8-K

UNITED STATES
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): September 29, 2006

K-TRON INTERNATIONAL, INC.

(Exact Name of Registrant Specified in Charter)

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

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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01. Entry into a Material Definitive Agreement.
	Item 1.02. Termination of a Material Definitive Agreement.
	Item 2.01. Completion of Acquisition or Disposition of Assets.
	Item 2.03. Creation of a Direct Financial Obligation of a Registrant.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURE
Exhibit Index
STOCK PURCHASE AGREEMENT
LOAN AGREEMENT
PRESS RELEASE

Item 1.01. Entry into a Material Definitive Agreement.

     On September 29, 2006, K-Tron International, Inc. (“K-Tron”) entered into a Loan Agreement (the “New Loan Agreement”) among K-Tron and certain subsidiaries of K-Tron identified therein as borrowers (the “Borrowers”) and Citizens Bank of Pennsylvania (“Citizens”), as lender and agent.

     The New Loan Agreement provides the Borrowers with a $50.0 million revolving line of credit (the “Revolving Credit Facility”), of which up to an aggregate of $10.0 million may be used for letters of credit. The Borrowers entered into the New Loan Agreement to (i) refinance certain existing indebtedness of the Borrowers to National City Bank and The Bank, (ii) provide for future working capital requirements and for other general corporate purposes and (iii) fund permitted acquisitions, including the acquisition of Premier Pneumatics, Inc., a Kansas corporation, described in Item 2.01 below. On September 29, 2006, the Borrowers borrowed $9.8 million under the Revolving Credit Facility to pay off the terminated credit facilities described in Section 1.02 below and to pay certain fees in connection with the New Loan Agreement. The New Loan Agreement terminates on September 29, 2011.

     Revolving loans under the New Loan Agreement can be either prime rate loans or LIBOR rate loans. Prime rate loans bear interest at a fluctuating rate per annum equal to the prime rate of interest announced by Citizens from time to time less a percentage ranging from 1.00% to 0.25% depending on the level of the ratio of funded debt to adjusted earnings before interest expense, tax expense, and depreciation and amortization expenses for such period (the “Debt Ratio”). LIBOR rate loans bear interest at a fluctuating rate per annum equal to LIBOR for the relevant period plus a percentage ranging from 0.875% to 1.625%, depending on the level of the Debt Ratio.

     The Borrowers are obligated to pay a fee for any unused borrowings with respect to the Revolving Credit Facility equal to (i) a percentage ranging from 0.125% to 0.20%, depending on the level of the Debt Ratio, times (ii) the average unused portion of the Revolving Credit Facility. In addition, the Borrowers paid Citizens a fee equal to $62,500 on execution of the New Loan Agreement.

     The New Loan Agreement is unsecured, except that the lenders have been given a pledge of 65% of the equity interests of the following foreign subsidiaries of the Company: K-Tron (Schweiz) AG, K-Tron Colormax Limited and K-Tron PCS Limited. The New Loan Agreement contains financial and other covenants, such as maintaining a fixed charge coverage ratio, net worth and Debt Ratio requirements, and includes limitations on, among other things, liens, certain acquisitions, consolidations, sales of assets, incurrence of debt and capital expenditures. If an event of default, such as non-payment or failure to observe specific covenants, were to occur under the New Loan Agreement, the lenders would be entitled to declare all amounts outstanding under the facility immediately due and payable.

     The New Loan Agreement is attached hereto as Exhibit 10.1.

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Item 1.02. Termination of a Material Definitive Agreement.

     Simultaneously with entering into the New Loan Agreement, on September 29, 2006 K-Tron terminated several existing credit facilities and repaid any and all outstanding amounts under such credit facilities.

     The first credit facility that was terminated was entered into on January 3, 2003 to partially finance the acquisition by the Company of all of the stock of Pennsylvania Crusher Corporation (“Penn Crusher”). In connection with that acquisition, Penn Crusher borrowed $15.0 million from National City Bank consisting of $13.5 million in secured term debt ($10.0 million with a five-year term and $3.5 million with a six-year term (collectively, the “Term Debt”)) and $1.5 million under a five-year secured revolving credit facility (together with the Term Debt, the “National City Debt”). Subject to certain conditions, the revolving credit facility provided for up to $3.5 million of total availability, including the $1.5 million originally borrowed thereunder. As of September 29, 2006, the only debt still outstanding to National City Bank was $3,062,500 on the five-year term loan. K-Tron paid $3,063,145 to terminate the National City Debt (including principal, accrued interest, accrued fees and breakage costs), and National City released all security interests it held in connection therewith.

     A copy of the credit agreement dated January 3, 2003 (the “Prior Loan Agreement”) among Penn Crusher, the lenders party to that credit agreement and National City Bank, as agent, was previously filed as an exhibit to K-Tron’s Form 8-K dated January 2, 2003 and filed with the Securities and Exchange Commission on January 15, 2003. A copy of amendment no. 1 dated May 12, 2003 to the Prior Loan Agreement was previously filed as an exhibit to K-Tron’s Form 10-Q for the quarterly period ended June 28, 2003. A copy of amendment no. 2 dated as of June 28, 2005 to the Prior Loan Agreement was previously filed as an exhibit to K-Tron’s Form 10-Q for the quarterly period ended July 2, 2005.

     The second credit facility that was terminated was entered into on December 20, 2002 to partially finance the acquisition of Penn Crusher. K-Tron, through K-Tron America, Inc. (“K-Tron America”), an indirect, wholly-owned subsidiary of K-Tron, borrowed $5.0 million from The Bank, a subsidiary of Fulton Financial Corporation, which loan was combined with an outstanding term loan from The Bank to K-Tron America and resulted in a new $7.3 million term loan. This loan was secured by substantially all of the assets of K-Tron America and was guaranteed by K-Tron. As of September 29, 2006, there was $3,666,667 outstanding under this term loan, and K-Tron paid $3,694,207 to terminate that obligation (including principal, accrued interest, accrued fees and a prepayment fee). A copy of the note dated December 20, 2002 from K-Tron America, Inc. in favor of The Bank was previously filed as an exhibit to K-Tron’s Form 8-K dated January 2, 2003 and filed with the Securities and Exchange Commission on January 15, 2003.

     The third credit facility that was terminated was entered into in June 2004 to finance the prepayment of $4,000,000 of unsecured promissory notes issued by K-Tron to the former stockholders of Penn Crusher as consideration in the acquisition of that company. K-Tron borrowed $4,000,000 from The Bank, a subsidiary of Fulton Financial Corporation. This term loan was guaranteed by the K-Tron America. As of September 29, 2006, $2,950,000 was outstanding under this term loan, and K-Tron paid

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$2,975,610 to terminate that obligation (including principal, accrued interest, accrued fees and a prepayment fee).

     The final credit facility that was terminated was a secured revolving credit facility entered into in June 1998 with The Bank, a subsidiary of Fulton Financial Corporation. As of September 29, 2006, there was no amount outstanding under this credit facility and the credit facility was terminated.

Item 2.01. Completion of Acquisition or Disposition of Assets.

     On October 5, 2006, K-Tron acquired all of the outstanding capital stock (the “Premier Stock”) of Premier Pneumatics, Inc., a Kansas corporation (“Premier”). The acquisition of the Premier Stock was made by Premier Pneumatics, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of K-Tron, pursuant to a Stock Purchase Agreement, dated October 5, 2006 (the “Stock Purchase Agreement”), by and among the subsidiary and the shareholder of Premier (the “Shareholder”). K-Tron guaranteed the prompt payment and performance by the purchaser of all of its obligations under the Stock Purchase Agreement.

     The purchase price paid for the Premier Stock was $27,564,670, $2.0 million of which was deposited by the subsidiary with an escrow agent to be held and disbursed by the escrow agent in accordance with the terms of an Escrow Agreement, dated as of October 5, 2006, entered into by and among U.S. Bank, the subsidiary and the Shareholder. The purchase price was paid with a borrowing under the Revolving Credit Facility described in Section 1.01 above.

     Premier, which has manufacturing and office facilities in Salina, Kansas, is a leading manufacturer of pneumatic conveying equipment for the North American market. Premier engineers and manufactures complete pneumatic conveying handling systems as well as components such as loaders, rotary valves and system controls.

     The Stock Purchase Agreement is attached hereto as Exhibit 2.1.

     A press release relating to the acquisition of the Premier Stock is attached hereto as Exhibit 99.1.

Item 2.03. Creation of a Direct Financial Obligation of a Registrant.

     The disclosures required by this item are included in Item 1.01 and are incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

     The financial statements required to be filed under this item are not included in this report. The financial statements will be filed by amendment to this report no later than 71 calendar days after the date this report is required to be filed.

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(b) Pro Forma Financial Information

     The pro forma financial information required to be filed under this item is not included in this report. The pro forma financial information will be filed by amendment to this report no later than 71 calendar days after the date this report is required to be filed.

(d) Exhibits.

Exhibit No.	Description
2.1	Stock Purchase Agreement, dated as of October 5, 2006, by and among Robert B. Korbelik, individually, The Robert B. Korbelik Trust dated December 14, 1995, as amended July 20, 2000, and Premier Pneumatics, Inc., a Delaware Corporation.
10.1	Loan Agreement, dated as of September 29, 2006, among K-Tron International, Inc., K-Tron Investment Co., K-Tron Technologies, Inc., K-Tron America, Gundlach Equipment Corporation, Pennsylvania Crusher Corporation and Jeffrey Specialty Equipment Corporation, as Borrowers and the Financial Institutions referred to on the signature pages as Lenders and Citizens Bank of Pennsylvania, individually as a Lender and as Agent.
99.1	Press Release, dated October 5, 2006, issued by K-Tron International, Inc.

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SIGNATURE

     Pursuant to the requirements of the Securities 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.
By	/s/ Edward B. Cloues, II
	Edward B. Cloues, II
	Chairman of the Board and Chief Executive Officer

Dated: October 5, 2006

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Exhibit Index

Exhibit No.	Description
2.1	Stock Purchase Agreement, dated as of October 5, 2006, by and among Robert B. Korbelik, individually, The Robert B. Korbelik Trust dated December 14, 1995, as amended July 20, 2000, and Premier Pneumatics, Inc., a Delaware corporation.
10.1	Loan Agreement, dated as of September 29, 2006, among K-Tron International, Inc., K-Tron Investment Co., K-Tron Technologies, Inc., K-Tron America, Gundlach Equipment Corporation, Pennsylvania Crusher Corporation and Jeffrey Specialty Equipment Corporation, as Borrowers and the Financial Institutions referred to on the signature pages as Lenders and Citizens Bank of Pennsylvania, individually as a Lender and as Agent.
99.1	Press Release, dated October 5, 2006, issued by K-Tron International, Inc.

EX-2.1

                                                                     Exhibit 2.1

                                                                  EXECUTION COPY

                            STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement (the "Agreement") is made and entered into on
the 4th day of October, 2006 by and among Robert B. Korbelik, individually ("Mr.
Korbelik"), The Robert B. Korbelik Trust dated December 14, 1995, as amended and
restated July 20, 2000, Robert B. Korbelik and Debra A. Korbelik, trustees (the
"Seller's Trust", and together with Mr. Korbelik, the "Sellers"), being the
owner of all of the issued and outstanding capital stock of Premier Pneumatics,
Inc., a Kansas corporation (the "Company"), and Premier Pneumatics, Inc., a
Delaware corporation (the "Buyer").

     The Seller's Trust owns all of the issued and outstanding capital stock of
the Company (the "Shares"). The Buyer desires to purchase from the Seller's
Trust, the Seller's Trust desires to sell to the Buyer and Mr. Korbelik desires
to cause the Seller's Trust 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 2.1(a) hereof) the Seller's Trust shall sell to the Buyer and
the Buyer shall purchase from the Seller's Trust all of the Shares in exchange
for a total purchase price of $27,564,670 (the "Purchase Price"), which Purchase
Price shall be payable at the Closing (as defined in Section 2.1(a) hereof) as
follows:

     (a) cash in the amount of $25,564,670 shall be paid by the Buyer to the
Seller's Trust in the manner provided in Section 2.1(b) hereof; and

     (b) cash in the amount of $2,000,000 shall be deposited by the Buyer with
the escrow agent (the "Escrow Agent") designated in the escrow agreement (the
"Escrow Agreement") in substantially the form of Exhibit A hereto to be entered
into at the Closing among the Buyer, the Sellers and the Escrow Agent, and shall
be held and disbursed by the Escrow Agent in accordance with the Escrow
Agreement.

