) defined as a "hazardous
      substance", "regulated substance" or "solid waste" under applicable state
      law, (B) petroleum, petroleum products or wastes, (C) asbestos, (D)
      designated as a "hazardous substance" pursuant to section 311 of the
      Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et
      seq. (33 U.S.C. Section 1321), or similar provision of applicable state
      law, (E) defined as a "hazardous waste" pursuant to section 1004 of the
      Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901
      et seq. (42 U.S.C. Section 6903), or similar provision of applicable state
      law, (F) defined as a "hazardous substance" pursuant to section 101 of the
      CERCLA or similar provision of applicable state law, (G) defined as a
      "regulated substance" pursuant to section 9001 of the Resource
      Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.
      (42 U.S.C. Section 6991), or similar provision of applicable state law, or
      (H) otherwise regulated under the Toxic Substances Control Act, as
      amended, 15 U.S.C. Section 2601 et seq., the Clean Air Act, as amended, 42
      U.S.C. Section 7401 et seq., the Hazardous Materials Transportation Act,
      as amended, 49 U.S.C. Section 1801 et seq., the Federal Insecticide,
      Fungicide and Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq.,
      the Emergency Planning and Community Right-to-Know Act, as amended, 42
      U.S.C. Section 11001 et seq., the Safe Drinking Water Act, as amended, 42
      U.S.C. Section 300(f) et seq., or the Occupational Safety and Health Act,
      as amended, 29 U.S.C. Section 651 et seq., or similar provisions of
      applicable state laws.

      5.20 Intellectual Property Matters. (a) Schedule 5.20(a) hereto contains a
true, correct and complete list of all patents and patent applications,
trademarks, service marks, trade names, and registrations and applications for
registration of industrial designs, copyrights, mask works, trademarks, service
marks, trade names, trade dress and domain names used or held for use by the
Company or its Subsidiary in the conduct of its business specifying as to each
such item, as applicable: (i) the owner of the item, (ii) the jurisdictions in
which the item is issued or registered or in which any application for issuance
or registration has been filed, (iii) the respective issuance, registration or
application number of the item, and (iv) the date of application and issuance or
registration of the item.

      (b) Schedule 5.20(b) hereto contains a true, correct and complete list of
all material licenses, sublicenses, consents and other agreements (whether
written or otherwise) (collectively, the "IP License Agreements") (i) pertaining
to any patents, industrial design rights, trademarks, service marks, trade
names, trade dress, copyrights, mask works, trade secrets, computer software
programs (other than standard, commercially available programs) and other
intellectual property used by the Company or its Subsidiary in the conduct of
its business, and (ii) by which the Company or its Subsidiary licenses or
otherwise authorizes a third party to use any such intellectual property. None
of the Company, its Subsidiary or, to the knowledge of any Seller, any other
party is in breach of or default under any IP License Agreement, and each such
IP License Agreement is now and immediately following the Closing shall be valid
and in full force and effect.


                                       17

      (c) Except as set forth in Schedule 5.20(c) hereto, the Company or its
Subsidiary owns or is licensed or otherwise has the exclusive right to use, and
has the right to bring actions for the infringement or other violation of, all
patents, industrial design rights, trademarks, service marks, trade names, trade
dress, copyrights, mask works, inventions, technology, know-how, designs,
formulae, trade secrets, confidential and proprietary information, computer
software programs (other than standard, commercially available programs), domain
names and other intellectual property necessary for the operation of business of
the Company and its Subsidiary as they are currently conducted.

      (d) Except as set forth on Schedule 5.20(d), the business operations of
the Company and its Subsidiary do not, to the knowledge of each of the Sellers,
infringe or otherwise violate the patents, industrial design rights, trademarks,
service marks, trade names, trade dress, copyrights, mask works, trade secrets
or other intellectual property rights of any third party, and no claim has been
made, notice given, or dispute arisen to that effect. Neither the Company nor
its Subsidiary has any pending claims that a third party has violated or
infringed any of the Company's or its Subsidiary's patents, industrial design
rights, trademarks, service marks, trade names, trade dress, copyrights, trade
secrets or other proprietary rights. Except as set forth in Schedule 5.20(d)
hereto, neither the Company nor its Subsidiary has given any indemnification
rights to any third party against infringement of such intellectual property
rights.

      (e) Except as set forth in Schedule 5.20(e) hereto, all of the patents,
industrial design registrations, trademark and service mark registrations,
copyright registrations, mask work registrations and domain name registrations
listed or described in Schedule 5.20(a) hereto are valid and in full force, are
held of record in the name of the Company or its Subsidiary (as designated in
Schedule 5.20(a) hereto) free and clear of all mortgages, licenses, liens,
pledges, security interests, charges, claims, restrictions and other
encumbrances and defects of title of any nature whatsoever, and are not the
subject of any cancellation or reexamination proceeding or any other proceeding
challenging their extent or validity. Except as set forth in Schedule 5.20(e)
hereto, the Company or its Subsidiary (as designated in Schedule 5.20(e) hereto)
is the applicant of record in all patent applications, and applications for
trademark, service mark, trade dress, industrial design, copyright and mask work
registration indicated in Schedule 5.20(a) hereto, and no opposition, extension
of time to oppose, interference, rejection or refusal to register has been
received in connection with any such application.

      (f) To the knowledge of each of the Sellers, none of the trade secrets,
know-how or other confidential or proprietary information of the Company or its
Subsidiary has been disclosed to any person unless such disclosure was necessary
and was made pursuant to a confidentiality agreement.

      5.21 Transactions with Affiliates. Neither any Seller nor any director,
officer or employee of the Company or its Subsidiary owns or during the past
three years has owned, directly or indirectly, or has, or within the past three
years has had, an interest, either of record, beneficially or equitably, in any
business, corporate or otherwise, which (a) has or had, or which is or was a
party to, or in any asset or property which is or was the subject of, any
material contract, agreement, business arrangement, relationship or course of
dealing with the Company or its Subsidiary, or (b) conducts any of the same
businesses as, or a similar business to, any of the businesses conducted by the
Company and its Subsidiary.

      5.22 No Brokers or Finders. All negotiations by the Sellers relative to
this Agreement have been carried on by the Sellers, and their attorneys and
accountants, directly without the intervention of any person who may be entitled
to any brokerage or finder's fee or other commission or similar compensation in
respect hereof or the consummation of the transactions contemplated hereby.

      5.23 No Third Party Options. There are no existing agreements, options,
commitments or rights with, to or in any third person to acquire any of the
assets or properties of the Company or its


                                       18

Subsidiary or any interest therein, except for those contracts entered into in
the ordinary course of business consistent with past practice for the sale of
the Company's and its Subsidiary's products and services.

      5.24 Schedules; Delivery of Documents; Corporate Records. The Sellers have
delivered or made available to the Buyer the originals or true, correct and
complete copies of all documents, including without limitation all amendments,
supplements or modifications thereof or waivers currently in effect thereunder,
referred to on the Schedules hereto or otherwise material to the representations
and warranties in this Agreement and have also delivered to the Buyer copies of
the Certificates of Incorporation and the By-Laws (each as amended to date) of
the Company and its Subsidiary. The minute and stock record books of the Company
and its Subsidiary, which have been made available to the Buyer for its
inspection, contain true, correct and complete copies of all charter documents
and the records of all meetings and consents in lieu of meeting of the Boards of
Directors (and any committees thereof) and voting stockholders of the Company
and its Subsidiary since the dates of their incorporation or formation.

      5.25 Completeness of Disclosure. No representation or warranty by any
Seller contained in this Agreement or any Schedule or Exhibit contains any
untrue statement of a material fact or omits to state any material fact
necessary to make any statement herein or therein not misleading. There is no
fact, development or threatened development (excluding general business
conditions in the industry in which the Company operates, and general economic
factors affecting business in general) which the Sellers have not disclosed to
the Buyer in writing which has had, or would reasonably be expected to have, a
material adverse effect on the business, operations, assets, properties,
prospects or condition (financial or otherwise) of either the Company or its
Subsidiary. Notwithstanding any provision of this Agreement to the contrary, no
Seller makes any representation or warranty of any kind or nature with respect
to any projections or forecasts regarding the business, operations, prospects,
financial condition, financial performance or any other matter, of or relating
to the Company or its Subsidiary.

      6. Representations and Warranties of the Buyer. The Buyer represents and
warrants to each of the Sellers as follows:

      6.1 Corporate Existence. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

      6.2 Corporate Power and Authorization. The Buyer has the corporate power
to execute, deliver and perform this Agreement. The execution, delivery and
performance hereof by the Buyer have been duly authorized by all necessary
corporate action. This Agreement is a legal, valid and binding obligation of the
Buyer and is enforceable against the Buyer in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and by general principles of equity (whether
considered in an action at law or in equity).

      6.3 Validity of Contemplated Transactions; Etc. The execution, delivery
and performance of this Agreement by the Buyer will not contravene or violate
(a) any law, rule or regulation to which the Buyer is subject, (b) any judgment,
order, writ, injunction or decree of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to the Buyer or (c)
the Certificate of Incorporation or By-Laws of the Buyer; nor will such
execution, delivery or performance violate, be in conflict with or result in the
breach (with or without the giving of notice or lapse of time, or both) of any
term, condition or provision of, or require the consent of any other party to,
any contract, commitment or agreement, oral or written, to or by which the Buyer
is a party or otherwise bound or affected or by which any of the Buyer's assets
or properties may be bound or affected. Except for the filing of a Certificate
of Ownership and Merger with the Secretary of State of the State of Delaware, no
authorization, approval


                                       19

or consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery and performance hereof by the Buyer.

      6.4 No Brokers or Finders. All negotiations by the Buyer relative to this
Agreement have been carried on by the Buyer or its affiliates, and their
attorneys and accountants, directly without the intervention of any person who
may be entitled to any brokerage or finder's fee or other commission or similar
compensation in respect hereof or the consummation of the transactions
contemplated hereby.

      7. Covenants.

      7.1 Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Buyer, the Company, its Subsidiary and the Sellers
for certain tax matters following the Closing Date:

      (a) Tax Periods Ending on or Before the Closing Date. The Company shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiary for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. The Company shall permit
the Sellers to review and comment on each such Tax Return described in the
preceding sentence prior to filing. Subject to Section 7.1(e), the Sellers shall
be solely responsible for and shall reimburse the Company for Taxes of the
Company and its Subsidiary with respect to such periods within 15 days after
payment by the Buyer or the Company and its Subsidiary of such Taxes but only if
and to the extent such Taxes are not reflected in the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the finally
determined Closing Balance Sheet.

      (b) Tax Periods Beginning Before and Ending After the Closing Date. The
Company shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company and its Subsidiary for Income Tax periods which begin
before the Closing Date and end after the Closing Date. Subject to Section
7.1(e), the Sellers shall pay to the Company within 15 days after the date on
which Taxes are paid with respect to such periods an amount equal to the portion
of such Taxes which relates to the portion of such Taxable period ending on the
Closing Date to the extent such Taxes are not reflected in the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of the finally
determined Closing Balance Sheet. For purposes of this Section 7.1, in the case
of any Taxes that are imposed on a periodic basis and are payable for a Taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax which relates to the portion of such Taxable period ending on the Closing
Date shall be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a Taxable
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Company and its
Subsidiary.

      (c) Cooperation on Tax Matters. The Buyer, the Company and the Sellers
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section 7.1
and in any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Buyer, the Company and the Sellers further
agree, upon request of the other party, to use their best efforts to obtain any
certificate or other document from any governmental authority or any other
person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including without limitation with respect to the transactions
contemplated hereby).


                                       20

      (d) Company S Election. With respect to any period ended prior to the
Closing Date, the Company and the Sellers shall not revoke the Company's
election to be taxed as an S corporation within the meaning of sections 1361 and
1362 of the Code and any corresponding provisions of state law. The Company and
the Sellers shall not take or allow any action, other than the transactions
contemplated by this Agreement, that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of
sections 1361 and 1362 of the Code and any corresponding provisions of state
law.

      (e) Subsidiary S Election. With respect to any period ended prior to the
Closing Date, the Company and the Sellers shall not revoke the Company's
election to treat the Subsidiary as a qualified subchapter S subsidiary within
the meaning of section 1361(b)(3)(B) of the Code and any corresponding
provisions of state law. The Company and the Sellers shall not take or allow any
action, other than the transactions contemplated by this Agreement, that would
result in the termination of the Subsidiary's status as a qualified subchapter S
subsidiary within the meaning of section 1361(b)(3)(B) of the Code and any
corresponding provisions of state law.

      (f) Section 338(h)(10) Election.

            (i) At the Buyer's request, each Seller shall join with the Buyer in
      making an election under section 338(h)(10) of the Code (and any
      corresponding elections under state, local or foreign tax law)
      (collectively, the "Section 338(h)(10) Election") with respect to the
      purchase and sale of the Shares; provided that, notwithstanding any other
      provision of this Agreement, in the event of a Section 338(h)(10)
      Election, as a condition to the Sellers making the Section 338(h)(10)
      Election, the Buyer shall pay to the Sellers, in cash, the amount of
      additional consideration necessary to cause the Sellers' after-tax net
      proceeds from the sale of the Shares with the Section 338(h)(10) Election
      to be equal to the after-tax net proceeds that the Sellers would have
      received had the Section 338(h)(10) Election not been made, taking into
      account all appropriate federal, state and local tax considerations (the
      "Section 338(h)(10) Gross Up").

            (ii) If the Buyer decides to make the Section 338(h)(10) Election,
      the Buyer and the Sellers shall cooperate as provided herein to determine
      the "aggregate deemed sales price" in accordance with Treasury Regulations
      section 1.338-4 ("ADSP") and the allocation of the ADSP among the assets
      of the Company and the Subsidiary in accordance with Treasury Regulations
      sections 1.338-6 and 1.338-7. The Buyer shall initially determine and send
      written notice to the Sellers of the ADSP and its allocation to the assets
      of the Company and the Subsidiary. The Sellers will be deemed to have
      accepted the Buyer's calculation of the ADSP and its allocation unless
      they provide written notice of disagreement to the Buyer within 20 days
      after receipt of such calculation and allocation. If the Sellers provide
      such notice to the Buyer, the parties shall attempt in good faith to agree
      to any disputed items. If, within 20 days after the Buyer receives the
      Sellers' notice of disagreement, the parties have not reached agreement,
      Ernst & Young LLP shall be engaged to determine any items remaining in
      dispute. The Sellers and the Buyer shall each pay one-half of the fees of
      Ernst & Young LLP.

            (iii) Within 20 days of the final determination of the ADSP and its
      allocation in accordance with Section 7.1(f)(ii), the Sellers shall
      provide the Buyer a written calculation of the Section 338(h)(10) Gross
      Up. The Buyer will be deemed to have accepted such calculation unless it
      provides the Sellers written notice of disagreement within 20 days of
      receipt of the Sellers' calculation. If the Buyer provides written notice
      of disagreement, any items of disagreement shall be resolved in a manner
      similar to that provided in Section 7.1(f)(ii).

            (iv) Within ten days of the final determination of the Section
      338(h)(10) Gross Up pursuant to Section 7.1(f)(iii), the Buyer shall
      deliver to the Sellers for execution a Form 8023


                                       21

      and any similar form under state or local law, and any schedules or
      attachments thereto (collectively, the "Section 338 Forms"). Within ten
      days of receipt of the Section 338 Forms, each Seller shall duly and
      promptly execute such Section 338 Forms and shall deliver them to the
      Buyer. The Buyer shall pay the Section 338(h)(10) Gross Up to the Sellers
      immediately upon, and as a condition to, receipt of the Section 338 Forms.
      The Buyer shall timely file such executed Section 338 Forms and shall
      deliver copies of them to the Sellers. The Sellers and the Buyer shall
      file all Tax Returns (including amended returns and claims for refund) in
      a manner consistent with such Section 338 Forms.

            (v) All references to the Buyer in this Section 7.1(f) shall also be
      deemed to mean the Company from and after the merger of the Buyer with and
      into the Company.

      7.2 Non-Competition. The Buyer and each Seller hereby agree that the
covenants set forth in this Section 7.2 are a material and substantial part of
the transactions contemplated by this Agreement.

      (a) Prohibited Activities. Until three years after the Closing Date, or
with respect to each Seller who remains an employee of the Company or its
Subsidiary (or who thereafter becomes an employee of any successor to, or new
subsidiary of, the Company or its Subsidiary) until the later of three years
after the Closing Date and one year after termination of such employment
relationship, each of the Sellers agrees that he or she will not, anywhere in
North America (the "Territory"), unless acting for the Company or its Subsidiary
or any such new entity or in accordance with the Buyer's prior written consent:

            (i) (directly or indirectly) own, manage, operate, join, control,
      finance or participate in the ownership, management, operation, control or
      financing of, or be connected as an officer, director, employee,
      principal, agent, representative, consultant, investor, owner, partner,
      manager, joint venturer or otherwise with, or permit his or her name to be
      used by or in connection with, any business or enterprise engaged anywhere
      in the Territory in any of the businesses engaged in by the Company or its
      Subsidiary on the Closing Date or, with respect to the Sellers who become
      employees of the Company or its Subsidiary (or who thereafter become an
      employee of any successor to, or new subsidiary of, the Company or its
      Subsidiary) any of the businesses engaged in by the Company or its
      Subsidiary or any such new entity, either during his or her employment or
      at the time of its termination;

            (ii) call on or solicit any person who or which is, at that time, or
      has been within two years prior thereto, a customer of the Company or its
      Subsidiary or of any such new entity with respect to any business covered
      by clause (i) above; or

            (iii) solicit the employment of or hire any person who at the time
      of such solicitation or hiring or who within one year prior thereto, is or
      was employed by the Company or its Subsidiary or by any such new entity on
      a full or part-time basis.

Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the Sellers from acquiring as a passive investment not more than two
percent of the outstanding voting capital stock of a competing business, whose
stock is traded on a national securities exchange or through the automated
quotation system of a registered securities association.

      (b) Remedies. Each of the Sellers acknowledges that (i) the provisions of
this Section 7.2 are reasonable and necessary to protect the legitimate
interests of the Buyer as the purchaser of the Shares, (ii) any violation of
this Section 7.2 will result in irreparable injury to the Buyer, the Company,
its Subsidiary and the other new entities refer to in Section 7.2(a), and that
damages at law would not be reasonable or adequate compensation to the Buyer,
the Company, its Subsidiary and such new entities for


                                       22

a violation of this Section 7.2 and (iii) the Buyer, the Company, its Subsidiary
and any such new entities shall be entitled to have the provisions of this
Section 7.2 specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages and without posting bond or
other security as well as to an equitable accounting of all earnings, profits
and other benefits arising out of any violation of this Section 7.2, including
without limitation estimated future earnings. In the event that the provisions
of this Section 7.2 should ever be deemed to exceed the time, geographic,
product or any other limitations permitted by applicable law, then such
provisions shall be deemed reformed to the maximum permitted by applicable law.

      (c) Jurisdiction. The Buyer and each Seller intend to and do hereby confer
jurisdiction to enforce the covenants set forth in this Section 7.2 upon the
courts of any jurisdiction within the geographical scope of such covenants. In
addition to Section 11.15 and not in limitation thereof, if the courts of any
one or more of such jurisdictions hold such covenants unenforceable in whole or
in part, it is the intention of the Buyer and each Seller that such
determination not bar or in any way adversely affect the right of the Buyer, the
Company, its Subsidiary and any such new entities to equitable relief and
remedies hereunder in courts of any other jurisdiction as to breaches or
violations of this Section 7.2, such covenants being, for this purpose,
severable into diverse and independent covenants.

      7.3 Employee Benefits.

      (a) During the period commencing on the Closing Date and ending on
December 31, 2003, the Company and its Subsidiary shall continue to provide or
cause to be provided, as applicable, to the employees of the Company and its
Subsidiary (the "Company Employees"), base wages or salaries and employee
benefits (excluding in all cases profit sharing and bonus benefits) which, taken
as a whole, are no less favorable than those provided to Company Employees
immediately prior to the Closing (all of which base wages or salaries and
pension and welfare benefits the Sellers have disclosed on Schedules 5.16, 5.18
and 7.3 hereto).

      (b) Nothing contained in the Agreement shall create any third party
beneficiary rights in any Transferred Employee, any beneficiary or dependent
thereof, or any other person with respect to compensation, terms and conditions
of employment, benefits or any other matter, and Section 7.3(a) may only be
enforced by, and may be waived by, the Sellers' Representative.

      7.4 Merger. On or before the Payment Date, the Buyer shall merge with and
into the Company and shall provide to the Sellers' Representative or his counsel
evidence that such merger has been consummated.

      8. Conditions Precedent to Buyer's Obligations to Make Closing Deliveries.
The obligation of the Buyer under this Agreement to purchase the Shares is
subject to the fulfillment or satisfaction, prior to or at the Closing, of each
of the following conditions precedent:

      8.1 Representations and Warranties; Performance of Obligations. All of the
representations and warranties of the Sellers contained in this Agreement shall
be true, correct and complete on and as of the Closing Date; all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by the Sellers on or before the Closing Date shall have
been duly complied with, performed or satisfied by each Seller; and the Buyer
shall have received a certificate dated the Closing Date and signed by the
Sellers to the foregoing effects.

      8.2 Opinion of Sellers' Counsel. The Buyer shall have received the written
opinion dated the Closing Date of Pepper Hamilton LLP, counsel for the Sellers,
in form and substance satisfactory to the Buyer and its counsel.


                                       23

      8.3 Approval of Counsel; Corporate Matters. All actions, proceedings,
resolutions, instruments and documents required to carry out this Agreement or
incidental hereto and all other related legal matters shall have been approved
on the Closing Date by Morgan, Lewis & Bockius LLP, counsel for the Buyer, in
the exercise of their reasonable judgment. The Sellers shall also have delivered
to the Buyer such other documents, instruments, certifications and further
assurances as such counsel for the Buyer may reasonably require.

      9. Conditions Precedent to the Sellers' Obligations to Make Closing
Deliveries. The obligations of the Sellers under this Agreement to sell the
Shares are subject to the fulfillment or satisfaction, prior to or at the
Closing, of each of the following conditions precedent:

      9.1 Representations and Warranties; Performance of Obligations. All of the
representations and warranties of the Buyer contained in this Agreement shall be
true, correct and complete on and as of the Closing Date; all of the
representations and warranties of K-Tron contained in each Seller Note shall be
true, correct and complete on and as of the Closing Date; all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by the Buyer on or before the Closing Date shall have
been duly complied with, performed or satisfied by the Buyer; the Sellers shall
have received a certificate dated the Closing Date and signed by an officer of
the Buyer to the foregoing effects relating to the Buyer; and the Sellers shall
have received a certificate dated the Closing Date and signed by an officer of
K-Tron to the foregoing effects relating to K-Tron.

      9.2 Opinion of Buyer's Counsel. The Sellers shall have received the
written opinion dated the Closing Date of Morgan, Lewis & Bockius LLP, counsel
for the Buyer, in form and substance satisfactory to the Sellers and their
counsel.

      9.3 Secretary's Certificate of the Buyer. The Buyer shall have delivered
to the Sellers a certificate executed by the Secretary or Assistant Secretary of
the Buyer containing true and correct copies of (a) the Buyer's Certificate of
Incorporation, as amended, (b) the Buyer's By-Laws, as amended, (c) resolutions
duly adopted by the Buyer's Board of Directors and stockholder, to the extent
required, approving and authorizing this Agreement and each of the other
agreements and documents contemplated hereby and the transactions contemplated
hereby and thereby, and (d) a good standing certificate issued by the Secretary
of State of the Buyer's jurisdiction of formation. The Secretary or Assistant
Secretary of the Buyer shall also certify in the certificate delivered pursuant
to this Section 9.3 that the resolutions and other documents attached thereto
have not been rescinded, revoked, modified, or otherwise changed and remain in
full force and effect.

      9.4 Incumbency Certificate of the Buyer. The Buyer shall have delivered to
the Sellers a certificate of incumbency of the Buyer executed by the officers of
the Buyer executing this Agreement, and attested by the Secretary or Assistant
Secretary of the Buyer listing the officers of the Buyer authorized to execute
this Agreement and any other agreements or documents delivered pursuant hereto
on behalf of the Buyer and certifying the authority of each such officer to
execute such documents in connection with the consummation of the transactions
contemplated herein.

      9.5 Secretary's Certificate of K-Tron. The Buyer shall have delivered to
the Sellers a certificate executed by the Secretary or Assistant Secretary of
K-Tron containing true and correct copies of (a) K-Tron's certificate of
incorporation, as amended, (b) K-Tron's By-Laws, as amended, (c) resolutions
duly adopted by K-Tron's Board of Directors approving and authorizing the Seller
Notes, and (d) a good standing certificate issued by the Secretary of State of
K-Tron's jurisdiction of formation. The Secretary or Assistant Secretary of
K-Tron shall also certify in the certificate delivered pursuant to this Section
9.5 that the resolutions and other documents attached thereto have not been
rescinded, revoked, modified, or otherwise changed and remain in full force and
effect.


                                       24

      9.6 Incumbency Certificate of K-Tron. The Buyer shall have delivered to
the Sellers a certificate of incumbency of K-Tron executed by the officers of
K-Tron executing the Seller Notes, and attested by the Secretary or Assistant
Secretary of K-Tron listing the officers of the Buyer authorized to execute the
Seller Notes.

      9.7 Approval of Counsel; Corporate Matters. All actions, proceedings,
resolutions, instruments and documents required to carry out this Agreement or
incidental hereto and all other related legal matters shall have been approved
on the Closing Date by Pepper Hamilton LLP, counsel for the Sellers, in the
exercise of their reasonable judgment. The Buyer shall also have delivered to
the Sellers such other documents, instruments, certifications and further
assurances as such counsel for the Sellers may reasonably require.

      10. Indemnification.

      10.1 Indemnification by the Sellers. Each Seller, individually and
separately with respect to Section 10.1(a)(i) hereof and Section 10.1(a)(iii)
hereof to the extent relating to a breach of the covenants contained in Section
7.2 hereof, and jointly and severally with respect to Sections 10.1(a)(ii),
(iii) (other than with respect to a breach of any covenant contained in Section
7.2 hereof) and (iv) hereof, shall reimburse, defend, indemnify and hold
harmless the Buyer and its affiliates (including without limitation after the
Closing the Company and its Subsidiary) and each of their directors, officers
and other employees (each such person and its, his or her heirs, administrators,
personal representatives, successors and assigns is referred to herein as a
"Buyer Indemnified Party") from, against and in respect of:

      (a) any and all liabilities, losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, diminutions in value, settlement
payments, deficiencies, costs and expenses (including without limitation
reasonable attorneys' fees and expenses) (collectively, "Claims") suffered,
sustained, incurred or paid by any Buyer Indemnified Party resulting from or
arising out of:

            (i) any breach of any representation or warranty of such Seller in
      Section 4 hereof;

            (ii) any breach of any representation or warranty of any Seller in
      this Agreement (other than Section 4 hereof) or in any certificate or
      other writing delivered by or on behalf of any Seller, the Company or its
      Subsidiary in connection herewith;

            (iii) any nonfulfillment of any covenant or agreement on the part of
      any Seller set forth in this Agreement; or

            (iv) the assertion against any Buyer Indemnified Party of any
      liability or obligation relating to or arising out of the business,
      operations, assets or activities of the Company, its Subsidiary or any
      predecessor thereof at or prior to the Closing to the extent such
      liabilities or obligations are not fully reflected in the finally
      determined Closing Balance Sheet, or out of the actions or omissions of
      the Company's, its Subsidiary's or any predecessor's directors, officers,
      stockholders, partners, employees or agents at or prior to the Closing;
      and

      (b) any and all actions, suits, claims, proceedings, investigations,
allegations, demands, assessments, audits, fines, judgments, costs and other
expenses (including without limitation reasonable attorneys' fees and expenses)
incident to any of the foregoing or to the enforcement of this Section 10.1.

      10.2 Indemnification by the Buyer. The Buyer shall reimburse, defend,
indemnify and hold harmless each Seller (each such person and his or her heirs,
administrators, personal representatives and assigns is referred to herein as a
"Seller Indemnified Party") from, against and in respect of:


                                       25

      (a) any and all Claims suffered, sustained, incurred or paid by any Seller
Indemnified Party resulting from or arising out of:

            (i) any breach of any representation or warranty of the Buyer in
      this Agreement or in any certificate or other writing delivered by or on
      behalf of the Buyer in connection herewith;

            (ii) any nonfulfillment of any covenant or agreement on the part of
      the Buyer set forth in this Agreement; or

            (iii) the assertion against any Seller Indemnified Party of any
      liability or obligation relating to or arising out of the business,
      operations, assets or activities of the Company or its Subsidiary after
      the Closing, except to the extent such liabilities or obligations are
      described in Section 10.1(a) hereof; and

      (b) any and all actions, suits, claims, proceedings, investigations,
allegations, demands, assessments, audits, fines, judgments, costs and other
expenses (including without limitation reasonable attorneys' fees and expenses)
incident to any of the foregoing or to the enforcement of this Section 10.2.

      10.3 Limitations on Liability. Except as otherwise provided in Section
10.5 hereof and except that this limitation shall not apply to any
indemnification claim arising under or with respect to any of Sections 4.1, 4.2,
4.3, 5.2, 5.3, 5.10 and 5.22 hereof, the Sellers shall not be liable to any
Buyer Indemnified Party under Section 10.1(a)(i), 10.1(a)(ii), or 10.1(a)(iv)
hereof (i) until and then only to the extent that the amount for which they
would otherwise (but for this provision) be liable to any or all Buyer
Indemnified Parties under such Sections exceeds in the aggregate $250,000 (the
"Deductible") or (ii) for an amount in excess of $3,500,000 (the "Cap").

      10.4 Survival of Representations and Warranties. Except as provided in
Section 10.5 hereof, the representations and warranties given or made by any
Seller or the Buyer in this Agreement or in any certificate or other writing
furnished in connection herewith shall survive the Closing for a period of 24
months after the Closing Date and shall thereafter terminate and be of no
further force or effect, except that (a) all representations and warranties
relating to Taxes and Tax Returns (as defined in Section 5.10 hereof) shall
survive the Closing for the period of the applicable statutes of limitation plus
any extensions or waivers thereof, (b) all representations and warranties set
forth in Sections 4.1, 4.2, 4.3, 5.2, 5.3, 5.22, 6.3 and 6.4 hereof shall
survive the Closing without limitation, (c) the representations and warranties
set forth in Section 5.19 hereof shall survive the Closing for a period of three
years after the Closing Date, (d) all representations and warranties set forth
in Section 5.18 hereof shall survive the Closing for a period of five years
after the Closing Date and (e) any representation or warranty as to which a
claim (including without limitation a contingent claim) shall have been asserted
during the survival period shall continue in effect with respect to such claim
until such claim shall have been finally resolved or settled. Notwithstanding
any investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations and warranties of the other party or parties set
forth herein.

      10.5 Sole Remedy; Exceptions to Limitations. The Buyer's sole and
exclusive remedy for any breach of this Agreement by any Seller shall be the
provisions of this Section 10; provided, however, that (i) nothing set forth in
this Section 10 shall be deemed to prohibit or limit any party's right at any
time, on or after the Closing Date, to seek injunctive or equitable relief for
the failure of any other party to perform any covenant or agreement contained in
this Agreement and (ii) nothing herein shall be deemed to limit or restrict in
any manner any rights or remedies which any Buyer Indemnified Party has, or
might have, at law, in equity or otherwise, against the Sellers, or which any
Seller Indemnified Party has or might have against the Buyer, based on fraud or
willful failure to fulfill any agreement or covenant set forth herein.


                                       26

      10.6 Payment of Indemnification Obligations. In the event that any Seller
or the Buyer is required to make any payment under this Section 10, such party
shall promptly pay the Buyer Indemnified Party or the Seller Indemnified Party,
as the case may be, the amount of such indemnity obligation. If there should be
a dispute as to such amount, such Seller or the Buyer, as the case may be, shall
nevertheless pay when due such portion, if any, of the obligation as shall not
be subject to dispute. The difference, if any, between the amount of the
obligation ultimately determined as properly payable under this Section 10 and
the portion, if any, theretofore paid shall bear interest for the period from
the date the amount was demanded by the Buyer Indemnified Party or the Seller
Indemnified Party, as the case may be, until payment in full, payable on demand,
at the rate of 6% per annum. So long as any principal is unpaid and outstanding
(and not previously set off pursuant to this Section 10.6) under the Seller
Notes, the Buyer (or the Company as successor by merger to the Buyer) and
K-Tron, as the case may be, shall first set off any amount owing, or which the
Buyer believes in good faith is or may be owing, by a Seller to the Buyer or
another Buyer Indemnified Party under this Agreement against the payment
obligations of the Buyer hereunder or the payment obligations of K-Tron under
the Seller Note to such Seller. If one or more Sellers are required to make any
payment to Buyer or a Buyer Indemnified Party under this Section 10, then Buyer
shall (i) set off only the Seller Notes of the Sellers obligated to make such
payments and (ii) any payment to, or set off by, the Buyer shall be deemed to
satisfy any obligations of Sellers to all Buyer Indemnified Parties in respect
of the claim for which payment or set off has been made and to the extent of
such payment or set off.

      10.7 Indemnification Procedure. All claims for indemnification under
Sections 10.1 and 10.2 hereof shall be asserted and resolved as follows:

      (a) In the event that any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party shall notify the
Indemnifying Party of such claim or demand with reasonable promptness
(following, with respect to any such claim or demand asserted against a Buyer
Indemnified Party, (i) receipt thereof by senior management of the Indemnified
Party and K-Tron or (ii) if no Seller is employed as the President, Chief
Executive Officer or Chief Financial Officer of the Company at the time of such
claim or demand, receipt thereof by senior management of the Indemnified Party),
specifying the nature of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim or demand) (the "Claim Notice");
provided that the failure to so notify the Indemnifying Party shall not limit
the rights of the Indemnified Party except to the extent that the Indemnifying
Party has been materially prejudiced thereby. The Indemnifying Party shall have
30 days from the receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party disputes the
Indemnifying Party's liability to the Indemnified Party hereunder with respect
to such claim or demand and (ii) if the Indemnifying Party does not dispute such
liability, whether or not the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend against such claim or demand,
provided that the Indemnified Party is hereby authorized (but not obligated)
prior to and during the Notice Period to file any motion, answer or other
pleading which the Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests, provided that no such motion, answer
or other pleading shall admit to any allegation for which indemnity is sought in
such a way that materially prejudices the Indemnifying Party's right to defend
against a claim or demand as provided hereunder. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
the Indemnifying Party does not dispute the Indemnifying Party's obligation to
indemnify hereunder and desires to defend the Indemnified Party against such
claim or demand and except as hereinafter provided, the Indemnifying Party shall
have the right to defend by appropriate proceedings, which proceedings shall be
settled or prosecuted by the Indemnifying Party to a final conclusion within a
reasonable period of time under the circumstances. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement the
Indemnified Party may do so at the Indemnified Party's sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified Party against such
claim or demand,


                                       27

whether by not giving the Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any rights against the
Indemnifying Party, may reasonably settle or defend against any such claim in
the Indemnified Party's reasonable discretion and, if it is ultimately
determined that the Indemnifying Party is responsible therefor under this
Section 10 then the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and all
indemnifiable costs and expenses of the Indemnified Party with respect thereto,
including interest as provided in Section 10.6 hereof.

      (b) The Indemnifying Party shall not settle any Claim without the consent
of the Indemnified Party if: (i) the amount of any such settlement exceeds the
Cap, or (ii) the settlement will have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Indemnified Party, the Company or its Subsidiary.

      (c) In the event the Indemnified Party should have a claim against the
Indemnifying Party hereunder (i) which, with respect to any such claim by a
Buyer Indemnified Party, is known to the senior management of K-Tron, and (ii)
which in any event does not involve a claim or demand being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party does not notify the Indemnified
Party within the Notice Period that the Indemnifying Party disputes such claim,
the amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.

      (d) The procedures set forth in Sections 10.7(a) and (c) hereof shall not
apply to claims or demands of a Buyer Indemnified Party which, in the reasonable
opinion of the Buyer, would be covered by the Deductible.

      11. Miscellaneous.

      11.1 Sellers' Representative.

      (a) Appointment. Each Seller hereby constitutes and appoints John D.
Whalen as the Sellers' Representative and as such Seller's true and lawful
attorney in fact, with full power in such Seller's name and on such Seller's
behalf:

            (i) to act on such Seller's behalf according to the terms of this
      Agreement, including, without limitation, the power: (i) to designate the
      accounts of the Seller for payment of the Purchase Price pursuant to
      Section 2(b) and to direct the Buyer to deliver a portion of the Purchase
      Price to certain third parties for fees, expenses, costs or other
      obligations; (ii) to act pursuant to Section 3 with respect to any
      Purchase Price adjustment; (iii) to consent to the assignment of rights
      under this Agreement; (iv) to give and receive notices on behalf of such
      Seller pursuant to Section 11.6; (v) to amend this Agreement or waive any
      provision of this Agreement in accordance with Sections 11.3 and 11.5; and
      (vi) to act on such Seller's behalf in connection with any matter as to
      which such Seller is, jointly with other Sellers, an "Indemnified Party"
      or "Indemnifying Party" under Section 10.1(b), all of the foregoing in the
      absolute discretion of the Sellers' Representative; and

            (ii) in general, to do all things and to perform all acts,
      including, without limitation, executing and delivering all agreements,
      certificates, receipts, instructions and other instruments contemplated by
      or deemed advisable in connection with this Agreement.