The Purchase Price has been calculated as set forth on Exhibit B hereto. The
Purchase Price is subject to adjustment after the Closing pursuant to Section
2.2 hereof.

     2. Closing; Post-Closing Adjustment to Purchase Price.

     2.1 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 the
Company, commencing at 9:00 a.m., local time, on the date hereof. The date of
the Closing is sometimes herein referred to as the "Closing Date", and the
Closing shall be deemed effective for accounting and tax purposes as of the
close of business on the Closing Date (the "Effective Time").

     (b) At the Closing, the Seller's Trust 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
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 (i) to the Seller's Trust, the consideration to be paid to the Seller's
Trust pursuant to Section 1(a) hereof and (ii) to the Escrow Agent, the amount
to be held by the Escrow Agent under the Escrow Agreement pursuant to Section
1(b) hereof. The cash payment to the Seller's Trust shall be by wire transfer of
immediately available funds to such account at such bank as the Seller's Trust
shall direct in writing delivered to the Buyer no less than three business days
prior to the Closing.



     (c) At the Closing, the Sellers shall make available to the Buyer the
written resignations of all the directors of the Company, and they shall cause
to be made available to the successor directors and to the officers of the
Company, including any new officers elected on the Closing Date (the
"post-Closing Company 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 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 of all other things and matters pertaining to the
operation of the business of the Company to be transferred and delivered to the
post-Closing Company directors and officers. At the Closing, the Sellers and the
Buyer shall enter into the Escrow Agreement with the Escrow Agent, and 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 6 and 7 hereof, respectively.

     (d) At the Closing, Mr. Korbelik shall repay to the Company all
indebtedness for money borrowed owing by him to the Company (the "Korbelik
Debt"), and he shall receive in exchange therefor any promissory notes
evidencing such repaid indebtedness duly marked by the Company as "cancelled".
Mr. Korbelik may repay the Korbelik Debt on the Closing Date by directing in
writing in form satisfactory to the Buyer that a portion of the Purchase Price
be used for this purpose.

     2.2 Post- Closing Adjustment to Purchase Price.

     (a) Definitions.

          (i) "Audited Balance Sheet" means the consolidated balance sheet of
     the Company as of December 31, 2005 included in the Audited Financials (as
     defined in Section 3.7 hereof).

          (ii) "Closing Balance Sheet" means a balance sheet of the Company as
     of the Closing, prepared in accordance with this Agreement and GAAP applied
     consistently with the principles applied in the preparation of the Audited
     Balance Sheet (to the extent they are consistent with GAAP). The Closing
     Balance Sheet shall take into account all of the transactions contemplated
     by this Agreement, including without limitation (A) the repayment and
     cancellation of the Korbelik Debt referred to in Section 2.1(d) hereof, (B)
     the payment prior to the Closing of all amounts owing by the Company under
     the Company's phantom stock plan units referred to in Section 3.5(c)
     hereof, and (C) the assignment to Summit Quest, LLC, and entity owned by
     the Seller's Trust and a trust for the benefit of Mr. Korbelik's spouse,
     prior to the Closing of all of the membership interests of Mariposa Group,
     LLC and related transactions referred to in Section 3.6(b) hereof.

          (iii) "Closing Net Working Capital Target" means $164,670 (being the
     Net Working Capital amount set forth on Exhibit B hereto).

          (iv) "Current Assets" means all current assets of the Company set
     forth on the Closing Balance Sheet.

          (v) "Current Liabilities" means all current liabilities of the Company
     set forth on the Closing Balance Sheet.

          (vi) "GAAP" means U.S. generally accepted accounting principles.

          (vii) "Net Working Capital Adjustment" means (A) if the amount of Net
     Working Capital at Closing on the finally determined Closing Balance Sheet
     is less than the Closing Net Working Capital Target, a dollar for dollar
     decrease to the Purchase Price by the amount of the deficiency in Net
     Working Capital at Closing (for example, if the Net Working Capital is


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     $64,670, the Purchase Price would be decreased by $100,000), and (B) if the
     amount of the Net Working Capital at Closing on the finally determined
     Closing Balance Sheet is greater than the Closing Net Working Capital
     Target, a dollar for dollar increase to the Purchase Price by the amount of
     the excess of Net Working Capital at Closing (for example, if the Net
     Working Capital is $264,670, the Purchase Price would be increased by
     $100,000.

          (viii) "Net Working Capital" means Current Assets minus Current
     Liabilities.

     (b) As soon as reasonably practicable following (but not more than 60 days
after) the Closing Date, the Buyer shall prepare, at the Buyer's expense, and
deliver to the Seller's Trust, a written statement (the "Final Purchase Price
Calculation Statement") setting forth the Closing Balance Sheet and the Buyer's
calculations (the "Buyer's Proposed Calculations") of the amount of the Net
Working Capital at Closing and the Net Working Capital Adjustment calculated by
reference thereto.

     (c) Within 30 days after its receipt of the Final Purchase Price
Calculation Statement, the Seller's Trust shall notify the Buyer in writing of
its agreement or disagreement with the Final Purchase Price Calculation
Statement and the accuracy of any of the Buyer's Proposed Calculations (and
during such 30 day period, the Buyer shall grant the Seller's Trust and its
accountants reasonable access to all work papers, schedules and calculations
used in the preparation of the Final Purchase Price Calculation Statement). If
the Seller's Trust disputes any aspect of the Final Purchase Price Calculation
Statement or the amount of any of the Buyer's Proposed Calculations within such
30 day period, then the Seller's Trust shall have the right to direct its
independent accountants, at the expense of the Seller's Trust, to review and
verify the accuracy of the Final Purchase Price Calculation Statement, and if
the Seller's Trust does not dispute any aspect of the Final Purchase Price
Calculation Statement or the amount of any of the Buyer's Proposed Calculations
within such 30-day period, then the Final Purchase Price Calculation Statement
and the Buyer's Proposed Calculations shall be conclusive and binding upon the
Buyer and the Sellers. In the event of a dispute, the Seller's Trust and its
accountants shall complete their review and verification of the Final Purchase
Price Calculation Statement within 30 days after the Seller's Trust's receipt
thereof and, if the Seller's Trust and its accountants, after such review and
verification, still disagree with the Buyer's Proposed Calculations, the
Seller's Trust shall submit its proposed alternative calculations (the "Seller's
Proposed Calculations") of the amount of Net Working Capital at Closing, and the
Net Working Capital Adjustment calculated by reference thereto, to the Buyer in
writing within 45 days after the Seller's Trust's receipt of the Final Purchase
Price Calculation Statement. If the Buyer does not accept the Seller's Proposed
Calculations within 15 days after the Buyer's receipt thereof, then, within 15
days after the date of the Buyer's rejection of (or failure to timely accept)
the Seller's Proposed Calculations, the Seller's Trust and the Buyer shall
select a mutually acceptable and nationally recognized independent accounting
firm (such firm, the "Independent Accounting Firm") to resolve the remaining
disputed items (the "Remaining Disputed Items") by conducting the Independent
Accounting Firm's own review and verification of the Final Purchase Price
Calculation Statement, and thereafter selecting either the Seller's Proposed
Calculations of the Remaining Disputed Items or the Buyer's Proposed
Calculations of the Remaining Disputed Items or an amount in between the two.
The Seller's Trust and the Buyer shall be bound by the determination of the
Remaining Disputed Items by the Independent Accounting Firm. The parties
acknowledge that Ernst & Young LLP is a mutually acceptable firm to be
designated as the Independent Accounting Firm. Each of the Buyer and the
Seller's Trust agrees to execute, if requested by the Independent Accounting
Firm, an engagement letter containing reasonable and customary terms. The Buyer
and the Seller's Trust shall each pay their own costs and expenses incurred
under this Section 2.2(c). The costs and expenses of the Independent Accounting
Firm shall be borne one-half by the Buyer and one-half by the Seller's Trust.
The Independent Accounting Firm shall act as an arbitrator to determine, based
upon the provisions of this Section 2.2(c), only the Remaining Disputed Items
and, in any event, each Remaining Disputed Item shall be no less than the lesser
of the amount claimed by either the Buyer or the Seller's Trust, and shall be no
greater than the greater of the amount claimed by either the Buyer or the
Seller's Trust.


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     (d) Upon the final determination, in accordance with Section 2.2(c), of the
Final Purchase Price Calculation Statement and the final calculations of the
amounts of the Net Working Capital at Closing and the Net Working Capital
Adjustment calculated by reference thereto, the Purchase Price shall be adjusted
as follows:

          (i) If the Net Working Capital at Closing is greater than the Closing
     Net Working Capital Target, then the Buyer shall pay to the Seller's Trust
     the Net Working Capital Adjustment (being the amount equal to any such
     excess); and

          (ii) If the Net Working Capital at Closing is less than the Closing
     Net Working Capital Target, then the Sellers shall pay to or as directed by
     the Buyer the Net Working Capital Adjustment (being an amount equal to any
     such deficiency).

          (iii) Any payments made by the Buyer to the Seller's Trust, or by the
     Sellers to or as directed by the Buyer, pursuant to this Section 2.2(d)
     shall be made by wire transfer of immediately available funds no later than
     three Business Days after the final determination referred to in the first
     sentence of this Section 2.2(d) and shall be deemed to be adjustments to
     the Purchase Price for all purposes.

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

     3.1 Share Ownership; Authority. The Seller's Trust is the lawful owner of
record and beneficially of the Shares, 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 Seller's Trust at any
time, or upon the happening of any stated event, any Shares. 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).

     3.2 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 either 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
either 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 (except for such consents as have been already
been obtained, all of which are listed on Schedule 3.2), any contract,
commitment, agreement, lease, license, permit, authorization, document or other
understanding, oral or written, to or by which either 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 either Seller.

     3.3 No Claims Against the Company. Neither 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 for any reason, other than claims in the ordinary
course, consistent with past practice, for the payment of salary, 401k
contributions, expense reimbursements or payments arising from other employee
benefit plans to the extent accrued but not yet paid (all of which shall be
fully reflected on the Closing Balance Sheet).


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     3.4 Corporate Existence. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Kansas, 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 not required to be qualified as a foreign corporation
authorized to do business in any other jurisdiction.

     3.5 Capitalization. (a) The total authorized capital stock of the Company
consists of (i) 500,000 shares of Company Class A Common Stock, of which 300,000
shares are issued and outstanding (all such issued and outstanding shares have
been previously defined as the "Shares"), and (ii) 100,000 shares of Company
Class B Common Stock, of which no shares 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
all applicable charter documents of the Company and all applicable federal,
state and foreign securities laws, rules and regulations. There are, and have
been, no preemptive rights with respect to the issuance of the Shares or any
other shares of capital stock of the Company. All redemptions and repurchases of
shares of capital stock by the Company, each of which is listed and described on
Schedule 3.5 hereto, 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 3.5 hereto, the Company is not a party to, and has not within
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) 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 the
Seller's Trust any shares of, or any securities convertible into shares of, the
capital stock of the Company.

     (c) The Company has terminated all phantom stock plans of the Company,
including without limitation the (i) First Amendment and Restatement of Phantom
Stock Plan and Agreement, dated as of November 28, 2005, between the Company and
Gary E. Lee; (ii) First Amendment and Restatement of Phantom Stock Plan and
Agreement, dated as of November 28, 2005, between the Company and Michael Wedel;
and (iii) First Amendment and Restatement of Phantom Stock Plan and Agreement,
dated as of November 28, 2005, between the Company and Todd Smith (collectively,
the "Phantom Stock Plans"). The Company has made full distributions of all
amounts owed under all phantom stock plans of the Company in accordance with
Section 409A of the Code (as defined in Section 3.13(f) hereof).

     3.6 No Interest in Other Entities. (a) The Company does not own any shares
of any corporation, and the Company does not have any ownership, membership or
other investment interest, either of record, beneficially or equitably, in any
association, company, partnership, joint venture or legal entity, except for
bank, checking and money market accounts and other cash equivalent investments.