      (b) Sellers' Acknowledgments. This power of attorney, and all authority
hereby conferred, is granted subject to the interests of the Sellers and the
Buyer hereunder and in consideration of the mutual


                                       28

covenants and agreements made herein, and, except as otherwise provided by law,
shall be irrevocable and shall not be terminated by any act of any Seller or by
operation of law, whether by the death or incapacity of any Seller or by the
occurrence of any other event. Each Seller hereby consents to the taking of any
and all actions and the making of any decisions required or permitted to be
taken or made by the Sellers' Representative under this Agreement. The Sellers
further acknowledge and expressly agree that the Sellers' Representative shall
have no obligation or liability to any person or entity for any action or
omission taken or omitted by the Sellers' Representative in good faith
hereunder, and each other Seller shall, on a proportionate basis in accordance
with his or her pro rata share of that portion of the purchase price to be paid
to all Sellers other than the Sellers' Representative pursuant to Section 1,
hold the Sellers' Representative free and harmless from and indemnify the
Sellers' Representative against any and all loss, damage or liability which the
Sellers' Representative may sustain as a result of any such action or omission
by the Sellers' Representative hereunder.

      (c) Reliance on Actions of the Sellers' Representative. The Buyer and,
after the Closing Date, the Company and its Subsidiary, shall be entitled to
rely upon any document or other paper delivered by the Sellers' Representative
(i) as being genuine and correct and (ii) as having been duly signed or sent by
the Sellers' Representative, and none of the Buyer, the Company or its
Subsidiary shall be liable to any of the Sellers for any action taken or omitted
to be taken by the Buyer, the Company or the Subsidiary in such reliance.

      11.2 Expenses; Sales and Transfer Taxes. (a) Each of the Buyer and the
Sellers shall pay their respective fees, expenses and costs incidental to the
preparation hereof and the consideration, investigation and, through the
Closing, the carrying out by it, him or her of the provisions hereof and the
consummation by it, him or her of the transactions contemplated hereby,
including their legal fees and expenses; however, upon written request from all
of the Sellers prior to the Closing Date, the Company shall pay the Sellers'
fees, expenses and costs incidental to such matters, but, if the Company does
so, payment of or accrual for all such fees, expenses and costs of the Sellers
shall be disclosed to Buyer at the time of the Closing and be fully reflected in
the Closing Balance Sheet. The parties hereto shall pay their own fees, expenses
and costs incidental to the carrying out of the provisions hereof after the
Closing, and no such fees, expenses and costs of the Sellers, including without
limitation the Sellers' legal fees and expenses, shall be paid by or out of any
of the assets or properties of the Company or its Subsidiary.

      (b) The Sellers shall pay all documentary, stamp, sales, transfer, excise
and other taxes incurred in connection with this Agreement and the transactions
contemplated hereby, and the Sellers shall, at their own expense, file all
necessary tax returns and other documentation with respect to all such
documentary, stamp, sales, transfer, excise and other taxes.

      11.3 Contents of Agreement; Parties in Interest; Etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except by
a written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral and including without
limitation the letter agreement dated August 27, 2002 and accepted August 28,
2002, are superseded by this Agreement.

      11.4 Assignment and Binding Effect. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the heirs, administrators, personal representatives, successors
and assigns of the parties hereto.

      11.5 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party.


                                       29

      11.6 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by certified mail, postage prepaid, or
by recognized courier service, as follows:

If to Buyer, to:                         If to any Seller, to:

PCC Acquisition Co.                      Mr. John D. Whalen, as Sellers'
c/o K-Tron International, Inc.           Representative
Routes 55 and 553                        600 Abbott Drive
P.O. Box 888                             P.O. Box 100
Pitman, NJ  08071                        Broomall, Pennsylvania 19008
Attention: Edward B. Cloues, II          Telefax: (610) 543-0190
Chairman and Chief Executive Officer
Telefax: (856) 582-7968


with a required copy to:                 with a required copy to:

Morgan, Lewis & Bockius LLP              Pepper Hamilton LLP
1701 Market Street                       400 Berwyn Park
Philadelphia, PA  19103                  899 Cassatt Road
Attention: Timothy Maxwell, Esq.         Berwyn, PA  19312
Telefax: (215) 963-5299                  Attention: James D. Rosener, Esq.
                                         Telefax: (610) 640-7835


or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched or, if given by any other means, shall be deemed given only when
actually received by the addressee.

      11.7 No Public Announcements. Prior to the Closing, none of the Buyer, any
of the Sellers or any of their respective affiliates shall issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or any of the transactions contemplated hereby without the prior
consultation of the other party, except as may be required by law or by any
listing agreement with a national securities exchange.

      11.8 Release; Termination of Other Agreements. (a) Effective as of the
Closing and without the requirement of taking any further action, each Seller
hereby fully and forever remises, releases, acquits and discharges the Company
and its Subsidiary (for the benefit of the Company, its Subsidiary and the
Buyer) of and from any and all claims, demands, agreements, contracts,
covenants, promises, actions, compensation and benefits (including without
limitation current and future severance compensation; but excluding any unpaid
wages and salary compensation), suits, causes of action, obligations,
controversies, debts, costs, expenses, accounts, damages, judgments, losses and
liabilities of whatever kind or nature, at law or in equity or otherwise,
whether known or unknown, which against either the Company or its Subsidiary he
or she may have had, now has or can, shall or may now or in the future have, for
or by reason of any matter, cause or thing whatsoever from the beginning of the
world to the date of these presents, including without limitation all matters
relating in any way to any future termination of employment with the Company or
its Subsidiary; provided that the foregoing release shall in no way affect the
rights of a Seller to seek indemnification from the Company pursuant to the
Company's Certificate of Incorporation and By-Laws for a claim against such
Seller with respect to which


                                       30

such Seller would be entitled to be so indemnified by the Company ("D&O
Indemnity") (i) to the extent that such claim does not arise out of or relate to
a matter for which the Company is entitled to indemnification from such Seller
pursuant to Section 10 hereto, or (ii) if such claim does arise out of or relate
to a matter for which the Company is entitled to indemnification from such
Seller pursuant to Section 10 hereto, then the amount of any D&O Indemnity
obligation of the Company shall be limited to (x) the amount by which the
Deductible has not been exceeded by all Buyer Indemnified Party claims that
would apply against the Deductible, plus (y) if but only after the Sellers have
made payments under Section 10 equal to the Cap, any remaining amount of such
D&O Indemnity claim. Any indemnification payments made by the Company to any
Seller for a D&O Indemnity claim under clause (ii)(x) of the preceding sentence
shall thereafter be included for the purpose of determining whether the
Deductible has been reached.

      (b) The Buyer and the Sellers hereby acknowledge that (i) the Sellers are
providing assistance to the Buyer with regard to the financing to be used in
connection with the transactions contemplated herein, (ii) that such assistance
shall in no way expand the Sellers' obligations or liabilities beyond those
contained herein and (iii) the foregoing does not release the Sellers of any of
their obligations or liabilities hereunder.

      (c) Effective as of the Closing and without the requirement of taking any
further action, the Sellers and the Company hereby terminate in its entirety the
Shareholder's Agreement, dated December 11, 1987, as amended on October 31,
1990, by and among the Sellers and the Company (the "Shareholder's Agreement"),
with the effect that after the Closing none of the parties to the Shareholder's
Agreement shall have any rights, liabilities or obligations thereunder or in
connection therewith.

      11.9 Specific Performance. Each party hereto acknowledges that the other
parties will be irreparably harmed and that there will be no adequate remedy at
law for any violation by any of them of any of the covenants or agreements
contained in this Agreement. It is accordingly agreed that, in addition to any
other remedies which may be available upon the breach of any such covenants or
agreements, each party hereto shall have the right to obtain injunctive relief
to restrain a breach or threatened breach of, or otherwise to obtain specific
performance of, the other parties' covenants and agreements contained in this
Agreement.

      11.10 Pennsylvania Law to Govern. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the Commonwealth of
Pennsylvania.

      11.11 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of, and may be
enforced by, the parties hereto and, (a) in the case of Section 3 hereof, K-Tron
and, (b) in the case of Sections 7.1 and 7.2 hereof, each affiliate of the Buyer
(including without limitation after the Closing the Company and its Subsidiary)
and, (c) in the case of Section 10 hereof, the other Buyer Indemnified Parties
and Seller Indemnified Parties and, (d) in the case of Sections 1, 3, 7.1, 7.2,
11.2(a) and 11.8 hereof, the Company and its Subsidiary, and their heirs,
administrators, personal representatives, successors and assigns, and they shall
not be construed as conferring any rights on any other persons.

      11.12 Headings; Interpretation. All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation hereof.
Words used herein, regardless of the number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires. Any
reference to a "person" herein shall include an individual, firm, corporation,
partnership, trust, governmental authority or body, association, unincorporated
organization or any other entity. Any reference to "knowledge of the Sellers" or
"best knowledge of the Sellers" and each phrase having equivalent meaning (e.g.,
"known to the Sellers" or


                                       31

"known to any Seller") shall be deemed and construed to include the knowledge of
each Seller and Donald W. Melchiorre or the knowledge of any Seller or Mr.
Melchiorre, as the case may be. Furthermore, any reference to the "opinion of
any Seller" or "belief of the Sellers" and each phrase having equivalent meaning
(e.g., "believed by the Sellers") shall be deemed and construed to include the
opinions, beliefs or equivalent views of each Seller and Donald W. Melchiorre.

      11.13 Further Assurances. At any time and from time to time after the
Closing, the parties agree to cooperate with each other, to execute and deliver
such other documents, instruments of transfer or assignment, files, books and
records and do all such further acts and things as may be reasonably required to
carry out the intent of the parties hereunder.

      11.14 Exhibits; Schedules. The Exhibits hereto and the Schedules referred
to herein are intended to be and hereby are specifically made a part of this
Agreement.

      11.15 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstance in any other jurisdiction or to other persons or
circumstances in any jurisdiction, shall not be affected thereby, and to this
end the provisions of this Agreement shall be severable.

      11.16 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts other than a single
counterpart executed by the party seeking or required to make such proof and the
party or parties against whom a claim is being made or against whom this
Agreement is sought to be enforced.


                                       32

      IN WITNESS WHEREOF, the parties hereto have duly executed this Stock
Purchase Agreement on the date first written.

Witness:

/s/  Nancy S. Hansen                /s/  John D. Whalen
- -----------------------------       -------------------------------
                                    JOHN D. WHALEN

Witness:

/s/  Nancy S. Hansen                /s/  Donald J. Carrozzino
- -----------------------------       -------------------------------
                                    DONALD J. CARROZZINO

Witness:

/s/  Nancy S. Hansen                /s/  Frank Wallitsch, Jr.
- -----------------------------       -------------------------------
                                    FRANK WALLITSCH, JR.

Witness:

/s/  Frank Wallitsch, Jr.           /s/  Nancy S. Hansen
- -----------------------------       -------------------------------
                                    NANCY S. HANSEN

                                    PCC ACQUISITION CO.

                                    By  /s/  Edward B. Cloues, II
                                      -----------------------------
                                    As its President


              PENNSYLVANIA CRUSHER CORPORATION LIMITED JOINDER

      Pennsylvania Crusher Corporation joins in the foregoing Stock Purchase
Agreement for purposes of Sections 1, 3, 7.1, 7.2, 11.2(a) and 11.8 thereof.

                              PENNSYLVANIA CRUSHER CORPORATION

                              By  /s/  John D. Whalen
                                -----------------------------
                              As its Chairman and Chief Executive Officer


                                       33

EXHIBITS

Exhibit A - Payments to Stockholders
Exhibit B - Form of Promissory Note

SCHEDULES

Schedule 5.1 - Foreign Qualifications
Schedule 5.2 - Capitalization
Schedule 5.3 - Subsidiary
Schedule 5.4 - Financial Statements
Schedule 5.7 - Absence of Undisclosed Liabilities
Schedule 5.8 - Existing Condition
Schedule 5.9 - Assets and Properties
Schedule 5.10 - Tax Returns
Schedule 5.11 - Legal Proceedings
Schedule 5.14 - Insurance
Schedule 5.15 - Contracts and Commitments
Schedule 5.16 - Additional Information
Schedule 5.18 - Employee Benefits
Schedule 5.19 - Environmental
Schedule 5.20 - Intellectual Property

                                       34

EX-10.1

                                                                    Exhibit 10.1

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

                                CREDIT AGREEMENT

                                      among

                        Pennsylvania Crusher Corporation

                 THE LENDERS PARTY TO THIS CREDIT AGREEMENT, and

                          NATIONAL CITY BANK, as Agent

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

                           Dated as of January 3, 2003

                                CREDIT AGREEMENT


      CREDIT AGREEMENT, dated as of the 3rd day of January, 2003 (as amended,
restated, modified or otherwise supplemented from time to time pursuant to the
terms hereof, this "AGREEMENT") by and among NATIONAL CITY BANK ("BANK"),
individually, as Issuer, a Lender and Agent, the OTHER FINANCIAL INSTITUTIONS,
if any, listed on the signature pages to this Agreement, and Pennsylvania
Crusher Corporation (the "BORROWER"). Bank, the financial institutions listed on
the signature pages to this Agreement, if any, and any other financial
institutions which may become parties to this Agreement pursuant to the terms
hereof from time to time, are sometimes collectively referred to as the
"LENDERS" and individually as a "LENDER." Bank, when acting in its capacity as
administrative agent for the Lenders and Issuer, or any successor or assign that
assumes that position pursuant to the terms of this Agreement, is hereinafter
sometimes referred to as the "AGENT."

                             BACKGROUND OF AGREEMENT

      The Borrower, itself and through its subsidiaries, is engaged in the
business of producing equipment used in the process of crushing various
materials, including coal and wood. The Borrower has requested the Lenders to
provide a senior credit facility in an aggregate amount not to exceed at any
time $17,000,000.00, consisting of (a) a revolving credit facility in an
aggregate amount not to exceed at any time $3,500,000.00 with a letter of credit
subfacility in an amount not to exceed $750,000.00, and (b) term loans in an
aggregate original principal amount equal to $13,500,000.00.

      The subsidiaries of the Borrower will derive substantial benefits from
this credit facility. The Borrower may, among other things, use proceeds of the
loans hereunder to make capital contributions in, and extend credit to, its
subsidiaries. Such access to capital provided to the subsidiaries though this
financing is on terms that are more advantageous to the subsidiaries than such
subsidiaries could obtain if they accessed capital independently. Accordingly,
the credit facility provided for in this Agreement, is to be guaranteed by the
Borrower's subsidiaries and secured by the equity of the Borrower and its
subsidiaries as well as by the material assets of those entities. Certain terms
used in this Agreement are defined in Article 9 below.

      NOW, THEREFORE, it is agreed:

                                    ARTICLE 1
                                    THE LOANS

      1.1 REVOLVING CREDIT LOANS.

            1.1.1 COMMITMENT TO MAKE RC LOANS. Subject to and upon the terms and
conditions set forth in this Agreement, the RC Lenders shall make advances to
the Borrower until the RC Maturity Date in an aggregate principal amount
outstanding at any one time not to exceed the lesser of the following: (a)
$3,500,000.00 (as the same may be reduced by any mandatory or voluntary
reductions pursuant to the terms of this Agreement, the "RC COMMITMENT"); or (b)
the amount of the Borrowing Base; provided, however, that no advance shall be
made in excess of the amount of the Available Commitment, and provided, further,
however that the percentage and aggregate amount of all RC Loans which each RC
Lender is obligated to lend shall not exceed at any time the percentage or
amount of the RC Commitment set forth opposite the name of such RC Lender on
Schedule 1.1 hereto (as supplemented and amended by giving effect to the
assignments contemplated in this Agreement). The portion of the RC Commitment
attributable to each RC Lender is sometimes referred to herein as such Lender's
RC Commitment. Within the limits set forth above, the Borrower may borrow under
this Section 1.1, repay or prepay such advances, and reborrow under this Section
1.1. The amounts loaned to the Borrower pursuant to the reducing revolving
credit facility described in this Section 1.1 are referred to as the "RC LOANS".

            1.1.2 AVAILABLE COMMITMENT. "AVAILABLE COMMITMENT" shall mean the RC
Commitment reduced by: (a) the face amount of any outstanding undrawn Letters of
Credit; (b) the amount of any Unreimbursed Drawings; and (c) the aggregate
principal amount of any outstanding RC Loans.

            1.1.3 VOLUNTARY COMMITMENT REDUCTIONS. In addition to the Borrower's
right to prepay the RC Loans under subsection 1.1.6 below, the Borrower shall
have the right at any time and from time to time upon five (5) Business Days'
prior written notice to the Agent to permanently reduce (on a pro rata basis
among the RC Lenders) or terminate the RC Commitment. Any partial reductions
shall be in minimum amounts of Two Hundred Fifty Thousand Dollars ($250,000.00)
or in whole multiples of Fifty Thousand Dollars ($50,000.00) in excess thereof.

            1.1.4 MANDATORY COMMITMENT REDUCTIONS. In addition to the RC
Commitment reductions specified in the preceding Subsection 1.1.3 (Voluntary
Commitment Reductions), the RC Commitment shall be permanently reduced at such
times as are set forth in Subsection 1.2.6 (Mandatory Prepayments).

            1.1.5 REPAYMENT IN CONNECTION WITH COMMITMENT REDUCTIONS AND ON RC
MATURITY DATE. Upon the effective date of each reduction in the RC Commitment
referred to above (whether voluntary or mandatory), the Borrower shall pay to
the Agent for the benefit of the RC Lenders the principal amount of the RC
Loans, to the extent, if any, that (a) the aggregate amount of the RC Loans then
outstanding plus the aggregate face amount of undrawn Letters of


                                      -2-

Credit then outstanding and any Unreimbursed Drawings, exceeds (b) the amount of
the RC Commitment as so reduced and as reduced by any previous mandatory or
voluntary reductions thereto. Accrued interest on the RC Loans so prepaid shall
be due and payable at the time of such prepayment. All amounts of principal,
interest and fees relating to RC Loans not due and payable before the RC
Maturity Date are due and payable on the RC Maturity Date.

            1.1.6 VOLUNTARY PREPAYMENT. In addition to the Borrower's right to
reduce the RC Commitment under subsection 1.1.3 above, and except as otherwise
provided in this Agreement, the Borrower shall be permitted to prepay the RC
Loans at any time without penalty or premium, and without limiting the
Borrower's ability to reborrow under the RC Commitment, other than as provided
in Subsections 1.8 (Additional Costs), 1.7.5 (Breakage) and 11.15
(Indemnification), if applicable. In connection with each voluntary prepayment:

                  (a) The Borrower shall provide the Agent with notice of its
intention to prepay,

                        (i) no later than 11:00 a.m. (Philadelphia, PA time) on
the date of prepayment in the case of Base Rate Loans, and

                        (ii) no later than 11:00 a.m. (Philadelphia, PA time)
three (3) Business Days prior to the date of prepayment in the case of LIBOR
Loans.

                  (b) Each prepayment of principal of an RC Loan shall be in a
minimum amount equal to $250,000.00 or in integral multiples of $50,000.00 in
excess thereof.

      1.2 TERM LOANS.

            1.2.1 COMMITMENT FOR TERM LOAN A. Upon the terms and subject to the
conditions of this Agreement, each Term Lender agrees to make advances to the
Borrower on the Closing Date ("TERM LOAN A") in an aggregate principal amount
not to exceed Ten Million Dollars ($10,000,000.00) (the "TERM LOAN A
COMMITMENT"), provided, however, that the amount and percentage of the Term Loan
A Commitment that any Lender is obligated to lend shall not exceed the amount or
percentage set forth opposite the name of such Lender on Schedule 1.1 hereto.
The Term Loan A Commitment of any Term Lender is sometimes referred to herein as
such Lender's Term Loan A Commitment. The Borrower shall not be permitted to
reborrow any amount of the Term Loan A once repaid.

            1.2.2 REPAYMENT OF TERM LOAN A. The principal of the Term Loan A
shall be due and payable in quarterly installments on March 31, June 30,
September 30 and December 31 of each year commencing on March 31, 2003 through
the Term Loan A Maturity Date and on the Term Loan A Maturity Date, in each case
in an amount equal to the amount specified below, such that all of the Term Loan
A will be repaid in full on or before the Term Loan A Maturity Date:


                                      -3-



                              Amount of Repayment
                              (Assuming No
Repayment Dates               Unscheduled Repayments)
- ---------------               -----------------------
                           
March 31, 2003 -              $1,500,000.00 in the aggregate
  December 31, 2003           ($375,000.00 per payment date)

March 31, 2004 -              $1,750,000.00 in the aggregate
  December 31, 2004           ($437,500.00 per payment date)

March 31, 2005 -              $2,000,000.00 in the aggregate
  December 31, 2005           ($500,000.00 per payment date)

March 31, 2006 -              $2,250,000.00 in the aggregate
  December 31, 2006           ($562,500.00 per payment date)

March 31, 2007 -              $2,500,000.00 in the aggregate
  September 30, 2007 and      ($625,000.00 per payment date)
  on the Term Loan A
  Maturity Date


All amounts of principal, interest and fees relating to Term Loan A not due and
payable before Term Loan A Maturity Date are due and payable on that date.

            1.2.3 COMMITMENT FOR TERM LOAN B. Upon the terms and subject to the
conditions of this Agreement, each Term Lender agrees to make advances to the
Borrower on the Closing Date ("TERM LOAN B") in an aggregate principal amount
not to exceed Three Million Five Hundred Thousand Dollars ($3,500,000.00) (the
"TERM LOAN B COMMITMENT"), provided, however, that the amount and percentage of
the Term Loan B Commitment that any Lender is obligated to lend shall not exceed
the amount or percentage set forth opposite the name of such Lender on Schedule
1.1 hereto. The Term Loan B Commitment of any Term Lender is sometimes referred
to herein as such Lender's Term Loan B Commitment. The Borrower shall not be
permitted to reborrow any amount of the Term Loan B once repaid.

            1.2.4 REPAYMENT OF TERM LOAN B. The principal of the Term Loan B
shall be due and payable in quarterly installments on March 31, June 30,
September 30 and December 31 of each year commencing on March 31, 2003 through
the Term Loan B Maturity Date and on the Term Loan B Maturity Date, in each case
in an amount equal to the amount specified below, such that all of the Term Loan
B will be repaid in full on or before the Term Loan B Maturity Date:


                                      -4-



                              Amount of Repayment
                              (Assuming No
Repayment Dates               Unscheduled Repayments)
- ---------------               -----------------------
                           
March 31, 2003 -              $100,000.00 in the aggregate
  December 31, 2003           ($25,000.00 per payment date)

March 31, 2004 -              $100,000.00 in the aggregate
  December 31, 2004           ($25,000.00 per payment date)

March 31, 2005 -              $100,000.00 in the aggregate
  December 31, 2005           ($25,000.00 per payment date)

March 31, 2006 -              $100,000.00 in the aggregate
  December 31, 2006           ($25,000.00 per payment date)

March 31, 2007 -              $100,000.00 in the aggregate
  December 31, 2007           ($25,000.00 per payment date)

March 31, 2008 -              $3,000,000.00 in the aggregate
  September 30, 2008 and      ($750,000.00 per payment date)
  on the Term Loan B
  Maturity Date


All amounts of principal, interest and fees relating to Term Loan B not due and
payable before Term Loan B Maturity Date, together with all other Secured
Obligations then outstanding, are due and payable on that date.

            1.2.5 VOLUNTARY PREPAYMENTS. The Borrower may at any time and from
time to time upon five (5) Business Days' prior written notice to the Agent
prepay any of the Term Loans (whether accruing interested based upon the Base
Rate or Adjusted LIBOR) in whole or in part, without penalty or premium except
as provided in Subsections 1.8 (Additional Costs), 1.7.5 (Breakage) and Section
11.15 (Indemnification), if applicable. In connection with each voluntary
prepayment:

                  (a) The Borrower shall provide the Agent with notice of its
intention to prepay,

                        (i) no later than 11:00 a.m. (Philadelphia, PA time) on
the date of prepayment in the case of Base Rate Loans, and

                        (ii) no later than 11:00 a.m. (Philadelphia, PA time)
three (3) Business Days prior to the date of prepayment in the case of LIBOR
Loans.

                  (b) Each prepayment of principal of a Term Loan shall be in a
minimum amount equal to $250,000.00 or in integral multiples of $50,000.00 in
excess thereof.


                                      -5-

            1.2.6 MANDATORY PREPAYMENTS.

                  (a) At any time that the Borrower or any of its Subsidiaries
issues any equity or incurs any Indebtedness for borrowed money (exclusive of
(a) equity issued to, or Indebtedness for borrowed money payable to, the
Borrower and (b) common stock issued by, or capital contributions made to, the
Borrower, subject to Change of Control limitations set forth herein), the
Borrower shall prepay, on the date of such issuance or incurrence thereof, such
amount of the Term Loans as is equal to the net proceeds of such equity or
Indebtedness. If the amount of such net proceeds exceeds the aggregate
outstanding principal amount of the Term Loans, the Term Loans shall be repaid
in full and any excess shall serve to prepay the RC Loans, or, at the Borrower's
option, reduce the amount of the RC Commitment, in accordance with Subsection
1.1.4.

                  (b) On or prior to April 30 of each fiscal year of the
Borrower, commencing April 30, 2004 until the Loans are repaid in full, the
Borrower shall deliver to the Agent, a written statement calculating the Excess
Cash Flow for the prior fiscal year (the "subject fiscal year") of the Borrower
and its Subsidiaries, on a Consolidated basis, and within seven (7) Business
Days of the delivery of such written statement shall pay to the Agent, for the
ratable account of Lenders, an amount equal to 50% of such Excess Cash Flow;
provided, however, that so long as no Default or Event of Default is then
occurring, voluntary reductions of the RC Commitment pursuant to Section 1.1.3
(Voluntary Commitment Reductions) and voluntary prepayments of Term Loans
pursuant to Section 1.2.5 (Voluntary Prepayments) made during the subject fiscal
year shall be applied first as a credit against the required Excess Cash Flow
payment and provided, further, that if no Default or Event of Default is then
occurring, the Borrower shall not be obligated to make the foregoing payment in
any fiscal year in which the Borrower's Consolidated Total Debt to EBITDA Ratio
for the prior fiscal year was less than 2.00:1.00. If the amount of such Excess
Cash Flow Payment exceeds the aggregate outstanding principal amount of the Term
Loans, the Term Loans shall be repaid in full and any excess shall serve to
prepay the RC Loans, or, at the Borrower's option, reduce the amount of the RC
Commitment, in accordance with Subsection 1.1.4.


                                      -6-

                  (c) In the event the Borrower or any of its Subsidiaries
receives property or casualty insurance proceeds and/or a condemnation or
similar payment, (a) if such payment is in excess of $1,000,000.00 for one event
or a series of related events and the Agent does not determine in its discretion
that such proceeds are to be used by (and upon such determination, such proceeds
will be used by) Borrower to repair or replace the applicable property, the
Borrower shall promptly, and in any event no later than thirty (30) days from
the date of receipt thereof, pay to the Agent, for the ratable benefit of the
Lenders, 100% of all such insurance proceeds or payments as a prepayment of the
Loans, or (b) if such payment is $1,000,000 or less for any one event or series
of related events and the Borrower or relevant Subsidiary does not use the
proceeds to repair or replace the applicable property, the Borrower shall
promptly, and in any event no later than thirty (30) days from the date of
receipt thereof, pay to the Agent, for the ratable benefit of the Lenders, 100%
of all such insurance proceeds or payments as a prepayment of the Loans. If the
amount of such insurance proceeds paid to the Agent exceeds the aggregate
outstanding principal amount of the Term Loans, the Term Loans shall be repaid
in full and any excess shall serve to prepay the RC Loans or, at Borrower's
option, to reduce the amount of the RC Commitment, in accordance with Subsection
1.1.4.

                  (d) At any time that the Borrower or any of its Subsidiaries
sells, leases, abandons, transfers or otherwise disposes of any of its assets or
property, whether directly or indirectly, in a single transaction or series of
transactions (other than transfers permitted under clauses (a) through (c) and
(f) of Subsection 7.7.2), the Borrower shall promptly prepay such amount of the
Term Loans as is equal to the net proceeds of such disposition. If the amount of
the net proceeds (after taxes) exceeds the aggregate outstanding principal
amount of the Term Loans, the Term Loans shall be repaid in full and any excess
shall serve to reduce the amount of the RC Commitment, in accordance with
Subsection 1.1.4.

            1.2.7 HOLDING OF MANDATORY PREPAYMENTS IN CASH COLLATERAL ACCOUNT.
Provided that no Event of Default or Default is then occurring or occurs during
the holding thereof, at the option of the Borrowers, any mandatory prepayments
under Subsection 1.2.6 above will be held in a cash collateral account by the
Agent for application to Loans as their Interest Periods expire and the required
payment date shall be deemed to be the last day of the relevant Interest Period.

            1.2.8 RELATIONSHIP OF VOLUNTARY AND OTHER MANDATORY PREPAYMENTS TO
SCHEDULED PAYMENTS. Any voluntary prepayments of Term Loans pursuant to
Subsection 1.2.5 above (Voluntary Prepayments) or mandatory prepayments pursuant
to Subsection 1.2.6 above (Mandatory Prepayments) shall be applied (a) against
the scheduled payments set forth in Subsections 1.2.2 and 1.2.4 above (Repayment
of Term Loan A and Repayment of Term Loan B, respectively) in inverse order of
maturity, and (b) as between the Term Loan A and Term Loan B, on a pro rata
basis.

      1.3 LENDERS' AND ISSUER'S OBLIGATIONS SEVERAL.

            Each Lender and the Issuer is severally bound by this Agreement, but
there shall be no joint obligation of the Lenders or the Issuer under this
Agreement. The failure of any Lender or the Issuer to make any share of the
Loans or obligations respecting Letters of Credit to be made by


                                      -7-

it on the date specified for the Loans or such obligations shall not relieve any
other Lender or the Issuer of its obligation to make its share of the Loans or
other obligations on such date, but neither any Lender, the Issuer nor the Agent
shall be responsible for the failure of any other Lender or the Issuer to make a
share of the Loans or other obligations to be made by such other Lender or the
Issuer.

      1.4 NOTES.

            Upon the request of any RC Lender, the aggregate principal amount of
each RC Lender's share of the RC Commitment and RC Loans shall be evidenced by a
note to be issued by the Borrower to each RC Lender in substantially the form
attached hereto as Exhibit A-1 (with appropriate completion of the name of the
applicable RC Lender). Upon the request of any Term Lender, the aggregate amount
of such Term Lender's share of the Term Loan A Commitment and the Term Loan A
shall be evidenced by a note to be issued by the Borrower to such Term Lender in
substantially the form attached hereto as Exhibit A-2 (with the appropriate
completion of the name of the applicable Term Lender). Upon the request of any
Term Lender, the aggregate amount of such Term Lender's share of the Term Loan B
Commitment and the Term Loan B shall be evidenced by a note to be issued by the
Borrower to such Term Lender in substantially the form attached hereto as
Exhibit A-3 (with the appropriate completion of the name of the applicable Term
Lender).

      1.5 BORROWING NOTICE.

            Each RC Loan shall be in the minimum amount of Five Hundred Thousand
Dollars ($500,000.00) and integral multiples of One Hundred Thousand Dollars
($100,000.00) in excess of such minimum amount. To effect a funding, the
Borrower shall give the Agent written notice in the form annexed to this
Agreement as Exhibit B specifying the amount and date of each intended borrowing
and the manner in which the same shall be disbursed, which notice:

                  (a) in the case of Base Rate Loans, shall be given no later
than 11:00 a.m. (Philadelphia, PA time) one (1) Business Day prior to the date
of such borrowing, and

                  (b) in the case of LIBOR Loans, shall be given no later than
11:00 a.m. (Philadelphia, PA time) at least three (3) Eurodollar Business Days
prior to each such borrowing and shall specify the Interest Period with respect
to such borrowing.

            The Agent in turn shall give prompt written or telephonic (promptly
confirmed in writing) notice to each Lender of its pro rata share of the
borrowing, the interest rate option selected and the scheduled date of the
funding. After receipt of such notice, each Lender shall make such arrangements
as are necessary to assure that its share of the funding shall be immediately
available (in Dollars) to the Agent no later than 2:00 p.m. (Philadelphia, PA
time), on the date on which the funding is to occur. After receipt of the funds,
the Agent shall disburse the amount of such funding in accordance with
instructions in the Borrower's borrowing notice.

            The Lenders shall not be obligated to comply with a borrowing notice
if there shall then exist and be continuing an Event of Default or a Default
regardless of whether Lenders have


                                      -8-

determined to exercise their remedies arising upon the occurrence of such Event
of Default or Default.

      1.6 FEES TO LENDERS.

            1.6.1 COMMITMENT FEES. The Borrower shall pay to the Agent for the
account of the RC Lenders quarterly in arrears on each Quarterly Payment Date a
commitment fee (the "COMMITMENT FEE") (calculated on the basis of a 360-day year
for the actual days elapsed) equal to one-half of one percent (.50%) of the
average daily unused portion of the RC Commitment for the preceding quarter.

            1.6.2 LETTER OF CREDIT FEES AND FACING FEES. The Borrower shall pay
to the Agent for the account of the Issuer and/or RC Lenders, as applicable,
such letter of credit fees as are described in Article 2 (Letters of Credit)
below.

            1.6.3 OTHER FEES. The Borrower shall pay such other fees, if any, as
the Borrower has otherwise agreed to pay to the Agent, the Issuer and/or the
Lenders, including without limitation the other fees identified in the
Commitment Letter.

            1.6.4 MISCELLANEOUS. All fees payable to Lenders hereunder or under
any of the other Loan Documents, when due, shall be fully earned and
non-refundable.

      1.7 INTEREST.

            1.7.1 THE RATES. The Loans shall bear interest at Borrower's option
(subject to the limitation and conditions set forth in this Subsection) at the
Base Rate plus the Applicable Margin or at the Adjusted LIBOR plus the
Applicable Margin. Interest on Base Rate Loans shall be payable quarterly on
each Quarterly Payment Date, commencing with the first Quarterly Payment Date
after the Closing Date. Interest on LIBOR Loans shall be payable on the last day
of each Interest Period, provided that if the Interest Period is six (6) months
or longer, interest shall be payable on the ninetieth (90th) day of the Interest
Period, every ninetieth (90th) day thereafter until the end of the Interest
Period and on the last day of the Interest Period. All interest on LIBOR Loans
shall be computed on the basis of a 360-day year, and all interest on Base Rate
Loans shall be computed on the basis of an actual/365-day year.

            1.7.2 APPLICABLE MARGIN. The term "APPLICABLE MARGIN" when used with
respect to the Base Rate shall mean the following:



 Consolidated Total                            Base Rate
Debt to EBITDA Ratio                      Applicable Margin (%)
- --------------------                      ---------------------
                                       
> 3.00:1.00                                      1.75
- -

> 2.50:1.00 < 3.00:1.00                          1.25
- -

> 2.00:1.00 < 2.50:1.00                           .75
- -

< 2.00:1.00                                       .25



                                      -9-

            The term "APPLICABLE MARGIN" when used with respect to Adjusted
LIBOR shall mean the following:



Consolidated Total               Adjusted LIBOR              Adjusted LIBOR
Debt to EBITDA                Applicable Margin for         Applicable Margin
   Ratio                   RC Loans and Term Loan A (%)     for Term Loan B (%)
   -----                   ----------------------------     -------------------
                                                      
> 3.00:1.00                           3.00                            3.50
- -

> 2.50:1.00 < 3.00:1.00               2.75                            3.25
- -

> 2.00:1.00 < 2.50:1.00               2.50                            3.00
- -

< 2.00:1.00                           2.00                            2.50


      Notwithstanding the foregoing, until delivery of the audited year-end
financial statements for the calendar year ending December 31, 2002 pursuant to
the terms hereof, the Applicable Margin shall be that set forth in the tables
above as if the Consolidated Total Debt to EBITDA Ratio were greater than or
equal to 3.00:1.00.

            1.7.3 ADJUSTMENTS TO APPLICABLE MARGIN. The Applicable Margin shall
be adjusted five (5) Business Days after the delivery of the Officer's
Compliance Certificate delivered pursuant to Subsection 5.1.3 below (Delivery of
Officers' Compliance Certificates), provided, however, at any time that the
Borrower shall have not delivered such compliance certificate at the time
specified in said Subsection 5.1.3, until such time as the certificate is so
delivered to the Agent, the Applicable Margin shall be the maximum amount for
the applicable type of Loan set forth above. The foregoing shall not limit any
rights of the Lenders to receipt of the Default Rate, if applicable.

            1.7.4 LIBOR ELECTION.

                  (a) Unless otherwise elected by the Borrower, all Loans shall
be Base Rate Loans. The Borrower may, upon three (3) Eurodollar Business Days'
prior written notice to the Agent in the form of Exhibit C to this Agreement,
and subject to and upon the terms and conditions set forth in this Agreement,
elect to borrow money that will bear interest based on Adjusted LIBOR plus the
Applicable Margin or to convert a portion of the Loans to bear interest based on
Adjusted LIBOR plus the Applicable Margin. Any such election may be made with
respect to a principal amount designated in such notice and equal to at least
Five Hundred Thousand Dollars ($500,000.00) and integral multiples of One
Hundred Thousand Dollars ($100,000.00) in excess of such minimum, for the period
next ensuing, which period ("INTEREST PERIOD") shall equal one, two, three or
six months as designated by Borrower in its notice.

                  (b) The Borrower may not convert any outstanding Loans to
LIBOR Loans if at the time of such conversion or election there shall exist a
Default or an Event of Default.

                  (c) If an interest rate based on Adjusted LIBOR plus the
Applicable Margin is elected, such interest rate shall remain in effect for the
Interest Period selected and


                                      -10-

such interest rate shall not otherwise be converted to another interest rate
prior to the expiration of the Interest Period except as otherwise required by
this Section. If an Interest Period for any LIBOR Loan would otherwise commence
on a day which is not a Eurodollar Business Day, such Interest Period shall
commence on the next Eurodollar Business Day.

                  (d) Each LIBOR Loan shall, on the last day of the applicable
Interest Period, automatically convert into a Base Rate Loan unless, at least
three (3) Business Days prior thereto, the Agent has received a notice in the
form of Exhibit C that the Borrower has elected to continue such Loan as a LIBOR
Loan.

                  (e) The Borrower may not elect an interest rate based on
Adjusted LIBOR if such election would require the Agent to administer
concurrently a combination of elective rates of interest based on Adjusted
LIBOR, Base Rate and/or any combination of Interest Periods that exceed an
aggregate of six (6).

                  (f) If an Interest Period would otherwise end on a day which
is not a Eurodollar Business Day, such Interest Period shall be extended to the
next Eurodollar Business Day, unless such next Eurodollar Business Day shall
fall in the next calendar month in which event such Interest Period shall end on
the immediately preceding Eurodollar Business Day.

                  (g) No Interest Period may be elected that would end later
than the RC Maturity Date (for RC Loans), the Term Loan A Maturity Date (for
Term Loan A) or the Term Loan B Maturity Date (for Term Loan B).

            1.7.5 BREAKAGE. Without limiting the Borrower's option to have
mandatory prepayments under Subsection 1.2.6 held in a cash collateral account
pursuant to Subsection 1.2.7 above, in the event that the Borrower makes a
prepayment (whether voluntary or mandatory) of any LIBOR Loans on a day other
than the last day of the applicable Interest Period, if the Borrower provides
written notice to the Agent of its request to borrow a LIBOR Loan and fails to
borrow such LIBOR Loan, if the Borrower provides written notice to the Agent of
its request to convert a Loan and fails to convert such Loan to a LIBOR Loan on
the date specified in the applicable notice, the Borrower will pay to the Agent,
upon demand, for the account of the affected Lenders any cost, loss or expense
incurred as a result thereof. Each affected Lender shall certify the amount of
such cost, loss or expense to the Borrower, which certification and statement
shall be conclusive in the absence of manifest error.

            1.7.6 DEFAULT RATE. Anything in this Agreement to the contrary
notwithstanding, (a) after maturity, whether scheduled, by acceleration or
otherwise, and whether prior to or after a judgment against the Borrower, or (b)
during the existence of an Event of Default, the outstanding Loans shall bear
interest at two percent (2%) per annum plus the interest rate(s) otherwise in
effect from time to time pursuant to this Agreement (the "DEFAULT RATE").

            1.7.7 SOURCE OF FUNDS. Although each Lender may elect to purchase in
the London Inter-Bank Eurocurrency Market one or more Eurodollar deposits in
order to fund or maintain its funding of LIBOR Loans hereunder, it is
acknowledged that the provisions of this Agreement relating to such funding are
included only for the purpose of determining the rate of


                                      -11-

interest to be paid and any other amounts owing under this Agreement in
connection with such election, and each Lender shall be entitled to fund and
maintain its funding of all or any part of that portion of the principal amount
of the Loans in any manner it sees fit. Nonetheless, all such determinations
shall be made as if each Lender had actually funded and maintained its LIBOR
Loans through the purchase of Eurodollar deposits.

      1.8 ADDITIONAL COSTS; UNAVAILABILITY.

            1.8.1 INABILITY TO DETERMINE LIBOR. In the event that the Agent or
Majority Lenders shall have determined that for any reason it has become
impossible or impracticable to determine the Adjusted LIBOR (or the Adjusted
LIBOR for any specified Interest Periods), the Agent shall promptly give notice
of such determination to the Borrower. In that case, no part of the Loans shall
thereafter be available at the Adjusted LIBOR (or at the Adjusted LIBOR for the
specified Interest Period) until the Agent determines that the circumstances
described above cease to exist.

            1.8.2 LAWS AFFECTING LIBOR AVAILABILITY. If it shall become unlawful
or impossible for any Lender (or any of their respective lending offices) to
make or maintain LIBOR Loans (or LIBOR Loans of a specified duration) due to (a)
the introduction of, or any change in, any Law or any change in the
interpretation or administration thereof by any Governmental Authority, or (b)
compliance by any Lender (or any of their respective lending offices) with any
request or directive (whether or not having the force of law) of any such
Governmental Authority, such Lender shall promptly give notice thereof to the
Agent and the Agent shall promptly give notice to the Borrower and the other
Lenders. Thereafter, until the Agent notifies the Borrower that such
circumstances no longer exist, (a) the obligations of the Lenders to make such
LIBOR Loans and the right of the Borrower to convert any Loan or continue any
Loan as such shall be suspended and thereafter the Borrower may select only Base
Rate Loans hereunder, and (b) if any of the Lenders may not lawfully continue to
maintain a Loan as a LIBOR Loan to the end of the then current Interest Period
applicable thereto, the applicable Loan shall immediately be converted to a Base
Rate Loan.

            1.8.3 CAPITAL ADEQUACY. If either (a) the introduction of, or any
change in, or in the interpretation of, any Law or (b) compliance with any
guideline or request from any central bank or comparable agency or other
Governmental Authority (whether or not having the force of law), has or would
have the effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, any
Lender or any corporation controlling such Lender as a consequence of, or with
reference to the Commitments and other commitments of this type, below the rate
which the Lender or such other corporation could have achieved but for such
introduction, change or compliance, then within five (5) Business Days after
written demand by any such Lender, the Borrower shall pay to such Lender from
time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or corporation controlling such Lender for such
reduction.

            1.8.4 OTHER INCREASED COSTS. Without limiting the provisions of the
preceding Subsection 1.8.3, if the introduction of, or any change in, any Law,
or in the interpretation or administration thereof by any Governmental
Authority, or compliance by any of the Lenders (or


                                      -12-

any of their respective lending offices) with any request or directive (whether
or not having the force of law) of such Governmental Authority:

                  (a) shall subject any of the Lenders (or any of their
respective lending offices) to any tax, duty or other charge with respect to any
Loan, Letter of Credit or commitment therefor or shall change the basis of
taxation of payments to any of the Lenders (or any of their respective lending
offices) with respect to the principal of or interest on any Loan or Letter of
Credit or commitment therefor or any other amounts due under this Agreement in
respect thereof (except for changes in the rate of tax on the overall net income
of any of the Lenders or any of their respective lending offices imposed by the
jurisdiction in which such Lender is organized or is or should be qualified to
do business or such ending office is located), or

                  (b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Lenders (or any of their respective lending offices) or
shall impose on any of the Lenders (or any of their respective lending offices)
or the foreign exchange and interbank markets any other condition affecting any
obligation hereunder; and the result of any of the foregoing is to increase the
costs to any of the Lenders of maintaining any Loan or issuing or participating
in Letters of Credit or to reduce the yield or amount of any sum received or
receivable by any of the Lenders under this Agreement or under the Notes in
respect of a Loan or Letter of Credit,

            then such Lender shall promptly notify the Agent, and the Agent
shall promptly notify the Borrower of such fact and demand compensation
therefor. Within fifteen (15) days after such notice by the Agent, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or Lenders for such increased cost or reduction.

            1.8.5 DETERMINATIONS AND NOTICE. Any determination by the Agent or
specified Lender pursuant to this Section 1.8 shall be conclusive and binding
for all purposes. The Agent shall notify the Borrower and each affected lender
as to the determinations made pursuant to this Section 1.8 and the Agent or the
applicable Lender will provide the Borrower with a written statement setting
forth the methodology of such determination by the Agent or the applicable
Lender, as the case may be; provided, however, that the Agent or applicable
Lender shall have no liability for failure to give such notice.

      1.9 PURPOSE.

            Upon satisfaction of the conditions and other requirements set forth
in this Agreement, the proceeds of the Loans shall be used by the Borrower: (a)
to fund amounts required in connection with the merger of pre-merger PCC
Acquisition Corp. and pre-merger Pennsylvania Crusher Corporation ("OLD PA
CRUSHER"), which merger is being consummated substantially simultaneously with
the initial advance hereunder and is resulting in the surviving entity being the
Borrower hereunder, and (b) for working capital needs and general corporate
purposes of Borrower and its Subsidiaries.


                                      -13-

      1.10 MECHANICS OF PAYMENTS: BORROWER PAYMENTS.

            1.10.1 MANNER OF MAKING PAYMENTS. All payments on account of
principal and interest on the Loans, the Commitment Fee, and all other amounts
otherwise payable to Lenders under this Agreement, shall be made to the Agent,
for the benefit of each Lender, in Dollars which are immediately available.
Unless otherwise specified, all payments by the Borrower shall be made by noon
(Philadelphia, PA time), on the due date for such payment, at the Agent's office
at One South Broad Street, 13th Floor, Locator 01-5997, Philadelphia,
Pennsylvania 19107, specifying the amount and date of payment, re: Pennsylvania
Crusher Corporation (and if by wire transfer, in accordance with the
instructions on the signature page to this Agreement) or to such other accounts
or Persons or at such other place as the Agent may direct in writing. The
failure by the Borrower to make a payment by noon shall not constitute an Event
of Default if such payment is made on the due date; however, any payment made
after such time on such due date shall be deemed made on the next Business Day
for the purpose of interest and reimbursement calculations.

            1.10.2 PERMITTED ASSUMPTIONS BY AGENT AS TO BORROWER PAYMENTS.
Unless the Agent shall have been notified by the Borrower in writing prior to
the date on which the Borrower is scheduled to make a payment to the Agent for
the account of one or more of the Lenders or the Issuer (such payment being the
"BORROWER REQUIRED PAYMENT") that the Borrower does not intend to make the
Borrower Required Payment to the Agent, the Agent may assume that the Borrower
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make such amount available to the Lenders entitled
thereto on such date. If the Borrower has not in fact made the Borrower Required
Payment to the Agent, the recipient(s) of such payment shall, on demand, repay
to the Agent the amount so made available together with interest in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the Federal Funds Rate for such day.

            1.10.3 DISBURSEMENTS FROM AGENT TO LENDERS. The Agent shall promptly
remit to each Lender its pro rata share of payments received pursuant to the
preceding Subsection 1.10.1 in immediately available funds, except that all
reimbursement payments in respect of losses, out-of-pocket expenses, funding
losses or like matters shall be retained by the Agent or remitted to the Lenders
according to their respective appropriate entitlement to such reimbursement.
Unless otherwise provided in this Agreement or other Loan Documents, payments
from the Borrower shall be applied first to fees, then to interest (to the
extent then payable), then to principal of Base Rate Loans, and then to
principal of LIBOR Loans (and among such LIBOR Loans, first to those with the
earliest expiring Interest Periods).

            1.10.4 AUTHORIZATION TO MAKE LOANS IN SATISFACTION OF SECURED
OBLIGATIONS. At any time that the Borrower is required to make a payment of
principal, interest, fees, costs, expenses or other amounts pursuant to the
terms of this Agreement or other Loan Documents and fails to do so, in addition
to other rights and remedies of the Agent and Lenders hereunder, under the other
Loan Documents and at Law, the Borrower hereby authorizes the Lenders (after
receipt of notice from the Agent to do so) to cause the aforesaid payments to be
made by drawing under


                                      -14-

the RC Commitment to make additional RC Loans (and any such drawings shall be
subject to interest at the Default Rate and shall be part of the Secured
Obligations and secured by all of the security interests granted pursuant to the
Loan Documents); provided, however, that notwithstanding the making by the
Lenders of any of the aforesaid payments as set forth in this sentence, the
failure of the Borrower to make any of the aforesaid payments when due shall
constitute an Event of Default. The Lenders may cause payments to be made
pursuant to this Subsection 1.10.4, in their sole discretion, regardless of the
existence of an Event of Default and whether or not the aggregate amount of the
outstanding RC Loans, after giving effect to such payments, exceeds the amount
of the RC Commitment.

            1.10.5 PAYMENTS DUE ON NON-BUSINESS DAYS. Subject to Subsection
1.7.4 (LIBOR Election) as to payments with respect to Adjusted LIBOR, whenever
any payment to be made under the Loan Documents shall become due and payable on
a day which is not a Business Day, such payment may be made on the next
succeeding Business Day and such extension of time shall in such case be
included in computing interest on such payment.

      1.11 MECHANICS OF PAYMENTS: LENDER PAYMENTS.

            1.11.1 PERMITTED ASSUMPTIONS BY AGENT AS TO LENDER PAYMENTS. Unless
the Agent shall have been notified by a Lender prior to noon (Philadelphia, PA
time) on the date on which it is scheduled to fund to the Agent any amount
payable by a Lender under this Agreement (such payment being the "LENDER
REQUIRED PAYMENT") that it does not intend to make the Lender Required Payment
to the Agent, the Agent may assume that the Lender Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the Borrower (or other appropriate party)
on such date. If such Lender has not in fact made the Lender Required Payment to
the Agent, the Borrower (or other recipient) shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
equal to the Base Rate. The foregoing does not limit the obligation of any
Lender to make a Lender Required Payment. Any Lender Required Payment made by
the Agent in reliance on the assumption that the applicable Lender was funding
the same, if not returned by the Borrower (or other recipient), shall be paid,
on demand, to the Agent by the applicable Lender, together with interest thereon
accruing at the Base Rate. In addition, any Lender that fails to make a Lender
Required Payment upon receipt of notice therefor, shall not be entitled to vote
on any matters that it otherwise would be entitled to vote on under this
Agreement until it makes such payment.

            1.11.2 SPECIAL PURPOSE FUNDING VEHICLE. Notwithstanding anything to
the contrary contained herein, any lender (a "GRANTING LENDER") may grant to a
special purpose funding vehicle (an "SPFV") the option to fund all or any part
of any Loan that such Granting Lender would otherwise be obligated to fund
pursuant to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPFV to fund any Loan, and (ii) if an SPFV elects not to
exercise such option or otherwise fails to fund all or any part of such Loan,
the Granting Lender shall be obligated to fund such Loan pursuant to the terms
hereof. The funding of a Loan by an SPFV hereunder shall utilize the RC
Commitment of the Granting Lender to the same extent, and as if, such Loan were
funded by such Granting Lender. Each party hereto hereby agrees that no SPFV


                                      -15-

shall be liable for any indemnity or payment under this Agreement for which a
Lender would otherwise be liable for so long as, and to the extent, the Granting
Lender provides such indemnity or makes such payment. Notwithstanding anything
to the contrary contained in this Agreement, any SPFV may disclose on a
confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or provider of any surety or Loans
to any rating agency, commercial paper, dealer or provider of any surety or
guarantee to such SPFV. This Section may not be amended without the prior
written consent of each Granting Lender, all or any part of whose Loan is being
funded by an SPFV at the time of such amendment. No SPFV shall be entitled to
any indemnities or additional costs or other amounts referred to in Section 1.8
(Additional Costs; Unavailability) or breakage pursuant to Subsection 1.7.5
(Breakage) or similar payments except to the extent it shares in payments made
to the Granting Lender pursuant to entitlements of the Granting Lender
hereunder.

      1.12 TAXES.

            1.12.1 PAYMENTS FREE AND CLEAR. Any and all payments by the Borrower
on account of the Secured Obligations shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholding, and all liabilities with respect thereto
excluding, (a) in the case of each Lender and the Agent, income and franchise
taxes imposed by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or is or should be qualified to do
business or any political subdivision thereof and (b) in the case of each
Lender, income and franchise taxes imposed by the jurisdiction of such Lender's
lending office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note or Letter of Credit to any Lender or the Agent, (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
1.12) such Lender or the Agent (as the case may be) receives an amount equal to
the amount such party would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (iv) the Borrower shall deliver to the Agent
evidence of such payment to the relevant taxing authority or other authority in
the manner provided in Subsection 1.12.4. The affected Lender will take
reasonable steps as are requested by the Borrower at the Borrower's expense to
obtain any refund that is available with respect to Taxes for which the Borrower
has compensated such Lender and will promptly remit any such refund as may be
received to the Borrower.

            1.12.2 STAMP AND OTHER TAXES. In addition, the Borrower shall pay
any present or future stamp, registration, recordation or documentary taxes or
any other similar fees or charges or excise or property taxes, levies of the
United States or any state or political subdivision thereof or any applicable
foreign jurisdiction which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Loans, the Letters of Credit, the other Loan Documents, or any
other Secured Obligations or the perfection of any rights or security interest
in respect thereto (hereinafter referred to as "OTHER TAXES").


                                      -16-

            1.12.3 INDEMNITY. The Borrower shall indemnify each Lender and the
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 1.12) paid by such Lender or the Agent (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted; provided, however, that there is a reasonable and
legal basis for the assertion of such Taxes. Such indemnification shall be made
within thirty (30) days from the date such Lender or the Agent (as the case may
be) makes written demand therefor, shall constitute Secured Obligations, be
secured by all collateral security for the Secured Obligations and, if not paid
within such 30-day period, shall accrue interest until paid at the Default Rate.

            1.12.4 EVIDENCE OF PAYMENT. Within thirty (30) days after the date
of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Agent,
at its address referred to in Section 11.1, the original or a certified copy of
a receipt evidencing payment thereof or other evidence of payment satisfactory
to the Agent.

            1.12.5 TAX FORMS. Each Lender or assignee or participant of a Lender
that is not incorporated under the Laws of the United States of America or a
state thereof agrees that it will deliver to each of the Borrower and the Agent
two (2) duly completed appropriate valid Withholding Certificates (as defined
under Section 1.1441-1(c)(16) of the Internal Revenue Code or Regulations
promulgated thereunder (for the purposes hereof, the "Regulations")) certifying
its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax
treaty or an exemption provided by the Internal Revenue Code. The term
"Withholding Certificate" means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form
W-8IMY and the related statements and certifications as required under Sections
1.1441-1(e)(2) and (3) of the Regulations; a statement described in Section
1.871-14(c)(2)(v) of the Regulations; or any other certificates under the
Internal Revenue Code or Regulations that certify or establish the status of a
payee or beneficial owner as a U.S. or foreign person. Each Lender, assignee or
participant required to deliver to the Borrower and the Agent a Withholding
Certificate pursuant to the preceding sentence shall deliver such valid
Withholding Certificate as follows: (A) each Lender which is a party hereto on
the Closing Date shall deliver such valid Withholding Certificate at least five
(5) Business Days prior to the first date on which any interest or fees are
payable by the Borrower hereunder for the account of such Lender; and (B) each
assignee or participant shall deliver such valid Withholding Certificate at
least five (5) Business Days before the effective date of such assignment or
participant. Each Lender, assignee or participant which so delivers a valid
Withholding Certificate further undertakes to deliver to each of the Borrower
and the Agent two (2) additional copies of such Withholding Certificate (or a
successor form) on or before the date that such Withholding Certificate expires
or becomes obsolete or after the occurrence of any event requiring a change in
the most recent Withholding Certificate so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably requested by the
Borrower or the Agent. Notwithstanding the submission of a Withholding
Certificate claiming a reduced rate of or exemption from U.S. withholding tax,
the Borrower or the Agent, as the case may be, shall be entitled to withhold
U.S. federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under Section 1.1441-7(b) of the Treasury Regulations.
Further, the Borrower and


                                      -17-

the Agent are indemnified under Section 1.1461-1(e) of the Treasury Regulations
against any claims and demands of any Lender or assignee or participant of a
Lender for the amount of any tax it deducts and withholds in accordance with
regulations under Section 1441 of the Internal Revenue Code.

            1.12.6 SURVIVAL. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 1.12 shall survive the payment in full of the
Secured Obligations and the termination of the Commitments.

                                    ARTICLE 2
                                LETTERS OF CREDIT

      2.1 LETTERS OF CREDIT.

            2.1.1 COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the
requirements set forth below, the Borrower may use a portion of the RC
Commitment, which portion shall not exceed $750,000.00 (the "LETTER OF CREDIT
SUBLIMIT"), for the purpose of causing the Issuer to issue standby Letters of
Credit for the account of the Borrower, provided that (a) the Borrower executes
and delivers a letter of credit application and, if required by the Issuer,
reimbursement agreement, each in a form acceptable to the Issuer, and complies
with any other conditions to the issuance of such Letter of Credit (including
the payment of any applicable fees) set forth therein; (b) the Issuer approves
the form of such Letter of Credit; (c) such Letter of Credit bears an expiration
date not later than the earlier of (i) one (1) year after issuance and (ii)
thirty (30) days prior to the RC Maturity Date; (d) the Issuer receives a
request for issuance three (3) Business Days prior to the date of issuance
(unless the Issuer, in its sole and absolute discretion, agrees to shorter
notice in any instance); and (e) the conditions set forth in Section 3.2
(Requirements for Each Loan/Letter of Credit) are satisfied to the satisfaction
of the Issuer as of the date of the issuance of such Letter of Credit.

            2.1.2 LIMITATION ON AMOUNT. The Issuer shall not be obligated or
permitted under this Section 2.1 to issue any Letter of Credit for the account
of the Borrower to the extent that the sum of (a) the amount that would be
available to be drawn under the proposed Letter of Credit plus (b) the sum of
all amounts available to be drawn under outstanding Letters of Credit plus (c)
any Unreimbursed Drawings would exceed the lesser of (i) the Letter of Credit
Sublimit, (ii) the excess of the RC Commitment over the outstanding principal
amount of RC Loans; and (iii) the excess of the amount of the Borrowing Base
over the outstanding principal amount of RC Loans.

            2.1.3 OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 2.1 (including without limitation reimbursement obligations) shall be
absolute and unconditional under any and all circumstances and irrespective of
the occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the Borrower
may have or have had against the Issuer, the Agent, any Lender or any
beneficiary of a Letter of Credit. The Borrower further agrees that the Issuer,
the Agent and the Lenders shall not be responsible for, and the Borrower's
reimbursement obligations shall not be


                                      -18-

affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, fraudulent or forged, or any dispute between or
among the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Issuer, the Agent and the Lenders
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. Any action taken or
omitted by the Issuer under or in connection with each Letter of Credit and the
related drafts and documents shall be binding upon the Borrower and shall not
result in any liability on the part of the Issuer.

            2.1.4 RELIANCE BY ISSUER. The Issuer shall be entitled to rely, and
shall be fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and believed by it to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Issuer and the Agent.

            2.1.5 FEES. In connection with each Letter of Credit issued
hereunder, the Borrower shall pay to the Agent for the account of the RC Lenders
a fee equal to the product of (a) the Applicable Margin for RC Loans bearing
interest at a rate based on Adjusted LIBOR (or, if the Default Rate is then in
effect, the margin of the Default Rate over Adjusted LIBOR) multiplied by (b)
the face amount of such Letter of Credit (the "LETTER OF CREDIT FEES"). In
addition, the Issuer shall receive a facing fee equal to 1/4 of 1% per annum of
the face amount of all outstanding Letters of Credit ("FACING FEE"). All Letter
of Credit Fees and Facing Fees are fully earned and non-refundable when due, and
shall be payable quarterly in arrears on each Quarterly Payment Date based on
the number of days during each quarter that a Letter of Credit is outstanding
during such quarter (calculated on the basis of a 360-day year). The Borrower
shall also pay to the Issuer all of the Issuer's standard fees and charges for
the opening, amendment, modification, presentation or cancellation of a Letter
of Credit and otherwise in respect of a Letter of Credit and shall execute all
of the Issuer's standard agreements in connection with the issuance of the
Letter of Credit.

            2.1.6 PARTICIPATION BY RC LENDERs.

                  (a) Effective immediately upon the issuance of each Letter of
Credit and without further action on the part of the Issuer, the Issuer shall be
deemed to have granted to each RC Lender, and each RC Lender shall be deemed to
have irrevocably purchased and received from the Issuer, without recourse or
warranty, an undivided interest and participation in such Letter of Credit to
the extent of each RC Lender's percentage of the RC Commitment. Further, each
Lender acknowledges and agrees that it shall be absolutely liable, to the extent
of its percentage of the RC Commitment, to fund on demand or reimburse the
Issuer on demand for the amount of each draft paid by the Issuer under each
Letter of Credit to the extent that such amount is not immediately reimbursed by
the Borrower.


                                      -19-

                  (b) In furtherance of the provisions of the preceding
paragraph (a), the Issuer shall notify the Agent promptly upon receipt of notice
of an intended draw under a Letter of Credit. The Agent shall give written,
telecopied or telegraphic notice to each of the other RC Lenders of its pro rata
share of such draw and the scheduled date thereof. After receipt of such notice,
and whether or not an Event of Default or Default then exists, each RC Lender
shall make available to the Agent such RC Lender's share of such draw in
immediately available (in Dollars) to the Agent no later than noon
(Philadelphia, PA time), on the date specified in the Agent's notice. The
failure of the Issuer or the Agent to give timely notice pursuant to this
Subsection 2.1.6 shall not affect the right of the Issuer to reimbursement from
the RC Lenders. Any amount paid by Agent and RC Lenders pursuant to a draw made
under a Letter of Credit shall constitute an RC Loan and shall be repaid
pursuant to the provisions respecting RC Loans, provided that if an Event of
Default or Default exists at the time of a draw, the Borrower shall immediately
reimburse the amount of such draw to the Agent for the benefit of the RC
Lenders.

            2.1.7 STANDARD OF CONDUCT. The Issuer shall be entitled to
administer each Letter of Credit in the ordinary course of business and in
accordance with its usual practices, modified from time to time as it deems
appropriate under the circumstances, and shall be entitled to use its discretion
in taking or refraining from taking any action in connection herewith as if it
were the sole party involved. Any action taken or omitted to be taken by the
Issuer under or in connection with any Letter of Credit shall not create for the
Issuer any resulting liability to any other Lender.

            2.1.8 CASH COLLATERAL ACCOUNT. In the event that (a) the excess of
(i) the amount of the RC Commitment, over (ii) the amount of outstanding RC
Loans, is less than (b) the aggregate face amount of all outstanding Letters of
Credit plus the amount of any Unreimbursed Drawings for any reason (whether
because the RC Commitment has been reduced or terminated or otherwise), the
Borrower shall forthwith pay to the Agent an amount equal to the excess of the
amount described in clause (b) above over the amount described in clause (a)
above. Such amount shall first be applied against Unreimbursed Drawings and the
remainder shall be maintained by the Agent in an interest bearing cash
collateral account in the name of and for the benefit of the Agent and the
Lenders to secure the repayment of Borrower's obligation to reimburse the
Lenders for drafts drawn or which may be drawn under outstanding Letters of
Credit until such time as all outstanding Letters of Credit have expired or been
cancelled.

            2.1.9 OBLIGATIONS SECURED. The obligations of the Borrower to the
Issuer, the Agent and the Lenders in respect of Letters of Credit shall be
Secured Obligations and shall be secured by all collateral security therefor.

                                    ARTICLE 3
                           CONDITIONS TO FUNDINGS AND
                          ISSUANCE OF LETTERS OF CREDIT

            3.1 CONDITIONS TO INITIAL FUNDING. The obligation of the Lenders to
make the initial Loans or the Issuer to issue the initial Letters of Credit
pursuant to this Agreement shall be subject to the fulfillment, to the
satisfaction of the Agent, Lenders and Issuer (unless otherwise


                                      -20-

specified), of the following conditions on or before January 3, 2003 (the date
of such fulfillment being the "CLOSING DATE"). The making of any Loan by any
Lender or the issuance of any Letter of Credit by the Issuer on the Closing Date
shall constitute evidence of such Lender's or the Issuer's satisfaction with the
fulfillment thereof.

            3.1.1 EXECUTION OF THIS AGREEMENT. This Agreement shall have been
duly executed by the Borrower, each Lender party to this Agreement as of the
Closing Date, the Issuer and the Agent.

            3.1.2 THE NOTES. The Borrower shall have delivered duly executed
Notes to each of the Lenders that requests a Note.

            3.1.3 SECURITY AGREEMENT. The Borrower and each Subsidiary of the
Borrower shall have executed and delivered to the Agent a Security Agreement (as
amended, restated, modified or supplemented from time to time in accordance with
the terms hereof and thereof, the "SECURITY AGREEMENT") in substantially the
form annexed to this Agreement as Exhibit D, together with (a) such Uniform
Commercial Code financing statements as are necessary to perfect the security
interests created by such Security Agreement, (b) such landlord waivers as the
Agent shall request, (c) bailee waiver letters from each Person that has
possession of any inventory of the Borrower or its Subsidiaries, and (d) a power
of attorney duly executed by the Borrower and each Subsidiary of the Borrower in
substantially the form attached as Annex B to the Security Agreement, and all
equipment appraisals required by Lenders shall have been completed to Lenders'
satisfaction.

            3.1.4 GUARANTY AND SURETYSHIP AGREEMENT. Each Subsidiary of the
Borrower shall have executed and delivered to the Agent one or more Guaranty and
Suretyship Agreements (as amended, restated, modified or supplemented from time
to time in accordance with the terms hereof and thereof, together with each
other guaranty and suretyship agreement executed by a Subsidiary of the Borrower
pursuant to the terms hereof, the "SUBSIDIARY SURETYSHIPS") in substantially the
form annexed to this Agreement as Exhibit E.

            3.1.5 PLEDGE AGREEMENTS.

                  (a) Parent shall own directly all of the capital stock of the
Borrower and shall have executed and delivered to the Agent a Pledge Agreement
(as the same may be amended, restated, modified or supplemented from time to
time in accordance with the terms hereof and thereof, the Parent Pledge (as the
same may be amended, restated, modified or supplemented from time to time in
accordance with the terms hereof and thereof, the "PARENT PLEDGE") in
substantially the form and annexed to this Agreement as Exhibit F-1, together
with all original stock certificates, duly executed in blank and undated
assignment powers and financing statements required thereunder.

                  (b) The Borrower shall own directly all of the capital stock
and other equity of the Subsidiaries specified on Schedule 4.1 hereto and the
Borrower shall have executed and delivered to the Agent a Pledge Agreement (as
the same may be amended, restated, modified or supplemented from time to time in
accordance with the terms hereof and thereof, the


                                      -21-

"BORROWER PLEDGE") in substantially the form annexed to this Agreement as
Exhibit F-2, together with all original stock and other equity certificates,
duly executed in blank and undated assignment powers and financing statements
required thereunder.

            3.1.6 SUBORDINATION AGREEMENT. Parent and K-Tron shall have executed
and delivered to the Agent a Subordination Agreement (as amended, restated,
modified or supplemented from time to time in accordance with the terms hereof
and thereof the "SUBORDINATION AGREEMENT") respecting management fees and other
obligations of the Borrower in substantially the form and annexed to this
Agreement as Exhibit G.

            3.1.7 MORTGAGES AND LANDLORD WAIVERS. The Borrower and each
Subsidiary shall have executed and delivered to the Agent mortgages (as amended,
restated, modified and supplemented from time to time in accordance with the
terms hereof and thereof, and together with any other mortgages delivered
pursuant to this Agreement at any time, the "MORTGAGES") in substantially the
form annexed to this Agreement as Exhibit I, in form appropriate for recording
in the relevant jurisdiction, and landlord waivers (as amended, restated,
modified and supplemented from time to time in accordance with the terms hereof
and thereof, and together with any other landlord consents, waivers or
subordinations delivered pursuant to this Agreement at any time, the "LANDLORD
WAIVERS") in form and substance satisfactory to Agent for each parcel of real
property owned or leased by such Person, and shall have delivered such
environmental reports, flood certifications, title commitments and insurance
policies, surveys, lease agreements, warehouseman waivers, mortgagee waivers and
other instruments, agreements, documents and certificates as may be required by
the Mortgages or otherwise reasonably requested by Agent in connection with any
real property owned, leased or otherwise occupied by Borrower or any of its
Subsidiaries or upon which any assets of the Borrower or any of its Subsidiaries
may be situated (including without limitation such reports, certifications,
commitments and other information relating to the South Carolina Property as the
Agent may reasonably request).

            3.1.8 REPAYMENT OF EXISTING INDEBTEDNESS. All Indebtedness of
Borrower, Old PA Crusher or any subsidiary of Old PA Crusher owing to any Person
other than Indebtedness permitted under Section 7.1 (collectively, the
"PREDECESSOR INDEBTEDNESS") shall have been repaid in full prior to or
concurrently with the initial advances under this Agreement. In addition, each
Person to which any Predecessor Indebtedness is owed, shall have terminated all
commitments in respect of its respective Predecessor Indebtedness and shall have
prepared and, if required by Law, executed and/or filed (or agreed to file
concurrent with receipt of payment in full of its respective Predecessor
Indebtedness), releases and terminations of all liens and cancellations of all
guarantees or other collateral security instruments and agreements provided in
connection therewith, in form and substance satisfactory to Agent. Arrangements
for the payoff of the Predecessor Indebtedness shall have been made and a payoff
letter in form and substance satisfactory to the Agent shall have been
delivered.

            3.1.9 PAYMENT OF FEES AND COSTS. The Borrower shall have paid all of
the fees required to be paid to the Agent, the Issuer and other Lenders on the
Closing Date, including without limitation the remaining portion of the upfront
fee referenced in the Commitment Letter and all of the fees and disbursements of
counsel for the Agent in connection with the review,


                                      -22-

negotiation, preparation, execution and delivery of this Agreement and the other
documents contemplated herein.

            3.1.10 NO DEFAULT. Before and after giving effect to the
Indebtedness to be incurred hereunder, there shall exist no Event of Default or
Default under this Agreement.

            3.1.11 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement or otherwise made in
writing in connection with this Agreement or the other Loan Documents, whether
made by the Borrower or any Subsidiary, shall be true and correct with the same
effect as though such representations and warranties were made to Lenders or
Agent on behalf of Lenders on and as of the Closing Date and the Borrower shall
deliver a certificate so stating.

            3.1.12 FINANCIAL STATEMENTS; PROJECTIONS.

                  (a) The Lenders shall have received a balance sheet, a
statement of incomes and changes in retained earnings and a statement of cash
flow of the Borrower and its Subsidiaries (or Old PA Crusher and its
Subsidiaries, as applicable) for the most recent twelve (12) month period on a
pro forma basis, all in form and substance satisfactory to the Lenders and
prepared in accordance with GAAP.

                  (b) The Lenders shall have received a final set of operating
projections and budgets for the Borrower and its Subsidiaries, dated no more
than 120 days prior to the Closing Date, for the period beginning on or before
the Closing Date and ending on December 31, 2007, which shall be in reasonable
detail, shall be based on the closing capital structure of the Borrower and its
Subsidiaries, shall reflect the consummation of the transactions contemplated by
this Agreement and shall otherwise be in form and substance satisfactory to the
Agent.

            3.1.13 LEGAL PROCEEDINGS. All corporate, partnership and other legal
proceedings and all instruments in connection with the transactions contemplated
by this Agreement and other Loan Documents shall be satisfactory in form and
substance to the Agent and its counsel, and the Agent and its counsel shall have
received all information and copies of all documents and records of all
corporate and partnership proceedings, which the Agent or its counsel has
requested, such documents where appropriate to be certified by proper corporate,
partnership, governmental or other authorities.

            3.1.14 CONSENTS AND APPROVALS. All corporate, governmental and
judicial consents, approvals and waivers and other third party consents,
approvals and waivers necessary in connection with this Agreement and the Loans,
the acquisition of Old PA Crusher or other related transactions, shall have been
obtained and, if applicable, become final and non-appealable, and shall remain
in full force and effect, without the imposition of any conditions that are not
acceptable to the Lenders.


                                      -23-

            3.1.15 MATERIAL ADVERSE CHANGE; COMPLIANCE WITH LAW.

                  (a) No Material Adverse Change shall have occurred since
September 30, 2002.

                  (b) The Borrower and its Subsidiaries shall be in substantial
compliance with all Law, including without limitation environmental laws.

                  (c) There shall be no material litigation or proceeding
pending or overtly threatened against the Borrower, Old PA Crusher or any of
their Subsidiaries, except as previously disclosed in writing to the Agent prior
to December 2, 2002.

            3.1.16 OPINIONS OF COUNSEL. The Agent shall have received the
following favorable opinions of counsel as to the transactions contemplated
hereby addressed to the Agent, the Issuer and the Lenders and dated as of the
Closing Date, in form and content satisfactory to Agent, the Issuer and the
Lenders:

                  (a) opinions of counsel to the Borrower, its Subsidiaries and
any other Loan Parties; and

                  (b) opinions of special local counsel to the Borrower and its
Subsidiaries in the State of South Carolina and such other states as Agent may
reasonably require.

            3.1.17 OFFICER'S COMPLIANCE CERTIFICATE. There shall have been
delivered to each Lender an Officer's Compliance Certificate, dated as of the
Closing Date, demonstrating pro forma compliance with the financial covenants
set forth in Article 6 (Financial Covenants) and certifying as to the absence of
any Default and any Event of Default.

            3.1.18 GOOD STANDING. The Agent shall have received (a) good
standing certificates for the Borrower and each of its Subsidiaries, evidencing
its good standing under the laws of the state of its incorporation or formation
and (b) good standing certificates for the Borrower and each of its
Subsidiaries, evidencing its good standing under the laws of each of the states
in which it is required to qualify to do business.

            3.1.19 LIEN SEARCHES. The Borrower shall have delivered to the Agent
Uniform Commercial Code, tax and judgment lien searches, pending litigation and
bankruptcy searches, of a recent date, in such offices as are acceptable to the
Agent, together with U.S. Patent and Trademark Office and Copyright Office
searches, of a recent date, if requested by Agent, in all cases showing no Liens
with respect to Borrower and each of its Subsidiaries other than Permitted
Liens.

            3.1.20 EVIDENCE OF INSURANCE. The Agent shall have received evidence
of the insurance required by Section 7.14 (Insurance) below.


                                      -24-

            3.1.21 STOCK PURCHASE AND MERGER DOCUMENTS, INSTRUMENTS AND
AGREEMENTS. The Agent shall have received (a) executed, final copies of the
stock purchase agreement relating to Borrower's acquisition of all of the issued
and outstanding capital stock of Old PA Crusher, together with all exhibits and
schedules thereto, which shall be in form and substance satisfactory to the
Agent, (b) all documents, instruments, certificates and agreements governing the
merger of Old PA Crusher with and into Borrower, including without limitation a
filed certificate of merger, all in form and substance satisfactory to Agent,
and (c) such evidence as Agent and its counsel may request, in form and
substance satisfactory to Agent, showing satisfaction of all conditions set
forth in any of the documents or agreements described in clause (a) or (b) of
this Subsection 3.1.21 and completion of the transactions contemplated in such
documents and agreements. The purchase price for Old PA Crusher shall not exceed
an amount equal to $25,000,000, plus reasonable fees and expenses associated
therewith in an amount acceptable to the Agent.