     (b) As part of the transactions contemplated by this Agreement, immediately
prior to the execution and delivery of this Agreement the Company transferred,
on a quit claim basis without representation, warranty or other recourse to the
Company, all of the membership interests of Mariposa Group, LLC, a Delaware
limited liability company (the "Former Subsidiary"), to Mr. Korbelik. All
maintenance, permits, licenses and other records or agreements previously in the
possession of the Company and relating to the aircraft owned by the Former
Subsidiary have also been transferred to Mr. Korbelik or the Former Subsidiary.
The Company does not have any remaining liability or obligation in connection
with the Former Subsidiary or with any maintenance, permits, licenses and other
records or agreements relating to the aircraft owned by the Former Subsidiary.

     3.7 Financial Statements. (a) The Sellers have delivered to the Buyer prior
to the date hereof (i) the consolidated balance sheets of the Company as of
December 31, 2005, 2004 and 2003 and the


                                       5


related consolidated statements of earnings, stockholder's equity and cash flows
for the 12-month periods then ended, reported on without qualification by KPMG
LLP, independent auditors (the "Audited Financials") and (ii) the unaudited
consolidated balance sheet of the Company as of June 30, 2006 (the "June Balance
Sheet") and the related unaudited consolidated statements of earnings and
stockholder's equity for the six-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 3.7, are accurate, complete and in accordance with the books
and records of the Company and the Former Subsidiary in all material respects
and present fairly the financial position and assets and liabilities of the
Company and the Former Subsidiary as of their respective dates and the results
of their operations and their cash flows for the periods then ended, in
conformity with GAAP except, in the case of the Unaudited Financials, for the
omission of footnote information and for normal year-end audit adjustments (none
of which will be material).

     (b) The accounting books and records maintained by the Company, and upon
which all of the Company Financials are based, taken as a whole, accurately
reflect all items of income and expense, assets, liabilities and businesses of
the Company and the Former Subsidiary. 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 GAAP and to maintain accountability for assets.

     (c) The outstanding balance under that certain Promissory Note, dated May
4, 2004, between Commerce Bank, N.A. and the Former Subsidiary, was paid in full
on April 28, 2006; the lender thereof has terminated and released all rights and
interests with respect thereto, and neither the Company nor the Former
Subsidiary has any remaining liability or obligation in connection therewith.

     (d) Except as set forth on Schedule 3.7(d), the Company does not have any
indebtedness for money borrowed or capital leases.

     3.8 Accounts Receivable. To Sellers' knowledge, none of the accounts
receivable of the Company are subject to valid defenses, set-offs or
counterclaims other than normal returns and allowances and were generated only
in the ordinary course of business.

     3.9 Inventory. All inventory of the Company consists of items of a normal
quality and quantity saleable in the ordinary course of its business consistent
with past practice.

     3.10 Absence of Undisclosed Liabilities. (a) The Company is not liable for
or subject to any liability except for:

          (i) those liabilities and obligations reflected on the June Balance
     Sheet to the extent 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

          (iii) those liabilities and obligations incurred, consistent with past
     practice, in the ordinary course of its business since June 30, 2006, which
     liabilities and obligations in the aggregate are of a character and
     magnitude consistent with past practice.

For purposes of this Agreement, the term "liabilities" shall include without
limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense,


                                       6



obligation or responsibility, either accrued, absolute, contingent or otherwise
and whether known or unknown.

     (b) The Company does not have any liability for any dividend or other
distribution to the Sellers. Since June 30, 2006, the Company has not redeemed,
purchased or otherwise acquired any of its capital stock.

     3.11 Existing Condition. Except as disclosed on Schedule 3.11 hereto, since
June 30, 2006, the Company has been operated in the ordinary course of business
consistent with past practice and the Company has not:

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

     (b) made or committed to make any capital expenditures in excess of $25,000
individually or $100,000 in the aggregate;

     (c) paid, or committed to pay, any bonuses, incentive compensation or other
similar payments;

     (d) declared, made, paid or otherwise become committed to make or pay any
dividend or other distribution in respect of its capital stock or phantom stock,
except for distributions to the Seller's Trust of amounts reasonably required to
cover the estimated income taxes of the Seller's Trust on income earned by the
Company (all of which distributions are listed on Schedule 3.11 hereto);

     (e) hired any new employees or made any offers of employment to any person,
except for persons as were either hired or offered employment on an at-will
basis;

     (f) created, incurred, assumed or guaranteed any indebtedness for money
borrowed or incurred any other liabilities exceeding $25,000 in the aggregate
except for current liabilities incurred consistent with past practice;

     (g) suffered any damage, destruction or loss, whether or not covered by
insurance, (i) materially and adversely affecting its business, results of
operations, assets, liabilities or financial condition or (ii) of any item
carried on its books of account at more than $25,000;

     (h) made any material, long-term commitments with respect to the Company or
its business other than in the ordinary course of business consistent with past
practice;

     (i) suffered any material adverse change in its business, results of
operations, assets, liabilities or financial condition;

     (j) 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 either Seller, or made any
increase in, or any addition to, other benefits to which any of its directors,
officers or employees or either Seller may be entitled; or

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

Except as disclosed on Schedule 3.11 hereto, since June 30, 2006, the Company
has not 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 or were bound.


                                       7



     3.12 Assets and Properties. (a) Schedule 3.12 hereto contains a description
of each parcel of real property owned, leased from another or subleased from
another by the Company or in which the Company has any real estate interest and
each lease agreement under which the Company has any direct or indirect
leasehold interest in any real property (collectively, "Real Property"). The
Company does not lease any of the Real Property to any other parties, either as
a lessor or sublessor. Schedule 3.12 hereto also contains a list of all
inventory and equipment (having a value in excess of $10,000 individually on the
books of the Company) owned by the Company as of June 30, 2006. The Company owns
outright, has good and valid title (and as to any owned Real Property,
marketable and fee title) to and is in possession of all of its Real Property
and other owned properties and assets, whether real, personal or mixed,
including without limitation all of the properties and assets reflected in the
June Balance Sheet and those acquired since June 30, 2006 (except in each case
for properties and assets sold or otherwise disposed of since June 30, 2006 in
the ordinary course of its business consistent with past practice), free and
clear of all mortgages, liens, pledges, security interests, leases, 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 3.12 hereto. All leases, subleases, licenses, permits and
authorizations in any manner related to the Real Property, or any material
assets, properties or businesses of the Company and all other instruments,
documents and agreements pursuant to which the Company 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, licenses, permits, authorizations, instruments, documents or
agreements any existing default by the Company, or to the knowledge of either
Seller any other party thereto, 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 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 the Company's business and conform to all
applicable laws, ordinances, codes, rules and regulations relating thereto and
to the construction, use, operation and maintenance thereof.

     (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, 2001, no notice has been received by either Seller or
the Company from the holder of any mortgage or from any insurance company that
has issued a policy with respect to any of 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 of the Real Property, or requesting
performance of any demolition, repairs, alterations or other work to any of the
Real Property.

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


                                       8



     (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 of
the Real Property which might give rise to any mechanics', materialmen's or
other lien against any of the Real Property.

     3.13 Tax Matters. (a) The Company has filed all Tax Returns (as defined in
Section 3.13(p) 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 3.13(p) hereof) owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company currently is not the beneficiary of any
extension of time within which to file any Tax Return.

     (b) Except as set forth on Schedule 3.13(b), since January 1, 2001, no
claim has been made by an authority in a jurisdiction where the Company does not
file Tax Returns that the Company is or may be subject to taxation by that
jurisdiction. There are no liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of Company.

     (c) No foreign, federal, state or local tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to the
Company. Except as set forth on Schedule 3.13(c), the Company has not received
from any foreign, federal, state or local taxing authority (including
jurisdictions where the Company has not filed Tax Returns) any written (i)
notice indicating an intent to open an audit or other review, (ii) request for
information related to Tax matters or (iii) notice of deficiency or proposed
adjustment for any amount of Tax proposed, asserted, or assessed by any taxing
authority against the Company.

     (d) Schedule 3.13(d) hereto lists all federal, state, local and foreign
income Tax Returns filed with respect to the Company for taxable periods ended
on or after January 1, 2001, 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 an audit. The Sellers have delivered to the
Buyer true, correct and complete copies of all federal income Tax Returns for
taxable periods ended on or after January 1, 2001. The Sellers have delivered to
the Buyer copies of all examination reports and statements of deficiencies
assessed against or agreed to by the Company since 1996.

     (e) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.

     (f) The Company has not made any material payments, is not obligated to
make any material payments and is not a party to any agreement that under
certain circumstances could obligate it to make any material payments that will
not be deductible under sections 280G, 404 or 162 of the Internal Revenue Code
of 1986, as amended (the "Code") or that will trigger the imposition of penalty
taxes under section 409A of the Code. The Company has not 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. The Company is not a party to any tax allocation or sharing agreement. The
Company (i) has not been a member of an affiliated group filing a consolidated
federal income Tax Return and (ii) has no liability for the Taxes of any person
(other than the Company) 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.

     (g) The unpaid Taxes of the Company (i) as of June 30, 2006 did not exceed
the accrual for Tax liability (rather than any accrual for deferred taxes
established to reflect timing differences between book and tax income), if any,
set forth on the face of the June Balance Sheet (rather than in any notes
thereto), and (ii) do not exceed that accrual as adjusted for the passage of
time through the Closing in accordance with the past custom and practice of the
Company.


                                       9



     (h) The Company will not 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; or (v) prepaid amount received
on or prior to the Closing Date.

     (i) The Company (and any predecessor of the Company) is currently, and has
been since December 23, 1986, an S corporation within the meaning of sections
1361 and 1362 of the Code and pursuant to any comparable provisions of state and
local law. 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. The Company is not and
has not been subject to either the built-in-gains tax under Section 1374 of the
Code or the passive income tax under Section 1375 of the Code.

     (j) The Company has not distributed stock of another entity and has not 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) The Company has not entered into any transaction that is either a
"listed transaction" or that the Company or either Seller believes or has a
reasonable basis to believe is a "reportable transaction" (both as defined in
Treas. Reg. Section 1.6011-4, as modified by Rev. Proc. 2004-68, Rev. Proc.
2004-67, Rev. Proc. 2004-66, Rev. Proc. 2004-65 and Rev. Proc. 2004-45).

     (l) The Company is not a party to any joint venture, partnership or other
arrangement that is treated as a partnership for federal income tax purposes.

     (m) The Sellers are eligible to join with Buyer in making a Section
338(h)(10) Election with respect to the acquisition by the Buyer of the Company.

     (n) Schedule 3.13(n) sets forth a good faith estimate of the tax basis of
the Company's assets and the tax basis of the Sellers' Shares as of the Closing
Date, used for the purpose of illustrating the principles upon which the Section
338(h)(10) Gross Up will be calculated.

     (o) Sellers represent that based upon their respective tax profiles and the
transactions contemplated herein, that they will receive no federal tax benefit
for state Taxes paid as a result of the Section 338(h)(10) Election.

     (p) For purposes of this Agreement, "Taxes" means any federal, state, local
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not and including any obligations to indemnify or otherwise
assume or succeed to the Tax liability of any other person; and "Tax Return"
means any return, declaration, report, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof. 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.


                                       10



     3.14 Legal Proceedings; Etc. Except as disclosed on Schedule 3.14 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 the Company or either Seller, threatened or contemplated, by or against or
affecting the Company or its assets or businesses, before or by any court or
governmental or regulatory official, body or authority, or before an arbitrator
of any kind. Neither the Company nor either 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. The Company is not 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.

     3.15 Compliance with Law. The Company has complied in all material respects
with each, and is not in material violation of any, law, rule or regulation to
which it or its business is, or its operations, assets or properties are,
subject and has 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 its assets and properties or to the conduct of its business.
Without limiting the generality of the foregoing, (a) none of the Sellers, the
Company, or to the knowledge of either Seller any director, officer, employee or
agent of or any consultant to the Company or any other person authorized to act
on behalf of the Company, 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, and (b) the Company is 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.

     3.16 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 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 charter documents 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
(except for such consents as have been already been obtained, all of which are
listed on Schedule 3.16), any contract, commitment, agreement, lease, license,
permit, authorization, document or other understanding, oral or written, to or
by which the Company is a party or otherwise bound or affected or by which any
of the assets or properties of the Company 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 thereunder.