            3.1.22 CAPITAL STRUCTURE AND EQUITY INVESTMENTS. Borrower shall have
received a capital contribution in an amount no less than $5,000,000.00 and the
Borrower's capitalization as of the Closing Date shall otherwise be satisfactory
to Lenders. The Agent shall have received copies of all documents related to the
capitalization of the Borrower, all of which shall be in form and substance
satisfactory to the Agent.

            3.1.23 INITIAL BORROWING BASE REPORT AND AVAILABILITY UNDER
BORROWING BASE. The Borrower shall have delivered to the Agent an initial
Borrowing Base Certificate showing availability under the Borrowing Base in an
amount acceptable to Lenders.

            3.1.24 MATERIAL CONTRACTS. The Agent shall have received copies of
all management agreements, employment contracts and other material contracts and
agreements requested by Agent, all in form and substance satisfactory to Agent.

            3.1.25 TAX SHARING AGREEMENT. The Borrower shall have delivered to
the Agent a duly executed tax sharing agreement with K-Tron and K-Tron's
Consolidated Subsidiaries in form and substance satisfactory to Agent (the "TAX
SHARING AGREEMENT").

            3.1.26 PRO FORMA EBITDA. The Agent shall have received satisfactory
evidence that the Borrower's (or Old PA Crusher's) pro forma EBITDA for the most
recent twelve (12) month period (or, subject to the reasonable satisfaction of
the Agent, the most recent twelve (12) month period for which financial
statements are available), as determined in accordance with GAAP (with certain
adjustments as agreed to by the Agent) shall be at least equal to $5,100,000.00.

            3.1.27 CONSOLIDATED TOTAL DEBT TO PRO FORMA EBITDA RATIO. The Agent
shall have received a certificate from the Borrower, signed by the Borrower's
Chief Executive Officer, President, Chief Financial Officer or Treasurer,
certifying as to the ratio of Consolidated Total Debt to pro forma EBITDA (as
measured above), which shall be no greater than 3.00 to 1.00, together with
supporting calculations and such evidence thereof as the Agent may request.


                                      -25-

            3.1.28 PRIMARY DEPOSIT ACCOUNTS. The Borrower and its Subsidiaries
shall maintain their primary deposit accounts with Agent or a Lender.

            3.1.29 OTHER REQUIREMENTS. The Agent shall have received such
additional information and material as the Agent or any Lender may reasonably
request.

      3.2 REQUIREMENTS FOR EACH LOAN/LETTER OF CREDIT.

            The Lenders shall not be required to make any Loans to the Borrower
(including, without limitation, the initial Loan) and Issuer shall not be
required to issue any Letters of Credit (including, without limitation, the
initial Letter of Credit) unless the following conditions are fulfilled to the
satisfaction of Agent:

            3.2.1 NO DEFAULT. There shall not, either prior to or after giving
effect to each such funding or Letter of Credit, exist an Event of Default or
Default;

            3.2.2 REQUEST FOR ADVANCE/LETTER OF CREDIT. Agent shall have timely
received a borrowing notice pursuant to Section 1.5 (Borrowing Notice) or
request for a Letter of Credit pursuant to Subsection 2.1.1 (Commitment to Issue
Letters of Credit);

            3.2.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Borrower and the other Loan Parties made in the Loan Documents
shall be true and correct in all material respects as of the date of each such
Loan or Letter of Credit (both immediately prior to and after giving effect to
said Loan or Letter of Credit) as if made on and as of such date, except to the
extent that changes in the facts and conditions on which such representations
and warranties are based do not result from an act or omission that constitutes
a breach of any covenant or Default or Event of Default set forth in this
Agreement or in any other Loan Document and have been disclosed to Lenders in
writing;

            3.2.4 MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of this Agreement; and

            3.2.5 METHOD OF CERTIFYING CERTAIN CONDITIONS. The request for, and
acceptance of, each Loan and each Letter of Credit by the Borrower shall be
deemed a representation and warranty by the Borrower that the conditions
specified in Subsections 3.2.1 (No Default), 3.2.3 (Representations and
Warranties), and 3.2.4 (Material Adverse Change) have been satisfied.

                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

            In order to induce Issuer and the Lenders to enter into this
Agreement and to make the Loans and other extensions of credit contemplated by
this Agreement, the Borrower hereby makes the following representations,
covenants and warranties:


                                      -26-

      4.1 STATUS.

            4.1.1 ORGANIZATION AND QUALIFICATION. The Borrower and each of its
Subsidiaries are duly organized and validly existing corporations, partnerships
or limited liability companies, as applicable, under the laws of the respective
states as indicated on Schedule 4.1 and each is in good standing under the laws
of its state of incorporation or formation, as applicable. The Borrower and each
of its corporate and limited liability company Subsidiaries has perpetual
existence, and the Borrower and each of its Subsidiaries has the corporate,
partnership or limited liability company, as applicable, power and authority to
own its property and assets and to transact the business in which it is engaged
or presently proposes to engage. Neither the Borrower nor any of its
Subsidiaries has failed to qualify to do business in any state or jurisdiction
where the failure to so qualify could result in a Material Adverse Change.

            4.1.2 STOCK OWNERSHIP. All of the capital stock of the Borrower is
owned by Parent. The Borrower does not have any Subsidiary and does not
presently operate all or any portion of its businesses through any Person, other
than through K-Tron pursuant to the Management Agreement and as otherwise
disclosed on Schedule 4.1. Schedule 4.1 also correctly lists as to each
Subsidiary of the Borrower on the date of this Agreement:

                  (a) its name,

                  (b) the jurisdiction of its incorporation or organization and
organizational number issued by such jurisdiction,

                  (c) the classes of stock or partnership or other equity
interest issued by such Person and the principal characteristics of each such
class, and

                  (d) the names of each of the equity holders and the number and
percentage of the issued and outstanding shares or partnership interests of each
class (and certificate numbers by which such interests are designated) owned by
each of the holders of such shares or interests.

All the outstanding shares of capital stock of the Borrower and of each of its
Subsidiaries are validly issued, fully paid and nonassessable, and all such
shares and partnership and other equity interests indicated in Schedule 4.1 as
owned by the Borrower or any of its Subsidiaries are so owned beneficially and
of record by such Person, free and clear of any Lien, except for the Lien
created pursuant to the Loan Documents and Permitted Liens. Schedule 4.1 also
correctly lists as to the Borrower and each of its Subsidiaries any options,
warrants or other securities issued by the Borrower or any of its Subsidiaries
and the identity of each holder of any such option, warrant or other security.
Except as set forth on Schedule 4.1, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction on the voting or
transfer of any shares of, capital stock of the Borrower or any of its
Subsidiaries pursuant to the certificate or articles of incorporation, bylaws or
other governing document or any agreement or other instrument to which the
Borrower or any of its Subsidiaries is a party or by which any of them may be
bound.


                                      -27-

      4.2 POWER AND AUTHORITY; ENFORCEABILITY.

            The Borrower and each of its Subsidiaries has the corporate,
partnership or limited liability company, as applicable, power to execute,
deliver and carry out the terms and provisions of the Loan Documents to which
each is a party, and each such Person has taken all necessary corporate,
partnership or limited liability company, as applicable, action (including,
without limitation, any consent of stockholders, members or partners required by
Law or by their respective articles of incorporation, bylaws or other
organizational documents) to authorize the execution, delivery and performance
of the Loan Documents to which each is a party. The Loan Documents, when
executed and delivered by the Borrower and/or its Subsidiaries, as applicable,
constitute or will constitute the authorized, valid and legally binding
obligations of each such Person enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.

      4.3 NO VIOLATION OF AGREEMENTS; ABSENCE OF CONFLICTS.

            The execution and delivery of the Loan Documents, the consummation
of the transactions contemplated by the Loan Documents and compliance with the
terms and provisions of the Loan Documents will not:

                  (a) require any consent or approval, governmental or
otherwise, not already obtained;

                  (b) violate any Law respecting the Borrower or any of its
Subsidiaries;

                  (c) conflict with, result in a breach of, or constitute a
default under, the charter documents or bylaws of the Borrower or any of its
Subsidiaries, or under any indenture, agreement, license or other instrument to
which the Borrower or any of its Subsidiaries is a party or by which any of them
or their respective properties may be bound; or

                  (d) result in, or require the creation or imposition of, any
Lien upon or with respect to any property now owned or hereafter acquired by the
Borrower or any of its Subsidiaries, other than in favor of Agent for the
benefit of the Secured Parties as provided herein and in the other Loan
Documents.

      4.4 RECORDING, ENFORCEABILITY AND CONSENT.

            Assuming the due recording of the Uniform Commercial Code financing
statements delivered in connection herewith, no consent, approval or
authorization of any Person, or recording, filing, registration, notice or other
similar action with or to any Person, is required in order to insure the
legality, validity, binding effect or enforceability of any of the Loan
Documents as against all Persons, except such consents, approvals or
authorizations as have been obtained and remain in effect. No consent, approval
or authorization of any Person which has not been obtained is required for the
continued conduct by the Borrower or any of its Subsidiaries of their business
as now conducted or as proposed to be conducted.


                                      -28-

      4.5 LINES OF BUSINESS.

            The Borrower and its Subsidiaries are engaged only in Permitted
Businesses.

      4.6 SECURITY INTEREST IN COLLATERAL.

                  (a) The Borrower has delivered, or caused to be delivered, to
the Agent all Uniform Commercial Code financing statements in recordable form
that may be necessary to perfect the security interests granted pursuant to the
Loan Documents to the extent that such security instruments may be perfected by
filing under the Uniform Commercial Code in effect in any applicable
jurisdiction. The Borrower has delivered, or caused to be delivered, to the
Agent all original instruments, certificates, documents and investment property
necessary to perfect the security interest granted pursuant to the Loan
Documents, to the extent that a security interest therein may be perfected by
delivery under the Uniform Commercial Code in effect in any applicable
jurisdiction. Upon the filing of such Uniform Commercial Code financing
statements in the offices specified therein no further action, including without
limitation, any filing or recording of any document or the obtaining of any
consent, is necessary in order to establish, perfect and maintain the Agent's
first priority security interests in the personal property (including fixtures)
and equity of the Borrower and its Subsidiaries (for the benefit of the Secured
Parties) purported to be created by the Pledge Agreements and the Security
Agreement, except for the periodic filing of continuation statements with
respect to such Uniform Commercial Code financing statements, or the filing of
appropriate documentation with the United States Patent and Trademark Office
and/or United States Copyright Office (all of which filings have been duly made,
to the extent such are necessary for the perfection of Agent's security interest
in Borrower's or any of its Subsidiary's Intellectual Property). The perfection
questionnaire delivered to the Agent by the Borrower is true, complete and
correct and there have been no changes thereto since the date of delivery.

                  (b) The Mortgage relating to the South Carolina Property, when
duly filed in the office referred to therein, will create a first priority
perfected Lien on the real property owned by the Borrower and its Subsidiaries
described therein, subject to no prior Liens other than Permitted Liens, and no
further action, including, without limitation, the filing or recording of any
document, is necessary to maintain such first priority perfected Lien.

                  (c) Except as set forth on Schedule 4.6 hereto, neither the
Borrower nor any Subsidiary of the Borrower has any inventory or other assets
located at any premises that are not owned or leased by the Borrower or such
Subsidiary and, in the case of inventory or other assets that are located at
premises leased by the Borrower or a Subsidiary, as to which a landlord waiver
has been duly obtained. Schedule 4.6 shows, as of the Closing Date, the address
of each of the premises where such inventory or other assets are located, the
name and address of the Person that is in possession of such inventory or other
assets and the value of the assets at each such location.

      4.7 LITIGATION; COMPLIANCE WITH LAWS.


                                      -29-

                  (a) There are no actions, suits, protests, reconsiderations or
proceedings pending, or to the knowledge of the Borrower, threatened against or
affecting the Borrower or any of its Subsidiaries or Affiliates before any court
or before any Governmental Agency, wherein unfavorable decisions, rulings or
findings individually or in the aggregate could result in a Material Adverse
Change.

                  (b) The Borrower and each of its Subsidiaries are in material
compliance with all Law.

      4.8 NO BURDENSOME AGREEMENTS.

            Neither the Borrower nor any of its Subsidiaries is a party to any
agreement or instrument or subject to any corporate or other restrictions which,
assuming compliance by such Persons with the terms of such agreements or
instruments, could result in a Material Adverse Change.

      4.9 CONDITION OF PROPERTY.

            All of the material properties, equipment and systems of the
Borrower and its Subsidiaries are in good repair, working order and condition
subject to normal wear and tear and routine maintenance and are and will be in
material compliance with all applicable standards or rules imposed by any
Governmental Authority.

      4.10 LICENSES; INTELLECTUAL PROPERTY.

            The Borrower and each of its Subsidiaries holds or is the licensee
of all patents, trademarks, service marks, trade names, copyrights, franchises,
licenses and authorizations, governmental or otherwise (the "rights") necessary
for the conduct of its business as now conducted, without any known material
conflict with the rights of others. The Borrower and each of its Subsidiaries
has obtained all material equipment rental or other agreements necessary for the
operation of its business as now conducted. Schedule 4.10 attached hereto
correctly lists all registered patents, registered trademarks and other material
intellectual property rights, including any licenses of same, as well as all
material governmental licenses, authorizations and similar rights. Each material
license agreement under which Borrower or any Subsidiary of Borrower is the
licensee is a valid and binding license agreement, enforceable against the
licensor.

      4.11 TITLE TO PROPERTIES; LIENS.

            The Borrower and each of its Subsidiaries has good and marketable
title to its properties and assets, including the properties and assets
reflected in the financial statements referred to in Subsection 4.13.1
(Financial Statements) (except properties and assets disposed of since the date
thereof in the ordinary course of business), and none of such properties or
assets is subject to any Liens except Permitted Liens. Each of the Borrower and
its Subsidiaries enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the


                                      -30-

operation of such properties and assets, and all such leases are valid and
subsisting and are in full force and effect.

      4.12 MANAGEMENT AGREEMENTS.

            The Borrower and its Subsidiaries are not parties to any management
or other similar agreement respecting the management of their businesses except
for (a) usual and customary employment agreements, (b) usual and customary
consulting agreements that do not provide for the control of the business or the
general management of the business, and (c) the Management Agreement.

      4.13 FINANCIAL STATEMENTS AND PROJECTIONS.

            4.13.1 FINANCIAL STATEMENTS. Each of the financial statements
delivered pursuant to Subsections 3.1.12 (Financial Statements; Projections),
5.1.1 (Delivery of Quarterly Financial Statements) and 5.1.2 (Delivery of Annual
Financial Statements; Accountants' Certification) have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
specified and present fairly in all material respects the financial position of
the Borrower and its Subsidiaries as of the date specified and the results of
operations and statements of cash flow for the period specified, except in the
case of unaudited financial statements for the omission of footnotes and
year-end adjustments.

            4.13.2 UNDISCLOSED LIABILITIES. Neither the Borrower nor any of its
Subsidiaries has any material liabilities, contingent or otherwise, other than
as disclosed in the financial statements referred to in the preceding Subsection
4.13.1 or other liabilities arising since the date of the most recent balance
sheet delivered to Agent that were incurred by Borrower in the ordinary course
of its business, and there are not now and not anticipated any material
unrealized losses of the Borrower or any of its Subsidiaries.

            4.13.3 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the
delivery of the most recent financial statements referred to in Subsection
3.1.12 (Financial Statements; Projections) above, there has been no Materially
Adverse Change.

            4.13.4 PROJECTIONS. The operating projections submitted on behalf of
the Borrower to the Lenders and Issuer pursuant to Subsection 3.1.12 (Financial
Statements; Projections) present to the best of the Borrower's knowledge and
belief based on the reasonable assumptions set forth in such projections the
expected results of operations and sources and uses of cash of the Borrower for
the periods covered by the projections.

      4.14 TAX RETURNS AND PAYMENTS; OTHER FEES.

                  (a) All tax returns required by Law to be filed (including
extensions) by or in respect of the Borrower and its Subsidiaries and each other
entity that files a consolidated tax return with the Borrower have been filed.
All taxes, assessments and other governmental charges levied upon them and any
of their respective properties, assets, income or franchises which are due and
payable have been paid, other than those presently payable without penalty or
interest.


                                      -31-

                  (b) The Borrower and each of its Subsidiaries and each other
entity that files a consolidated tax return with the Borrower have paid all
franchise, license and other fees and charges which have become due pursuant to
any franchise or permit in respect of its business and has made appropriate
provision as is required by GAAP for any such fees and charges which have
accrued.

      4.15 FISCAL YEAR.

            The fiscal year of the Borrower and each of its Subsidiaries ends on
December 31 or such date as may be permitted under Section 7.16.

      4.16 FEDERAL RESERVE REGULATIONS.

            Neither the Borrower nor any of its Subsidiaries is engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying, any "margin security" or
"margin stock" as defined in Regulations T, U and X of the Board of Governors of
the Federal Reserve System. None of the proceeds of any of the Loans shall be
used to purchase or carry, or to reduce or retire or refinance any credit
incurred to purchase or carry, any margin stock (within the meaning of
Regulations T, U and X of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any
margin stock. If requested by the Agent, the Borrower shall complete and sign
Part I of a copy of the Federal Reserve Form U-1 referred to in Regulation U of
the Board of Governors of the Federal Reserve System and deliver such copy to
each Lender. Neither the Borrower nor any of its Subsidiaries, nor any bank
acting on any of their behalf, has taken or will take any action which might
cause this Agreement or the Note to violate Regulation T, U or X or any other
regulation of the Board of Governors of the Federal Reserve System, as now or
hereafter in effect.

      4.17 INVESTMENT COMPANY ACT.

            Neither the Borrower nor any of its Subsidiaries is an "investment
company", or "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.

      4.18 PUBLIC UTILITY HOLDING COMPANY ACT.

            Neither the Borrower nor any Subsidiary of the Borrower is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.

      4.19 BENEFIT PLAN COMPLIANCE.

            4.19.1 PLANS. None of the Borrower, any of its Subsidiaries or any
ERISA Affiliate maintains or contributes to any Plan, except as disclosed in
Schedule 4.19 attached hereto (and other than Plans in effect outside the United
States and its territories). The Borrower


                                      -32-

has furnished to the Lender a copy of the most recent actuarial report for each
Plan which is a defined benefit plan as defined in Section 3(35) of ERISA or is
a funded employee welfare benefit plan, and each such report is true, complete
and accurate in all material respects.

            4.19.2 FAVORABLE DETERMINATION LETTERS. Except as described in
Schedule 4.19, each Plan as most recently amended, which is intended to be
qualified within the meaning of Section 401 of the Code, is the subject of a
favorable determination by the Internal Revenue Service with respect to its
qualification under Section 401 of the Code.

            4.19.3 COMPLIANCE WITH LAW. The Borrower, its Subsidiaries and their
respective ERISA Affiliates have operated each Plan in all material respects in
compliance with the requirements of the Code and ERISA and the terms of each
Plan.

            4.19.4 ABSENCE OF CERTAIN CONDITIONS. Except as specifically
disclosed in Schedule 4.19: (a) no Plan has engaged in any transaction in
connection with which the Borrower or any of its Subsidiaries could be subject
to either a material civil penalty assessed pursuant to Section 502(i) of ERISA
or a material tax penalty imposed pursuant to Section 4975 of the Code, (b)
there is no Accumulated Funding Deficiency with respect to any Employee Pension
Plan, whether or not waived, or an unfulfilled obligation to contribute to any
Multiemployer Plan or withdrawal from any Multiemployer Plan, (c) no Plan has
been terminated under conditions which resulted or could result in any material
liability to the PBGC, (d) no material liability to the PBGC has been or is
expected by the Borrower to be incurred with respect to any Plan maintained by
the Borrower or any of its Subsidiaries or ERISA Affiliates except for required
premium payments to the PBGC, (e) there has been (i) no Reportable Event with
respect to any Employee Pension Plan (except to the extent that the PBGC has
waived such reporting requirement with respect to any such event), and (ii) no
event or condition which presents a material risk of termination of any Plan by
the PBGC, in either case involving conditions which could result in any
liability to the PBGC, (f) none of the Borrower or its Subsidiaries or any ERISA
Affiliate has incurred or anticipates incurring Withdrawal Liability with
respect to any Multiemployer Plan, (g) no Multiemployer Plan is in
Reorganization, (h) the Borrower and its Subsidiaries have complied in all
material respects with the health continuation coverage requirements of COBRA
and the requirements of the Health Insurance Portability and Accountability Act
of 1996, (i) there is no material unfunded benefit liability in respect of any
Plan, (j) there is not now, and has not been, any material violation of the Code
or ERISA with respect to the filing of applicable reports, documents, and
notices regarding any Plan with the Secretary of Labor, the Secretary of the
Treasury, the PBGC or any other governmental entity or the furnishing of such
documents to the participants or beneficiaries of such Plan and (k) there is no
Plan providing for retiree health and/or life insurance or retiree death
benefits or any welfare plan having material unfunded liabilities. For the
purposes of Subsection 4.19.3 and this Subsection, the term "material" means any
violation that could reasonably be expected to result in, and the phrase "in
material compliance with" means in compliance to the extent that noncompliance
could reasonably be expected to result in, liabilities in excess of $75,000.00
singly or in the aggregate with all other such liabilities, or any violation or
noncompliance which could otherwise result in a Material Adverse Change.


                                      -33-

            4.19.5 ABSENCE OF CERTAIN LIABILITIES. No liability (whether or not
such liability is being litigated) has been asserted against the Borrower, any
of its Subsidiaries or any ERISA Affiliate in connection with any Employee
Pension Plan or any Multiemployer Plan by the PBGC other than for required
premium payments to the PBGC, by a trustee appointed pursuant to Section 4042(b)
or (c) of ERISA, or by a sponsor or an agent of a sponsor of a Multiemployer
Plan, and no lien has been attached and no Person has threatened to attach a
lien on any of the Borrower's, any of its Subsidiaries' or any ERISA Affiliate's
property as a result of failure to comply with ERISA or as a result of the
termination of any Plan.

      4.20 ACCURACY AND COMPLETENESS OF DISCLOSURE.

            Neither this Agreement nor any other document, certificate or
instrument delivered to the Agent or Lenders by or on behalf of the Borrower or
any Subsidiary in connection with this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained in this Agreement and in such other documents,
certificates or instruments not misleading in light of the circumstances under
which such statements were made.

      4.21 ADEQUACY OF CAPITAL; SOLVENCY.

            The proceeds of the Loans, together with the proceeds of
Indebtedness, if any, permitted under Section 7.1 (Indebtedness), will be
sufficient until satisfaction in full of the Loans to enable the Borrower and
its Subsidiaries to operate their respective businesses as currently
contemplated by the Borrower. The Borrower and each of its Subsidiaries is
Solvent and will be Solvent after giving effect to the transactions contemplated
by this Agreement.

      4.22 ABSENCE OF RESTRICTIVE PROVISIONS.

            Other than this Agreement, neither the Borrower nor any of its
Subsidiaries is subject or party to any agreement, lien or encumbrance, charter
or bylaw, regulatory, or other provision (except for applicable statutory
corporate law), restricting, directly or indirectly,

                  (a) the payment of dividends by a Subsidiary of the Borrower
or the making of advances or other cash payments by any Subsidiary to the
Borrower, or

                  (b) the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or permit to exist any Lien on or with respect to any
property or asset of the Borrower or any of its Subsidiaries.

      4.23 ENVIRONMENTAL COMPLIANCE. Except for occurrences or conditions which
could not reasonably be expected to result in liabilities in excess of
$10,000.00 singly or in the aggregate with all other violations or
non-compliance or liabilities, or any violation which could not reasonably be
expected to otherwise result in a Material Adverse Change:

            4.23.1 None of the real property currently or previously owned
and/or occupied by the Borrower or any of its Subsidiaries has ever been used by
previous owners and/or


                                      -34-

operators or ever been used by the Borrower or any of its Subsidiaries to treat,
produce, store, handle, transfer, process, transport, dispose or otherwise
Release any Hazardous Substances in violation of any Environmental Law;

            4.23.2 There is no condition which exists on the real property owned
and/or occupied by the Borrower or any of its Subsidiaries which requires
Remedial Action;

            4.23.3 Neither the Borrower nor any of its Subsidiaries has been
notified of, or has actual knowledge of any notification having been filed with
regard to, a Release on or into any real property now or previously owned and/or
occupied by the Borrower or any of its Subsidiaries;

            4.23.4 Neither the Borrower nor any of its Subsidiaries has received
a summons, citation, notice of violation, administrative order, directive,
letter or other communication, written or oral, from any Governmental Authority
concerning any intentional or unintentional action or omission related to the
generation, storage, transportation, handling, transfer, disposal or treatment
of Hazardous Substances in violation of any Environmental Law;

            4.23.5 There are no "friable" (as that term is defined in
regulations under the Federal Clean Air Act) asbestos or asbestos-containing
materials which have not been encapsulated in accordance with accepted
guidelines promulgated by the United States Environmental Protection Agency
existing in any real property owned and/or occupied by the Borrower or any of
its Subsidiaries;

            4.23.6 No equipment containing polychlorinated biphenyls, including
electrical transformers, are located on any real property occupied by the
Borrower or any of its Subsidiaries in levels which exceed those permitted by
any and all governmental authorities with jurisdiction over such premises and
which are not properly labeled in accordance with requisite standards; and

            4.23.7 Each of the tanks on any real property owned and/or occupied
by the Borrower or any of its Subsidiaries have been registered and tested to
the extent required by, and in accordance with, any applicable Environmental
Laws and there is no evidence of leakage from any such tanks. All tanks that
have been removed or abandoned have been closed in accordance with applicable
standards under Environmental Laws.

      4.24 INSURANCE. Borrower is in compliance with the requirements relating
to insurance coverage set forth in Section 7.14.

                                    ARTICLE 5
                       REPORTING REQUIREMENTS AND NOTICES

      The Borrower covenants that from the date of this Agreement so long as any
of the Secured Obligations remain unpaid, any Letters of Credit remain
outstanding, the Lenders have an unexpired Commitment to lend hereunder or the
Issuer has an unexpired commitment to issue


                                      -35-

Letters of Credit hereunder, it shall comply with each of the reporting and
notice requirements set forth in this Article 5.

      5.1 FINANCIAL DATA AND REPORTING REQUIREMENTS; NOTICE OF CERTAIN EVENTS.

            5.1.1 DELIVERY OF QUARTERLY FINANCIAL STATEMENTS. As soon as
practicable and in any event within forty-five (45) days after the close of each
of the first three quarters of each fiscal year of Borrower, the Borrower shall
deliver to the Lenders a management-prepared Consolidated and Consolidating
balance sheet, statement of income and changes in retained earnings, and
statement of cash flows of Borrower and its Subsidiaries as at the end of and
for (a) the period commencing at the end of the previous fiscal year and ending
with such quarter and (b) the period commencing at the end of the previous
fiscal quarter and ending with such currently reported quarter, setting forth in
comparative form the corresponding figures for the appropriate periods of the
preceding fiscal year, certified by the Chief Executive Officer, President,
Chief Financial Officer or Treasurer of the Borrower as (i) having been prepared
in accordance with GAAP and (ii) presenting fairly the financial position and
results of operations of the Borrower and such Subsidiaries as at the date and
for the period specified, and subject to normal recurring year-end audit
adjustments, it being understood that footnotes may be omitted.

            5.1.2 DELIVERY OF ANNUAL FINANCIAL STATEMENTS. As soon as
practicable and in any event within one hundred twenty (120) days after the
close of each fiscal year of the Borrower, the Borrower shall deliver to the
Lenders, an audited Consolidated and Consolidating balance sheet, statement of
income and changes in retained earnings, and statement of cash flow of K-Tron
and its Subsidiaries, including Borrower and its Subsidiaries, as at the end of
and for the fiscal year just closed in reasonable detail and certified (without
any qualification, modification or exception) by KPMG, LLC or other
nationally-recognized independent certified public accountants selected by the
Borrower and satisfactory to Agent provided that the Consolidating statements
for the Borrower and its Subsidiaries are included within the audit and
specifically referenced therein.

            5.1.3 DELIVERY OF OFFICER'S COMPLIANCE CERTIFICATES. As soon as
practicable after the close of each quarter of each fiscal year of the Borrower
and in any event no later than the date on which financial statements are
required to be delivered for each such quarter or year, as provided in
Subsections 5.1.1 (Delivery of Quarterly Financial Statements) and 5.1.2
(Delivery of Annual Financial Statements; Accountants' Certification), the
Borrower shall deliver to the Lenders an Officer's Compliance Certificate (a)
demonstrating compliance with the financial covenants set forth in Article 6 and
(b) certifying that, as at the date of such Certificate, there existed no Event
of Default and no Default or if any such Event of Default or Default existed,
specifying the nature thereof, the period of existence thereof and what action
the Borrower proposes to take, or has taken, with respect thereto.

            5.1.4 AUDITORS' REPORTS. Promptly upon receipt, the Borrower shall
deliver to the Lenders copies of all financial reports or written
recommendations, if any, submitted to the Borrower or any of its Subsidiaries by
its auditors in connection with each annual or interim audit or examination of
its books by such auditors.


                                      -36-

            5.1.5 SEC FILINGS, ETC. Promptly upon receipt or transmission
thereof, as applicable, the Borrower shall deliver to the Agent and the Lenders:

                  (a) at any time when the Borrower or any of its Subsidiaries
is subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended, or any regulations promulgated thereunder, all letters of comment or
material correspondence sent to the Borrower or any of its Subsidiaries by any
securities exchange or the Securities and Exchange Commission in relation to the
affairs of the Borrower or any of its Subsidiaries,

                  (b) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by the Borrower or any of its
Subsidiaries with any securities exchange or with the Securities and Exchange
Commission or any governmental authority succeeding to any of its functions,

                  (c) financial statements, reports, notices and proxy
statements sent or made available generally by the Borrower or any of its
Subsidiaries to other lenders to such Persons (if any) and their other
respective bondholders or security holders (or any trustee or other
representative of any of the foregoing) and any non-routine notices or other
non-routine correspondence from bondholders or security holders (or trustee or
other representative of such Persons), and

                  (d) all press releases and other statements made available by
the Borrower or any of its Subsidiaries to the public concerning material
developments in their respective businesses.

            5.1.6 MONTHLY CERTIFICATES AND REPORTS. As soon as practicable after
the close of each month and in any event within thirty (30) days of the last day
of each month, the Borrower shall deliver to the Agent (a) a duly executed
Borrowing Base Certificate, and (b) a management-prepared statement of
operations for the Borrower and its Subsidiaries on a Consolidated basis, each
certified by Borrower's Chief Executive Officer, President or Chief Financial
Officer to be true, correct and complete. In connection therewith, the Agent
may, during normal business hours upon reasonable advance notice, conduct such
field examinations as it may deem necessary or advisable, in its discretion, to
evaluate the Borrower's Inventory and Accounts Receivable, which exams shall be
at Borrower's sole cost and expense.

            5.1.7 ANNUAL BUDGET. No later than January 31 of each year, the
Borrower shall deliver management-prepared operating projections and budgets for
the Borrower and its Subsidiaries for such fiscal year, certified to be true,
correct and complete by the Chief Executive Officer, President or Chief
Financial Officer of Borrower, in reasonable detail and otherwise in form and
substance satisfactory to the Lenders.


                                      -37-

      5.2 NOTICE OF DEFAULTS.

            The Borrower shall give written notice of any Event of Default or
Default to the Agent, the Issuer and the Lenders promptly upon (and in any event
within two (2) Business Days of) any officer of the Borrower obtaining knowledge
thereof.

      5.3 NOTICE OF DISPUTES AND OTHER MATTERS.

            The Borrower shall give written notice to Agent of any of the
following occurrences promptly upon (and in any event within ten (10) Business
Days of) any officer of the Borrower obtaining knowledge thereof:

            5.3.1 CERTAIN LITIGATION. Any actions, proceedings or claims
commenced or asserted against Borrower or any of its Subsidiaries in which the
amount involved is $100,000.00 or more and which is not fully covered by
insurance, or which, if not solely a claim for monetary damages, could
reasonably be expected to, if adversely determined, result in a Material Adverse
Change;

            5.3.2 CONDITIONS AFFECTING COLLATERAL. Any of the following
conditions: (i) movement of any Collateral to a location not covered by a
Uniform Commercial Code financing statement, to the extent local filing is
required due to the nature of such Collateral; (ii) acquisition of property by
the Borrower or any Subsidiary not subject to a valid and perfected, first
priority Lien pursuant to the then existing Loan Documents; (iii) any change of
name, jurisdiction of registration or address of the chief executive office of
the Borrower or any Subsidiary; or (iv) any other circumstance which could
affect the attachment or perfection of the Agent's security interest in the
Collateral;

            5.3.3 MATERIAL ADVERSE CHANGE. Any Material Adverse Change or the
existence of any facts or circumstances or the occurrence or failure to occur of
any event which could result in a Material Adverse Change; or

            5.3.4 REPRESENTATIONS AND WARRANTIES. Any changes in facts or
circumstances on which the representations and warranties set forth in this
Agreement are made which makes such representations and warranties false or
misleading in any material respect.

      5.4 ERISA NOTICES.

      The Borrower shall deliver to the Agent:

            (a) promptly after the filing or receiving thereof, copies of all
reports, including annual reports and audited financial statements, and notices
which the Borrower or any Subsidiary or any ERISA Affiliate files with or
receives from PBGC or the US Department of Labor under ERISA, and

            (b) as soon as possible and in any event within twenty (20) days
after the Borrower or any of its Subsidiaries or any ERISA Affiliate knows or
has reason to know that any


                                      -38-

Reportable Event or Prohibited Transaction has occurred with respect to any Plan
or that the PBGC or the Borrower or any Subsidiary or any ERISA Affiliate has
instituted or will institute proceedings under Title IV of ERISA to terminate
any Plan, or that any Withdrawal Liability from a Multiemployer Plan has been or
will be incurred by Borrower or any of its Subsidiaries or any ERISA Affiliate
or that any Multiemployer Plan to which Borrower or any of its Subsidiaries or
any ERISA affiliate contribute is or will be in Reorganization, a certificate of
the chief financial officer of the Borrower setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination or Withdrawal
Liability or Reorganization and the action the Borrower proposes to take with
respect thereto.

      5.5 MISCELLANEOUS. With reasonable promptness, the Borrower shall deliver
such other information respecting the business, operations and financial
condition of itself and its Subsidiaries as the Agent or any Lender may from
time to time reasonably request.

      5.6 AUTHORIZATION OF THIRD PARTIES TO DELIVER INFORMATION. The Borrower
hereby agrees that any opinion, report or other information delivered to the
Agent, the Issuer or any Lender pursuant to the Loan Documents is hereby deemed
to have been authorized and directed by the Borrower to be delivered for the
benefit, and reliance thereupon, of such recipient.

                                    ARTICLE 6
                               FINANCIAL COVENANTS

      The Borrower covenants that from the date of this Agreement so long as any
of the Secured Obligations remain unpaid, any Letters of Credit remain
outstanding, the Lenders have an unexpired Commitment to lend hereunder or the
Issuer has an unexpired commitment to issue Letters of Credit hereunder, it
shall comply with each of the financial covenants set forth in this Article 6.

      6.1 MINIMUM TANGIBLE NET WORTH. The Borrower and its Subsidiaries, on a
Consolidated basis, shall maintain a Tangible Net Worth of not less than the sum
of (a) the Base Amount (as defined below) plus (b) an amount equal to 50% of the
Consolidated Net Income of the Borrower and its Subsidiaries for the period
commencing on the first day of the 2003 fiscal year and ending on the last day
of the fiscal year ending on, or most recently prior to, the applicable test
date. Test dates for this covenant shall be the last day of each fiscal quarter.
"BASE AMOUNT" means the Tangible Net Worth of the Borrower and its Subsidiaries
as at the last day of the 2002 fiscal year, subject to such adjustments as are
satisfactory to Agent.

      6.2 FIXED CHARGE COVERAGE RATIO. The Borrower and its Subsidiaries, on a
Consolidated basis, shall maintain a Fixed Charge Coverage Ratio of at least
1.10:1.00 at all times. This covenant shall be tested quarterly.

      6.3 CONSOLIDATED TOTAL DEBT TO EBITDA RATIO. The Borrower and its
Subsidiaries, on a Consolidated basis, shall maintain a ratio of Consolidated
Total Debt, as at the date of determination, to EBITDA, for the twelve (12)
month period most recently ended, of no more


                                      -39-

than the ratio specified for the period specified. For purposes of this Section
6.3: the first fiscal quarter of any fiscal year shall be designated as "Q1";
the second fiscal quarter of any fiscal year shall be designated as "Q2"; the
third fiscal quarter of any fiscal year shall be designated as "Q3"; and the
fourth fiscal quarter of any fiscal year shall be designated as "Q4".



                  Ratio                     Period
                  -----                     ------
                                         
                  3.00:1.00                 Closing through end of Q4 2003

                  2.75:1.00                 thereafter through end of Q2  2004

                  2.50:1.00                 thereafter through end of Q4 2004

                  2.25:1.00                 thereafter through end of Q4 2005

                  2.00:1.00                 thereafter through end of Q4 2006

                  1.75:1.00                 thereafter


This covenant shall be tested quarterly and at any time the Borrower incurs any
Indebtedness hereunder; provided, however, the Borrower shall not be required to
provide written evidence of compliance at the time of each incurrence of
Indebtedness (unless the Agent specifically requests such evidence in connection
with any specified incurrence), it being understood that the request for a Loan
hereunder shall be deemed to constitute a representation by Borrower as to such
compliance.

      6.4 LIMITATION ON CAPITAL EXPENDITURES. The Borrower and its Subsidiaries,
on a Consolidated basis, shall not permit its Capital Expenditures to exceed
$1,000,000.00 in the aggregate in any fiscal year.

      6.5 ADDITIONAL PROVISIONS RESPECTING CALCULATION OF FINANCIAL COVENANTS.
Except as otherwise provided in this Agreement, the following provisions shall
apply.

            6.5.1 Calculations made pursuant to this Article 6 shall give
effect, on a pro forma basis, to all Acquisitions and dispositions made during
the quarter or year to which the required compliance relates, as if such
Acquisition or disposition had been consummated on the first day of the
applicable period.

            6.5.2 Except as otherwise provided in this Agreement, calculations
under this Agreement shall be made and financial data and terms referred to in
this Agreement shall be prepared and interpreted both as to classification of
items and as to amounts in accordance with GAAP.


                                      -40-

                                    ARTICLE 7
                               BUSINESS COVENANTS

      The Borrower covenants that from the date of this Agreement so long as any
of the Secured Obligations remain unpaid, any Letters of Credit remain
outstanding, the Lenders have an unexpired Commitment to lend hereunder or the
Issuer has an unexpired commitment to issue Letters of Credit hereunder, it
shall comply with each of the covenants set forth in this Article 7.

      7.1 INDEBTEDNESS.

            7.1.1 IN GENERAL. The Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
permit to exist or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness other than any of the following:

                  (a) obligations under Interest Rate Protection Agreements
entered into with respect to the Borrower's or a Subsidiary's Indebtedness but
not for speculative purposes;

                  (b) obligations under the Loan Documents and Letters of Credit
issued hereunder;

                  (c) Capital Lease Obligations and Equipment Purchase Money
Indebtedness in a principal amount not to exceed $1,000,000.00 singly or in the
aggregate at any time;

                  (d) obligations owing to the Borrower or to a Subsidiary of
Borrower; and

                  (e) the Old PA Crusher Letter of Credit Indebtedness, to the
extent such obligations (i) are unsecured except by cash collateral acceptable
to Agent and (ii) expire on the date (or dates) described in Schedule 7.1.1
annexed hereto.

            7.1.2 LIMITATION ON INCURRENCE. In addition to the limitations on
the incurrence or existence of Indebtedness referred to above, no Indebtedness
may be incurred by Borrower or any of its Subsidiaries unless immediately before
and after giving effect to the incurrence of such Indebtedness, no Default or
Event of Default shall have occurred and be continuing.

            7.1.3 NO DEFAULT. The Borrower shall not allow any such Indebtedness
to be in default.


                                      -41-

      7.2 LIENS; LICENSES.

            7.2.1 IN GENERAL. The Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or assets of the Borrower or
any of its Subsidiaries, except any of the following (the Liens referred to in
clauses (a) through (e) are, collectively, the "PERMITTED LIENS"):

                  (a) Liens created in favor of the Agent for the benefit of the
Secured Parties pursuant to the Loan Documents;

                  (b) Liens for taxes, assessments or other governmental charges
the payment of which is not at the time required by Section 7.11 (Payment of
Taxes and Claims);

                  (c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due or the payment of which is not at the time
required by Section 7.11 (Payment of Taxes and Claims);

                  (d) Capital Leases or Liens securing Equipment Purchase Money
Indebtedness, incurred in compliance with paragraph (c) of Subsection 7.1.1
above, provided that no such security interest or other Lien shall extend to or
cover any property other than the leased property or equipment purchased from
the proceeds of such Equipment Purchase Money Indebtedness;

                  (e) cash collateral acceptable to the Agent securing the Old
PA Crusher Letter of Credit Indebtedness, to the extent such cash collateral is
released promptly after expiration of the letter of credit secured by such cash
collateral;

                  (f) encumbrances arising by reason of easements, licenses,
reservations, covenants, rights-of-way and other similar encumbrances on the use
of real property, to the extent such Liens do not materially interfere with the
use, enjoyment or value of the subject real property or with the business of the
Borrower or any of its Subsidiaries;

                  (g) any exception to title set forth in the title insurance
policy or title commitment with respect to any property of the Borrower or any
of its Subsidiary with respect to which a Mortgage has been executed;

                  (h) leases or subleases of real estate permitted by this
Agreement granted to others, easements, rights-of-way, restrictions and other
similar charges or encumbrances on real property, in each case (i) incidental to
and not interfering with the ordinary conduct of the business of the Borrower or
any of its Subsidiaries and (ii) subordinate, on terms and conditions acceptable
to the Agent, to the Lien of the Lenders (or the Agent for the benefit of the
Secured Parties) on such real property under the Loan Documents;


                                      -42-

                  (i) Liens listed on Schedule 7.2.1 annexed hereto; and

                  (j) encumbrances in the nature of utility easements, zoning or
other building restrictions and other similar Liens on real property disclosed
in real property record searches and title insurance commitments delivered to
the Agent, to the extent such Liens do not materially interfere with the use,
enjoyment or value of the subject real property or with the business of the
Borrower or any of its Subsidiaries.

            7.2.2 NEGATIVE PLEDGE. The Borrower will not, and will not permit
any of its Subsidiaries to, agree with any Person, to restrict or place
limitations on the right of the Borrower or any of its Subsidiaries to create,
incur, assume or permit to exist any Lien on or with respect to any property or
asset of the Borrower or any of its Subsidiaries.

            7.2.3 LICENSES. Except as set forth on Schedule 7.2.3 annexed
hereto, the Borrower will not, and will not permit any Subsidiaries to, license
or sublicense any of its Intellectual Property or general intangibles.

      7.3 INVESTMENTS, LOANS, ACQUISITIONS, ETC.

      Except as set forth on Schedule 7.3 annexed hereto, the Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
make or permit to exist any Investment or make any Acquisition, whether in one
transaction or in a series of transactions except that so long as no Default or
Event of Default then exists or would be caused thereby, the Borrower and its
Subsidiaries may purchase:

                  (a) Investments by the Borrower in its direct or indirect
wholly-owned Subsidiaries or the creation by the Borrower of new direct or
indirect wholly-owned Subsidiaries, subject to compliance with the provisions of
Subsections 3.1.4 (Guaranty and Suretyship Agreements) and 3.1.5(Pledge
Agreements);

                  (b) Investments by a Subsidiary of the Borrower in an other
Person that is a direct or indirect wholly-owned Subsidiary of the Borrower or
the creation by any direct or indirect wholly-owned Subsidiary of the Borrower
of an other Person that is a direct or indirect wholly-owned Subsidiary of the
Borrower, subject to compliance with the provisions of Subsections 3.1.4
(Guaranty and Suretyship Agreements) and 3.1.5 (Pledge Agreements);

                  (c) marketable, direct obligations of the United States of
America, its agencies and instrumentalities maturing within three hundred
sixty-five (365) days of the date of purchase;

                  (d) commercial paper issued by corporations, each of which
shall have a net worth of at least $100 million and each of which conducts a
substantial part of its business in the United States of America, maturing
within two hundred seventy (270) days from the date of the original issue
thereof, and which at the time of acquisition has the highest rating by Moody's
Investors Service, Inc. or Standard and Poor's Corporation; and


                                      -43-

                  (e) bankers' acceptances and certificates of deposit maturing
within three hundred sixty-five (365) days of the date of purchase which are
issued by, or time deposits maintained with, an Eligible Institution having
capital, surplus and undivided profits totaling more than $100 million and which
have the highest rating by Moody's Investors Service, Inc. or Standard and
Poor's Corporation.

      7.4 RESTRICTED PAYMENTS

            The Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any sum or
property for any Restricted Payment, except that:

                  (a) INTERCOMPANY DISTRIBUTIONS. Restricted Payments may be
declared and paid to the Borrower by direct or indirect wholly owned
Subsidiaries of the Borrower.

                  (b) TAX DISTRIBUTIONS. In addition, Tax Distributions may be
made in any fiscal year, so long as no Event of Default or Default exists or
would be created as a result of the making thereof.

      7.5 SALE-LEASEBACKS.

            The Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly sell or otherwise transfer, in one or more related
transactions, any property (whether real, personal or mixed) and thereafter rent
or lease such transferred property or substantially identical property.

      7.6 TRANSACTIONS WITH AFFILIATES.

            The Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, engage in any transaction with any Affiliate, on
terms that are less favorable to the Borrower or such Subsidiary than those
which might be obtained at the time from unaffiliated third parties, provided
that the foregoing restrictions shall not apply to transactions among the
Borrower and any of its Subsidiaries or to the transactions specified on
Schedule 7.6 hereto.

      7.7 MERGERS AND DISPOSITIONS.

            7.7.1 CONSOLIDATIONS AND MERGERS. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly:

                  (a) consolidate with or merge into any other Person, except
that a Subsidiary of the Borrower may consolidate with or merge into a
wholly-owned Subsidiary of the Borrower;

                  (b) permit any Person that is not a Subsidiary of the Borrower
to consolidate with or merge into it; or


                                      -44-

                  (c) enter into any winding-up, liquidation, dissolution,
division or similar transaction.

            7.7.2 SALES AND OTHER DISPOSITIONS. The Borrower will not, and will
not permit any Subsidiaries to, directly or indirectly, whether in a single
transaction or series of related transactions, sell, lease, license, abandon or
otherwise transfer or dispose of (any such transaction being a "transfer") any
of its assets or property of any nature except (a) sales of inventory in the
ordinary course of its business, (b) transfers to a wholly-owned Subsidiary of
the Borrower or to the Borrower, (c) transfers of assets no longer used or
useful in the business of the Borrower and its Subsidiaries, for substantially
market value, the proceeds of which are used within ninety (90) days of transfer
to purchase or otherwise acquire capital assets for use in the business of the
Borrower and its Subsidiaries, (d) subject to the mandatory prepayment
requirement of Subsection 1.2.6(d), transfers of assets no longer used or useful
in the business of the Borrower and its Subsidiaries, for substantially market
value, the proceeds of which are not used within ninety (90) days of transfer to
purchase or otherwise acquire capital assets for use in the business of the
Borrower and its Subsidiaries, to the extent the value thereof does not exceed
$500,000.00 singly or in the aggregate in any fiscal year, (e) subject to the
mandatory prepayment requirement of Subsection 1.2.6(d), other transfers
specifically agreed to in writing by the Majority Lenders, and (f) the lease or
sublease of real property (other than the South Carolina Property which will not
be leased without the Agent's consent) not constituting a sale and leaseback, to
the extent not otherwise prohibited by this Agreement.

      7.8 MANAGEMENT ARRANGEMENTS.

            The Borrower shall not, and shall not permit any of its Subsidiaries
to (a) enter into any management agreement with any Person that gives such
Person the right to manage its business except for usual and customary
employment agreements and the Management Agreement, the payment under which
shall not exceed $500,000.00 in any fiscal year, or (b) directly or indirectly
pay or accrue to any Person any sum or property for fees for management or
similar services rendered in connection with the operation of a Permitted
Business except as set forth above. The Borrower shall not permit the Management
Agreement to be amended, modified or otherwise supplemented except upon the
Agent's prior written consent.

      7.9 EXISTENCE.

            The Borrower will at all times preserve and keep in full force and
effect (a) its corporate existence and the corporate, partnership or other
existence of each of its Subsidiaries, and (b) its good standing and the good
standing of each of its Subsidiaries, in each case in all states in which it or
its Subsidiaries are formed or required to qualify to do business, except, as to
qualification only, where the failure to keep in full force and effect any such
good standing could not result in a Material Adverse Change and except that a
Subsidiary of the Borrower may be dissolved following the transfer of all of its
assets to one or more other wholly-owned Subsidiaries of the Borrower (the
"TRANSFEREE SUBSIDIARIES") subject to the conditions that (i) both before and
after the transfer and subsequent dissolution, no Event of Default or Potential
Default shall exist and (ii) all of the equity of the Transferee Subsidiaries
shall have been duly pledged to the Agent, for the


                                      -45-

benefit of the Secured Parties, pursuant to Subsection 3.1.5 (Pledge
Agreements), all of the material assets of the Transferee Subsidiaries shall
have been pledged as security pursuant to the Security Agreement, Mortgages and
leasehold mortgages (if required by the Agent, and if required, in form and
substance satisfactory to Agent) (collectively, "LEASEHOLD MORTGAGES")and the
Transferee Subsidiaries shall all be parties to one or more Subsidiary
Suretyships pursuant to Subsection 3.1.4 (Guaranty and Suretyship Agreements).

      7.10 COMPLIANCE WITH LAW.

            The Borrower will, and will cause each of its Subsidiaries to,
comply with all Law, and obtain or maintain all franchises, permits, franchises
and other governmental authorizations and approvals necessary for the ownership,
acquisition and disposition of their respective properties and the conduct of
their respective businesses.

      7.11 PAYMENT OF TAXES AND CLAIMS.

            The Borrower will, and will cause each of its Subsidiaries to, pay
all taxes, assessments and other governmental charges imposed upon it or any of
its properties or assets or in respect of any of its franchises, business,
income or profits before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by Law have or
might become a Lien upon any of its properties or assets, provided that no such
charge or claim need be paid if being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted and if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor and, if the filing of a bond or other indemnity is necessary
to avoid the creation of a Lien against any of the assets of the Borrower or any
of its Subsidiaries, such bond shall have been filed or indemnity provided.

      7.12 TAX CONSOLIDATION.

            The Borrower will not file, or consent to or permit the filing of,
any consolidated income tax return on behalf of it or any of its Subsidiaries
with any Person, other than a consolidated return of K-Tron and its
Subsidiaries. The Borrower shall cause the Tax Sharing Agreement to remain in
full force and effect, and shall not permit same to be amended, modified or
otherwise supplemented except upon the prior written consent of Agent. The
Borrower shall compute its federal income tax liability in accordance with
Section 1552(a)(2) of the Code.

      7.13 COMPLIANCE WITH ERISA. Except for violations that could not
reasonably be expected to result in liabilities in excess of $75,000.00 singly
or in the aggregate with all other such liabilities, or any violation or
noncompliance which could not reasonably be expected to otherwise result in a
Material Adverse Change:

            7.13.1 The Borrower shall, and shall cause each of its Subsidiaries
and ERISA Affiliates to, in all respects, make all contributions to any Employee
Pension Plan and Multiemployer Plan when such contributions are due and not
incur any Accumulated Funding


                                      -46-

Deficiency, whether or not waived, and will otherwise comply with the
requirements of the Code and ERISA with respect to the operation of all Plans in
all respects;

            7.13.2 The Borrower shall, and shall cause each of its Subsidiaries
and ERISA Affiliates to, comply in all respects with the provisions of ERISA and
the Code with respect to any Plan both in form and operation including, but not
limited to, the timely filing of required annual reports and the payment of PBGC
premiums;

            7.13.3 The Borrower shall, and shall cause each of its Subsidiaries
and ERISA Affiliates to, comply in all respects with the requirements of COBRA
regarding continued health coverage and of the Health Insurance Portability and
Accountability Act of 1996 with respect to any Plans subject to the requirements
thereof;

            7.13.4 The Borrower will not, and will not permit any of its
Subsidiaries or any of its ERISA Affiliates to, take any of the following
actions or permit any of the following events to occur if such action or event
together with all other such actions or events would subject the Borrower, any
of its Subsidiaries or any of its ERISA Affiliates to any tax, penalty, or other
liabilities:

                  (a) engage in any transaction in connection with which the
Borrower, any of its Subsidiaries or any ERISA Affiliate could be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code;

                  (b) terminate any Employee Pension Plan in a manner, or take
any other action, which could result in any liability of the Borrower, any of
its Subsidiaries or any ERISA Affiliate to the PBGC;

                  (c) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower, any of its Subsidiaries or any
ERISA Affiliate is required to pay as contributions thereto, or permit to exist
any Accumulated Funding Deficiency, whether or not waived, with respect to any
Employee Pension Plan;

                  (d) permit the current value of all vested accrued benefits
under all Plans which are subject to Title IV of ERISA to exceed the current
value of the assets of such Plans allocable to such vested accrued benefits,
except as may be permitted under actuarial funding standards adopted in
accordance with Section 412 of the Code; or

                  (e) withdraw from any Multiemployer Plan, if such withdrawal
would result in the imposition of Withdrawal Liability; and

            7.13.5 The Borrower shall comply with the ERISA reporting
requirements set forth in Section 5.4 (ERISA Notices) hereof.

            As used in this Section, the term "accrued benefit" has the meaning
specified in Section 3(23) of ERISA and the term "current value" has the meaning
specified in Section 4001(a)(18)(B) of ERISA.


                                      -47-

      7.14 INSURANCE.

            7.14.1 LIABILITY, PROPERTY DAMAGE, ETC. The Borrower will maintain,
and will cause each of its Subsidiaries to maintain, with financially sound and
reputable insurers, insurance against loss or damage and liability of the kinds
customarily insured against by Persons of established reputation engaged in the
same or similar businesses and similarly situated and in such amounts as are
customarily carried under similar circumstances by, and otherwise as is prudent
for, Persons engaged in such same or similar businesses. In addition, Borrower
will, and will cause each of its Subsidiaries to, maintain such other insurance
as may be required by the Security Agreement, Mortgages or any other Loan
Document. On an annual basis (and from time to time upon request of the Agent),
the Borrower will promptly furnish to the Agent evidence, in form and substance
satisfactory to the Agent, of the maintenance of all insurance, indemnities or
bonds required by this Section.

            7.14.2 PBGC. The Borrower shall maintain or cause to be maintained
all insurance available through the PBGC and/or insurers acceptable to the Agent
against its obligations and the obligations of its Subsidiaries to the PBGC.

      7.15 MAINTENANCE OF PROPERTIES.

            The Borrower will, and will cause each Subsidiary to: (a) maintain
its and their properties and their properties in good repair, working order and
condition; (b) make all appropriate and proper repairs, renewals, replacements,
additions and improvements thereto; and (c) keep all systems and equipment which
may now or in the future be subject to compliance with any material standards or
rules imposed by any Governmental Authority in compliance in all material
respects with such standards or rules. The Borrower shall, and shall cause each
Subsidiary to, maintain, preserve and protect, and, when necessary, renew, all
franchises, licenses, permits, service marks, patent applications, patents,
trademarks, trade names and other general intangibles held by any of them and
all material agreements to which any of them are parties which are necessary to
conduct the Borrower's or applicable Subsidiary's business.

      7.16 MAINTENANCE OF RECORDS; FISCAL YEAR.

            The Borrower will, and will cause each of its Subsidiaries to, keep
at all times books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
affairs. The Borrower will, and will cause each of its Subsidiaries to, keep its
and their books of account and financial statements in accordance with GAAP and
report on the basis of a fiscal year ending on December 31; provided, however,
that the Borrower and its Subsidiaries may change their fiscal year to end on
the Saturday nearest to December 31 upon prior written notice to Agent.

      7.17 INSPECTION.

            Upon reasonable notice (and for this purpose no more than two (2)
Business Days notice shall be required under any circumstances) if no Event of
Default or Default shall exist, or at


                                      -48-

any time with or without notice after the occurrence of an Event of Default or
Default, the Borrower will, and will cause each of its Subsidiaries to, allow
any representative of Agent, the Issuer or any Lender to visit and inspect any
of the properties of the Borrower and any of its Subsidiaries, to examine the
books of account and other records and files of the Borrower and any of its
Subsidiaries (including, without limitation, the financial statements (audited
and unaudited, to the extent prepared) of each Subsidiary and information with
respect to each Permitted Business operated by the Borrower and any of its
Subsidiaries), to make copies thereof and to discuss the affairs, business,
finances and accounts of the Borrower and its Subsidiaries with its personnel
and accountants.

      7.18 EXCHANGE OF NOTES.

            Upon receipt of a written notice of loss, theft, destruction or
mutilation of any or all of the Notes and of a letter of indemnity from the
affected Lender or its successors or assigns, and upon surrendering for
cancellation such Notes if mutilated (in which event no indemnity shall be
required), the Borrower shall promptly execute and deliver a new Note or Notes
of like tenor in lieu of such lost, stolen, destroyed or mutilated Notes, as the
case may be.

      7.19 FURTHER ASSURANCES

            At its sole cost and expense, upon the reasonable request of the
Agent, the Borrower will duly execute and deliver, and will cause each
Subsidiary to execute and deliver, to the Agent and the Lenders such further
instruments and do or cause to be done such further acts as may be necessary or
proper in the reasonable opinion of the Agent to carry out more effectively the
provisions and purpose of this Agreement and the other Loan Documents.

      7.20 CONSISTENT ACTION - VOTING.

            The Borrower shall, and shall cause its Subsidiaries to, exercise
any and all voting or similar rights that they hold in any Person in a manner
consistent with adherence to the provisions of this Agreement and the other Loan
Documents.

      7.21 ISSUANCE OF EQUITY.

            The Borrower shall not, and shall not permit any Subsidiary to,
issue, authorize the issuance of, or obligate itself to issue any shares of its
capital stock or other equity to any Person that (a) would contravene any other
provision of this Agreement, including without limitation result in a Change of
Control, or (b) would result in there being capital stock of the Borrower or any
of its Subsidiaries that is not pledged pursuant to the Pledge Agreements.

      7.22 CHANGE IN DOCUMENTS; NEW DOCUMENTS.

            The Borrower will not, and will not permit any of its Subsidiaries
to, amend or otherwise modify the respective articles or certificate of
incorporation, bylaws or other organization document of such Person (except in
connection with a merger permitted by Section 7.7 above (Mergers and
Dispositions.)


                                      -49-

      7.23 LIMITATIONS ON CERTAIN RESTRICTIVE PROVISIONS.

            The Borrower will not, and will not permit any of its Subsidiaries
to (a) permit or place any restriction, directly or indirectly, on (x) the
payment of dividends or distributions by any Subsidiary or (y) the making of
advances or other cash payments by any such Subsidiary or (z) the transfer by
any Subsidiary of any of its properties or assets, in each case to the Borrower
or its Subsidiaries, or (b) agree with any Person other than the Agent and the
Lenders that the Borrower and/or its Subsidiaries shall not amend the Loan
Documents.

      7.24 ENVIRONMENTAL MATTERS.

            Except for occurrences or conditions which could not reasonably be
expected to result in liabilities in excess of $10,000.00 singly or in the
aggregate with all other violations or liabilities, or any violation or
non-compliance which could not reasonably be expected to otherwise result in a
Material Adverse Change, the Borrower shall not, and shall not allow any of its
Subsidiaries to,

                  (a) cause a Release of any Hazardous Substance in violation of
any Environmental Law,

                  (b) permit to exist any Release of any Hazardous Substance on
any real property owned or occupied by the Borrower or any of its Subsidiaries
in violation of any Environmental Law, or

                  (c) take any action (or fail to take any action) in violation
of the Environmental Law or take any action (or fail to take any action) which
could result in liability in as a result of any environmental condition.

      7.25 CORPORATE SEPARATENESS.

            The Borrower and each of its Subsidiaries shall conduct its business
and operations separate from that of each other Affiliate. Without limiting the
generality of the foregoing, the Borrower shall not, and shall not permit any
Subsidiary, to commingle funds with any Person that is not the Borrower or a
Subsidiary of the Borrower.

      7.26 SUBSIDIARIES, SUBSIDIARY PLEDGES AND SUBSIDIARY SURETYSHIPS.

            Without limiting any other restrictions set forth in this Agreement,
if any Subsidiary of the Borrower at any time acquires or otherwise comes to own
directly any capital stock or other equity interest in any Subsidiary of the
Borrower (other than any Subsidiary existing on the date hereof), such
Subsidiary shall promptly execute and deliver to the Agent a Pledge Agreement
(each such Pledge Agreement, as amended, restated, modified and supplemented
from time to time in accordance with the terms hereof and thereof, a "SUBSIDIARY
PLEDGE") in form and substance satisfactory to the Agent, together with all
original stock and other equity certificates, duly executed in blank and undated
assignment powers and financing


                                      -50-

statements required thereunder. If Borrower or any Subsidiary of Borrower at any
time creates or otherwise causes to exist any direct or indirect Subsidiary of
Borrower (other than any Subsidiary existing on the date hereof), Borrower shall
promptly cause such new Subsidiary to execute and deliver to the Agent a
Subsidiary Suretyship along with such other documents, agreements and
instruments as the Agent may reasonably request in connection therewith.

      7.27 INTELLECTUAL PROPERTY COLLATERAL AGREEMENTS.

            Without limiting any other restrictions set forth in this Agreement,
if Borrower or any of its Subsidiaries at any time acquires or otherwise comes
to own any material copyrights or other material Intellectual Property, the
Borrower or such Subsidiary, as the case may be, shall promptly execute and
deliver to the Agent an Intellectual Property Collateral Agreement (each such
Intellectual Property Collateral Agreement, as amended, restated, modified or
supplemented from time to time in accordance with the terms hereof and thereof,
an "INTELLECTUAL PROPERTY COLLATERAL AGREEMENT") in form and substance
satisfactory to the Agent, together with such other notices for recording in the
United States Patent and Trademark Office or the Copyright Office and such
Uniform Commercial Code financing statements as are reasonably necessary to
perfect the security interests created by such Intellectual Property Collateral
Agreement.

      7.28 REAL PROPERTY LEASED AND OWNED; OTHER LOCATIONS.

            7.28.1 IN GENERAL. Without limiting any other restrictions set forth
in this Agreement, if Borrower or any of its Subsidiaries at any time acquires
or otherwise comes to own any fee or leasehold interests in any real property
(other than real property in which the Agent, for the benefit of the Secured
Parties, has obtained a perfected Lien pursuant to the Mortgages or any then
existing Leasehold Mortgages executed pursuant to the terms hereof), or
otherwise comes to occupy or have assets situated upon any real property owned
by any other Person unless otherwise agreed to by the Agent, the Borrower or
such Subsidiary, as the case may be, shall promptly execute and deliver to the
Agent such mortgages, leasehold mortgages, in form and substance satisfactory to
the Agent, together with such Uniform Commercial Code financing statements as
are necessary to perfect the security interests created by, in each case in form
appropriate for recording in the relevant jurisdiction, and shall deliver such
opinions of counsel, environmental reports, flood certifications, title
commitments and insurance policies, surveys, lease agreements, landlord consents
and waivers, warehouseman waivers, mortgagee waivers and other instruments,
agreements, documents and certificates as may be reasonably requested by Agent
in connection therewith, all in form and substance reasonably satisfactory to
the Agent.

            7.28.2 OTHER LOCATIONS. The Borrower shall notify the Agent if it or
any of its Subsidiaries has, at any time, inventory or other assets at a
location not owned or leased by the Borrower or such Subsidiary and not listed
on Schedule 4.6 hereto. In that event, the Borrower shall use commercially
reasonable efforts to deliver to the Agent a bailee acknowledgement and
agreement in form and substance satisfactory to the Agent. If the Borrower fails
to obtain any such a bailee acknowledgment and agreement, any assets of the
Borrower or its Subsidiaries at the subject location shall be excluded from the
Borrowing Base.


                                      -51-

                                    ARTICLE 8
                                EVENTS OF DEFAULT

      8.1 EVENTS OF DEFAULT

            "EVENT OF DEFAULT" wherever used herein means any one of the
following events (whatever the reason for such Event of Default, whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court, or any order, rule or regulation
of any administrative or governmental instrumentality):

            8.1.1 FAILURE TO PAY PRINCIPAL. If the Borrower shall fail to make
any payment of the principal of the Loans on the dates when the same shall
become due and payable, whether at stated maturity or at a date fixed for any
installment or prepayment thereof or otherwise; or

            8.1.2 FAILURE TO PAY INTEREST, FEES, REIMBURSEMENT OBLIGATIONS, ETC.
If the Borrower shall fail to make any payment of interest on the Loans, the
Commitment Fees, reimbursement obligations in respect of Letters of Credit or
any other amounts owing hereunder (other than principal of the Loans) or under
any Letters of Credit on the dates when such interest, Commitment Fees or other
amounts shall become due and payable and such failure continues for more than
two (2) Business Days; or

            8.1.3 CROSS-DEFAULT TO INDEBTEDNESS. (a) If the Borrower or any of
its Subsidiaries shall default (as payor or guarantor or other surety) in the
payment of any Indebtedness (other than obligations which are covered in
Subsections 8.1.1 or 8.1.2 above) and the underlying obligation with respect to
which a default has occurred aggregates Five Hundred Thousand Dollars
($500,000.00) or more or could result in a required payment of Five Hundred
Thousand Dollars ($500,000.00) or more, or (b) if any event shall occur or
condition shall exist in respect of any such Indebtedness or under any Interest
Rate Protection Agreements or Letters of Credit which would permit, or shall
have caused, the acceleration of the payment, time for payment or maturity of
any such obligations; or

            8.1.4 OTHER CROSS-DEFAULTS. If the Borrower or any of its
Subsidiaries shall default in a payment or performance of any obligation (except
obligations which are covered in Subsections 8.1.1, 8.1.2 and 8.1.3 above),
whether now or hereafter incurred, which default or could result in a required
payment of Five Hundred Thousand Dollars ($500,000.00) or more; or

            8.1.5 MISREPRESENTATIONS. If any representation or warranty made (a)
by the Borrower in this Agreement or in any other Loan Document or (b) by the
Borrower or any other Person (other than the Agent, the Issuer or a Lender) in
any document, certificate or statement furnished pursuant to this Agreement or
any other Loan Document, shall be false or misleading in any material respect
when made or deemed made; or

            8.1.6 CERTAIN COVENANT DEFAULTS. If there shall occur a default in
the due performance or observance of any term, covenant or agreement to be
performed or observed


                                      -52-

pursuant to any of Article 5 (Reporting Requirements And Notices), Article 6
(Financial Covenants), or Article 7 (Business Covenants); or

            8.1.7 OTHER COVENANT DEFAULTS. If there shall occur any default in
the due performance or observance of any term, covenant or agreement to be
performed or observed pursuant to the provisions of this Agreement, other than
as provided in Subsections 8.1.1, 8.1.2, 8.1.3, and/or 8.1.6 above, or any
agreement incidental hereto (other than as provided in Subsection 8.1.8) and, if
capable of being remedied, such default shall continue unremedied for thirty
(30) days after the commencement of such default; or

            8.1.8 OTHER LOAN DOCUMENT DEFAULTS; SECURITY. If any of the parties,
other than the Agent, the Issuer and the Lenders, to any of the Loan Documents
(other than this Agreement) shall fail to perform any of its obligations under
any of such agreements (after taking into account any applicable cure period set
forth in such agreements); or if the validity of this Agreement or any of the
other Loan Documents shall have been challenged or disaffirmed by or on behalf
of any of such parties thereto; or if, other than as a direct result of any
action of the Agent, the Issuer or the Lenders, any Liens created or intended to
be created by any of the Loan Documents shall at any time cease to be valid and
perfected first priority Liens in favor of the Agent (for the benefit of the
Secured Parties), subject to no equal or prior Liens except Permitted Liens; or

            8.1.9 CUSTODY OR CONTROL OF ASSETS. If custody or control of any
substantial part of the property of the Borrower or any of its Subsidiaries or
any Affiliate of the foregoing shall be assumed by any Governmental Authority or
any court of competent jurisdiction, or any other Person at the insistence of
any Governmental Authority or any court of competent jurisdiction; or

            8.1.10 DISCONTINUANCE OF BUSINESS. If the Borrower or any of its
Subsidiaries shall suspend or discontinue its business except, in the case of
Subsidiaries, pursuant to a dissolution or merger of such Subsidiary permitted
by the terms of this Agreement; or

            8.1.11 INSOLVENCY. If the Borrower or any of its Subsidiaries or any
of their Affiliates shall make an assignment for the benefit of creditors or a
composition with creditors, shall generally not be paying its debts as they
mature, shall admit its inability to pay its debts as they mature, shall file a
petition in bankruptcy, shall become insolvent (howsoever such insolvency may be
evidenced), shall be adjudicated insolvent or bankrupt, shall petition or apply
to any tribunal for the appointment of any receiver, custodian, liquidator or
trustee of or for it or any substantial part of its property or assets, shall
commence any proceeding relating to it under any bankruptcy, reorganization,
arrangement, readjustment of debt, receivership, dissolution or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect; or if there
shall be commenced against the Borrower or any of its Subsidiaries or any of
their Affiliates any such proceeding and the same shall not be dismissed within
sixty (60) days or an order, judgment or decree approving the petition in any
such proceeding shall be entered against the Borrower or any of its Subsidiaries
or any of their Affiliates, or if the Borrower or any of its Subsidiaries or any
of their Affiliates, shall have concealed, removed, or permitted to be concealed
or removed, any part of its property, with intent to hinder, delay or defraud
its creditors, or any of them, or shall have made or suffered a transfer of any
of its property which may be fraudulent under any


                                      -53-

bankruptcy, fraudulent conveyance or similar law, or if the Borrower or any of
its Subsidiaries or any of their Affiliates, shall have made any transfer of its
property to or for the benefit of a creditor which constitutes a preferential
transfer under any bankruptcy or similar law; or if the Borrower or any of its
Subsidiaries or any of their Affiliates shall have suffered or permitted, while
insolvent, any creditor to obtain a lien upon any of its property through legal
proceedings or distraint; or

            8.1.12 MATERIAL ADVERSE EFFECT. If there shall occur or be
threatened any event, or if there shall exist any fact or condition, which could
result in a Material Adverse Change; or

            8.1.13 JUDGMENTS. If any final judgment or judgments or
non-appealable assessment or assessments for the payment of money in excess of
Five Hundred Thousand Dollars ($500,000.00) in the aggregate shall be rendered
against the Borrower or any of its Subsidiaries and such judgment remains either
unstayed or unsatisfied for a period of thirty (30) days or more; or

            8.1.14 CHANGE OF CONTROL. If there shall occur a Change of Control;
or

            8.1.15 LEASE TERMINATION. If the Borrower's lease (as in effect from
time to time) for its premises located in Cuyahoga Falls, Ohio or Broomall,
Pennsylvania is terminated prior to the end of its stated term except a
voluntary early termination of the lease by the Borrower, or the landlord under
such lease sends Borrower or Agent a notice of its intention to terminate such
lease prior to the end of its stated term.

            8.1.16 SUBORDINATION. If the obligations purported to be subject to
the Subordination Agreement or any other subordination agreement in favor of the
Lenders (or the Agent for the benefit of the Secured Parties) cease to be fully
subordinated to all of the obligations under this Agreement.

      8.2 ACCELERATION; REMEDIES.

            8.2.1 ACCELERATION UPON INSOLVENCY. Upon the occurrence of any event
described in Subsection 8.1.11 (Insolvency) relating to the Borrower or any
Subsidiary thereof, the entire unpaid principal balance of the Notes, and
interest accrued and premium, if any, thereon, and any unpaid accrued Commitment
Fees and all other Secured Obligations shall be immediately due and payable by
the Borrower and the Commitment shall terminate without presentation, demand,
protest, notice of protest or other notice of dishonor of any kind, all of which
are hereby expressly waived by the Borrower.

            8.2.2 ACCELERATION UPON OTHER DEFAULTS. Upon the occurrence of any
other Event of Default, or at any time thereafter if any Event of Default shall
then be continuing, the Agent may (and shall if directed by the Majority
Lenders) by written notice to the Borrower, declare the entire unpaid principal
balance or any portion of the principal balance of all or any of the Notes, and
interest accrued and premium, if any, thereon and any unpaid accrued Commitment
Fees and all other Secured Obligations, to be immediately due and payable by the
Borrower and/or may terminate the Commitment.

                                      -54-



      8.2.3 REMEDIES IN GENERAL. In the event of acceleration pursuant to
Subsection 8.2.1 (Acceleration Upon Insolvency) or Subsection 8.2.2
(Acceleration Upon Other Defaults) above, all principal and interest, premium,
fees, and other Secured Obligations shall thereupon become and be immediately
due and payable, without presentation, demand, protest, notice of protest or
other notice of dishonor of any kind, all of which are hereby expressly waived
by the Borrower; and the Agent (acting directly or through appointment of one or
more trustees of the Agent's choosing) may proceed to protect and enforce its
rights and those of the Issuer and the Lenders under the Loan Documents in any
manner or order it deems expedient without regard to any equitable principles of
marshalling or otherwise. It is agreed that, in addition to all other rights
hereunder or under Law, the Agent shall have the right to institute proceedings
in equity or other appropriate proceedings for the specific performance of any
covenant or agreement made in any of the Loan Documents or for an injunction
against the violation of any of the terms of any of the Loan Documents or in aid
of the exercise of any power granted in any of the Loan Documents or by Law or
otherwise. Further, the Agent shall be entitled to the appointment of a trustee
or receiver for all or any part of the businesses of the Borrower or any of its
Subsidiaries, which trustee or receiver shall have such powers as may be
conferred by the appointing authority. All rights and remedies given by this
Agreement, the Notes and the other Loan Documents are cumulative and not
exclusive of any of such rights or remedies or of any other rights or remedies
available to the Agent, the Issuer or any Lender, and no course of dealing
between the Borrower or any Subsidiary, on one hand, and the Agent, the Issuer
or any Lender, on the other hand, or any delay or omission in exercising any
right or remedy shall operate as a waiver of any right or remedy, and every
right and remedy may be exercised from time to time and as often as shall be
deemed appropriate by the Agent.

      8.3 PROCEEDS OF COLLATERAL.

      Following an Event of Default and acceleration of remedies, the Agent
shall apply proceeds of Collateral as follows:

                  First, to payment of that portion of the Secured Obligations
         constituting fees, expenses (including, without limitation, expenses
         relating to attorneys' fees and other professionals' fees), indemnities
         and other amounts due to the Agent in its capacity as such;

                  Second, to payment of that portion of the Secured Obligations
         constituting accrued and unpaid interest and accrued and unpaid
         Commitment Fees or other fees, ratably amongst the Secured Parties in
         proportion to the respective amounts described in this clause "Second"
         due to them;

                  Third, to payment of that portion of the Secured Obligations
         constituting unpaid principal of the Loans, ratably amongst the Lenders
         in proportion to the respective amounts described in this clause
         "Third" due to them;


                                      -55-

                  Fourth, to payment of all other Secured Obligations, ratably
         amongst the Secured Parties in proportion to the respective amounts
         described in this clause "Fourth" due to them; and

                  Finally, the balance, if any, after all of the Secured
         Obligations have been satisfied, to the Borrower or applicable
         Subsidiary or as otherwise required by Law.

                                   ARTICLE 9

                                   DEFINITIONS

      9.1 DEFINED TERMS.

            As used in this Agreement, the following terms shall have the
meanings specified in this Section unless the context otherwise requires.
Defined terms in this Agreement shall also mean in the singular number the
plural and in the plural the singular.