     3.17 Insurance. Schedule 3.17 hereto contains a true, correct and complete
list of all insurance policies (including any deductible amounts) in effect now
or at any time during the past five years with respect to the Company and its
business and properties, together with a description of each insurance claim in
excess of $25,000 made by the Company during the past five years. There has been
no default by the Company, or to the knowledge of either Seller any other party
thereto, 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 there are no provisions in any insurance
coverage of the Company 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. All general
liability insurance policies maintained by the Company are and within the past
ten years have been occurrence policies, and there have been no gaps in the
maintenance of such coverage during such ten


                                       11



year period. Except as disclosed on Schedule 3.17 hereto, there are no
outstanding performance bonds or other surety arrangements covering or issued
for the benefit of either the Company or its business or as to which the Company
has or may incur any liability.

     3.18 Contracts and Commitments. Except as listed and described on Schedule
3.18 hereto or, in the case of benefit plans and arrangements, Schedule 3.21
hereto, the Company is not a party to or otherwise bound or affected by any
written or oral agreement, contract, commitment or arrangement:

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

     (b) with any labor union or other representative of employees;

     (c) 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 $50,000 or
more;

     (d) to sell or supply products or to perform services, involving in any one
case $50,000 or more;

     (e) (i) providing for payments based upon the revenues or profits of the
Company or any other entity or (ii) continuing over a period of more than six
months from the date hereof or exceeding $50,000 in value;

     (f) with a sales representative or sales agent;

     (g) to lease any real or personal property under which it is either lessor
or lessee;

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

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

     (j) for any capital expenditure in excess of $25,000;

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

     (l) including any license, franchise, distributorship or other similar
agreement, contract or commitment, including without limitation those which
relate in whole or in part to any patent, trademark, trade name, service mark,
or copyright or application(s) or registration(s) for any of the foregoing, or
to any ideas, technical assistance or other know-how or any other intellectual
property of or used by the Company; or

     (m) any other material agreement, contract or commitment not made in the
ordinary course of its business and that is not required to be disclosed under
any other subsection in this Section 3.18.

     Except as may be disclosed on Schedule 3.18 hereto, each of the agreements,
contracts, commitments, arrangements, leases and other instruments, documents
and undertakings listed on Schedule 3.18 hereto, or not required to be listed
thereon because of the term or amount involved or


                                       12



otherwise, is valid and enforceable in accordance with its terms, and the
Company, 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, to the knowledge
of either Seller, any other party thereto; furthermore, except as may be
disclosed on Schedule 3.18 hereto, no such agreement, contract, commitment,
arrangement, lease or other instrument, document or undertaking, in the
reasonable opinion of the Company or either Seller, contains any contractual
requirement with which there is a reasonable likelihood the Company or any other
party thereto will be unable to comply. To the knowledge of the Sellers, there
are no outstanding or threatened material disputes or disagreements with respect
to any such agreement, contract, commitment, arrangement, lease or other
instrument. There are no negotiations of, or attempts to renegotiate,
outstanding rights to any amounts paid or payable by or to Company or either
Seller under current or contemplated agreements, contracts, commitments,
arrangements, leases and other instruments disclosed on Schedule 3.18 other than
negotiations and renegotiations that arise in the ordinary course of business
none of which will materially impact such agreements, contracts, commitments,
arrangements, leases and other instruments disclosed on Schedule 3.18.

     3.19 Additional Information. Schedule 3.19 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 material items of personal property owned or leased by the Company,
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 that have a value individually on the books of the
Company of, or for which the aggregate of any remaining lease payments amount
to, more than $10,000;

     (b) all real property and interests in real property owned, leased or
otherwise held by the Company, 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;

     (d) the names and current annual salaries or hourly rates of all present
officers and employees of the Company 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 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;

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

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

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


                                       13



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

     3.20 Labor Matters. There are no labor controversies, grievances, troubles
or disputes, in any manner or form whatsoever, pending or threatened against the
Company, and neither the Company nor either Seller has any 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, there are no employees of the Company known or
believed by the Company or either Seller to be currently seeking union
representation, there is no union known or believed by the Company or the
Sellers to be currently seeking to represent such employees and, within the past
five years, the Company has not committed any unfair labor practice, as defined
in the National Labor Relations Act, as amended. The relations of the Company
with its employees are good (routine individual grievances excepted), and none
of the Sellers or the Company has knowledge of any facts that would be likely to
affect adversely such relations.

     3.21 Benefit Plans and Arrangements. (a) Schedule 3.21 hereto lists all
employee benefit plans (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and all 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 3.21), 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 or one or more of its
Benefits Affiliates (or their beneficiaries or dependents), which were or are
established, contributed to or maintained by the Company or one or more of its
Benefits Affiliates, including without limitation welfare, fringe benefit,
pension, profit sharing, retirement, stock purchase, stock option, phantom
stock, 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 3.21 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, (ii) any trade or business (whether or not incorporated) which is under
common control (as defined in section 414(c) of the Code) with the Company,
(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 and (iv) any other entity required to be aggregated with
the Company 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, 2001 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) The Plans and provisions thereof, any trusts created thereby and the
operation of the Plans are (and at all times have been) in compliance with and
conform (and at all times have been in compliance with and conformed) in all
material respects to the applicable provisions of the Code, ERISA and all other
applicable statutes and governmental rules and regulations.

     (d) The Plans marked on Schedule 3.21(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


                                       14



exempt from tax under section 501(a) of the Code, and each such determination
remains in effect and has not been revoked. Except as disclosed on Schedule
3.21(d), 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 and
regulations to the extent such amendments are required by law at the time of
Closing.

     (e) With respect to each Plan, there has occurred no 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 material 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 have been paid, accrued or otherwise adequately reserved in accordance with
GAAP; 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. No Plan provides for the investment in stock of the Company or a
Benefits Affiliate.

     (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, to the knowledge of the
Company, 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. No Plan triggers the imposition of penalty taxes under section
409A of the Code. Each Plan that is subject to section 409A of the Code has been
maintained and operated in good faith based on IRS guidance with respect to
section 409A of the Code and has been amended to comply with section 409A of the
Code. Neither the Company nor any Benefits Affiliate has declared or paid any
bonus compensation in contemplation of the transactions contemplated by this
Agreement.

     (h) Neither the Company nor any Benefits Affiliate has made any 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


                                       15



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, (iii) a
plan providing life, health or medical benefits to retired or terminated
employees (other than as required by sections 601-608 of ERISA) or (iv) a
"multiple employer welfare arrangement" as defined in section 3(40) 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 in all material respects 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) of the Code)
materially complies, and in each and every case has in all material respects
complied, with all applicable requirements of ERISA and section 4980B of the
Code.

     3.22 Environmental Matters. In addition to the representations and
warranties in Section 3.15 hereof and not in limitation thereof, and except as
disclosed on Schedule 3.22 hereto, (a) no releases of Hazardous Materials (as
defined in this Section 3.22) have occurred at or from any property which is now
owned, operated, leased or otherwise used by the Company or which was owned,
operated, leased or otherwise used at any prior time by the Company or any of
its predecessors, (b) there are no past, pending or threatened Environmental
Claims (as defined in this Section 3.22) against the Company, (c) to the
knowledge of the Company there are no underground storage tanks owned by the
Company, or located at any facility now or at any prior time owned, operated,
leased or otherwise used by the Company or any of its predecessors, (d) there
are no facts, circumstances, or conditions that could reasonably be expected to
restrict, under any Environmental Law or Environmental Permit (each as defined
in this Section 3.22) 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 to give rise to any legal liability of the
Company under the Environmental Laws pertaining to any property now or at any
prior time owned, operated, leased or otherwise used by the Company or any of
its predecessors, (e) neither the Company nor either Seller has received a
request under any of the Environmental Laws for information relating to any
property now or at any prior time owned, operated, leased or otherwise used by
the Company or any of its 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 any of its predecessors, (g) none of the properties owned, operated,
leased or otherwise used by the Company or any of its 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 are no pending,
and there have not been in the past, Environmental Claims relating to any
asbestos-containing material, lead-based paint or equipment containing
polychlorinated biphenyls located at any of the facilities or properties now or
at any prior time owned, operated, leased or otherwise used by the Company, and,
to the knowledge of the Company, 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 prior time owned, operated,
leased or otherwise used by the Company or any of its predecessors, (i) except
as set forth on Schedule 3.22, neither the Company nor either Seller 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) there is no liability
with respect to the cleanup or investigation at any facility or property at
which the Company or any of its


                                       16


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
     Laws or for personal injury or property damage resulting from the release
     of a Hazardous Material at, to or from any facility or property of the
     Company or any of its predecessors, or any facility or property at which
     the Company or any of its predecessors disposed or arranged for the
     disposal or treatment (with a transporter or otherwise) of Hazardous
     Materials, including without limitation employees of the Company seeking
     damages for exposure to Hazardous Materials;

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

          (iv) "Hazardous Materials" means any and all hazardous, toxic or
     radioactive substances, materials and wastes which are 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), (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), (F)
     defined as a "hazardous substance" pursuant to section 101 of the CERCLA,
     (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 (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.

     3.23 Intellectual Property Matters. (a) Schedule 3.23(a) hereto contains a
true, correct and complete list of all patents and patent applications,
trademark applications and registrations, service mark applications and
registrations, trade names, and registrations and applications for registration
of industrial designs, and copyright applications and registrations, mask works,
trade dress and domain names owned, used, held for use or relied upon by the
Company in the conduct of its business as presently conducted 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


                                       17



respective issuance, registration or application number of the item and (iv) the
date of application and issuance or registration of the item.

     (b) Schedule 3.23(b) hereto contains a true, correct and complete list of
all material licenses, sublicenses, consents and other agreements (whether
written or otherwise) (i) pertaining to any patents, patent applications,
industrial design rights, trademarks, trademark applications or registrations,
service marks, service mark applications or registrations, trade names, trade
dress, copyrights, mask works, trade secrets, inventions, know-how, technology,
designs, formulae, confidential and proprietary information, computer software
programs (whether in source code or object code) and related documentation
(other than standard, commercially available programs pursuant to "shrink wrap"
licenses having fully-paid license fees of less than $10,000), domain names and
other intellectual property owned, used, held for use or relied upon by the
Company in the conduct of its business as presently conducted or as it is
currently contemplated to be conducted, and (ii) by which the Company licenses
or otherwise authorizes a third party to use such intellectual property. Neither
the Company nor, to the knowledge of the Sellers, any other party is in breach
of or default under any such license or other agreement, and each such license
and other agreement is now and immediately following the Closing shall be valid
and in full force and effect.

     (c) Except as set forth in Schedule 3.23(c) hereto, the Company 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, trade secrets, inventions, know-how, technology, designs, formulae,
confidential and proprietary information, computer software programs (whether in
source code or object code) and related documentation (other than standard,
commercially available programs pursuant to "shrink wrap" licenses having
fully-paid license fees of less than $10,000), domain names and other
intellectual property necessary for the operation of the Company in the conduct
of its business as presently conducted.

     (d) Except as set forth in Schedule 3.23(d) hereto, the business operations
of the Company do not, nor do any products or services of the Company, to the
knowledge of the Company, infringe, dilute or otherwise violate the patents,
industrial design rights, trademarks, service marks, trade names, trade dress,
copyrights, mask works, trade secrets, domain names or other intellectual
property rights of any third party, and no claim has been made, notice given, or
dispute arisen to that effect. Except as set forth in Schedule 3.23(d), to the
knowledge of Sellers, no third party is violating or infringing or has violated
or infringed any of the Company's patents, industrial design rights, trademarks,
service marks, trade names, trade dress, copyrights, trade secrets, domain names
or other proprietary rights. Except for indemnification for the benefit of the
Company's customers in the ordinary course of business, the Company has not
given any indemnification rights to any third party against infringement of any
intellectual property rights.

     (e) Except as set forth in Schedule 3.23(e) hereto, all registrations
listed or required to be listed on Schedule 3.23(a) are valid and in full force,
are held of record in the name of the Company 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
3.23(e) hereto, the Company is the applicant of record in all applications
listed or required to be listed on Schedule 3.23(a), 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 has
been disclosed to any person unless such disclosure was necessary and was made
pursuant to a confidentiality agreement or similar obligation regarding the
non-disclosure of confidential information.


                                       18



     (g) All computer software programs (whether in source code or object code)
and related documentation are owned by the Company or used pursuant to valid
licenses or other enforceable rights and are not "bootleg" versions or copies.
The computer software programs used to operate the business, to the knowledge of
the Company, (i) are in satisfactory working order and scalable to meet current
and reasonably anticipated capacity; (ii) have reasonable security, back ups,
disaster recovery arrangements and hardware and software support and maintenance
to minimize the risk of a material error, breakdown, failure or security breach
from occurring and to ensure if such an event does occur it does not cause a
material disruption to the business of the Company; (iii) are configured and
maintained so as to minimize the effects of viruses and do not contain trojan
horses or other malicious code; and (iv) have not suffered any material error,
breakdown, failure or security breach in the last twelve months which has caused
disruption or damage to the businesses of the Company.

     3.24 Transactions with Affiliates. None of the Sellers nor any current or
former director, officer, stockholder or employee of the Company 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 (b) conducts any of the same
businesses as, or a similar business to, any of the businesses conducted by the
Company.

     3.25 No Brokers or Finders. Except for St. Charles Capital, LLC and the
Sellers' attorneys and accountants, whose fees and expenses have been and are
the sole responsibility of the Sellers and not the Company or the Buyer, the
marketing of the Company and all negotiations by the Sellers relative to this
Agreement have been carried on by the Sellers directly without the intervention
of any person who may be entitled to any brokerage or finder's fee or other
commission or compensation in respect hereof or the consummation of the
transactions contemplated hereby.

     3.26 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 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 products and services.

     3.27 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 Articles of Incorporation and the Bylaws (each as amended to date) of the
Company. The minute and stock record books of the Company, 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 since the date of its incorporation.

     3.28 Completeness of Disclosure. No representation or warranty by either
Seller contained in this Agreement, any Schedule or any 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, results of operations, prospects,
assets, liabilities or financial condition of the Company. 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


                                       19



business, operations, prospects, financial condition, financial performance or
any other matter, of or relating to the Company.

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

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

     4.2 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).

     4.3 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 Bylaws 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. 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 Buyer.

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

     5. Covenants.

     5.1 Non-Competition. The Buyer and Mr. Korbelik hereby agree that the
covenants set forth in this Section 5.1 are a material and substantial part of
the transactions contemplated by this Agreement.

     (a) Prohibited Activities. Until three years after the Closing Date, Mr.
Korbelik agrees that he will not, anywhere in the United States, Canada or
Mexico (the "Territory"), unless 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 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 on the Closing
     Date;

          (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 with
     respect to any business covered by clause (i) above; or


                                       20



          (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 on a full or part-time basis.

Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Mr. Korbelik from acquiring as a passive investment not more than one
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. Mr. Korbelik acknowledges that (i) the business of the
Company is conducted throughout the Territory and the provisions of this Section
5.1 are reasonable and necessary to protect the legitimate interests of the
Buyer as the purchaser of the Shares, (ii) any violation of this Section 5.1
will result in irreparable injury to the Buyer and the Company, and that damages
at law would not be reasonable or adequate compensation to the Buyer and the
Company and (iii) the Buyer and the Company shall be entitled to have the
provisions of this Section 5.1 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 5.1, including without limitation, estimated future earnings. In the
event that the provisions of this Section 5.1 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 Mr. Korbelik intend to and do hereby confer
jurisdiction to enforce the covenants set forth in this Section 5.1 upon the
courts of any jurisdiction within the geographical scope of such covenants. In
addition to Section 9.14 hereof 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 of the Sellers that such
determination not bar or in any way adversely affect the right of the Buyer and
the Company to equitable relief and remedies hereunder in courts of any other
jurisdiction as to breaches or violations of this Section 5.1, such covenants
being, for this purpose, severable into diverse and independent covenants.

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

     (a) Tax Periods Ending on or Before the Closing Date. The Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The Buyer shall permit the Sellers to review and
comment on each such Tax Return described in the preceding sentence prior to
filing. The Sellers shall be solely responsible for Taxes of the Company with
respect to such periods, and shall reimburse the Buyer therefor within 15 days
after payment by the Buyer or the Company, but only if and to the extent such
Taxes are not reflected in the accrual for Tax liability (rather than any
accrual 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
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for tax periods which begin before the Closing Date
and end after the Closing Date. The Sellers shall pay to the Buyer 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 accrual for Tax liability (rather than any accrual for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the finally determined Closing Balance Sheet. For purposes of this
Section 5.2, 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


                                       21



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.

     (c) Cooperation on Tax Matters. The Buyer 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 5.2 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 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). All Tax deductions relating to the payment of all amounts payable under
the Phantom Stock Plans and any employee bonus or other compensation plan
(collectively, the "Bonus Plans") to the extent accrued on the finally
determined Closing Balance Sheet shall be reflected on the Form 1120S for the
period ending on the Closing Date. For purposes of the preceding sentence, the
Bonus Plans that are payable as a result of the Closing shall be treated as
accrued immediately prior to the Effective Time. After the Closing Date, each
Tax Return prepared or caused to be prepared by the Buyer with respect to the
Company that relates to any period that includes days on or before the Closing
Date shall be subject to pre-filing review by the Sellers. Unless otherwise
agreed to by the parties, Tax Returns subject to such pre-filing review shall be
submitted by the Buyer to the Sellers at least 15 days prior to the due date of
such return, and the Sellers shall complete their review of such return and
provide comments, if any, within 15 days of receipt. In the event of any
disagreement relating to any such return between the Buyer and the Sellers, such
disagreement shall be resolved by the Independent Accounting Firm, and any such
determination by the Independent Accounting Firm shall be final, save for fraud
or manifest error.

     (d) Company S Election. With respect to any period ended on or prior to the
Closing Date, the Buyer and the Sellers shall not revoke (or allow to be
revoked) 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 Buyer 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) Section 338(h)(10) Election.

          (i) The Seller's Trust 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, as a condition to the Seller's Trust making the Section 338(h)(10)
     Election, the Buyer shall pay to the Seller's Trust, 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"), in accordance with the payment and
     adjustment procedures set forth in Section 5.2(e)(iv) hereof. An
     illustration of a calculation of the Section 338(h)(10) Gross Up based on
     an good faith estimate of the ADSP of the assets of the Company and the tax
     basis of the Company's assets as of the Closing Date is set


                                       22



     forth in Schedule 5.2(e)(i). After final determination of the ADSP of the
     Company's assets pursuant to Section 5.2(e)(iii), the final calculation of
     the Section 338(h)(10) Gross Up shall be made as set forth in Section
     5.2(e)(iv). In determining the Section 338(h)(10) Gross Up, the Buyer and
     the Sellers shall take into account Mr. Korbelik's status as a resident of
     Colorado and the calculation must assume that long-term capital gain
     treatment would have been afforded to the Sellers for the sale of the
     Shares to Buyer in the absence of the Section 338(h)(10) Election being
     made.

          (ii) At the Closing, the Buyer shall deliver to the Seller's Trust for
     execution a Form 8023 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, the Seller's
     Trust shall duly and promptly execute such Section 338 Forms and shall
     deliver them to the Buyer. The Buyer shall timely file such executed
     Section 338 Forms and shall deliver copies of them to the Seller's Trust.
     The Seller's Trust and the Buyer shall file all Tax Returns (including
     amended returns and claims for refund) in a manner consistent with such
     Section 338 Forms.

          (iii) The Buyer and the Seller's Trust 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 in accordance with Treasury
     Regulations sections 1.338-6 and 1.338-7. Within 10 days after the final
     determination of the Closing Balance Sheet, the Buyer shall initially
     determine and send written notice to the Seller's Trust of the ADSP and its
     allocation to the assets of the Company. The Seller's Trust will be deemed
     to have accepted the Buyer's calculation of the ADSP and its allocation
     unless it provides written notice of disagreement to the Buyer within 20
     days after receipt of such calculation and allocation. If the Seller's
     Trust provides 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 Seller's Trust's notice of disagreement, the parties have not
     reached agreement, the Independent Accounting Firm shall be engaged to
     determine any items remaining in dispute. The Sellers and the Buyer shall
     each pay one-half of the fees of the Independent Accounting Firm relating
     to such dispute. Buyer, the Company, and Sellers shall prepare and file
     Internal Revenue Service Form 8883, and all Tax Returns (including amended
     returns and claims for refund) and information reports in a manner
     consistent with the allocations determined pursuant to this Section
     5.2(e)(iii).

          (iv) Section 338(h)(10) Gross Up.

                    (1) Within 20 days of the final determination of the ADSP
and its allocation in accordance with Section 5.2(e)(iii), the Seller's Trust
shall provide the Buyer a written calculation of the Section 338(h)(10) Gross
Up, such calculation to be based on a materially accurate calculation of the
Company's tax basis in its assets on the Closing Date. The Buyer will be deemed
to have accepted such calculation unless it provides the Seller's Trust written
notice of disagreement within 20 days of receipt of the Seller's Trust's
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
5.2(e)(iii).

                    (2) The Section 338(h)(10) Gross Up shall be paid by Buyer
by wire transfer to the Seller's Trust after the final calculation of the of the
Section 338(h)(10) Gross Up pursuant to Section 5.2(e)(iv) and at least 15 days
prior to the due date of the federal estimated tax payment of the Sellers that
encompasses the Closing.

                    (3) The Sellers shall refund the portion of the Section
338(h)(10) Gross Up that is excessive based on a breach of the representation
made in Section 3.13(o). The Sellers shall


                                       23



refund the entire Section 338(h)(10) Gross Up in the event the Section
338(h)(10) Election is deemed invalid by a final determination of the applicable
taxing or governmental authority.

     5.3 Benefit Plans. The Buyer shall cause the Company to pay to the
Company's employees' 401(k) accounts at least the amounts accrued as of the
Closing Date under the Company's 401(k) Profit Sharing Plan in a manner
consistent with the Company's past practices. In addition, not later than
January 31, 2007, the Buyer shall cause the Company to pay at least the amounts
accrued as of the Closing Date under the Company's Management Incentive
Compensation Plan in the amounts and to each of the individuals set forth on
Schedule 5.3 (the "Management Bonus Payments"). The Management Bonus Payments
shall be deemed fully vested as of the Closing Date and shall be paid to the
applicable employee (or any such employee's estate, if applicable) regardless of
whether any such employee remains employed as of the payment date.

     6. Conditions Precedent to Buyer's Obligations. 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:

     6.1 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 the Sellers; and the Buyer
shall have received a certificate dated the Closing Date and signed by the
Sellers to the foregoing effects.

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

     6.3 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 its 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.

     7. Conditions Precedent to the Sellers' Obligations. 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:

     7.1 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 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; and the Sellers
shall have received a certificate dated the Closing Date and signed by an
officer of the Buyer to the foregoing effects.

     7.2 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.

     7.3 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 Faegre & Benson LLP, counsel for the


                                       24



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.

     8. Indemnification.

     8.1 Indemnification by the Sellers. Each Seller jointly and severally shall
reimburse, defend, indemnify and hold harmless the Buyer and its affiliates
(including without limitation after the Closing the Company) 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 in connection with,
resulting from or arising out of:

          (i) any breach of any representation or warranty of either Seller in
     this Agreement or in any certificate or other writing delivered by or on
     behalf of either Seller or the Company in connection herewith (excluding
     those breaches (if any) of Sections 3.15 and 3.22 of which the Buyer has
     actual knowledge at the time of Closing as a result of its environmental
     investigation of the Company);

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

          (iii) the assertion against any Buyer Indemnified Party of any
     liability relating to or arising out of the Former Subsidiary, including
     without limitation the ownership or operation of the aircraft owned by the
     Former Subsidiary or the transfer of the membership interests thereof to
     Mr. Korbelik prior to the Closing;

          (iv) the assertion against any Buyer Indemnified Party of any
     liability relating to or arising out of any phantom stock plan of the
     Company, including without limitation the (i) First Amendment and
     Restatement of Phantom Stock Plan and Agreement, dated as of November 28,
     2005, between the Company and Gary E. Lee; (ii) First Amendment and
     Restatement of Phantom Stock Plan and Agreement, dated as of November 28,
     2005, between the Company and Michael Wedel; and (iii) First Amendment and
     Restatement of Phantom Stock Plan and Agreement, dated as of November 28,
     2005, between the Company and Todd Smith; or

          (v) the assertion against any Buyer Indemnified Party of any liability
     relating to or arising out of the business, operations, assets or
     activities of the Company or any predecessor thereof at or prior to the
     Closing to the extent such liabilities are not fully reflected as current
     liabilities in the finally determined Closing Balance Sheet, or out of the
     actions or omissions of the Company'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 8.1.