            - ACCOUNT DEBTOR: the meaning specified for such term under the
Uniform Commercial Code, but in any even shall include, but not be limited to,
each Person obligated on an Account Receivable.

            - ACCOUNT RECEIVABLE: the meaning specified for "Account" under the
Uniform Commercial Code, but in any event shall include, but not be limited to,
credit card receivables, lottery winnings, health-care-insurance receivables,
any right to payment arising out of goods or other property (including, without
limitation, Intellectual Property) sold or leased, licensed, assigned or
disposed of or for services rendered which is not evidenced by an instrument or
chattel paper, whether or not it has been earned by performance including all
rights to payment of rents under a lease or license and payment under a charter
or other contract and all rights incident to such lease, charter or contract.

            - ACCUMULATED FUNDING DEFICIENCY: any accumulated funding deficiency
as defined in Section 302(a) of ERISA.

            - ACQUISITION: means (whether by purchase, lease, exchange, issuance
of equity or debt securities, merger, reorganization or any other method) (a)
any acquisition by the Borrower or any of its Subsidiaries of an interest in any
other Person which shall then become Consolidated with the Borrower or any such
Subsidiary in accordance with GAAP, or (b) any acquisition by the Borrower or
any of its Subsidiaries of all or any substantial part of the assets of any
other Person.

            - ADJUSTED LIBOR: the rate per annum (rounded upwards if necessary
to the nearest one-hundredth of one percent) determined by the Agent to be equal
to the quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the
Reserve Percentage.

            - AFFILIATE: means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Control" means the possession, directly or indirectly,


                                      -56-

of the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

            - AGENT: the meaning specified in the preamble to this Agreement.

            - AGREEMENT: the meaning specified in the introductory paragraph
hereof.

            - APPLICABLE MARGIN: the meaning specified in Subsection 1.7.2.

            - APPROVED FUND: any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

            - ASSIGNMENT AND ASSUMPTION: an assignment and assumption agreement
entered into by a Lender and an Eligible Assignee (with the consent of any party
whose consent is required by Subsection 11.7.2 (Assignment)), and accepted by
the Agent, in substantially the form of Exhibit K, or any other form approved by
the Agent.

            - AVAILABLE COMMITMENT: the meaning specified in Subsection 1.1.2.

            - BASE RATE: the higher of (a) the rate of interest publicly
announced by the Agent from time to time at its principal office as its prime
commercial lending rate (which rate is not necessarily the lowest rate charged
by the Agent to its borrowers) and (b) the Federal Funds Rate plus one-half of
one percent (-1/2%).

            - BASE RATE LOANS: Loans bearing interest at a rate equal to the
Base Rate plus the Applicable Margin.

            - BORROWER: the meaning specified in the preamble to this Agreement.

            - BORROWER PLEDGE: the meaning specified in paragraph (b) of
Subsection 3.1.5.

            - BORROWER REQUIRED PAYMENT: the meaning specified in Subsection
1.10.2.

            - BORROWING BASE: means, at any time, an amount equal to the sum of
(a) eighty-five (85%) percent of Eligible Accounts Receivable, plus (b) sixty
(60%) percent of Eligible Finished Inventory (without duplication of any
Eligible Raw Materials Inventory), plus (c) sixty (60%) percent of Eligible Raw
Materials Inventory.

            - BORROWING BASE CERTIFICATE: means a full and complete certificate
in the form attached hereto as Exhibit L, certified as true and correct by the
Borrower's Chief Executive Officer, President or Chief Financial Officer.


                                      -57-

            - BUSINESS DAY: a day other than a Saturday, Sunday or other day on
which commercial banks in Philadelphia, PA are authorized or required by law to
close.

            - CAPITAL EXPENDITURES: expenditures for fixed or capital assets.

            - CAPITAL LEASE: a lease with respect to which the lessee is
required to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.

            - CAPITAL LEASE OBLIGATION: with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder which would in accordance with
GAAP appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.

            - CERCLA: the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended from time to time, and all rules and
regulations promulgated in connection therewith.

            - CHANGE OF CONTROL:

            (a) K-Tron (i) ceases to own, directly or indirectly, all of the
voting stock of the Borrower, free and clear of all Liens (and if K-Tron's
ownership is indirect, all equity that is involved in the indirect ownership
chain is free and clear of Liens) except Liens in favor of Lender pursuant to
the Pledge Agreement, (ii) enters into, or allows any of its Subsidiaries to
enter into, any voting trust or other agreement which in any way limits its
ability to exercise such 100% voting power, or transfers any of the economic
benefits of ownership of such voting stock to any other Person with the effect
that it ceases to maintain 100% of the economic and non-economic benefits of
ownership of the voting stock of the Borrower, or (iii) otherwise ceases to own
and control, directly or indirectly, 100% of the voting stock of the Borrower;

            (b) None of John D. Whalen, Donald J. Carrozzino and Donald W.
Melchiorre serve in key management positions with the Borrower (it being
understood that this Event of Default is not triggered so long as any one of the
three specified individuals remains with the Borrower); provided that Borrower
shall have ninety (90) days to replace such individuals with other individuals
reasonably satisfactory to the Majority Lenders (it being agreed that from and
after one year after the Closing Date, either Ronald Remick or Edward B. Cloues,
II, will be a satisfactory replacement); or

            (c) Both Ronald Remick and Edward B. Cloues, II, cease to serve in
key management positions with K-Tron, provided that K-Tron shall have ninety
(90) days to replace such individuals with other individuals reasonably
satisfactory to the Majority Lenders.

            - CLOSING DATE: the meaning specified in Section 3.1.

            - COBRA: the group health plan continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of the Title I of ERISA.


                                      -58-

            - CODE: the Internal Revenue Code of 1986, as amended, or its
predecessor or successor, as applicable, and any Treasury regulations, revenue
rulings or technical information releases issued thereunder.

            - COLLATERAL: all property of any sort in which the Borrower or any
Subsidiary of the Borrower has granted, or purported to grant, a security
interest or other Lien pursuant to any of the Loan Documents.

            - COMMITMENT FEE: the meaning specified in Subsection 1.6.1.

            - COMMITMENT FEE BASE: the meaning specified in Subsection 1.6.1.

            - COMMITMENT LETTER: that certain commitment letter and attachments
thereto, dated December 2, 2002, between the Agent and K-Tron.

            - COMMITMENTS: the collective reference to the RC Commitment, the
Term Loan A Commitment and the Term Loan B Commitment.

            - CONSOLIDATED: with respect to any Person and any specified
Subsidiaries, refers to the consolidation of financial statements of such Person
and such Subsidiaries and of particular items in such financial statements in
accordance with GAAP.

            - CONSOLIDATED TOTAL DEBT: for any period, for any Person, all
Indebtedness of such Person.

            - CONSOLIDATING: with respect to any Person and any specified
Subsidiaries, refers to the separate presentation of financial statements of
each such Person in accordance with GAAP.

            - DEFAULT: any condition or event specified in Article 8 which, with
notice or lapse of time or both, would become an Event of Default.

            - DEFAULT RATE: the meaning specified in Subsection 1.7.6.

            - DISQUALIFIED STOCK: means, with respect to any Person, any capital
stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable): (a) matures or is mandatorily
redeemable for any reason, (b) is convertible or exchangeable for Indebtedness
or Disqualified Stock, or (c) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
stated maturity of the Notes.


                                      -59-

            - EBITDA:(1) for any Person for any period, the Net Income of such
Person for such period plus the sum of the following (to the extent deducted in
the computation of such Net Income):

            (a) depreciation expense;

            (b) amortization expense;

            (c) Interest Expense;

            (d) income and franchise taxes or Tax Distributions (but, if there
is a net tax benefit, that shall be deducted from Net Income in calculating
EBITDA); and

            (e) permitted management fees.

            - ELIGIBLE ACCOUNT: an Account Receivable of Borrower or any of its
Subsidiaries party to the Subsidiary Suretyship and Security Agreement that
meets all of the following requirements on its date of invoice or other
origination date and continuing thereafter until collected:

            (a) such Account Receivable represents a complete bona fide
transaction which requires no further act under any circumstances on the part of
such Person to make such Account Receivable payable by the Account Debtor;

            (b) such Account Receivable shall not be unpaid more than ninety
(90) days from its due date, not to exceed one hundred twenty (120) days from
its date of invoice or other origination date;

            (c) if applicable, the goods, the sale of which gave rise to such
Account Receivable, were shipped or delivered to the Account Debtor on an
absolute sale basis and not on a bill and hold sale basis, a consignment sale
basis, a progress basis, a guaranteed sale basis, a sale or return basis, or on
the basis of any other similar understanding, and no part of such goods has been
returned or rejected;

            (d) such Account Receivable is not evidenced by chattel paper or an
instrument of any kind;

            (e) the Account Debtor with respect to such Account Receivable is
not insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action which might have a materially adverse
effect on the business of such Account Debtor or is not, in the reasonable
discretion of Agent, deemed ineligible for credit for any other reason;

            (f) if such Account Receivable arises from the performance of
services, such services have been fully rendered;

(1) Closing Date adjustments satisfactory to Agent to be made.


                                      -60-

            (g) such Account Receivable is a valid, legally enforceable
obligation of the Account Debtor with respect thereto and is not subject to any
present, or contingent, and no facts exist which are the basis for any future,
offset or counterclaim or other defense on the part of such Account Debtor,
including, without limitation, any account payable owing by such Person to such
Account Debtor;

            (h) such Account Receivable shall be subject to a valid and
perfected first priority Lien in favor of the Agent (for the benefit of the
Secured Parties), subject to no Lien, except for Liens in favor of Agent (for
the benefit of the Secured Parties) and other Permitted Liens;

            (i) such Account Receivable is evidenced by an invoice or other
documentation in a form acceptable to the Agent;

            (j) such Account Receivable is not subject to any provision
prohibiting its assignment or requiring notice of, or consent to, such
assignment;

            (k) if applicable, the goods giving rise to such Account Receivable,
at the time of the sale thereof, were subject to a valid and perfected first
priority Lien in favor of the Agent (for the benefit of the Secured Parties) and
subject to no Lien, except for Liens in favor of Agent (for the benefit of the
Secured Parties) and other Permitted Liens;

            (l) if the Account Debtor with respect thereto is the United States
or any department, agency or instrumentality thereof, such Account Receivable
shall have been assigned to the Agent in full compliance with all applicable
laws and regulations, including without limitation the Assignment of Claims Act
of 1940, as amended;

            (m) the Account Debtor with respect thereto is domiciled within the
United States of America or, if permitted by Agent, Canada, except as provided
in subclause (n) below;

            (n) if the Account Debtor with respect thereto is located outside of
the United States of America, or, if permitted by Agent, Canada, the goods which
gave rise to such Account Receivable were shipped after receipt by such Person
from the Account Debtor of an irrevocable letter of credit, which letter of
credit has been confirmed by a financial institution acceptable to the Agent and
is in form and substance acceptable to the Agent, payable in the full face
amount of the face value of the Account Receivable in freely convertible Dollars
at a place of payment located within the United States of America;

            (o) such Account Receivable does not arise out of any transaction
with any Affiliate of such Person;

            (p) such Account Receivable is not due from an Account Debtor where
more than fifty (50%) percent of the total Accounts Receivable from such Account
Debtor are not Eligible Accounts Receivable;

            (q) that portion of an otherwise Eligible Account that does not
exceed twenty (20%) percent of the aggregate total of all of such Person's
Accounts Receivable; and

            (r) such Account Receivable is otherwise satisfactory to the Agent
in its sole discretion based upon the Agent's eligibility requirements as in
effect from time to time.


                                      -61-

            - ELIGIBLE ASSIGNEE:


            (a) a Lender;

            (b) an Affiliate of a Lender;

            (c) an Approved Fund; and

            (d) any Person (other than a natural person) approved by (i) the
Agent, (ii) in the case of any assignment of a RC Commitment, the Issuer, and
(iii) unless an Event of Default has occurred and is continuing, the Borrower
(each such approval not to be unreasonably withheld or delayed); provided that
notwithstanding the foregoing, "Eligible Assignee" shall not include the
Borrower or any of the Borrower's Affiliates or Subsidiaries.

            - ELIGIBLE FINISHED INVENTORY: Inventory of Borrower or any of its
Subsidiaries party to the Subsidiary Suretyship and the Security Agreement
which:

            (a) has been sold by such Person in the ordinary course of business,
(i) with respect to the Borrower, during the preceding forty-eight (48) month
period, or (ii) with respect to any of Borrower's Subsidiaries, during the
preceding twenty-four (24) month;

            (b) is located on premises (i) owned by the Borrower or a Subsidiary
of the Borrower free of any mortgage, except in favor of the Agent, (ii) leased
by the Borrower or a Subsidiary of the Borrower where the landlord (and any
mortgagee thereof) shall have executed and delivered a landlord waiver in form
and substance satisfactory to Agent, or (iii) otherwise used by the Borrower or
a Subsidiary of the Borrower where the bailee (and, if required by Agent, any
landlord or mortgagee thereof) shall have executed and delivered a bailee
acknowledgement and agreement in form and substance satisfactory to Agent;

            (c) is owned by such Person and not purchased or acquired on a
consignment, approval or sale or return basis;

            (d) is subject to a valid and perfected first priority Lien in favor
of the Agent (for the benefit of the Secured Parties), and subject to no other
Liens;

            (e) is fully and adequately insured, with the Agent named as an
additional insured and lender loss payee as provided herein;

            (f) is not unsalable, damaged or obsolete as the Agent shall
determine;

            (g) is not classified as work-in-progress except Eligible Raw
Materials Inventory to the extent it is so classified;

            (h) is not cartons or packaging materials;

            (i) is not manufacturing materials or supplies; and


                                      -62-

            (j) is otherwise satisfactory to the Agent in its sole discretion
based upon the Agent's eligibility requirements as in effect from time to time.

            - ELIGIBLE RAW MATERIALS INVENTORY: Inventory of Borrower or any of
its Subsidiaries party to the Subsidiary Suretyship and Security Agreement which
consists of raw materials and is otherwise satisfactory to the Agent in its sole
discretion.

            - EMPLOYEE PENSION PLAN: any Plan which (a) is maintained by the
Borrower, any of its Subsidiaries or any ERISA Affiliate and (b) is subject to
Part 3 of Subtitle B of Title I of ERISA.

            - ENVIRONMENTAL LAWS: any national, state or local law or regulation
(including, without limitation, CERCLA and RCRA) enacted in connection with or
relating to the protection or regulation of the environment, including, without
limitation, those laws, statutes, and regulations regulating the disposal,
removal, production, storing, refining, handling, transferring, processing, or
transporting of Hazardous Substances, and any regulations issued or promulgated
in connection with such statutes by any governmental authority and any orders,
decrees or judgments issued by any court of competent jurisdiction in connection
with any of the foregoing.

            - ERISA: the Employee Retirement Income Security Act of 1974, as
amended, and any regulations issued thereunder by the Department of Labor or
PBGC.

            - ERISA AFFILIATE: (a) any corporation included with the Borrower in
a controlled group of corporations within the meaning of Section 414(b) of the
Code, (b) any trade or business (whether or not incorporated) which is under
common control with the Borrower within the meaning of Section 414(c) of the
Code, and (c) any member of an affiliated service group of which the Borrower is
a member within the meaning of Section 414(m) of the Code.

            - EQUIPMENT PURCHASE MONEY INDEBTEDNESS: indebtedness for the
purchase of equipment, whether such indebtedness is in the form of lease
payments or otherwise.

            - EURODOLLAR BUSINESS DAY: a day on which the relevant London
international financial markets are open for the transaction of business
contemplated in this Agreement and which is also other than a Saturday, Sunday
or other day on which commercial banks are required or permitted to close in
Philadelphia, PA.

            - EVENT OF DEFAULT: the meaning specified in Section 8.1.

            - EXCESS CASH FLOW: means, for any fiscal year, (a) EBITDA, minus
(b) the sum of (without duplication) (i) scheduled principal payments on total
Indebtedness, including scheduled payments under Capital Leases, plus (ii)
Interest Expense, plus (iii) Capital Expenditures, plus (iv) cash income and
franchise taxes (or cash Tax Distributions, as applicable), plus (v) management
fees paid and any Restricted Payments paid in cash, plus or minus (vi) any
decrease or increase during such fiscal year in net working capital, as
determined for Borrower and its Subsidiaries on a Consolidated basis for such
fiscal year in accordance with GAAP.


                                      -63-

            - FEDERAL FUNDS RATE: for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next Business Day as
so published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to Agent on such day on such transactions as determined by the
Agent.

            - FIXED CHARGE COVERAGE RATIO: as at the end of any fiscal quarter,
the ratio of EBITDA as at the end of such quarter to Fixed Charges for the four
fiscal quarters then ending.

            - FIXED CHARGES: for any period, the sum of the following determined
on a Consolidated basis, without duplication, for the Borrower and its
Subsidiaries in accordance with GAAP: (a) scheduled principal payments on all
Indebtedness, including scheduled payments under Capital Leases, plus (b)
Interest Expense, plus (c) Capital Expenditures, plus (d) cash income and
franchise taxes (or cash Tax Distributions, as applicable).

            - FOREIGN LENDER: a Lender that is not organized under the Laws of
the United States or any state or political subdivision thereof.

            - FACING FEE: the meaning specified in Subsection 2.1.5.

            - FUND: any Person (other than a natural person) that is (or will
be) engaged in making, purchasing, holding or otherwise interesting in
commercial loans and similar extensions of credit in the ordinary course of its
business.

            - GAAP: generally accepted accounting principles consistently
applied, which, as applied to the Borrower and its Subsidiaries shall be
consistent with those applied in the preparation of the financial statements
referred to in Subsection 3.1.12 (Financial Statements; Projections).

            - GOVERNMENTAL AUTHORITY: any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government
including, without limitation, the European Central Bank.

            - GRANTING LENDER: the meaning of specified in Subsection 1.11.2.

            - GUARANTY: as applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another Person, including,
but not limited to, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect of
which such Person is otherwise directly or indirectly liable, including, but not
limited to, any such obligation in effect guaranteed by


                                      -64-

such Person through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the solvency or any balance sheet or other financial condition of
the obligor of such obligation, or to make payment for any products, materials
or supplies or for any transportation or services regardless of the non-delivery
or nonfurnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. No Guaranty shall be permitted by this Agreement unless the maximum
dollar amount of the obligation being guaranteed is readily ascertainable by the
terms of such obligation or the agreement or instrument evidencing such Guaranty
specifically limits the dollar amount of the maximum exposure of the guarantor
thereunder, and the amount involved in any Guaranty made during any period shall
be the aggregate amount of the obligation guaranteed (or such lesser amount as
to which the maximum exposure of the guarantor shall have been specifically
limited), less any amount by which the guarantor may have been discharged with
respect thereto (including any discharge by way of a reduction in the amount of
the obligation guaranteed).

            - HAZARDOUS SUBSTANCES: any and all pollutants, contaminants, toxic
or hazardous wastes or any other substances that might pose a hazard to health
or safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage or filtration of
which is or shall be restricted, prohibited or penalized by any Environmental
Law (including, without limitation, petroleum products, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls and substances
defined as Hazardous Substances under CERCLA).

            - INDEBTEDNESS: with respect to any Person (without duplication):

            (a) all indebtedness of such Person for borrowed money;

            (b) all obligations of such Person for the deferred purchase price
of capital assets or for any part of the deferred purchase price of other
property or services which purchase price for other property or services is due
more than six months (or a longer period of up to one year, if such terms are
available from suppliers in the ordinary course of business) from the date of
incurrence of the obligation in respect thereof;

            (c) all obligations of such Person evidenced by notes, bonds (other
than performance bonds), debentures or other similar instruments;

            (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property) and all other indebtedness secured by a Lien on the property or assets
of such Person;


                                      -65-

            (e) all Capital Lease Obligations of such Person;

            (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities;

            (g) all obligations in respect of Disqualified Stock or other
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, which obligations shall be valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends and, in the
case of other such obligations, at the amount that, in light of all the facts
and circumstances existing at the time of determination, can reasonably be
expected to become payable;

            (h) a Guaranty of such Person;

            (i) all Indebtedness referred to in clauses (a) through (g) above
secured by (or which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness;

            (j) all unfunded pension liabilities;

            (k) all payments required by such Person under non-compete
agreements; and

            (l) all obligations of such Person that are the functional
equivalent of the Indebtedness referred to in clauses (a) through (d) such as
synthetic lease obligations.

            - INDEMNITEES: the meaning specified in Section 11.15.

            - INTELLECTUAL PROPERTY: the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, (a) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, l registrations
and recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, (b) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, and all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (c) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers, and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State


                                      -66-

thereof or any other country or any political subdivision thereof, or otherwise,
and all common-law rights related thereto, (d) all rights to obtain any reissues
or extensions of the foregoing, and (e) all licenses for any of the foregoing.

            - INTELLECTUAL PROPERTY COLLATERAL AGREEMENT: the meaning specified
in Section 7.27.

            - INTEREST EXPENSE: for any period, the sum of (a) the amount of
interest accrued on, or with respect to, Consolidated Indebtedness for such
period, including without limitation imputed interest on Capital Leases and
imputed or accreted interest in respect of deep discount or zero coupon
obligations, plus (b) the net amount payable under all Interest Rate Protection
Agreements in respect of such period (or minus the net amount receivable under
Interest Rate Protection Agreements in respect of such period), plus (c)
Commitment Fees payable during such period. For purposes of calculating Interest
Expense, it shall be assumed that any Guaranties constituting Indebtedness will
require payments of interest, if any, in the amounts as called for in the
underlying obligation which is the subject of the Guaranty.

            - INTEREST PERIOD: the meaning specified in Subsection 1.7.4.

            - INTEREST RATE PROTECTION AGREEMENT: an interest rate swap, cap or
collar agreement or similar arrangement between any Person and a financial
institution providing for the transfer or mitigation of interest risks either
generally or under specific contingencies.

            - INVENTORY: the meaning specified for such term under the Uniform
Commercial Code, but in any event shall include, but not be limited to, tangible
personal property held by or on behalf of Borrower (or in which Borrower has an
interest in mass or a joint or other interest) for sale or lease or to be
furnished under contracts of service, tangible personal property which Borrower
has so leased or furnished, and raw materials, work in process and materials
used, produced or consumed in Borrower's business, and shall include tangible
personal property returned to Borrower by the purchaser following a sale thereof
by Borrower and tangible personal property represented by documents or
instruments. Without limiting the foregoing, all equipment, accessories and
parts at any time attached or added to items of Inventory or used in connection
therewith shall be deemed to be part of the Inventory.

            - INVESTMENT: as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities of any
other Person, or any direct or indirect loan, advance or capital contribution by
such Person to any other Person, including all Indebtedness and accounts
receivable from such other Person which are not current assets or did not arise
from sales to such other Person in the ordinary course of business.

            - ISSUER: Bank so long as it is a Lender, or if Bank is no longer a
Lender, a Lender designated by the Borrower and acceptable to the Agent.

            - K-TRON: K-Tron International, Inc., a New Jersey corporation.

            - LANDLORD WAIVER: the meaning specified in Subsection 3.1.7.


                                      -67-

            - LAW: all common law and all applicable provisions of
constitutions, laws, statutes, ordinances, rules, treaties, regulations,
permits, licenses, approvals, interpretations and orders of courts or
Governmental Authorities and all orders and decrees of all courts and
arbitrators

            LEASEHOLD MORTGAGES: the meaning specified in Section 7.9.

            - LENDERS: each of the Persons that execute this Agreement as a
Lender together with any other Persons which become parties to this Agreement as
a Lender from time to time.

            - LENDER REQUIRED PAYMENT: the meaning specified in Section 1.11.1.

            - LETTER OF CREDIT FEES: the meaning specified in Subsection 2.1.5.

            - LETTER OF CREDIT SUBLIMIT: the meaning specified in Section 2.1.1.

            - LETTERS OF CREDIT: letters of credit issued pursuant to this
Agreement.

            - LIBOR: the per annum rate (rounded to the next higher one
sixteenth of one percent) for deposits in Dollars for a period equal to the
relevant Interest Period as reported on Telerate Page 3750 as of 11:00 a.m.
(London time), on the day that is two (2) Business Days prior to the
commencement of such Interest Period and, if such rate is not published, then
the rate of interest per annum (rounded upwards if necessary to the nearest
one-sixteenth of one percent) at which deposits of Dollars, for periods equal to
the Interest Period designated by the Borrower and in amounts substantially
similar to the outstanding principal amount of the LIBOR Loan, are available to
the Agent from prime banks in the London Interbank Eurocurrency Market on or
about 11:00 a.m. (London time) two (2) Business Days prior to the first day of
the relevant Interest Period or such other method as the Agent may reasonably
use to determine LIBOR.

            - LIBOR LOANS: Loans bearing interest at a rate equal to Adjusted
LIBOR plus the Applicable Margin.

            - LIEN: any mortgage, lien, pledge, adverse claim, charge, security
interest or other encumbrance.

            - LOAN DOCUMENTS: this Agreement, the Notes, the Subsidiary
Suretyships, the Pledge Agreements, the Subordination Agreements, the Security
Agreement, the Mortgages, the Landlord Waivers, the Leasehold Mortgages, the
Intellectual Property Collateral Agreements and any and all agreements,
documents and instruments executed, delivered or filed pursuant to this
Agreement, as the same may be amended, modified or supplemented from time to
time in accordance with the terms thereof, provided, however, Interest Rate
Protection Agreements and Letters of Credit are not Loan Documents.

            - LOANS: the amounts loaned to the Borrower pursuant to this
Agreement. Loans may be RC Loans or Term Loans.


                                      -68-

            - MAJORITY LENDERS: at any time, Lenders having greater than or
equal to sixty-six and 2/3 of one percent (66-2/3%) of the Total Facility. For
purposes of this definition, "Total Facility" means, collectively, at any time
(a) the RC Commitment and (b) the outstanding principal amount of the Term
Loans, but shall exclude any RC Commitment or Term Loans of Lenders who have
forfeited their right to vote under the terms of this Agreement.

            - MANAGEMENT AGREEMENT: that certain Management Services Agreement
dated on or about January 3, 2003 between Borrower and K-Tron for provision of
management-related services, as amended, restated, modified or otherwise
supplemented from time to time, and in all instances in form and substance
satisfactory to Agent.

            - MATERIAL ADVERSE CHANGE: any material adverse change in

            (a) the business, condition (financial or otherwise), operations,
properties or prospects of (i) the Borrower, (ii) the Borrower and its
Subsidiaries taken as a whole, or (iii) of the Borrower or any of its
Subsidiaries, individually, if such change could result in the insolvency or
dissolution (other than pursuant to a merger or dissolution permitted by this
Agreement) of such Person or in the loss of control (by the current holder
thereof) over such Person's assets;

            (b) the binding nature, validity or enforceability of any of the
Loan Documents; or

            (c) the validity, perfection, priority or enforceability of the
Liens granted to Agent in respect of the property of the Borrower and its
Subsidiaries.

            - MATURITY DATE: the latest of the RC Maturity Date, the Term Loan A
Maturity Date and the Term Loan B Maturity Date.

            - MORTGAGES: the meaning specified in Subsection 3.1.7.

            - MULTIEMPLOYER PLAN: means a multiemployer pension plan as defined
in Section 3(37) of ERISA to which Borrower, any of its Subsidiaries or any
ERISA Affiliate is or has been required to contribute.

            - NET INCOME: means, for any period, the aggregate net income (or
loss) of the Borrower and its Subsidiaries for such period on a Consolidated
basis, provided, the following items shall be excluded from the calculation of
Net Income:

            (a) after-tax gains and losses from asset sales or abandonment or
reserves relating thereto;

            (b) items classified as extraordinary, nonrecurring or unusual
gains, losses or charges, and the related tax effects, each determined in
accordance with GAAP;


                                      -69-

            (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary of the
Borrower or is merged or consolidated with the Borrower or any Subsidiary of the
Borrower;

            (d) the net income (but not loss) of any Subsidiary of the Borrower
to the extent that the declaration of dividends, the making of intercompany
loans or similar payments by that Subsidiary of that income is restricted by a
contract, operation of law or otherwise;

            (e) the net income of any Person, other than the Borrower or a
Subsidiary of the Borrower, except to the extent of cash dividends or
distributions paid to the Borrower or a Subsidiary of the Borrower by such
Person;

            (f) any restoration to income of any contingency reserve; and

            (g) income or loss attributable to discontinued operations
(including operations disposed of during such period whether or not such
operations were classified as discontinued).

            - NOTES: the promissory notes delivered by the Borrower to the
Lenders (including any successors or assigns thereof) pursuant to this Agreement
(including any amendments, modifications or supplements which may from time to
time, be created in respect of such notes), and any replacement promissory notes
issued in lieu of the foregoing.

            - OBLIGATIONS: shall mean and include any and all indebtedness,
obligations and liabilities of any type or nature, direct or indirect, absolute
or contingent, related or unrelated, due or not due, liquidated or unliquidated,
arising by operation of law or otherwise, now existing or hereafter arising or
created of the Borrower, and/or any Subsidiary of the Borrower, and/or any other
Person, to any Secured Party, represented by or incurred pursuant or relating to
the Loan Documents. Without limiting the generality of the foregoing, the term
"Obligations" shall include:

            (a) principal of, and interest on, the Loans and the Notes;

            (b) any and all other fees, indemnities, costs, obligations and
liabilities of the Borrower and its Subsidiaries from time to time under or in
connection with the Loan Documents;

            (c) all obligations of the Borrower owing to any Issuer or Lender
under Letters of Credit or other debt instruments issued by any Issuer or Lender
under the terms of this Agreement; and

            (e) all amounts (including but not limited to post-petition
interest) in respect of the foregoing that would be payable but for the fact
that the obligations to pay such amounts are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
the Borrower or any Subsidiary.


                                      -70-

            - OFFICER'S COMPLIANCE CERTIFICATE: an Officer's certificate in the
form of Exhibit J.

            - OLD PA CRUSHER: the meaning specified in Subsection 1.9.

            - OLD PA CRUSHER LETTER OF CREDIT INDEBTEDNESS: reimbursement
obligations owing to First Union National Bank/Wachovia Bank, N.A. in connection
with the letter of credit facility described on Schedule 7.1.1 annexed hereto.

            - OTHER TAXES: the meaning specified in Subsection 1.12.2.

            - PARENT: K-Tron Investment Co., a Delaware corporation.

            - PARENT PLEDGE: the meaning specified in Subsection 3.1.5(a).

            - PARTICIPANT: the meaning specified in Subsection 11.7.4.

            - PENNSYLVANIA PROPERTY: the leased premises utilized by the
Borrower located at 600 Abbott Drive, Broomall, Pennsylvania.

            - PBGC: means Pension Benefit Guaranty Corporation, or any
governmental agency or instrumentality succeeding to the functions thereof.

            - PERMITTED BUSINESSES: means owning, operating, managing and
maintaining businesses engaged in producing, selling and servicing equipment to
crush various materials, including coal and wood, and business directly related
thereto.

            - PERMITTED LIEN: the meaning specified in Subsection 7.2.1.

            - PERSON: any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, governmental
authority or other entity.

            - PLAN: means an "Employee Pension Benefit Plan" (as defined in
Section 3(2) of ERISA) or an "Employee Welfare Benefit Plan" (as defined in
Section 3(1) of ERISA) - or other pension or welfare benefit plan which is or
has been established or maintained, or to which contributions are or have been
made, by the Borrower, any of its Subsidiaries or any ERISA Affiliate (or any
predecessor thereof).

            - PLEDGE AGREEMENTS: the Borrower Pledge, the Subsidiary Pledge(s),
if any, and the Parent Pledge, collectively.

            - PREDECESSOR INDEBTEDNESS: the meaning specified in Subsection
3.1.8.

            PROHIBITED TRANSACTION: means a transaction described in Section
4975 of the Code or in Part 4 of Subtitle B of Title I of ERISA.


                                      -71-

            - QUARTERLY PAYMENT DATE: the last Business Day of each March, June,
September and December.

            - RC COMMITMENT: the meaning specified in Subsection 1.1.1.

            - RC LENDER: each Lender designated as an "RC Lender" on Schedule
1.1 hereto and each successor and assign thereof.

            - RC LOANS: the meaning specified in Subsection 1.1.1.

            - RC MATURITY DATE: the fifth anniversary of the Closing Date or
such earlier date as the RC Commitment is terminated hereunder.

            - RCRA: the Resource Conservation and Recovery Act of 1976, as
amended, and any rules and regulations issued in connection therewith.

            - REGISTER: the meaning specified in Subsection 11.7.3.

            - RELATED PARTIES: with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.

            - RELEASE: a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Hazardous Substances through or in the air, soil, surface water, groundwater or
property.

            - REMEDIAL ACTION: actions necessary to comply with any
Environmental Law with respect to (a) clean up, removal, treatment or handling
Hazardous Substances in the indoor or outdoor environment; (b) prevention of
Releases or threats of Releases or minimization of further Releases of Hazardous
Substances so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (c) performance of
pre-remedial studies and investigations and post-remedial monitoring and care.

            - REORGANIZATION: any reorganization as defined in Section 4241(a)
of ERISA.

            - REPORTABLE EVENT: means, with respect to any Employee Pension
Plan, an event described in Section 4043(c) of ERISA.

            - RESERVE PERCENTAGE: for any day, the percentage (expressed as a
decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%)
which is in effect for such day as prescribed by the Federal Reserve Board (or
any successor) for determining the maximum reserve requirement (including
without limitation any basic, supplemental or emergency reserves) in respect of
Eurocurrency Liabilities or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.


                                      -72-

            - RESTRICTED PAYMENT: (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock or ownership
interest of the Borrower or any of its Subsidiaries, as the case may be, now or
hereafter outstanding, except dividends and other distributions payable solely
in shares of stock (other than Disqualified Stock) of the Borrower or such
Subsidiary, as the case may be;

            (b) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of any class of stock or ownership interest of
the Borrower or any of its Subsidiaries, as the case may be, now or hereafter
outstanding, or of any warrants, rights or options to acquire any such shares or
interests, except to the extent that the consideration therefor consists solely
of shares of stock (other than Disqualified Stock) of the Borrower or such
Subsidiary;

            (c) any sinking fund, other prepayment or installment payment on
account of any shares of stock or ownership interests of the Borrower or any of
its Subsidiaries;

            (d) any other payment, loan or advance to a stockholder or other
direct or indirect equity holder of the Borrower or of any of its Subsidiaries
whether in the capacity of such Person as a stockholder or otherwise, including
Tax Distributions, except management fees paid to Parent not in excess of
$500,000.00 in any calendar year pursuant to the Management Agreement and
reasonable salaries and other reasonable compensation, the payment of which is
not otherwise restricted under the Loan Documents, paid in the ordinary course
of business, consistent with past practice; or

            (e) any forgiveness or release without adequate consideration by the
Borrower or any of its Subsidiaries of any Indebtedness or other obligation
owing to the Borrower or such Subsidiary by a stockholder or other direct or
indirect equity holder of the Borrower or such Subsidiary.

            - SECURED OBLIGATIONS: collectively, (a) the Obligations and (b) any
obligations under or arising out of Interest Rate Protection Agreements that
have been or will be entered into with any Lender or Affiliate of a Lender, from
time to time consistent with the terms of this Agreement.

            - SECURED PARTY: the Agent, the Lenders, the Issuer, the Indemnitees
and all other Persons referred to in any Loan Documents as a beneficiary of the
Lien granted therein and all other holders of Secured Obligations, including
Lenders and Affiliates thereof party to Interest Rate Hedging Agreements
obligation under which constitute Secured Obligations.

            - SECURITY AGREEMENT: the meaning specified in Subsection 3.1.3.

            - SOLVENT: a condition of a Person on a particular date, whereby on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including, but not limited to, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not



                                      -73-

intend to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature, and (d) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
an unreasonably small capital. In computing the amount of contingent liabilities
at any time, it is intended that such liabilities will be computed at the amount
that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

            - SOUTH CAROLINA PROPERTY: the real property and fixtures thereto
located at 398 Willis Road, Woodruff, South Carolina 29388.

            - SPFV: the meaning specified in Subsection 1.11.2.

            - SUBORDINATION AGREEMENT: the meaning specified in Subsection
3.1.6.

            - SUBSIDIARY: with respect to any Person (referred to in this
definition as the "parent"),

            (a) any other Person of which more than 50% of the issued and
outstanding equity having ordinary voting power to elect a majority of the Board
of Directors or other governing body is directly or indirectly owned or
controlled by such parent,

            (b) any other Person of which more than 50% of the voting equity
interests are directly or indirectly owned or controlled by such parent, or

            (c) any other Person which is Consolidated with such parent.

            - SUBSIDIARY PLEDGE: the meaning specified in Section 7.26.

            - SUBSIDIARY SURETYSHIPS: the meaning specified in Subsection 3.1.4.

            - TANGIBLE NET WORTH: the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total assets
(a) goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other similar intangibles, (b) all prepaid expenses,
deferred charges or unamortized debt discounts and expenses, (c) all reserves
carried and not deducted from assets, (d) debt or equity interests in (including
without limitation capital contributions to, and investments in) any Subsidiary,
(e) securities which are not readily marketable, (f) cash held in a sinking or
other analogous fund established for the purpose of redemption, retirement or
prepayment of capital stock or Indebtedness, (g) any write-up in the book value
of any asset resulting from a revaluation thereof subsequent to the date of the
financial statements referred to in Subsection 3.1.12 (Financial Statements;
Projections), and (h) any items not included in clauses (a) through (g) above
which are treated as intangibles in conformity with GAAP, all for Borrower and
its Subsidiaries on a Consolidated basis.