     8.2 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 in connection with, 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
after the Closing, except to the extent such liabilities or obligations are
described in Section 8.1(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 8.2.

     8.3 Limitations on Liability. Except as otherwise provided in Section 8.5
hereof and except that these limitations shall not apply to any indemnification
claim arising under or with respect to any of Sections 3.1, 3.2, 3.3, 3.5, 3.6,
3.7(c), 3.7(d), 3.13 and 3.25 hereof, the Sellers shall not be liable to any
Buyer Indemnified Party under Section 8.1(a)(i) or (v) hereof (a) 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 $300,000 (the "Deductible") or (b) for an amount in
excess of $4,250,000 provided, however, that the Deductible will also apply to
any liability to any Buyer Indemnified Party relating to a breach of Section
3.13, or any other Section, to the extent such breach relates to any state
income, sales, franchise or other similar state Tax.

     8.4 Survival of Representations and Warranties. Except as provided in
Section 8.5 hereof, the representations and warranties given or made by the
Sellers 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 3.13 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 3.1, 3.2, 3.3, 3.5, 3.6, 3.7(c), 3.7(d), 3.25, 4.3 and 4.4
hereof shall survive the Closing without limitation, (c) the representations and
warranties set forth in Section 3.21 hereof shall survive the Closing for a
period of five years after the Closing Date, (d) the representations and
warranties set forth in Section 3.22 hereof shall survive the Closing for a
period of three 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. Except as set forth in Section 8.1(a)(i) hereof, 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.

     8.5 Sole Remedy; Exceptions to Limitations; Etc.

     (a) Each Party's sole and exclusive remedy for any breach of this Agreement
by any other Party shall be the provisions of Sections 8 and 9.8 hereof;
provided, however, that (i) nothing set forth in this Section 8 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 the Sellers have or might have
against the Buyer, based on any fraud or willful failure to fulfill any
agreement or covenant set forth herein.

     (b) Any indemnification payments made by the Buyer or the Sellers pursuant
to this Section 8 shall be treated by all parties as an adjustment to the
Purchase Price hereunder.


                                       26



     (c) Notwithstanding any provision of this Agreement to the contrary, the
Buyer Indemnified Parties shall not be entitled to indemnification hereunder for
any Claims arising from a breach of any representation or warranty regarding the
Company or the Sellers hereunder, and the amount of any damages incurred in
respect of any such breach shall not be included in the calculation of aggregate
damages subject to the Deductible, to the extent such liabilities or obligations
are fully reflected as current liabilities in the finally determined Closing
Balance Sheet.

     (d) If and when a Buyer Indemnified Party receives a claim or demand from a
third party for which the Buyer Indemnified Party has determined to assert an
indemnification claim hereunder for a breach of Section 3.13, or any other
Section, relating to any state income, sales, franchise or other similar state
Tax, the Buyer shall cause the Company to administer and respond to such third
party claim or demand in substantially the same manner as the manner in which
the Company's affiliates respond to similar third party claims and demands in
the ordinary course of business.

     8.6 Payment of Indemnification Obligations. In the event that either Seller
or the Buyer is required to make any payment under this Section 8, 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 8 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 Sellers,
as the case may be, until payment in full, payable on demand, at the fluctuating
rate per annum which at all times shall be two percentage points in excess of
the "prime rate" from time to time of Citizens Bank of Pennsylvania or its
successor. So long as any amounts are held by the Escrow Agent under the Escrow
Agreement and are not subject to a previously asserted indemnification claim
(the "Available Escrow"), the Buyer (on behalf of itself or any other Buyer
Indemnified Party asserting an indemnity claim) shall first look to the
Available Escrow for payment of any indemnity claim and shall seek payment from
the Sellers for amounts, if any, in excess of the Available Escrow.

     8.7 Indemnification Procedure. All claims for indemnification under
Sections 8.1 and 8.2 hereof shall be asserted and resolved as follows:

     (a) In the event that any claim or demand for which an indemnifying party
(each an "Indemnifying Party") would be liable to an indemnified party (each an
"Indemnified Party") hereunder is asserted against an Indemnified Party by a
third party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such claim or demand, 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


                                       27



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, 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 settle or defend against any such claim in the Indemnified Party's
sole discretion and, if it is ultimately determined that the Indemnifying Party
is responsible therefor under this Section 8 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 8.6 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
Deductible, 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 or the Company.

     (c) In the event the Indemnified Party should have a claim against the
Indemnifying Party hereunder which 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 this Section 8.7(d) and Sections 8.7(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.

     (e) The Buyer and the Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the defense by an
Indemnifying Party of any third party claim that is the subject of
indemnification hereunder to ensure the proper and adequate defense of any such
claim. Such cooperation shall include the retention and (upon the Indemnifying
Party's request) the provision of books, records and information which are
reasonably relevant to any such third party claim or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any such material provided hereunder.

     9. Miscellaneous.

     9.1 Expenses; Sales and Transfer Taxes. (a) The Buyer shall pay its
expenses incidental to the negotiation and preparation hereof and, through the
Closing, the carrying out by it of the provisions hereof and the consummation by
it of the transactions contemplated hereby. The Sellers, and not the Company,
shall pay their and the Company's expenses incidental to the marketing of the
Company and the negotiation and preparation hereof and, through the Closing, the
carrying out by them and the Company of the provisions hereof and the
consummation by the Sellers of the transactions contemplated hereby, including
without limitation all amounts owing to St. Charles Capital, LLC and SDR
Ventures. The parties hereto shall pay their own expenses incidental to the
carrying out of the provisions hereof after the Closing, and no such expenses 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.

     (b) The Buyer shall pay all transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and


                                       28



interest) incurred in connection with this Agreement and the transactions
contemplated hereby, and the Buyer shall, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such Taxes, fees and
charges, and, if required by applicable law, the Sellers will, and will cause
their respective Affiliates to, join in the execution of any such Tax Returns
and other documentation.

     9.2 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 15, 2006, are superseded by this
Agreement.

     9.3 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.

     9.4 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.

     9.5 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 either Seller, to:

Premier Pneumatics, Inc.               Robert B. Korbelik
c/o K-Tron International, Inc.         123 Beaver Dam Road, Unit B -West
Routes 55 and 553                      Vail, CO 81657
P.O. Box 888                           Fax: (970) 476-9192
Pitman, NJ 08071
Attention: Edward B. Cloues, II
Chairman and Chief Executive Officer
Fax: (856) 582-7968

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

Morgan, Lewis & Bockius LLP            Faegre & Benson LLP
1701 Market Street                     3200 Wells Fargo Center
Philadelphia, PA 19103                 1700 Lincoln Street
Attention: Timothy Maxwell, Esq.       Denver, Colorado 80203-4532
Fax: (215) 963-5001                    Attention: Douglas R. Wright, Esq. or
                                       Nathaniel G. Ford, Esq.
                                       Fax: (303) 607-3600

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.

     9.6 No Public Announcements. Prior to the Closing, none of the Buyer, 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


                                       29



prior consultation of the other party, except as may be required by law or by
any listing agreement with a national securities exchange.

     9.7 Release. 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 (for the benefit of the Company 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 the Company he or it 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; 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 Articles of
Incorporation and Bylaws for a claim against such Seller with respect to which
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 8 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 8 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 8 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.

     9.8 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.

     9.9 Delaware Law to Govern. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Delaware.

     9.10 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 5.1 hereof, each
affiliate of the Buyer (including without limitation after the Closing the
Company), (b) in the case of Section 8 hereof, the other Buyer Indemnified
Parties and Seller Indemnified Parties and, (c) in the case of Sections 5.1,
9.1(a) and 9.7 hereof, the Company, and also in each case his or its heirs,
administrators, personal representatives, successors and assigns, and they shall
not be construed as conferring any rights on any other persons.

     9.11 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 Company" or
"best


                                       30



knowledge of the Company" and each phrase having equivalent meaning (e.g.,
"known to the Company") shall be deemed and construed to include the actual
knowledge of each Seller and Gary E. Lee, Michael Wedel and Todd Smith or the
knowledge of any Seller or such persons, as the case may be.

     9.12 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.

     9.13 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.

     9.14 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.

     9.15 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. Any electronically
transmitted signature hereto shall be deemed an original and binding on the
parties hereto.

                            [Signature pages follow]


                                       31



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

                                        SELLER:


                                        /s/ Robert B. Korbelik
                                        ----------------------------------------
                                        ROBERT B. KORBELIK, individually


                                        SELLER'S TRUST:

                                        THE ROBERT B. KORBELIK TRUST


                                        By: /s/ Robert B. Korbelik
                                            ------------------------------------
                                            Robert B. Korbelik, Trustee


                                        By: /s/ Debra A. Korbelik
                                            ------------------------------------
                                            Debra A. Korbelik, Trustee


                                        BUYER:

                                        PREMIER PNEUMATICS, INC.


                                        By: /s/ Edward B. Cloues, II
                                            ------------------------------------
                                        Name: Edward B. Cloues, II
                                        Title: President

                     GUARANTY OF K-TRON INTERNATIONAL, INC.

     K-Tron International, Inc., a New Jersey corporation and the ultimate
parent of Premier Pneumatics, Inc, a Delaware corporation (the "Buyer"), hereby
guarantees the prompt payment and performance by the Buyer of all of its
obligations under the foregoing Stock Purchase Agreement.

                                        GUARANTOR:

                                        K-TRON INTERNATIONAL, INC.


                                        By: /s/ Edward B. Cloues, II
                                            ------------------------------------
                                        Name: Edward B. Cloues, II
                                        Title: Chairman and Chief Executive
                                               Officer

EX-10.1

                                                                    Exhibit 10.1

                                 LOAN AGREEMENT

                                      AMONG

                           K-TRON INTERNATIONAL, INC.,
                             K-TRON INVESTMENT CO.,
                           K-TRON TECHNOLOGIES, INC.,
                              K-TRON AMERICA, INC.,
                         GUNDLACH EQUIPMENT CORPORATION,
                        PENNSYLVANIA CRUSHER CORPORATION,

                                       AND

                     JEFFREY SPECIALTY EQUIPMENT CORPORATION

                                  AS BORROWERS

                                       AND

                           THE FINANCIAL INSTITUTIONS
                       REFERRED TO ON THE SIGNATURE PAGES,

                                   AS LENDERS

                                       AND

                         CITIZENS BANK OF PENNSYLVANIA,
                      INDIVIDUALLY AS A LENDER AND AS AGENT

                         DATED AS OF: SEPTEMBER 29, 2006



                                Table of Contents



                                                                            Page
                                                                            ----
                                                                         
1. DEFINITIONS AND CONSTRUCTION..........................................     1
   1.1   Definitions.....................................................     1
   1.2   Accounting Terms................................................    13
   1.3   Construction....................................................    13
   1.4   Schedules and Exhibits..........................................    13

2. REVOLVING CREDIT FACILITY.............................................    13
   2.1   The Revolving Credit Facility...................................    14
   2.2   Use of Proceeds.................................................    14

3. LETTERS OF CREDIT.....................................................    14
   3.1   Issuance........................................................    14
   3.2   Request for Letter of Credit....................................    14
   3.3   Description of Letters of Credit................................    14
   3.4   Reduction of Availability.......................................    14
   3.5   Indemnification.................................................    14
   3.6   Disbursements...................................................    15
   3.7   Reimbursement Obligations.......................................    15
   3.8   Lender's Reimbursement Obligations..............................    15
   3.9   Cash Collateral.................................................    16
   3.10  Waiver of Liability.............................................    16

4. INTEREST, FEES AND CHARGES............................................    17
   4.1   Interest........................................................    17
   4.2   Closing Fee.....................................................    18
   4.3   Letter of Credit Fees...........................................    18
   4.4   Unused Commitment Fee...........................................    18
   4.5   Agency Fee......................................................    19

5. LOAN ADMINISTRATION...................................................    19
   5.1   Manner of Borrowing.............................................    19
   5.2   Disbursement....................................................    22
   5.3   Authorization...................................................    23
   5.4   LIBOR Rate Loans................................................    23
   5.5   Conversion of Prime Rate Loans..................................    23
   5.6   Continuation of LIBOR Rate Loans................................    23
   5.7   Prepayment......................................................    24
   5.8   Indemnification.................................................    24
   5.9   Inability to Make LIBOR Rate Loans..............................    24
   5.10  Basis For Determining Interest Rate Inadequate or Unfair........    25
   5.11  Capital Adequacy................................................    25
   5.12  Increased Costs.................................................    26



                                        i



                                Table of Contents
                                   (continued)



                                                                            Page
                                                                            ----
                                                                         
6. PAYMENTS..............................................................    27
   6.1   Interest Payments...............................................    27
   6.2   Principal Payments..............................................    27
   6.3   Payment Method..................................................    27
   6.4   Maintenance of Loan Accounts; Statements of Obligations.........    28

7. COLLECTION OF RECEIVABLES.............................................    28
   7.1   General.........................................................    28
   7.2   Remittance of Items; Endorsements...............................    28

8. REPRESENTATIONS AND WARRANTIES........................................    28
   8.1   Valid Organization, Good Standing and Qualification.............    29
   8.2   Licenses........................................................    29
   8.3   Ownership Interests.............................................    29
   8.4   Subsidiaries....................................................    29
   8.5   Financial Statements............................................    30
   8.6   No Material Adverse Change in Financial Condition...............    30
   8.7   Pending Litigation or Proceedings...............................    30
   8.8   Due Authorization; No Legal Restrictions........................    30
   8.9   Enforceability..................................................    31
   8.10  No Default Under Other Obligations, Orders or Governmental
         Regulations.....................................................    31
   8.11  Governmental Consents...........................................    31
   8.12  Taxes...........................................................    31
   8.13  Names and Addresses.............................................    31
   8.14  Current Compliance..............................................    31
   8.15  Pension and Benefit Plans.......................................    31
   8.16  Leases and Contracts............................................    32
   8.17  Intellectual Property...........................................    32
   8.18  Business Interruptions..........................................    32
   8.19  Accuracy of Representations and Warranties......................    33
   8.20  Solvency........................................................    33
   8.21  Common Enterprise...............................................    33

9. AFFIRMATIVE COVENANTS.................................................    33
   9.1   Payment of Principal, Interest and Other Amounts Due............    33
   9.2   Claims for Labor and Materials..................................    33
   9.3   Existence; Approvals; Qualification; Business Operations;
         Compliance with Laws............................................    34
   9.4   Maintenance of Properties.......................................    34
   9.5   Insurance.......................................................    34
   9.6   Inspections; Examinations.......................................    35
   9.7   Pension Plans...................................................    35
   9.8   Bank Accounts...................................................    35
   9.9   Indebtedness with Affiliates....................................    36



                                       ii



                                Table of Contents
                                   (continued)



                                                                            Page
                                                                            ----
                                                                         
   9.10  Additional Documents and Future Actions.........................    36
   9.11  Taxes...........................................................    36
   9.12  Leases..........................................................    36
   9.13  Notices.........................................................    37

10. NEGATIVE COVENANTS...................................................    37
   10.1  Limitation on Sale and Leaseback................................    37
   10.2  Limitation on Indebtedness......................................    37
   10.3  Investments and Loans...........................................    38
   10.4  Guaranties......................................................    38
   10.5  Disposition of Assets...........................................    38
   10.6  Merger; Consolidation; Business Acquisitions; Subsidiaries......    38
   10.7  Taxes; Claims for Labor and Materials...........................    38
   10.8  Liens...........................................................    39
   10.9  Transactions with Affiliates....................................    40
   10.10 [Intentionally Omitted].........................................    40
   10.11 Name Change; Governing Documents................................    40
   10.12 Restrictions on Use of Proceeds.................................    40
   10.13 Prohibited Events Under ERISA...................................    40

11. FINANCIAL COVENANTS..................................................    41
   11.1  Fixed Charge Coverage Ratio.....................................    41
   11.2  Funded Debt to Adjusted EBITDA Ratio............................    41
   11.3  Net Worth.......................................................    41
   11.4  Capital Expenditures............................................    41

12. ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS.................    41
   12.1  Annual Statements...............................................    42
   12.2  Projections and Cash Flow.......................................    42
   12.3  Quarterly Statements............................................    42
   12.4  Audit Reports...................................................    43
   12.5  Reports to Governmental Agencies and Other Creditors............    43
   12.6  Requested Information...........................................    43
   12.7  Compliance Certificates.........................................    43
   12.8  Other Reporting.................................................    43

13. ENVIRONMENTAL REPRESENTATIONS AND COVENANTS..........................    43
   13.1  Representations.................................................    44
   13.2  Real Property...................................................    44
   13.3  Covenant Regarding Compliance...................................    44
   13.4  Notices.........................................................    45
   13.5  Indemnity.......................................................    45
   13.6  Testing.........................................................    45



                                       iii



                                Table of Contents
                                   (continued)



                                                                            Page
                                                                            ----
                                                                         
   13.7  Survival........................................................    46
   13.8  Definitions.....................................................    46

14. CONDITIONS PRECEDENT TO THE INITIAL ADVANCE OR LETTER OF CREDIT......    47
   14.1  Searches........................................................    47
   14.2  Loan Documents..................................................    47
   14.3  Resolutions, etc................................................    47
   14.4  Governing Documents.............................................    48
   14.5  Good Standing...................................................    48
   14.6  Foreign Qualification...........................................    48
   14.7  Insurance.......................................................    48
   14.8  Opinions........................................................    48
   14.9  No Changes......................................................    48
   14.10 No Litigation...................................................    48
   14.11 Financial Reporting.............................................    48
   14.12 Additional Information..........................................    49
   14.13 Due Diligence...................................................    49
   14.14 Capitalization..................................................    49
   14.15 Existing Indebtedness...........................................    49
   14.16 Fees............................................................    49
   14.17 Licenses; Permits...............................................    49
   14.18 Miscellaneous...................................................    49
   14.19 Non-Waiver of Rights............................................    49

15. CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT...........    49
   15.1  Representations and Warranties..................................    50
   15.2  No Default or Event of Default..................................    50
   15.3  No Injunction or Order..........................................    50
   15.4  Maximum Revolving Credit Facility Amount........................    50

16. CONDITIONS PRECEDENT TO MAKING REVOLVING CREDIT LOANS FOR PERMITTED
    ACQUISITIONS.........................................................    50

17. DEFAULT AND REMEDIES.................................................    51
   17.1  Events of Default...............................................    51
   17.2  Remedies........................................................    54
   17.3  Set-Off.........................................................    54
   17.4  Turnover of Property Held by Lender.............................    55
   17.5  Delay or Omission Not Waiver....................................    55
   17.6  Remedies Cumulative.............................................    55
   17.7  Consents, Approvals and Discretion..............................    55
   17.8  Certain Fees, Costs, Expense Expenditures.......................    56



                                       iv



                                Table of Contents
                                   (continued)



                                                                            Page
                                                                            ----
                                                                         
18. REGARDING AGENT......................................................    57
   18.1  Appointment.....................................................    57
   18.2  Nature of Duties................................................    57
   18.3  Lack of Reliance on Agent and Resignation.......................    58
   18.4  Certain Rights of Agent.........................................    58
   18.5  Reliance........................................................    59
   18.6  Notice of Default...............................................    59
   18.7  Indemnification.................................................    59
   18.8  Agent in its Individual Capacity................................    59
   18.9  Borrowers' Undertaking to Agent.................................    60

19. INDEMNIFICATION AND OTHER PROVISIONS.................................    60
   19.1  Indemnification.................................................    60
   19.2  Time is of the Essence..........................................    60

20. COMMUNICATIONS AND NOTICES...........................................    60

21. WAIVERS..............................................................    61
   21.1  Waivers.........................................................    62

22. SUBMISSION TO JURISDICTION...........................................    62

23. SALE AND ASSIGNMENT..................................................    62
   23.1  Successors and Assigns; Participations; New Lenders.............    62

24.  BORROWING AGENCY....................................................    65
   24.1  Borrowing Agency Provisions.....................................    65
   24.2  Subrogation.....................................................    65

25. MISCELLANEOUS........................................................    66
   25.1  Modification of Agreement.......................................    66
   25.2  Brokers.........................................................    66
   25.3  Use of Agent's or Lender's Name.................................    67
   25.4  No Joint Venture................................................    67
   25.5  Survival........................................................    67
   25.6  No Assignment...................................................    67
   25.7  Publicity.......................................................    67
   25.8  Binding Effect..................................................    67
   25.9  Severability....................................................    67
   25.10 No Third Party Beneficiaries....................................    67
   25.11 Holidays........................................................    67
   25.12 Law Governing...................................................    68
   25.13 Integration.....................................................    68



                                        v



                                Table of Contents
                                   (continued)



                                                                            Page
                                                                            ----
                                                                         
   25.14 Exhibits and Schedules..........................................    68
   25.15 Headings........................................................    68
   25.16 Counterparts....................................................    68
   25.17 Joint and Several...............................................    68
   25.18 Limitation on Damages...........................................    68
   25.19 Waiver of Right to Trial by Jury................................    68



                                       vi


                                 LOAN AGREEMENT

     THIS LOAN AGREEMENT is made effective as of September 29, 2006, by and
among K-TRON INTERNATIONAL, INC. ("KTI"), K-TRON INVESTMENT CO. ("KTIC"), K-TRON
TECHNOLOGIES, INC. ("KTTI"), K-TRON AMERICA, INC. ("KTAI"), GUNDLACH EQUIPMENT
CORPORATION ("GEC"), PENNSYLVANIA CRUSHER CORPORATION ("PCC") and JEFFREY
SPECIALTY EQUIPMENT CORPORATION ("JSEC") (each individually, a "BORROWER" and
collectively, the "BORROWERS"); each of the financial institutions identified
under the caption "Lenders" on the signature pages of this Agreement (including
without limitation Citizens Bank of Pennsylvania in such capacity) or which,
pursuant to SECTION 23.1 shall become a "Lender" (individually, a "LENDER" and,
collectively, the "LENDERS"); and CITIZENS BANK OF PENNSYLVANIA, a national
banking association, as agent for Lenders (in such capacity, together with its
successors in such capacity, the "AGENT").

     NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any extensions of credit now or hereafter made to or for the
benefit of Borrowers under this Agreement, the parties hereto, intending to be
legally bound hereby, agree as follows:

     1. DEFINITIONS AND CONSTRUCTION.

          1.1 DEFINITIONS. The following words and phrases as used in
capitalized form in this Agreement, whether in the singular or plural, shall
have the meanings indicated.

          ACCOUNT DEBTOR means any Person who is or who may become obligated
under, with respect to, or on account of, an Account.

          ACCOUNTS means all currently existing and hereafter arising or
acquired accounts, contract rights, and all other forms of obligations owing to
a Person arising out of the sale or lease of goods or the rendition of services
by such Person, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.

          ADJUSTED EBITDA means, for any period, EBITDA of KTI and its
Subsidiaries, including, with respect to any Permitted Acquisition, the EBITDA
of a target acquiree for that portion of the applicable period that preceded the
consummation of such Permitted Acquisition with such adjustments as shall be
mutually agreed to by Borrower and Agent.

          ADVANCE means an advance by Agent or any member of the Lender Group
under the Revolving Credit Facility, including without limitation, advances made
with respect to Letters of Credit.

          AFFILIATE means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 15%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and


                                        1



policies of a Person.

          AGENT means Citizens, solely in its capacity as agent for Lenders, and
shall include any successor agent.

          AGREEMENT means this Loan Agreement.

          APPLICABLE MARGIN means the percent per annum below or above, as
applicable, the Prime Rate or LIBOR Rate as set forth in the following pricing
matrix:



                   Funded Debt
               to Adjusted EBITDA
Level       (trailing four quarters)   Prime Rate   LIBOR Rate
- -----       ------------------------   ----------   ----------
                                           
Level I     < 1.0 to 1.0                 -1.00%       +.875%

Level II    > or = 1.0 to 1.0 but        -0.75%       +1.125%
            < 1.5 to 1.0

Level III   > or = 1.5 to 1.0 but        -0.50%       +1.375%
            < 2.0 to 1.0

Level IV    > or = 2.0 to 1.0 but        -0.25%       +1.625%
            < 2.50 to 1.0


For purposes hereof, "Funded Debt" will be measured as of the end of each fiscal
quarter and "EBITDA" will be measured for the trailing twelve (12) month period
then ended as of each fiscal quarter end.