                                      -74-

            - TAX DISTRIBUTIONS: collectively, any and all payments, loans,
distributions and advances made by the Borrower to K-Tron (or the relevant
Subsidiary thereof) for payment of federal, state and local income taxes
(assuming the maximum individual combined tax rate) in respect of income of the
Borrower and its Subsidiaries (including gain from any disposition of assets)
allocable to the Borrower and its Subsidiaries. Any Tax Distributions allowable
pursuant to this definition shall (a) in the case of quarterly Tax
Distributions, be computed on the basis of the estimated taxable income of the
Borrower (as estimated in good faith by the Borrower using reasonable
assumptions) for the relevant fiscal quarter and shall be paid not more than ten
(10) days prior to the date that the Borrower is required to pay estimated
income taxes in respect of such income, (b) in the case of additional income
taxes for any fiscal year that would be owed by the Borrower, computed based
upon the actual taxable income of the Borrower for such fiscal year and shall be
paid not more than ten (10) days prior to the date that the Borrower is required
to pay income taxes in respect of such actual income and (c) be consistent with
the terms of the Tax Sharing Agreement.

            - TAXES: the meaning specified in Subsection 1.12.1.

            - TAX SHARING AGREEMENT: the meaning specified in Subsection 3.1.25.

            - TERM LENDER: each Lender designated as a "Term Lender" on Schedule
1.1 hereto and each successor and assign thereof.

            - TERM LOAN A: the meaning specified in Subsection 1.2.1.

            - TERM LOAN A COMMITMENT: the meaning specified in Subsection 1.2.1.

            - TERM LOAN A MATURITY DATE: the fifth anniversary of the Closing
Date or such earlier date as the Term Loan A is due and payable hereunder.

            - TERM LOAN B: the meaning specified in Subsection 1.2.3.

            - TERM LOAN B COMMITMENT: the meaning specified in Subsection 1.2.3.

            - TERM LOAN B MATURITY DATE: the (a) later of the sixth anniversary
of the Closing Date or January 5, 2009, or (b) such earlier date as the Term
Loan B is due and payable hereunder.

            - TERM LOANS: together, the Term Loan A and the Term Loan B.

            - TRANSFEREE SUBSIDIARY: the meaning specified in Section 7.9.

            - TREATY: the Treaty establishing the European Economic Community,
being the Treaty of Rome of March 25, 1957 as amended by the Single European Act
1987 and the Maastricht Treaty (the Treaty on European Union) (which was signed
on February 7, 1992 and came into force on November 1, 1993) and as may, from
time to time, be further amended, supplemented or otherwise modified.


                                      -75-


      -     UNIFORM COMMERCIAL CODE: the Uniform Commercial Code in effect on
the date hereof and as amended from time to time, and as enacted in the
Commonwealth of Pennsylvania or in any state or states which, pursuant to the
Uniform Commercial Code as enacted in the Commonwealth of Pennsylvania, has
jurisdiction with respect to all, or any portion of, the Collateral or this
Agreement, from time to time. It is the intent of the parties that the
definitions set forth above should be construed in their broadest sense so that
Collateral will be construed in its broadest sense. Accordingly if there are,
from time to time, changes to defined terms in the Uniform Commercial Code that
broaden the definitions, they are incorporated herein and if existing
definitions in the Uniform Commercial Code are broader than the amended
definitions, the existing ones shall be controlling. Similarly, where the phrase
"as defined in the Uniform Commercial Code, but in any event shall include, but
not be limited to . . ." is used above, it means as defined in the Uniform
Commercial Code except that if any of the enumerated types of items specified
thereafter would not fall within the Uniform Commercial Code definition, they
shall nonetheless be included in the applicable definition for purposes of this
Agreement.

      -     UNREIMBURSED DRAWINGS: drawings made under Letters of Credit which,
for any reason, have not been reimbursed by or on behalf of the Borrower whether
through borrowings of Loans hereunder or otherwise.

      -     WITHDRAWAL LIABILITY: any withdrawal liability as defined in Section
4201 of ERISA.

                                   ARTICLE 10
                                      AGENT

      10.1 AUTHORITY.

            The Lenders and the Issuer (for themselves and their successors and
assigns) hereby irrevocably appoint Bank to act as Agent as specified herein and
in the other Loan Documents. Each such Person hereby irrevocably authorizes Bank
to execute and take such action on its behalf under the provisions of this
Agreement, the Notes, and the other Loan Documents and to exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the terms
of the Loan Documents and such powers as are reasonably incidental thereto.


                                     - 76 -

      10.2 EXPENSES.

            In default of reimbursement or indemnification by the Borrower, the
Lenders will, in proportion to their respective portions of the Commitment,
reimburse the Agent for and against all expense, liability, penalty and damage
of any nature whatsoever (including but not limited to reasonable attorneys'
fees) which may be incurred or sustained by the Agent in any way in connection
with the Loan Documents or its duties under the Loan Documents provided that no
Lender shall be liable for any portion of the foregoing items resulting from the
gross negligence or willful misconduct of the Agent. Without limiting the
generality of any other provision excusing the Agent form taking any actions,
the Agent shall not have any obligation to take any action in connection with
the performance of its duties as Agent under the Loan Documents which, in its
opinion, requires the payment of expenses or the incurrence of liability, if
there is any ground for belief that reimbursement of such expenses or liability
is not reasonably assured to it.

      10.3 ACTION BY AGENT.

      The Agent is authorized to take any action specified in this Agreement and
all actions reasonably related thereto. However, except for actions expressly
required to be taken by the Agent in this Agreement (which actions the Agent
will take as required subject to all of the exculpatory provisions herein), the
Agent is not required to take actions that it may be authorized to take.

      10.4 EXCULPATORY PROVISIONS.

            10.4.1 GENERAL STANDARD. Neither the Agent nor any of its officers,
directors, employees or agents, shall be liable for any action taken or omitted
under the Loan Documents or in connection with the Loan Documents unless caused
by its or their gross negligence or willful misconduct. Neither the Agent nor
any of its officers, directors, employees or agents, shall be liable for any
action taken or omitted by it at the direction of the Majority Lenders. The
Agent shall not be responsible for any recitals, warranties or representations
in the Loan Documents or for the validity, enforceability, collectibility or due
execution of this Agreement or any of the other Loan Documents.

            10.4.2 AGENTS AND EMPLOYEES. The Agent may execute any of its duties
by or through agents or employees, all of whom shall be entitled to the benefits
of any exculpatory provision herein.

            10.4.3 ADVICE OF PROFESSIONALS. Agent shall be entitled to advice of
counsel, accountants or other professionals of its selection concerning all
matters pertaining to the Loan Documents and its duties under the Loan
Documents. Agent is entitled to rely on the advice of its professionals whether
or not the advice is correct.

            10.4.4 RELIANCE ON INFORMATION BELIEVED TO BE GENUINE. The Agent
shall be entitled to rely upon any writing or other document, telegram or
telephone conversation believed by it to have been signed, sent or made by the
proper person or persons.


                                     - 77 -

      10.5 INVESTIGATION BY LENDERS.

      Each Lender expressly acknowledges that the Agent has not made any
representation or warranty to it and that no act taken by the Agent shall be
deemed to constitute a representation or warranty by the Agent to the Lenders.
Each Lender further acknowledges that it has taken and will continue to take
such action and to make such investigation as it deems necessary to inform
itself of the affairs of the Borrower and its Subsidiaries. Each Lender further
acknowledges that it has made and will continue to make its own independent
investigation of the creditworthiness and the business and operations of the
Borrower and its Subsidiaries. In entering into this Agreement, and in making an
advance under this Agreement, each Lender represents that it has not relied and
will not rely upon any information or representations furnished or given by the
Agent or by any other Lender. The Agent shall be under no duty or responsibility
to the Lenders to ascertain or to inquire into the performance or observance by
the Borrower of any of the provisions of this Agreement or any document or
instrument now or hereafter executed in connection with this Agreement.

      10.6 NOTICE OF EVENTS OF DEFAULT.

      Without limiting the generality of the provisions of the preceding Section
10.5, it is expressly understood and agreed that the Agent shall not be deemed
to have knowledge of the existence, occurrence or continuance of an Event of
Default or Default, unless the Agent shall have been notified in writing of such
Event of Default by any Lender or the Borrower pursuant to a writing designated
as a "Notice of Event of Default". For the avoidance of doubt, the provisions of
this Section 10.6 are expressly not for the benefit of the Borrower.

      10.7 RESIGNATION; TERMINATION.

            The Agent may resign at any time by giving prior written notice to
the Borrower and the Lenders and the Agent may be removed at any time with or
without cause by the Majority Lenders. Such resignation or removal shall take
effect at the end of the sixty (60) day period after such notice of resignation
or removal has been given or upon the earlier appointment of a successor agent.
The Lenders shall (with the consent of the Borrower so long as no Event of
Default has occurred and is then continuing), upon receipt of such notice,
appoint a successor agent from among the Lenders. The Lenders and the Borrower
shall execute such documents as shall be necessary to effect such appointment.
During any period that there shall not be a duly appointed and acting Agent, the
Borrower agrees to make each payment due under this Agreement and under the
Notes directly to each Lender entitled thereto and to provide copies of each
certificate or other document required under this Agreement directly to each
Lender.

      10.8 SHARING.

            If any Lender shall at any time receive payment of principal on
account of all or a part of any Note held by it, whether by set-off or
otherwise, in a greater proportion than the principal payments made on the Notes
held by the other Lenders, such Lender shall simultaneously purchase, without
recourse, for cash, ratably from each of the other Lenders, such


                                     - 78 -

portion of the Notes held by such other Lenders so that, after such purchase,
each Lender will hold an unpaid principal amount of Notes in the same proportion
that the outstanding principal balance due to such Lender immediately prior to
such payment bore to the aggregate outstanding principal balance due to all
Lenders immediately prior to such payment. In the event that, at any time, any
Lender shall be required to refund any amount which has been paid to or received
by it on account of any Note held by it, and which has been applied to the
purchase of a portion of the Notes held by other Lenders pursuant to this
Section, then, upon notice from such Lender, each of the other Lenders shall
simultaneously purchase, without recourse, its portion for cash, to the extent
of its ratable share thereof, of the Notes held by the Lender required to make
such refund.

      10.9 OTHER RELATIONSHIPS.

            It is acknowledged that the Agent, the Issuer, the Lenders and/or
any of their Affiliates may now or hereafter have lending or other relationships
with the Borrower and Affiliates of the Borrower. It is agreed that the Agent
and the Lenders are free to act with respect thereto without consulting with one
another and without regard to the effect of any such action or relationship upon
the Loans or other Secured Obligations. With respect to the portion of the Loans
made by it and Notes issued to it, the Agent shall have the same rights and
powers under the Loan Documents as any other Lender or holder of a Note and may
exercise the same as though it were not the Agent, and the term "Lenders" or
"holders of Notes" or any similar term shall, unless the context otherwise
indicates, include the Agent in its capacity as a Lender

                                   ARTICLE 11
                                  MISCELLANEOUS

      11.1 NOTICES.

            All notices, requests, demands, directions and other communications
(collectively "notices") given to or made upon any party under the provisions of
this Agreement shall be by telephone or in writing (including facsimile
communication) unless otherwise expressly provided under this Agreement. It
shall be delivered or sent by facsimile or telephoned to the respective parties
at the addresses and numbers set forth under their respective names on the
signature pages of this Agreement or in accordance with any subsequent unrevoked
written direction from any party to the others. All notices shall, except as
otherwise expressly provided in this Agreement, be effective (a) in the case of
facsimile, when received as set forth on a confirmation thereof, (b) in the case
of hand-delivered notice, when hand delivered, (c) in the case of telephone,
when telephoned, provided, however, that in order to be effective, telephonic
notices must be confirmed in writing no later than the next day by letter,
facsimile or telex, (d) if given by mail, four (4) days after such communication
is deposited in the mails with first class postage prepaid, return receipt
requested, and (e) if given by any other means (including by air courier), when
delivered; provided, that notices to the Agent shall not be effective until
received. Any Lender giving any notice to the Borrower shall simultaneously send
a copy of such notice to the Agent. In the event of a discrepancy between any
telephonic or written notice, the written notice shall control.

      11.2 SURVIVAL OF REPRESENTATIONS.


                                     - 79 -

            All representations and warranties contained in the Loan Documents
shall survive the making of the Loans and shall not be waived by the execution
and delivery of this Agreement, or by any investigation by the Agent or the
Lenders.

      11.3 NO IMPLIED WAIVERS.

            No failure or delay on the part of the Agent, the Issuer or any
Lender in exercising any right, power or privilege under the Loan Documents and
no course of dealing between the Borrower or any of its Subsidiaries, on the one
hand, and the Agent, the Issuer or any Lender, on the other hand, shall operate
as a waiver of any such right, power or privilege. No single or partial exercise
of any right, power or privilege under the Loan Documents preclude any other or
further exercise of any such right, power or privilege or the exercise of any
other right, power or privilege. The rights and remedies expressly provided in
the Loan Documents are cumulative and not exclusive of any rights or remedies
which the Agent, the Issuer or any Lender would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or shall constitute a
waiver of the right of the Agent, the Issuer or any Lender to take any other or
further action in any circumstances without notice or demand. Any waiver that is
given shall be effective only if in writing and only for the limited purposes
expressly stated in the applicable waiver.

      11.4 ENTIRE AGREEMENT.

            This Agreement, the Letters of Credit and related documents and the
other Loan Documents represent the entire agreement between the parties to this
Agreement with respect to the Commitment, the Letters of Credit, the Loans and
the transactions contemplated under the Loan Documents and, except as expressly
provided in the Loan Documents, shall not be affected by reference to any other
documents; provided, however, the fee and indemnification obligations set forth
in the Commitment Letter shall survive.

      11.5 SEVERABILITY.

            Every provision of the Loan Documents is intended to be severable.
If any term or provision of the Loan Documents shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby. Any invalidity,
illegality or unenforceability in any jurisdiction shall not affect the
validity, legality or enforceability of any such term or provision in any other
jurisdiction.

      11.6 AMENDMENTS, WAIVERS AND CONSENTS.

            With the written consent of the Majority Lenders, the Agent may, on
behalf of the Lenders, enter into agreements which change, amend or supplement
this Agreement or any other Loan Document, and with such consent, the Agent may
waive compliance with any provision of any of the Loan Documents, all as
referred to in this Section 11.6. However, no such change, amendment, supplement
or waiver shall, without the consent of each Lender:


                                     - 80 -

                  (a) increase the maximum amount of the RC Commitment, the Term
Loan A Commitment or the Term Loan B Commitment,

                  (b) extend the RC Maturity Date, the Term Loan A Maturity
Date, the Term Loan B Maturity Date, the Maturity Date or any scheduled
amortization or date for payment of interest on the Loans,

                  (c) decrease the rate of interest, provided that the written
consent of the Majority Lenders, rather than the consent of all Lenders, shall
be sufficient to waive imposition of the Default Rate pursuant to Subsection
1.7.6 (Default Rate),

                  (d) reduce the amount of the fees payable under Subsection
1.6.1 (Commitment Fees) or other fees, other than any fee payable solely to
Agent,

                  (e) modify the provisions of this Section,

                  (f) amend the definition of "Majority Lenders",

                  (g) release all or substantially all of the guaranties or all
or a substantial portion of the Collateral that secures the Secured Obligations;
provided however, the Agent may without the consent of any Person release any
guarantor or any Collateral security granted pursuant to the Loan Documents and
file UCC-3 termination statements or statements of amendment or take other
appropriate action (i) as a court of competent jurisdiction may direct, (ii) in
connection with a disposition (other than to the Borrower or a Subsidiary
thereof) permitted under Subsection 7.7.2 (Sales and Other Dispositions) (which
subsection may be amended by the Majority Lenders) or as otherwise provided
under the Loan Documents, or (iii) if in accordance with this Agreement cash
proceeds from any sale or transfer of the Collateral are used to prepay
outstanding sums due under the Loans or are reinvested in the Borrower and its
Subsidiaries, or

                  (h) waive an Event of Default under Subsection 8.1.1 (Failure
to Pay Principal) or 8.1.2 (Failure to Pay Interest, Fees, Reimbursement
Obligations, Etc.) other than in respect of the imposition of the Default Rate,
after such Event of Default shall have occurred (but the Majority Lenders may
direct the Agent to forbear under such circumstances).

      11.7 SUCCESSORS AND ASSIGNS.

            11.7.1 IN GENERAL; THE BORROWER. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender and no Lender may assign or
otherwise transfer any of its rights or obligations hereunder except (a) to an
Eligible Assignee in accordance with the provisions of Subsection 11.7.2
(Assignment), (b) by way of participation in accordance with the provisions of
Subsection 11.7.4 (Participations) or (c) by way of pledge or assignment of a
security interest subject to the restrictions of Subsection 11.7.5 (Certain
Permitted Pledges) (and any attempted assignment or transfer by any party hereto
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied,


                                     - 81 -

shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby Participants to the
extent provided in Subsection 11.7.4 (Participations) and, to the extent
expressly contemplated hereby, the Related Parties of each of the Agent and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

            11.7.2 ASSIGNMENT. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it); provided that:

                  (a) except in the case of an assignment of the entire
remaining amount of the assigning Lender's Commitment and the Loans at the time
owing to it or in the case of an assignment to a Lender or an Affiliate of a
Lender or an Approved Fund with respect to a Lender, the aggregate amount of the
Commitment (which for this purpose includes Loans outstanding thereunder) or, if
the applicable Commitment is not then in effect, the principal outstanding
balance of the Loan of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent or, if "Trade Date" is
specified in the Assignment and Assumption, as of the Trade Date) shall not be
less than $2,500,000.00, unless the Agent and, so long as no Event of Default
has occurred and is continuing, the Borrower otherwise consents (each such
consent not to be unreasonably withheld or delayed);

                  (b) each partial assignment shall be made as an assignment of
a proportionate part of all the assigning Lender's rights and obligations under
this Agreement with respect to the Loan or Commitment assigned, except that this
clause (b) shall not prohibit any Lender from assigning all or a portion of its
rights and obligations in respect to the RC Loans and RC Commitment on a non-pro
rata basis with the Term Loans and vice versa;

                  (c) any assignment of a RC Commitment must be approved by the
Agent and the Issuer unless the Person that is the proposed assignee is itself a
Lender with a RC Commitment (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and

                  (d) the parties to each assignment shall execute and deliver
to the Agent an Assignment and Assumption, together with a service, processing
and recordation fee of $3,500.00.

                  (e) Subject to acceptance and recording thereof by the Agent
pursuant to Subsection 11.7.3 (Register), from and after the effective date
specified in each Assignment and Assumption, the Eligible Assignee thereunder
shall be a party to this Agreement and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Subsection 1.7.5


                                     - 82 -

(Breakage), Section 1.8 (Additional Costs; Unavailability) and Section 11.15
(Indemnification) with respect to the facts and circumstances occurring prior to
the effective date of the assignment. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
Subsection 11.7.4 (Participations) below.

            11.7.3 REGISTER. The Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at one of its offices in the United States
a copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "REGISTER"). The entries in the Register shall be
conclusive, and the Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.

            11.7.4 PARTICIPATIONS.

                  (a) Any Lender may, without the consent of, or notice to, the
Borrower or the Agent, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower's Affiliates or Subsidiaries)
(each a "PARTICIPANT") in all or a portion of such Lender's rights and/or
obligations under this Agreement (including all or a portion of its Commitment
and/or the Loans owing to it); provided that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver with
respect to the matters specifically referred to in clauses (a), (b), (c) and (g)
of Section 11.6 (Amendments, Waivers and Consents) hereof. Subject to Subsection
11.7.4(b), the Borrower agrees that each Participant shall be entitled to the
benefits of Subsections 1.8.5 (Breakage), 1.9.3 (Capital Adequacy) and 1.9.4
(Other Increased Costs) to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Subsection 11.7.2 (Assignment).
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 11.12 (Set-off) as though it were a Lender, provided such
Participant agrees to be subject to Section 10.8 (Sharing) as though it were a
Lender.

                  (b) A Participant shall not be entitled to receive any greater
payment under Subsections 1.9.3 (Capital Adequacy) and 1.9.4 (Other Increased
Costs) than the applicable Lender would have been entitled to receive with
respect to the participation sold to


                                     - 83 -

such Participant, unless the sale of the participation to such Participant is
made with the Borrower's prior written consent. A Participant that is a Foreign
Lender if it were a Lender shall not be entitled to the benefits of Section 1.12
(Taxes) unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Subsection 1.12.5 (Tax Forms) as though it were a Lender.

            11.7.5 CERTAIN PERMITTED PLEDGES. Any Lender may at any time pledge
or assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including without limitation any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

      11.8 DESCRIPTIVE HEADINGS.

            The descriptive headings of the several sections of this Agreement
are inserted for convenience only and shall not affect the meaning or
construction of any of the provisions of this Agreement.

      11.9 GOVERNING LAW.

            This Agreement and the other Loan Documents shall be construed in
accordance with the Commonwealth of Pennsylvania (without giving effect to the
choice of law provisions thereof).

      11.10 MAXIMUM LAWFUL INTEREST RATE.

            Notwithstanding any provision contained in this Agreement or the
Notes, the total liability of the Borrower for payment of interest pursuant to
this Agreement and the Notes shall not exceed the maximum amount of such
interest permitted by Law to be charged, collected, or received from the
Borrower. If any payments by the Borrower include interest in excess of such a
maximum amount, each Lender shall apply such excess to the reduction of the
unpaid principal amount due pursuant to this Agreement and the Notes, or if none
is due, such excess shall be refunded to the Borrower.

      11.11 SET-OFF.

            The Borrower hereby pledges and gives to each Lender a Lien upon and
in the balance of any account maintained by the Borrower with such Lender or any
other liability of Lender to the Borrower for the amount of the Secured
Obligations owing to such Lender. Upon the occurrence of and throughout the
period in which there is continuing an Event of Default, in such Lender's sole
option, at any time and from time to time, the Borrower hereby authorizes such
Lender to apply any such account balances now or hereafter in the possession of
such Lender and/or a credit in the amount of any such other liability to the
payment of the Indebtedness owing to Lender under the Loan Documents. The
provisions of this Section shall not be deemed or construed


                                     - 84 -

to limit rights of set-off or liens or similar rights which any Lender may
otherwise have by reason of applicable Law.

      11.12 COUNTERPARTS.

            This Agreement may be executed in one or more counterparts, each of
which shall constitute an original, and all of which, when taken together, shall
constitute one instrument. Delivery of a photocopy or telecopy of an executed
counterpart of a signature page to this Agreement shall be effective as delivery
of a manually executed counterpart.

      11.13 CONFIDENTIALITY.

            The Agent and each Lender hereby acknowledges that it may from time
to time receive from the Borrower information about the Borrower and its
Subsidiaries or K-Tron pursuant to or in connection with this Agreement and the
other Loan Documents that is confidential in nature. Each Lender agrees to keep
confidential any such information delivered or made available to it and
specifically marked "Confidential non-public information"; provided, that
nothing herein shall prevent the Agent or any Lender from disclosing such
information (i) to the Agent or any other Lender or their Affiliates, (ii) upon
the order of any court or administrative agency of competent jurisdiction, (iii)
upon the request or demand of any regulatory agency or authority, (iv) which has
been publicly disclosed other than as a result of a disclosure by the Agent or
any Lender which is not permitted hereunder, (v) in connection with any
litigation to which any Agent, any Lender, or any of their respective Affiliates
may be a party to the extent reasonably required, (vi) to the Agent's or any
Lender's legal counsel and independent auditors and other professional advisors,
and (vii) to any actual or proposed participant or assignee of all or part of
the Agent's or any Lender's rights under this Agreement; provided, that prior to
any such disclosure under clause (vii) of this paragraph, each such assignee or
participant or proposed assignee or participant shall have agreed in writing to
be bound by the terms of this agreement (or a confidentiality agreement with
substantially similar terms). Each Lender further agrees to use reasonable
efforts to notify the Agent and the Borrower of any required disclosure under
clauses (ii) or (v) of this paragraph.

      11.14 COSTS AND EXPENSES OF THE AGENT.

            Whether or not any Loans are made or Letters of Credit are issued
pursuant to this Agreement, the Borrower shall, unconditionally upon demand, pay
or reimburse the Agent for all costs, expenses, claims, charges and/or other
liabilities (including without limitation fees and disbursements of legal
counsel, accountants, investigators and other experts, whether or not they are
employees of the Agent) imposed on, incurred by or asserted against the Agent
arising out of, relating to or connected with:

                  (a) the negotiation, preparation, execution and delivery of
(i) the Loan Documents and (ii) whether or not executed, any waiver, amendment
or consent under or with respect to any of the Loan Documents,


                                     - 85 -

                  (b) consulting with respect to any matter in any way arising
out of, related to, or connected with, the Loan Documents, including (i) the
protection or preservation of the Collateral, (ii) the protection, preservation,
exercise or enforcement of any of the rights of the Agent or any other Person
in, under or related to such Collateral or the Loan Documents or (iii) the
performance of any of the obligations of the Agent under or related to the Loan
Documents,

                  (c) protecting or preserving the Collateral, or

                  (d) protecting, preserving, exercising or enforcing any of the
rights of the Agent and Lenders in, under or related to such Collateral or the
Loan Documents, including defending the security interest granted to Lenders as
a valid, perfected, first priority security interest in such Collateral.

      11.15 INDEMNIFICATION

            11.15.1 INDEMNIFICATION AND REIMBURSEMENT IN GENERAL. Whether or not
any Loans are made or Letters of Credit are issued under this Agreement, the
Borrower shall, unconditionally upon demand, pay or reimburse the Agent and
Lenders for, and indemnify and save the Agent, Lenders, and their respective
Affiliates, officers, directors, employees, agents, attorneys, stockholders,
partners and consultants (collectively, "INDEMNITEES") harmless against, any all
liabilities, losses, costs, expenses, claims and/or charges (including without
limitation fees and disbursements of legal counsel) imposed on, incurred by or
asserted against such Indemnitees (whether direct, indirect or consequential and
whether based on any federal, state, or local laws and regulations, under common
law or at equity, or on contract, tort or otherwise, arising from or connected
with the past, present or future operations of the Borrower, its Subsidiaries or
their respective predecessors in interest, or the past, present or future
environmental condition of property of the Borrower and its Subsidiaries) and
arising out of, relating to or connected with:

                  (a) ll transfer, documentary, stamp and similar taxes, and all
recording and filing fees and taxes payable in connection with, arising out of,
or in any way related to, the execution, delivery and performance of the Loan
Documents or the making of the Loans;

                  (b) (i) the Loan Documents, or any act, event or transaction
or alleged act, event or transaction relating or attendant thereto; (ii) any
acquisition or proposed acquisition of stock or assets by the Borrower or any of
its Subsidiaries; and/or (iii) any use made or proposed to be made by the
Borrower or any of its Subsidiaries of all or any portion of the Loans; or

                  (c) commissions or claims by or on behalf of brokers, finders
or agents not retained by Lenders. The Borrower represents that it has not
engaged or used any such broker, finder or agent in connection with this
Agreement.

            11.15.2 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the
foregoing, the Borrower shall not be required to indemnify any Indemnitee with
respect to a claim or liability


                                     - 86 -

that arises as the result of the gross negligence or willful misconduct of any
Indemnitee as shall have been determined in a nonappealable judgment of a court
of competent jurisdiction.

      11.16 CERTIFICATION OF AMOUNTS. The certification by the Agent or a Lender
hereunder of the amount of liabilities, losses, costs, expenses, claims and/or
charges pursuant to Section 11.14 (Costs and Expenses of the Agent) and 11.15
(Indemnification) shall be conclusive if such amounts have been computed or
reached in a reasonable manner.

      11.17 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL.

                  (a) The Borrower hereby consents to the jurisdiction and venue
of the courts of the Commonwealth of Pennsylvania or of any federal court
located in such state, waives personal service of any and all process upon it
and consents that all such service of process be made by certified or registered
mail directed to the Borrower at the address provided for in Section 11.1
(Notices). Service so made shall be deemed to be completed upon actual receipt.
The Borrower hereby waives the right to contest the jurisdiction and venue of
the courts located in the county of Philadelphia, Commonwealth of Pennsylvania
on the ground of inconvenience or otherwise and, further, waives any right to
bring any action or proceeding against (a) the Agent in any court outside the
county of Philadelphia, Commonwealth of Pennsylvania, or (b) any other Lender
other than in a state within the United States designated by such Lender. The
provisions of this Section 11.17 shall not limit or otherwise affect the right
of the Agent, any Lender or other Secured Party to institute and conduct an
action in any other appropriate manner, jurisdiction or court.

                  (b) NO PARTY TO THIS AGREEMENT, NOR ANY ASSIGNEE, SUCCESSOR,
HEIR OR PERSONAL REPRESENTATIVE OF THE FOREGOING SHALL SEEK A JURY TRIAL IN ANY
PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY OTHER LOAN
DOCUMENT OR ANY GUARANTY RELATING TO SUCH INDEBTEDNESS OR THE RELATIONSHIP
BETWEEN OR AMONG SUCH PERSONS OR ANY OF THEM. NO SUCH PERSON WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED.

                  (c) EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO WAIVES ANY
RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY ARBITRATION OR OTHER LITIGATION,
ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS AGREEMENT (i)
CERTIFIES THAT NEITHER THE AGENT NOR ANY REPRESENTATIVE, OR ATTORNEY OF THE
AGENT NOR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR
SUCH LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND EACH OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.17. THE PROVISIONS OF THIS SECTION
11.17 HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND THE


                                     - 87 -

PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED
WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 11.17
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


                                     - 88 -

            IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have
caused this Credit Agreement to be duly executed by their respective, duly
authorized officers as of the date first above written.

                                    PENNSYLVANIA CRUSHER CORPORATION

                                    By:  /s/ Ronald R. Remick
                                         ----------------------------
                                         Name:  Ronald R. Remick
                                         Title: Vice President and Treasurer

                                    Notice Information
                                    Address: Routes 55 & 553
                                    P.O. Box 888
                                    Pitman, New Jersey 08071-0888
                                    Phone No.: (856)256-3310
                                    Fax No.: (856) 582-7968
                                    Attention: Ronald R. Remick, Vice President
                                               and Treasurer

                                    NATIONAL CITY BANK, in its capacity as
                                    Agent and a Lender


                                    By: /s/ Lyle Cunningham
                                        ----------------------------
                                        Name:  Lyle Cunningham
                                        Title: Senior Vice President

                                    Notice Information
                                    Address: One South Broad Street
                                    13th Floor, Locator 01-5997
                                    Philadelphia, Pennsylvania  19107
                                    Phone No.:
                                    Fax No.:
                                    Attention:

                                    Wire Transfer Information
                                    Bank Name:  National City Bank
                                    City & State:  Cleveland, Ohio
                                    ABA Routing Number:  41000124
                                    Account Name:  Commercial Loan Operations
                                    Account Number:  151804
                                    Re:  Pennsylvania Crusher Corporation

LIST OF ADDENDA (EXHIBITS AND SCHEDULES)

EXHIBITS

Exhibit A-1       Form of RC Note (Section 1.4)
Exhibit A-2       Form of Term Loan A Note (Section 1.4)
Exhibit A-3       Form of Term Loan B Note (Section 1.4)
Exhibit B         Request for Advance (Section 1.5)
Exhibit C         LIBOR Election (Section 1.7.4)
Exhibit D         Form of Security Agreement (Section 3.1.3)
Exhibit E         Form of Guaranty and Suretyship Agreement (Section 3.1.4)
Exhibit F-1       Form of Parent Pledge Agreement (Section 3.1.5(a))
Exhibit F-2       Form of Borrower Pledge Agreement (Section 3.1.5(b))
Exhibit F-3       Form of Subsidiary Pledge Agreement (Section 7.27)
Exhibit G         Form of Subordination Agreement (Section 3.1.6)
Exhibit I         Form of Mortgage (Section 3.1.7)
Exhibit J         Form of Officer's Compliance Certificate (Section 9.1;
                  Section 5.1.3)
Exhibit K         Form of Assignment and Assumption (Section 11.7.2(c))
Exhibit L         Form of Borrowing Base Report (Section 5.1.6)

SCHEDULES

Schedule 1.1      Lenders' Commitments
Schedule 4.1      Equity Ownership, List of Subsidiaries of Borrower and States
                  of Formation
Schedule 4.6      Additional Inventory Locations
Schedule 4.10     Intellectual Property
Schedule 4.19     ERISA
Schedule 7.1.1    Old PA Crusher Letter of Credit Indebtedness
Schedule 7.2.1    Liens
Schedule 7.2.3    Sublicenses of Intellectual Property
Schedule 7.3      Other Investments
Schedule 7.6      Affiliate Transactions

                                TABLE OF CONTENTS




                                                                                                              PAGE
                                                                                                           
ARTICLE 1             THE LOANS ..........................................................................     2

         1.1      Revolving Credit Loans. ................................................................      2

                  1.1.1    Commitment to Make RC Loans ...................................................     2

                  1.1.2    Available Commitment ..........................................................     2

                  1.1.3    Voluntary Commitment Reductions ...............................................     2

                  1.1.4    Mandatory Commitment Reductions ...............................................     2

                  1.1.5    Repayment In Connection With Commitment Reductions and on RC Maturity Date ....     2

                  1.1.6    Voluntary Prepayment ..........................................................     3

         1.2      Term Loans .............................................................................     3

                  1.2.1    Commitment for Term Loan A ....................................................     3

                  1.2.2    Repayment of Term Loan A ......................................................     3

                  1.2.3    Commitment for Term Loan B ....................................................     4

                  1.2.4    Repayment of Term Loan B ......................................................     4

                  1.2.5    Voluntary Prepayments .........................................................     5

                  1.2.6    Mandatory Prepayments .........................................................     6

                  1.2.7    Holding of Mandatory Prepayments in Cash Collateral Account ...................     7

                  1.2.8    Relationship of Voluntary and Other Mandatory Prepayments to Scheduled Payments     7

         1.3      Lenders' and Issuer's Obligations Several ..............................................     7

         1.4      Notes ..................................................................................     8

         1.5      Borrowing Notice .......................................................................     8

         1.6      Fees to Lenders ........................................................................     9

                  1.6.1    Commitment Fees ...............................................................     9

                  1.6.2    Letter of Credit Fees and Facing Fees .........................................     9

                  1.6.3    Other Fees ....................................................................     9

                  1.6.4    Miscellaneous .................................................................     9

         1.7      Interest ...............................................................................     9

                  1.7.1    The Rates .....................................................................     9

                  1.7.2    Applicable Margin .............................................................     9

                  1.7.3    Adjustments to Applicable Margin ..............................................    10



                                       -i-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
                  1.7.4    LIBOR Election ................................................................    10

                  1.7.5    Breakage ......................................................................    11

                  1.7.6    Default Rate ..................................................................    11

                  1.7.7    Source of Funds ...............................................................    11

         1.8      Additional Costs; Unavailability .......................................................    12

                  1.8.1    Inability to Determine LIBOR ..................................................    12

                  1.8.2    Laws Affecting LIBOR Availability .............................................    12

                  1.8.3    Capital Adequacy ..............................................................    12

                  1.8.4    Other Increased Costs .........................................................    12

                  1.8.5    Determinations and Notice .....................................................    13

         1.9      Purpose ................................................................................    13

         1.10     Mechanics of Payments:  Borrower Payments ..............................................    14

                  1.10.1   Manner of Making Payments .....................................................    14

                  1.10.2   Permitted Assumptions by Agent as to Borrower Payments ........................    14

                  1.10.3   Disbursements from Agent to Lenders ...........................................    14

                  1.10.4   Authorization to Make Loans In Satisfaction of Secured Obligations ............    14

                  1.10.5   Payments Due on Non-Business Days .............................................    15

         1.11     Mechanics of Payments:  Lender Payments ................................................    15

                  1.11.1   Permitted Assumptions by Agent as to Lender Payments ..........................    15

                  1.11.2   Special Purpose Funding Vehicle ...............................................    15

         1.12     Taxes ..................................................................................    16

                  1.12.1   Payments Free and Clear .......................................................    16

                  1.12.2   Stamp and Other Taxes .........................................................    16

                  1.12.3   Indemnity .....................................................................    17

                  1.12.4   Evidence of Payment ...........................................................    17

                  1.12.5   Tax Forms .....................................................................    17

                  1.12.6   Survival ......................................................................    18

ARTICLE  2             LETTERS OF CREDIT ..................................................................    18

         2.1      Letters of Credit ......................................................................    18



                                      -ii-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
                  2.1.1    Commitment to Issue Letters of Credit .........................................    18

                  2.1.2    Limitation on Amount ..........................................................    18

                  2.1.3    Obligations Absolute ..........................................................    18

                  2.1.4    Reliance by Issuer ............................................................    19

                  2.1.5    Fees ..........................................................................    19

                  2.1.6    Participation by RC Lenders ...................................................    19

                  2.1.7    Standard of Conduct ...........................................................    20

                  2.1.8    Cash Collateral Account .......................................................    20

                  2.1.9    Obligations Secured ...........................................................    20

ARTICLE  3             CONDITIONS TO FUNDINGS AND ISSUANCE OF LETTERS OF CREDIT ...........................    20

         3.1      Conditions to Initial Funding ..........................................................    20

                  3.1.1    Execution of this Agreement ...................................................    21

                  3.1.2    The Notes .....................................................................    21

                  3.1.3    Security Agreement ............................................................    21

                  3.1.4    Guaranty and Suretyship Agreement .............................................    21

                  3.1.5    Pledge Agreements. ............................................................    21

                  3.1.6    Subordination Agreement .......................................................    22

                  3.1.7    Mortgages and Landlord Waivers ................................................    22

                  3.1.8    Repayment of Existing Indebtedness ............................................    22

                  3.1.9    Payment of Fees and Costs .....................................................    22

                  3.1.10   No Default ....................................................................    23

                  3.1.11   Correctness of Representations and Warranties .................................    23

                  3.1.12   Financial Statements; Projections. ............................................    23

                  3.1.13   Legal Proceedings .............................................................    23

                  3.1.14   Consents and Approvals ........................................................    23

                  3.1.15   Material Adverse Change; Compliance With Law ..................................    24

                  3.1.16   Opinions of Counsel ...........................................................    24

                  3.1.17   Officer's Compliance Certificate ..............................................    24

                  3.1.18   Good Standing .................................................................    24



                                      -iii-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
                  3.1.19   Lien Searches .................................................................    24

                  3.1.20   Evidence of Insurance .........................................................    24

                  3.1.21   Stock Purchase and Merger Documents, Instruments and Agreements ...............    25

                  3.1.22   Capital Structure and Equity Investments ......................................    25

                  3.1.23   Initial Borrowing Base Report and Availability under Borrowing Base ...........    25

                  3.1.24   Material Contracts ............................................................    25

                  3.1.25   Tax Sharing Agreement .........................................................    25

                  3.1.26   Pro Forma EBITDA ..............................................................    25

                  3.1.27   Consolidated Total Debt to Pro Forma EBITDA Ratio .............................    25

                  3.1.28   Primary Deposit Accounts ......................................................    26

                  3.1.29   Other Requirements ............................................................    26

         3.2      Requirements for Each Loan/Letter of Credit ............................................    26

                  3.2.1    No Default ....................................................................    26

                  3.2.2    Request for Advance/Letter of Credit ..........................................    26

                  3.2.3    Representations and Warranties ................................................    26

                  3.2.4    Material Adverse Change .......................................................    26

                  3.2.5    Method of Certifying Certain Conditions .......................................    26

ARTICLE  4             REPRESENTATIONS AND WARRANTIES .....................................................    26

         4.1      Status. ................................................................................    27

                  4.1.1    Organization and Qualification ................................................    27

                  4.1.2    Stock Ownership ...............................................................    27

         4.2      Power and Authority; Enforceability. ...................................................    28

         4.3      No Violation of Agreements; Absence of Conflicts .......................................    28

         4.4      Recording, Enforceability and Consent ..................................................    28

         4.5      Lines of Business ......................................................................    29

         4.6      Security Interest in Collateral ........................................................    29

         4.7      Litigation; Compliance with Laws .......................................................    29

         4.8      No Burdensome Agreements. ..............................................................    30

         4.9      Condition of Property. .................................................................    30



                                      -iv-

                                TABLE OF CONTENTS

                                   (continued)




                                                                                                              PAGE
                                                                                                           
         4.10     Licenses; Intellectual Property ........................................................    30

         4.11     Title to Properties; Liens .............................................................    30

         4.12     Management Agreements ..................................................................    31

         4.13     Financial Statements and Projections ...................................................    31

                  4.13.1   Financial Statements ..........................................................    31

                  4.13.2   Undisclosed Liabilities .......................................................    31

                  4.13.3   Absence of Material Adverse Change ............................................    31

                  4.13.4   Projections ...................................................................    31

         4.14     Tax Returns and Payments; Other Fees ...................................................    31

         4.15     Fiscal Year ............................................................................    32

         4.16     Federal Reserve Regulations ............................................................    32

         4.17     Investment Company Act. ................................................................    32

         4.18     Public Utility Holding Company Act .....................................................    32

         4.19     Benefit Plan Compliance ................................................................    32

                  4.19.1   Plans .........................................................................    32

                  4.19.2   Favorable Determination Letters ...............................................    33

                  4.19.3   Compliance with Law ...........................................................    33

                  4.19.4   Absence of Certain Conditions .................................................    33

                  4.19.5   Absence of Certain Liabilities ................................................    34

         4.20     Accuracy and Completeness of Disclosure. ...............................................    34

         4.21     Adequacy of Capital; Solvency ..........................................................    34

         4.22     Absence of Restrictive Provisions ......................................................    34

         4.23     Environmental Compliance ...............................................................    34

         4.24     Insurance ..............................................................................    35

ARTICLE  5             REPORTING REQUIREMENTS AND NOTICES .................................................    35

         5.1      Financial Data and Reporting Requirements; Notice of Certain Events. ...................    36

                  5.1.1    Delivery of Quarterly Financial Statements ....................................    36

                  5.1.2    Delivery of Annual Financial Statements .......................................    36

                  5.1.3    Delivery of Officer's Compliance Certificates .................................    36

                  5.1.4    Auditors' Reports .............................................................    36



                                       -v-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
                  5.1.5    SEC Filings, Etc ..............................................................    37

                  5.1.6    Monthly Certificates and Reports ..............................................    37

                  5.1.7    Annual Budget .................................................................    37

         5.2      Notice of Defaults. ....................................................................    38

         5.3      Notice of Disputes and Other Matters ...................................................    38

                  5.3.1    Certain Litigation ............................................................    38

                  5.3.2    Conditions Affecting Collateral ...............................................    38

                  5.3.3    Material Adverse Change .......................................................    38

                  5.3.4    Representations and Warranties ................................................    38

         5.4      ERISA Notices. .........................................................................    38

         5.5      Miscellaneous ..........................................................................    39

         5.6      Authorization of Third Parties to Deliver Information ..................................    39

ARTICLE  6             FINANCIAL COVENANTS ................................................................    39

         6.1      Minimum Tangible Net Worth .............................................................    39

         6.2      Fixed Charge Coverage Ratio ............................................................    39

         6.3      Consolidated Total Debt to EBITDA Ratio ................................................    39

         6.4      Limitation on Capital Expenditures .....................................................    40

         6.5      Additional Provisions Respecting Calculation of Financial Covenants ....................    40

ARTICLE  7             BUSINESS COVENANTS .................................................................    41

         7.1      Indebtedness. ..........................................................................    41

                  7.1.1    In General ....................................................................    41

                  7.1.2    Limitation on Incurrence ......................................................    41

                  7.1.3    No Default ....................................................................    41

         7.2      Liens; Licenses. .......................................................................    42

                  7.2.1    In General ....................................................................    42

                  7.2.2    Negative Pledge ...............................................................    43

                  7.2.3    Licenses ......................................................................    43

         7.3      Investments, Loans, Acquisitions, etc. .................................................    43

         7.4      Restricted Payments ....................................................................    44

         7.5      Sale-Leasebacks. .......................................................................    44



                                     -vi-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
         7.6      Transactions with Affiliates. ..........................................................    44

         7.7      Mergers and Dispositions. ..............................................................    44

                  7.7.1    Consolidations and Mergers ....................................................    44

                  7.7.2    Sales and Other Dispositions ..................................................    45

         7.8      Management Arrangements. ...............................................................    45

         7.9      Existence. .............................................................................    45

         7.10     Compliance with Law ....................................................................    46

         7.11     Payment of Taxes and Claims. ...........................................................    46

         7.12     Tax Consolidation. .....................................................................    46

         7.13     Compliance with ERISA ..................................................................    46

         7.14     Insurance. .............................................................................    48

                  7.14.1   Liability, Property Damage, Etc ...............................................    48

                  7.14.2   PBGC ..........................................................................    48

         7.15     Maintenance of Properties. .............................................................    48

         7.16     Maintenance of Records; Fiscal Year ....................................................    48

         7.17     Inspection. ............................................................................    48

         7.18     Exchange of Notes ......................................................................    49

         7.19     Further Assurances .....................................................................    49

         7.20     Consistent Action - Voting. ............................................................    49

         7.21     Issuance of Equity .....................................................................    49

         7.22     Change in Documents; New Documents .....................................................    49

         7.23     Limitations on Certain Restrictive Provisions ..........................................    50

         7.24     Environmental Matters. .................................................................    50

         7.25     Corporate Separateness. ................................................................    50

         7.26     Subsidiaries, Subsidiary Pledges and Subsidiary Suretyships. ...........................    50

         7.27     Intellectual Property Collateral Agreements ............................................    51

         7.28     Real Property Leased and Owned; Other Locations ........................................    51

                  7.28.1   In General ....................................................................    51

                  7.28.2   Other Locations ...............................................................    51

ARTICLE  8             EVENTS OF DEFAULT ..................................................................    52



                                      -vii-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
         8.1      Events of Default ......................................................................    52

                  8.1.1    Failure to Pay Principal ......................................................    52

                  8.1.2    Failure to Pay Interest, Fees, Reimbursement Obligations, Etc .................    52

                  8.1.3    Cross-Default to Indebtedness .................................................    52

                  8.1.4    Other Cross-Defaults ..........................................................    52

                  8.1.5    Misrepresentations ............................................................    52

                  8.1.6    Certain Covenant Defaults .....................................................    52

                  8.1.7    Other Covenant Defaults .......................................................    53

                  8.1.8    Other Loan Document Defaults; Security ........................................    53

                  8.1.9    Custody or Control of Assets ..................................................    53

                  8.1.10   Discontinuance of Business ....................................................    53

                  8.1.11   Insolvency ....................................................................    53

                  8.1.12   Material Adverse Effect .......................................................    54

                  8.1.13   Judgments .....................................................................    54

                  8.1.14   Change of Control .............................................................    54

                  8.1.15   Lease Termination .............................................................    54

                  8.1.16   Subordination .................................................................    54

         8.2      Acceleration; Remedies. ................................................................    54

                  8.2.1    Acceleration Upon Insolvency ..................................................    54

                  8.2.2    Acceleration Upon Other Defaults ..............................................    54

                  8.2.3    Remedies in General ...........................................................    55

         8.3      Proceeds of Collateral .................................................................    55

ARTICLE  9             DEFINITIONS ........................................................................    56

         9.1      Defined Terms ..........................................................................    56

ARTICLE  10            AGENT ..............................................................................    76

         10.1     Authority. .............................................................................    76

         10.2     Expenses ...............................................................................    77

         10.3     Action by Agent. .......................................................................    77

         10.4     Exculpatory Provisions .................................................................    77

                  10.4.1   General Standard ..............................................................    77



                                     -viii-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
                  10.4.2   Agents and Employees ..........................................................    77

                  10.4.3   Advice of Professionals .......................................................    77

                  10.4.4   Reliance on Information Believed to Be Genuine ................................    77

         10.5     Investigation by Lenders ...............................................................    78

         10.6     Notice of Events of Default ............................................................    78

         10.7     Resignation; Termination ...............................................................    78

         10.8     Sharing ................................................................................    78

         10.9     Other Relationships ....................................................................    79

ARTICLE  11            MISCELLANEOUS ......................................................................    79

         11.1     Notices ................................................................................    79

         11.2     Survival of Representations ............................................................    79

         11.3     No Implied Waivers .....................................................................    80

         11.4     Entire Agreement .......................................................................    80

         11.5     Severability ...........................................................................    80

         11.6     Amendments, Waivers and Consents .......................................................    80

         11.7     Successors and Assigns .................................................................    81

                  11.7.1   In General; The Borrower ......................................................    81

                  11.7.2   Assignment ....................................................................    82

                  11.7.3   Register ......................................................................    83

                  11.7.4   Participations ................................................................    83

                  11.7.5   Certain Permitted Pledges .....................................................    84

         11.8     Descriptive Headings ...................................................................    84

         11.9     Governing Law ..........................................................................    84

         11.10    Maximum Lawful Interest Rate ...........................................................    84

         11.11    Set-off ................................................................................    84

         11.12    Counterparts ...........................................................................    85

         11.13    Confidentiality ........................................................................    85

         11.14    Costs and Expenses of the Agent ........................................................    85

                  11.15   Indemnification ................................................................    86

                  11.15.2 Limitations on Indemnification .................................................    86



                                      -ix-

                                TABLE OF CONTENTS
                                   (continued)




                                                                                                              PAGE
                                                                                                           
         11.16    Certification of Amounts ...............................................................    87

         11.17    Consent to Jurisdiction, Service and Venue; Waiver of Jury Trial .......................    87



                                       -x-

EX-10.2

                                                                    Exhibit 10.2


THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE STATE OR FEDERAL SECURITIES LAW.
NO OFFER, SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS
PROMISSORY NOTE MAY BE MADE UNLESS THIS PROMISSORY NOTE IS REGISTERED UNDER THE
ACT AND ANY OTHER APPLICABLE SECURITIES LAW, OR AN EXEMPTION FROM ANY SUCH
REGISTRATION REQUIREMENTS IS APPLICABLE TO SUCH TRANSACTION.

THIS PROMISSORY NOTE IS BEING EXECUTED AND DELIVERED IN CONNECTION WITH, AND IS
SUBJECT TO THE TERMS AND CONDITIONS OF, A STOCK PURCHASE AGREEMENT DATED JANUARY
2, 2003 TO WHICH A SUBSIDIARY OF THE COMPANY AND THE PAYEE ARE PARTIES (THE
"PURCHASE AGREEMENT"). EACH HOLDER OF THIS PROMISSORY NOTE, BY SUCH HOLDER'S
ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THIS PROMISSORY NOTE.

                             FORM OF PROMISSORY NOTE

Principal Amount: $________________                        Date: January 2, 2003

      FOR VALUE RECEIVED, K-TRON INTERNATIONAL, INC., a New Jersey corporation
(the "Company") promises to pay to ______________________ ("Payee"), at
______________________ or such other place as may be designated in writing by
Payee at least seven days prior to any payment, the principal sum of
____________________ ($_________) (the "Principal Amount") in accordance with
the terms of this Note. Unless the context otherwise requires, the term
"Noteholder" means the person named as Payee above or any other person who shall
at the time be the permitted assignee of this Note.

            SECTION 1. Principal and Interest Payments. Payments of the
Principal Amount shall be made as follows: (a) one installment of
__________________ Dollars ($_________) shall be made on January 2, 2005, (b)
one installment of __________________ Dollars ($_________) shall be made on
January 2, 2006, and (c) one installment of __________________ Dollars
($_________) shall be made on January 2, 2007. Interest shall accrue on the
Principal Amount outstanding from time to time at a simple rate per annum equal
to six percent (6%) and all such accrued interest shall be payable quarterly
beginning April 2, 2003 and the second day of July, October, January and April
thereafter and such other date on which the Principal Amount shall be due and
payable hereunder. All payments under this Note shall be paid by check or wire
transfer of immediately available funds in lawful money of the United States of
America on the date when due to an account designated in writing by the
Noteholder (as defined herein).

            SECTION 2. Voluntary Prepayment. The Company may prepay this Note in
full or in part without premium or penalty. Any such prepayments shall first be
applied against accrued interest and thereafter against any unpaid Principal
Amount.

            SECTION 3. Representations and Warranties. The Company represents
and warrants to Payee as follows:

            (a) Corporate Existence. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey.

            (b) Corporate Power and Authorization. The Company has the corporate
power to execute, deliver and perform this Note. The execution, delivery and
performance hereof by the Company have been duly authorized by all necessary
corporate action. This Note is a legal, valid and binding obligation of the
Company and is enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and by general principles of equity
(whether considered in an action at law or in equity).

            (c) Validity of Contemplated Transactions; Etc. The execution,
delivery and performance of this Note by the Company will not contravene or
violate (a) any law, rule or regulation to which the Company is subject, (b) any
judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
the Company or (c) the Certificate of Incorporation or By-Laws of the Company;
nor will such execution, delivery or performance violate, be in conflict with or
result in the breach (with or without the giving of notice or lapse of time, or
both) of any term, condition or provision of, or require the consent of any
other party to, any contract, commitment or agreement, oral or written, to or by
which the Company is a party or otherwise bound or affected or by which any of
the Company's assets or properties may be bound or affected. No authorization,
approval or consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery and performance hereof by the Company.

            SECTION 4. Default. The entire principal amount of, and all accrued
interest on, this Note shall become due and payable, at the option of the
Noteholder exercised by written notice to the Company if any one or more of the
events specified in Sections 4(a), 4(b), 4(c) or 4(d) below shall have occurred
and be then continuing, and immediately upon the occurrence of any of the events
specified in Sections 4(e) or 4(f) below (each of the events specified in
Sections 4(a) through 4(f), inclusive, being referred to herein as an "Event of
Default"):

            (a) The Company shall fail to make any payment required to be made
under this Note that is not made within ten (10) days after its receipt of
notice from the Noteholder that any such required payment has not been made;

            (b) The Company shall have breached any of its representations or
warranties contained in Section 3 of this Note;

            (c) A final judgment or order for the payment of money, or any final
order granting equitable relief, shall be entered against the Company by a court
of competent jurisdiction which is not stayed on appeal, and such judgment or
order would reasonably be expected to render the Company unable to pay the
future payments due under this Note;


                                     Page 2

            (d) A default, event of default, or event which with the giving of
notice or the passage of time or both would constitute a default or event of
default, shall have occurred under any document, instrument, contract or
agreement now or hereafter entered into by the Company with respect to any
indebtedness of the Company for borrowed money in an aggregate principal amount
of greater than $100,000 and the holder of any such indebtedness (or any agent
or trustee acting on behalf of one or more holders) accelerates the maturity of
any such indebtedness;

            (e) The Company shall (i) commence a voluntary case under the
Bankruptcy Code of 1978, as amended, or other federal bankruptcy law (as now or
hereafter in effect); (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts; (iii) consent
to or fail to contest in a timely manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws; (iv) apply for or
consent to, or fail to contest in a timely manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of itself
or of a substantial part of its property, domestic or foreign; (v) be unable to,
or admit in writing its inability to, pay its debts as they become due; (vi)
make a general assignment for the benefit of its creditors; or (vii) make a
conveyance fraudulent as to creditors under any state or federal law, which
conveyance would reasonably be expected to have a material adverse effect on the
financial condition of the Company; or

            (f) a case or other proceeding shall be commenced and not
discharged, dismissed or stayed within thirty (30) days, against the Company in
any court of competent jurisdiction seeking (i) relief under the Bankruptcy Code
of 1978, as amended or other federal bankruptcy law (as now or hereafter in
effect) or under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or adjustment of debts or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or all or any substantial part of the assets, domestic or foreign, of
the Company.

            SECTION 5. Remedies. Upon an Event of Default, and for so long as
such Event of Default is continuing, interest shall accrue on the outstanding
Principal Amount and all accrued interest hereunder at a compound rate per annum
equal to ten percent (10%).

            SECTION 6. Notices. All communications provided for in this Note
shall be in writing and sent (a) by first class registered or certified mail,
return receipt requested (postage prepaid), (b) by a recognized overnight
delivery service (charges prepaid), or (c) by messenger (charges prepaid). The
address of the Company for the purposes of this Agreement is set forth on the
signature page to this Note and the address of the Noteholder for purposes of
this Note shall be _________________________________ or such other address as
the Noteholder shall have provided to the Company in writing. Each of the
Company and the Noteholder may change its address by notice to the other in
accordance with this Section 6. Communications under this Note shall be deemed
received (i) in the case of mailing, on the third business day after posting;
(ii) in the case of overnight delivery service, the first business day after
delivery to the overnight delivery service; and (iii) in the case of messenger,
on the date of actual delivery.

            SECTION 7. Binding Effect. This Note is being executed and delivered
in connection with, and is subject to, the Purchase Agreement. This Note shall
be binding upon and


                                     Page 3

inure to the benefit of the Company and the Noteholder and their respective
successors and assigns.

            SECTION 8. Governing Law. This Note shall be governed by the laws of
the State of Pennsylvania without giving effect to the choice of law rules of
Pennsylvania or any other jurisdiction.

            SECTION 9. Expenses. The Company shall pay all fees and expenses
incurred by Payee after an Event of Default in the collection and enforcement of
this Note, including, without limitation, the fees of Payee's counsel.

            IN WITNESS WHEREOF, the Company has caused this Note to be executed
on the date first above written.

                                     K-TRON INTERNATIONAL, INC.

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

                                     Name:
                                           ------------------------------------

                                     Title:
                                            -----------------------------------

                                     Address for Notices

                                     K-TRON INTERNATIONAL, INC.

                                     Routes 55 and 553
                                     P.O. Box 888
                                     Pitman, NJ  08071
                                     Attention: Edward B. Cloues, II,
                                     Chairman and Chief Executive Officer

                                     with a copy to (which shall not constitute
                                     notice for purposes of this Note):

                                     Morgan, Lewis & Bockius LLP
                                     1701 Market Street
                                     Philadelphia, PA  19103
                                     Attention: Timothy Maxwell, Esq.


                                     Page 4

                                  Schedule 10.2

Donald J. Carrozzino
Nancy S. Hansen
Frank Wallitsch, Jr.
John D. Whalen


                                     Page 5

EX-10.3

                                                                    Exhibit 10.3


                                      NOTE

$7,333,333.00                                               WOODBURY, NEW JERSEY

                                                            DECEMBER 20, 2002


      BETWEEN the Borrower K-TRON AMERICA, INC., A DELAWARE CORPORATION, whose
address is Routes 55 and 553, P.O. Box 888, Pitman, New Jersey 08071-0888,
referred to as "Borrower".

      AND the Lender, THE BANK, whose address is 100 Park Avenue, Woodbury, New
Jersey 08096, referred to as "THE BANK".

      The phrase "THE BANK" means the original Lender and anyone else who takes
this Note by transfer.

      BORROWER'S PROMISE TO PAY PRINCIPAL AND INTEREST. In return for a loan
that Borrower may receive hereunder, Borrower promises to pay $733,333,333.00 or
such lesser amount as may be advanced by the THE BANK as hereinafter set forth
(called "principal"), plus interest to the order of THE BANK. The borrower may
borrow any part of the loan up to an amount not to exceed $3,700,000.00 at a per
annum FIXED INTEREST RATE OF 5.625% and all or any part of the loan on a
floating rate basis equal to the one (1) month LIBOR rate plus 185 basis points,
as Borrower elects at the time of funding under this Note. Funding under this
Note will occur when requested by Borrower, with the anticipated date being
December 31, 2002 but in no event later than January 31, 2002, and will consist
of a $5,000,000.00 borrowing plus the amount necessary to refinance the
principal balance then due on the Borrower's $7,000,000.00 February 4, 2000 note
in favor THE BANK, with the total to be funded hereunder not to exceed
$7,333,333.00.

Interest will be charged on the remaining part of the principal balance due on
this Note until all principal has been paid. Interest shall be calculated
hereunder for the actual number of days that principal is outstanding based on a
year of 360 days.

      PAYMENTS. Borrower will pay principal and interest based on a FIVE (5)
YEAR schedule with monthly principal payments of $83,333.33, PLUS INTEREST, on
the SIXTH DAY OF EACH MONTH BEGINNING ON FEBRUARY 6, 2003. The amount of each
said principal payment allocated to the fixed and floating rate portions of the
loan shall be in the same ratio as those fixed and floating rate portions bear
to each other. Borrower will pay all amounts owed under this Note no later than
JANUARY 6, 2008. All payments will be made to THE BANK at the address shown
above or to a different place if required by the THE BANK.

      LIBOR RATE. For the floating rate portion of the Note, a variable interest
rate equal to the one (1) month LIBOR rate plus 185 basis points. The rate of
interest shall be established on the twenty-fifth (25th) day of each calendar
month, during the term of this Note, or the next business day thereafter, with
such rate of interest to be effective on the first business day of the next
calendar month. For purposes of this Note, LIBOR interest rate shall be defined
as the rate of interest equal to the sum of (a) the London Interbank Offered
Rate (LIBOR) for maturities of one (1) month, expressed as an annual yield, as
reported in the Wall Street Journal or a comparable source on the date the quote
by THE BANK is given (the "LIBOR Index Rate"); and (b) 185 basis points. The
rate of interest so established shall remain in effect until the first business
day of the succeeding calendar month, at which time the rate of interest shall
be reestablished as provided herein. The interest rate established at time of
funding under the terms of this Note shall be the same as if established on the
first of said month.

      SECURITY. The Borrower hereunder has delivered as security for this
instrument a


                                      -2-

second mortgage bearing even date herewith covering premises designated on the
official tax map as Lot 3.01, Block 249, Township of Mantua, Gloucester County,
New Jersey, which Mortgage is about to be recorded in the office of the Clerk of
Gloucester County together with a second lien security interest, subject only to
THE BANK'S first lien perfected security interest, in the accounts receivable,
inventory, and equipment now owned or hereafter acquired by Borrower located at
Routes 55 and 553, Pitman, New Jersey 08071 and Suite 601, VPR Commerce Center,
1001 Lower Landing Road, Blackwood, New Jersey 08012. The provisions of any
mortgage or security agreement given as security for this Note are incorporated
herein by reference.

      COVENANTS AND CONDITIONS:

1. Borrower has provided to THE BANK acceptable current financial statements and
will provide annual updates on the Borrower and Guarantor. The updates for
financial statements and tax returns are to be submitted within thirty (30) days
of the date requested by THE BANK. Should the Borrower or Guarantor fail to
submit required financial information within thirty (30) days of the date of
request, THE BANK may, at its sole option, increase the interest rate of this
Note by one-half (1/2) of one (1) percent per annum.

2. The Borrower must maintain with THE BANK a meaningful deposit relationship.

3. Borrower agrees that until all obligations hereunder are fully paid and
discharged, Borrower and Guarantor will not without the prior written consent of
THE BANK:

      A. Permit the consolidated debt to net worth ratio of Guarantor to be more
than 1.25 at fiscal year-end 2003 and each fiscal year-end thereafter.


                                      -3-

      B. Permit the consolidated net worth of Guarantor to be less than $27
million at fiscal year-end 2003 and each fiscal year-end thereafter.

      C. Both of the above covenants set forth in paragraphs A and B above shall
be calculated exclusive of declines due to changes in foreign exchange rates
subsequent to December 28, 2002.

      D. Permit the consolidated annual debt coverage ratio of Guarantor at each
fiscal year end to be less than 1.50.

      E. Each of covenants set forth in paragraphs A, B, and D above shall be
calculated without taking into account Pennsylvania Crusher Corporation and its
subsidiaries.

      F. Permit upstreaming of funds from Borrower to Guarantor or K-Tron
Technologies, Inc. or downstreaming of funds from Guarantor to Pennsylvania
Crusher Corporation or its subsidiaries, except for management fees consistent
with past practice and royalties paid in the ordinary course of business and
except for dividends paid in connection with the Pennsylvania Crusher
Corporation acquisition, including to pay the $5 million note expected to be
issued by Guarantor to the stockholders of Pennsylvania Crusher Corporation.

      G. Permit any merger or acquisition by Guarantor or its subsidiaries
involving consideration of more than $2 million without the written approval of
THE BANK.

      PREPAYMENT: As to the amount borrowed under the Fixed Interest Rate
Option, Borrower shall have the right at any time during the term hereof to
prepay all or a part of the principal balance then outstanding under the Note to
which the Fixed Interest Rate Option applies provided that, if required, it also
pays the premiums and charges, if any are applicable, hereinafter set forth in
this paragraph. A principal prepayment requiring such a premium or charge shall
be deemed to have occurred upon Borrower's payment to THE BANK in any Loan


                                      -4-

Year of any sum in reduction of principal which exceeds one third of the
original principal amount borrowed under the Fixed Interest Rate Option,
excluding principal payments (including scheduled amortization) the Borrower is
obligated to make under any other term or provision of the Note, the Mortgage
securing the Note or any other document constituting a part of the loan
transaction evidenced by the Note. Upon the occurrence of such a principal
prepayment including prepayment of the entire debt, THE BANK shall be entitled
to charge and Borrower shall be obligated to pay, in addition to interest and
all other charges then properly due, a prepayment premium equal to 2% of the
amount prepaid which is in excess of what could have been prepaid without such a
premium. The term "Loan Year" as used herein is defined as any period of one
year commencing on the date of the Note or on any anniversary of such date.
Except as provided above, there shall be no prepayment premium or charge on a
prepayment of any amount borrowed under the Fixed Interest Rate Option.

      At no time will there by a prepayment penalty on the Variable Interest
Rate portion of the loan, which portion may be prepaid in full or in part at any
time.

      LATE CHARGE: The effective date of the receipt by the holder of any
installment of this Note shall be the day on which the holder receives cash or
collected funds at the place of payment as specified herein in payment of any
such installment. BORROWER shall be entitled to a FIFTEEN (15) DAY grace period
after which period a "late charge" of $0.05 FOR EACH $1.00 OVERDUE may be
charged by the holder for the purpose of defraying the expense incident to
handling such delinquent payment.

      DEFAULT: If any installment of this Note or interest payment is not paid
within 15 days of the date and at the place herein specified and after THE BANK
has given the BORROWER 15 days' written notice to cure said default, THE BANK
may at its option, and


                                      -5-

without further notice declare this Note to be in default and the entire
principal balance then remaining unpaid together with all interest which shall
have accrued on the unpaid principal balance from and after the date of such
default shall be due and payable in full without notice.

      It shall be a default of this Note if Borrower shall default in any
payment of principal or interest on any indebtedness or contingent obligation
for money borrowed (other than Borrower's obligations under this Note) or any
other event shall occur, the effect of which is to permit such indebtedness or
contingent obligation to be declared or such indebtedness or contingent
obligation shall otherwise become due prior to is stated maturity, provided,
however, that this provision shall not apply concerning obligations other than
Borrower's obligations under this Note unless the amount involved exceeds
$50,000.00

      If a default shall occur in this loan and not be cured as provided in the
loan documents or otherwise agreed to by THE BANK, THE BANK shall, after
declaring the loan to be in default, have the right to increase the interest
rate TWO (2%) PERCENT PER YEAR in excess of the note rate. This provision is in
addition to any late charges that may be due.

      ATTORNEY'S FEE: If this Note is placed in the hands of an attorney for
collection because of a default in the terms hereof or in the terms of the
mortgage given as security for the within obligation, the undersigned agrees to
pay the reasonable fees and costs of such attorney, whether or not legal action
is instituted and further consents that if a judgment is entered in any action
the amount of such fees shall form a part of such judgment in addition to any
fees allowed by Statute or Rule of the Court.

      COMMITMENT LETTER COMPLIANCE: This Note is contingent upon BORROWER'S
compliance with all of the terms and conditions contained in the commitment
letter issued by THE BANK to BORROWER on December 6, 2002. Upon breach of any
term


                                      -6-

or condition contained there THE BANK shall have the right to declare this loan
in default and demand payment in full of the principal balance remaining unpaid,
together with all interest which shall have accrued thereon. Further, providing
the said commitment letter so provides, THE BANK reserves the right to increase
the interest rate in accordance with the provisions of the loan commitment for
failure of the BORROWER or any guarantor to submit required financial
information within thirty days of the date of request by THE BANK. Should there
be any conflict between the provisions of said commitment letter and this Note,
the provisions of this Note shall apply.

      PAYMENT AT MATURITY: THIS LOAN IS PAYABLE IN FULL AT MATURITY OR UPON
DEMAND IN THE EVENT OF A DEFAULT HEREUNDER OR DEFAULT UNDER THE MORTGAGE
SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER APPLICABLE LOAN
INSTRUMENT. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID
INTEREST THEN DUE. THE BANK IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT
TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY
OWN OR YOU WILL HAVE TO FIND A LENDER WILLING TO LEND YOU THE MONEY. IF YOU
REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING
COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM
THE BANK.

      WAIVER OF PRESENTMENT: EACH AND ALL PARTIES hereto whether maker,
endorsers, sureties, guarantor or otherwise do hereby jointly and severally
waive presentment and demand for payment, notice of dishonor, protest and notice
of protest.


                                      -7-

      IN WITNESS WHEREOF, the BORROWER hereunder has hereunto set its hand and
seal the day and year first above written.

                                   
ATTEST:                               K-TRON AMERICA INC.
                                      BY:



/s/ Mary E. Vaccara                   /s/ Patricia M. Moore
- --------------------------------      -----------------------------------
Mary E. Vaccara, Secretary            Patricia M. Moore, Vice President-Finance




                                      -8-

EX-10.4

                                                                    Exhibit 10.4

                              [THE BANK LETTERHEAD]


                                    THE BANK

                           LOAN MODIFICATION AGREEMENT

                              K Tron America, Inc.
                                  P.O. Box 888
                              Pitman, NJ 08071-0888

Date: December 20, 2002                                  Account #: 6039359-6600

Original Amount: $5,000,000.00                           Present Balance: $0.00

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

WHEREAS, the undersigned Borrower executed the note referred to above on June
27, 1998; and,

WHEREAS, the loan documents, executed by the Borrower allow for a modification
of interest rate, due date or other terms or conditions without affecting the
priority of The Bank's lien;

NOW, therefore, in consideration of a modification fee of $0.00, the above
referenced note is modified as follows:

COMMITMENT:    The total commitment on the line of credit is hereby reduced from
               $5,000,000.00 to $4,000,000.00 effective December 20, 2002.

All other terms and conditions of the original note, commitment letter and any
security thereto attached is fully incorporated herein and fully ratified except
as specifically modified by this modification agreement.

THE BANK                                     K-TRON AMERICA, INC.
BY: /s/ David J. Hanrahan, Sr.               /s/ Patricia M. Moore,
   ---------------------------               ----------------------------------
        DAVID J. HANRAHAN, SR.               PATRICIA M. MOORE, V.P./FINANCE
        SENIOR VICE PRESIDENT
                                             /s/ Mary E. Vaccara,
                                             ----------------------------------
                                             MARY E. VACCARA, SECRETARY

EX-99.1

                                                                    Exhibit 99.1


                K-TRON ACQUIRES PENNSYLVANIA CRUSHER CORPORATION

PITMAN, NEW JERSEY - - JANUARY 6, 2003 - - K-Tron International, Inc.
(NASDAQ-KTII) today announced the acquisition of all of the stock of
privately-held Pennsylvania Crusher Corporation ("PCC") and its wholly-owned
subsidiary, Jeffrey Specialty Equipment Corporation ("Jeffrey"). The purchase
price was $23.5 million, of which $19.5 million was paid in cash and $4.0
million was in unsecured, promissory notes which are payable in equal, annual
installments on January 2 in each of 2005, 2006 and 2007. The purchase price is
subject to adjustment based on PCC's consolidated stockholders' equity at
December 31, 2002.

Pennsylvania Crusher Corporation (http://www.penncrusher.com), which is
headquartered in Broomall, Pennsylvania and has a manufacturing facility in
Cuyahoga Falls, Ohio, is a leading manufacturer of size reduction equipment
which is sold to electric utility companies to crush coal for use in coal-fired
power generation plants. Tracing its roots back to 1905, PCC estimates that its
machines crush a significant majority of all U.S. steam coal for the electric
utility industry. PCC equipment most commonly used by power plants includes
hammermills, Bradford breakers, Coalpactors(R), cage mills, granulators (ring
hammermills), clinker crushers and grinding mills. A substantial part of PCC's
business comes from replacement parts sales since it has a large installed base
of equipment.

Jeffrey Specialty Equipment Corporation (http://www.jeffreycorp.com), which is
located in a manufacturing/office facility in Woodruff, South Carolina near
Greenville, is a leading manufacturer of industrial hammermills for size
reduction used primarily by the paper and pulp industries to crush wood for the
production of paper. Jeffrey, whose origins go back to 1874, also manufactures
large-scale vibratory feeders for use in feeding coal, minerals, chemicals and
bulk materials. Like PCC, replacement parts sales are a major part of Jeffrey's
business.

Top management of PCC is expected to remain following the acquisition, including
John Whalen, the Chairman and Chief Executive Officer, Don Melchiorre, the
President and Chief Operating Officer, Don Carrozzino, Vice President, Finance
and Chief Financial Officer, and Nancy S. Hansen, Vice President,
Administration.

For the trailing 12-month period ended November 30, 2002, PCC's unaudited
consolidated (with Jeffrey) net sales were $34.76 million and its unaudited
consolidated operating income was $4.57 million. The acquisition was structured
as a corporate leveraged buy-out, with the Philadelphia office of National City
Bank providing $15 million of financing through two tranches of term debt and a
revolving credit facility. These loans were made directly to PCC with no
recourse to K-Tron. K-Tron also borrowed $5 million in connection with the
transaction from The Bank (formerly The Bank of Gloucester County), a subsidiary
of Fulton Financial Corporation, and issued the $4 million of notes payable to
the selling stockholders. There was no subordinated debt or K-Tron stock
involved. Also, neither PCC nor Jeffrey has any debt for money borrowed except
for the acquisition financing from National City Bank, including an additional
$2 million of availability under the revolving credit line for working capital
purposes.

Commenting on the acquisition, K-Tron Chairman and Chief Executive Officer
Edward B. Cloues, II said, "We are exceptionally pleased to be able to add
Pennsylvania Crusher




Corporation and Jeffrey Specialty Equipment Corporation to K-Tron's growing
family of high-quality material handling businesses. PCC and Jeffrey have
excellent market positions and reputations, good profitability, solid product
offerings, quality management and work forces and strong cash flow production
capability, driven largely by a steady replacement parts business that
constitutes a significant portion of their revenues. The fact that PCC and
Jeffrey serve very different material handling markets than K-Tron does today
and generate a major part of their business from the sale of replacement parts
will broaden and diversify K-Tron's business and reduce our dependence on some
of the more cyclical markets that we serve, such as plastics and chemicals."
John Whalen, Chairman and Chief Executive Officer of both PCC and Jeffrey,
added, "The entire management teams at PCC and Jeffrey are enthusiastic about
the increased opportunities that the acquisition by K-Tron will afford PCC and
Jeffrey, particularly with respect to global expansion."

While indicating that K-Tron does not intend to provide guidance to the market
with respect to future earnings, Mr. Cloues said that he expects the acquisition
of PCC and Jeffrey to be accretive to K-Tron's earnings and cash flow per share
in 2003.

K-Tron International, Inc. and its subsidiaries design, produce, market and
service material handling equipment and systems for a wide variety of industrial
markets. The Company has manufacturing facilities in the United States,
Switzerland, the United Kingdom and Canada, and its equipment is sold throughout
the world.

                                    * * * * *

This news release contains statements that are or may be deemed forward-looking
relating to the acquisition of PCC and Jeffrey, including the retention of top
management of PCC, their future prospects, their expected contribution to the
Company's 2003 earnings and cash flow per share and related matters, which
statements involve a number of risks and uncertainties. Important factors that
could cause actual results to differ materially from those indicated or
suggested by such forward-looking statements include the possibility of reduced
demand for their equipment, the failure of bookings for new equipment and
replacement parts to be received as currently anticipated, and the possibility
that future economic and business conditions will be less favorable than the
Company currently expects. Recipients of this news release are cautioned to
consider these risks and uncertainties and to not place undue reliance on the
forward-looking statements contained herein. Except as required by applicable
securities laws, the Company does not intend to update its forward-looking
statements.


                                       2