From the Closing Date through the quarter ending December 31, 2006, the
Applicable Margin for Advances under the Revolving Credit Facility shall be at
the pricing set forth in Level I above, provided that, if Borrowers consummate a
Permitted Acquisition after the Closing Date but prior to the end of the quarter
ending December 31, 2006, the Applicable Margin may be increased effective as of
the consummation of such acquisition to such pricing Level based upon a
compliance certificate delivered to Agent within five (5) Business Days
following the closing date of such Permitted Acquisition evidencing Funded Debt
to Adjusted EBITDA as of such closing date. For each fiscal quarter ending after
December 31, 2006, the Applicable Margin will be based upon the Funded Debt to
Adjusted EBITDA Ratio on a quarterly basis as reflected on the quarterly
financial statements of KTI and its consolidated Subsidiaries delivered to Agent
pursuant to SECTION 12.3 and the compliance certificates delivered to Agent
pursuant to SECTION 12.7 below. The adjustment in the Applicable Margin, if any,
will be effective five (5) Business Days after the later of receipt by Agent of
the quarterly financial statements of KTI and its consolidated Subsidiaries
delivered to Agent pursuant to SECTION 12.3 or the compliance certificates
delivered to Agent pursuant to SECTION 12.7 below.

          ATTRIBUTABLE INDEBTEDNESS means, on any date, (a) in respect of any
Capitalized


                                       2



Lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a Capitalized Lease.

          AVERAGE UNUSED PORTION OF MAXIMUM REVOLVING AMOUNT means, as of any
date of determination, (a) the Maximum Revolving Credit Facility Amount, less
(b) the sum of (i) the average Daily Balance of Advances that were outstanding
during the immediately preceding calendar quarter, plus (ii) the average Daily
Balance of the undrawn Letters of Credit that were outstanding during the
immediately preceding calendar quarter.

          BANKRUPTCY CODE means the United States Bankruptcy Code (11 U.S.C.
Section 101 et seq.), as amended, and any successor statute.

          BOOKS means all of a Person's books and records, including without
limitation, ledgers; records indicating, summarizing, or evidencing such
Person's properties or assets or liabilities; all information relating to such
Person's business operations or financial condition; and all computer programs,
disk or tape files, printouts, runs or other computer prepared information.

          BORROWER and BORROWERS means KTI, KTIC, KTTI, KTAI, GEC, PCC and JSEC,
individually and collectively.

          BORROWING AGENT means KTI.

          BUSINESS means the design, production, marketing, sale and servicing
of material handling equipment and systems.

          BUSINESS DAY means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized to close under the Laws of the
Commonwealth of Pennsylvania, or are in fact closed in the state where Agent's
office is located and, if such day relates to any LIBOR Rate Loan, means any
such day on which dealings in Dollar deposits are conducted by and between banks
in the London interbank eurodollar market.

          CAPITAL EXPENDITURES means any expenditure that would be classified as
a capital expenditure in accordance with GAAP.

          CAPITALIZED LEASE OBLIGATIONS means all amounts payable with respect
to a Capitalized Lease.

          CAPITALIZED LEASES means all lease obligations which have been or
should be, in accordance with GAAP, capitalized on the books of the lessee.

          CAPITAL STOCK shall mean, with respect to any Person, any and all
shares interests, participations or other equivalents (however designated) of
such Person's capital stock, partnership interests or limited liability company
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into


                                       3



such capital stock).

          CHANGE OF CONTROL shall mean the acquisition by any Person or group
(as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial
ownership, directly or indirectly, of fifty percent (50%) or more of the voting
power of the total outstanding Voting Stock of KTI.

          CITIZENS means Citizens Bank of Pennsylvania and its successors and
assigns.

          CLOSING DATE means the date of the first to occur of the making of the
initial Advance or the issuance of the initial Letter of Credit under the
Revolving Credit Facility.

          COMMITMENT means, with respect to any Lender, the amount set forth
below such Lender's name on the signature page of this Agreement, as the same
may be adjusted upon any assignment by a Lender to the extent permitted by
SECTION 23.1 herein.

          COMMITMENT PERCENTAGE means, with respect to any Lender, the
percentage set forth below such Lender's name on the signature page of this
Agreement, as the same may be adjusted upon any assignment by a Lender to the
extent permitted by SECTION 23.1 herein.

          COMMITMENT TRANSFER SUPPLEMENT has the meaning given to such term in
SECTION 23.1(C) herein.

          COMPLIANCE CERTIFICATE means a certificate substantially in the form
of EXHIBIT A and delivered by the chief executive officer, chief financial
officer or chief accounting officer of Borrowing Agent to Agent, as required
under SECTION 12.7 herein.

          CONTRACT PERIOD means the period of time commencing on the date of
this Agreement and expiring on September 29, 2011, provided that, Borrowers may,
within one (1) year prior to the expiration of such Contract Period, request in
writing to Agent, and Agent and Lenders in their sole and absolute discretion
may agree, to extend the term of such Contract Period for an additional one (1)
year period.

          DAILY BALANCE means the amount outstanding under the Revolving Credit
Facility or the face amount of undrawn Letters of Credit, as applicable, at the
end of a given day.

          DEFAULT means an event, condition or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.

          DEFAULTING LENDER has the meaning set forth in SECTION 5.1(A)(VII)(A).

          DEFAULT RATE has the meaning given to such term in SECTION 4.1(B).

          DOLLARS OR $ means lawful money of the United States.

          EBITDA means, for any period, without duplication, the combined Net
Income of KTI and its Subsidiaries, on a consolidated basis (exclusive of
extraordinary gains) for such period, plus the aggregate amounts deducted in
determining such combined Net Income in respect of (i) interest expense, (ii)
tax expense, and (iii) depreciation and amortization


                                       4



expenses for such period, each determined on a consolidated basis in accordance
with GAAP.

          ELIGIBLE TRANSFEREE means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $5,000,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country, and having total
assets in excess of $5,000,000,000, (c) a finance company, insurance or other
financial institution, or fund that is engaged in making, purchasing, or
otherwise investing in commercial loans in the ordinary course of its business
and having total assets in excess of $500,000,000, (d) any Affiliate (other than
individuals) of an existing Lender, and (e) any other Person approved by Agent.

          EQUITY INTERESTS means, with respect to any Person, all of the shares
of capital stock of (or other ownership or profit interests in) such Person, all
of the warrants, options or other rights for the purchase or other acquisition
from such Person, of shares of capital stock of (or other ownership or profit
interests in )such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase or
other acquisition from such Person of such shares (or such other interests), and
all of the other ownership or profit interests in such person (including without
limitation, partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such shares, warrants, options, rights or other
interests are authorized or otherwise existing on the date of determination.

          ERISA means the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.

          ERISA AFFILIATE means (a) any Person subject to ERISA whose employees
are treated as employed by the same employer as the employees of any Borrower
under IRC Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of any
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any Person subject to ERISA that is a member
of an affiliated service group of which any Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with any Borrower and whose employees are aggregated with the employees of any
Borrower under IRC Section 414(o).

          ERISA EVENT means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by any Borrower or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by any Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate a Pension
Plan, the treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the


                                       5



commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA
Affiliate.

          EXCHANGE ACT means the Securities Exchange Act of 1934, together with
all rules, regulations and interpretations thereunder or related thereto.

          FEDERAL FUNDS RATE means, for any day, the rate per annum equal 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 preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Citizens on
such day on such transactions as determined by Agent.

          FEIN means Federal Employer Identification Number.

          FIXED CHARGE COVERAGE RATIO means the ratio calculated on a rolling
four-quarter basis of (A) the sum of (i) Adjusted EBITDA, minus (ii) the sum of:
(a) dividends or distributions paid by KTI during such period, plus (b) cash tax
expense, plus (c) unfunded Capital Expenditures, to (B) the sum of (i) interest
expense, plus (ii) current maturities of long-term debt (excluding any payments
under the Revolving Credit Facility).

          FUNDED DEBT shall mean without duplication, all Indebtedness of
Borrowers for borrowed money, and all guaranties of Borrowers of any or all of
the foregoing. Funded Debt shall include, without limitation, all Capitalized
Lease Obligations of Borrowers.

          FUNDING DATE means the date, which must be a Business Day, on which an
Advance is made.

          GAAP means generally accepted accounting principles in the United
States of America, in effect from time to time, consistently applied and
maintained.

          GOVERNING DOCUMENTS means the certificate or articles of
incorporation, by-laws, partnership agreement, joint venture agreement,
operating agreement or other organizational or governing documents of any
Person.

          INDEBTEDNESS means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

          (a)  all obligations of such Person for borrowed money and all
               obligations of such Person evidenced by bonds, debentures, notes,
               loan agreements


                                       6



               or other similar instruments;

          (b)  all direct or contingent obligations of such Person arising under
               letters of credit (including standby and commercial), bankers'
               acceptances, bank guaranties, surety bonds and similar
               instruments;

          (c)  net obligations of such Person under any Swap Contract;

          (d)  all obligations of such Person to pay the deferred purchase price
               of property or services (other than trade accounts payable in the
               ordinary course of business and, in each case, not past due for
               more than ninety (90) days after the date on which such trade
               account payable was created);

          (e)  indebtedness (excluding prepaid interest thereon) secured by a
               Lien on property owned or being purchased by such Person
               (including indebtedness arising under conditional sales or other
               title retention agreements), whether or not such indebtedness
               shall have been assumed by such Person or is limited in recourse;

          (f)  Capitalized Leases and Synthetic Lease Obligations;

          (g)  all obligations of such Person to purchase, redeem, retire,
               defease or otherwise make any payment in respect of any Equity
               Interest in such Person or any other Person, valued, in the case
               of a redeemable preferred interest, at the greater of its
               voluntary or involuntary liquidation preference plus accrued and
               unpaid dividends; and

          (h)  all guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any Capitalized Lease or Synthetic Lease
Obligation as of any date shall be deemed to be the amount of Attributable
Indebtedness in respect thereof as of such date.

          INVENTORY means all present and future inventory in which a Person has
any interest, including goods held for sale or lease or to be furnished under a
contract of service and all of such Person's present and future raw materials,
work in process, finished goods, packaging, packing and shipping materials,
goods used or consumed in the Person's business, component parts, supplies and
returned, rejected or repossessed goods, wherever located.

          IRC means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.

          LENDER and LENDERS have the respective meanings set forth in the
preamble to


                                       7



this Agreement, and shall include any other Person made a party to this
Agreement in accordance with the provisions of SECTION 23.1 which are mutually
agreeable to Agent and Borrowing Agent.

          LENDER GROUP means, individually and collectively, each of the
individual Lenders and Agent.

          LENDER GROUP EXPENSES has the meaning given to such term in SECTION
17.9.

          LETTERS OF CREDIT means the letters of credit issued by Agent pursuant
to this Agreement. A Letter of Credit may be a commercial letter of credit or a
standby letter of credit.

          LIBOR RATE means with respect to any Advance accruing interest at a
LIBOR Rate plus Applicable Margin as permitted hereunder, for any day during
each Rate Period, the per annum rate of interest (computed on a basis of a year
of 360 days and actual days elapsed) determined by Agent to be equal to the
quotient of (a) the per annum rate of interest estimated in good faith by Agent
in accordance with its usual procedures (which determination shall be
conclusive) to be the average of the rate per annum for deposits, in an amount
denominated in U.S. Dollars comparable to the amount of principal relating to
such Rate Period and having maturities comparable to such Rate Period, offered
to major money center banks in the London interbank market as referenced by
Reuters Screen "LIBOR" at or about 11:00 a.m., London time, two (2) London
business days prior to such Rate Period, divided by (b) a number equal to 1.00
minus the LIBOR Reserve Percentage for the relevant Rate Period. In the event
that the LIBOR Rate is unavailable or cannot be ascertained, Agent will have the
right to designate the LIBOR Rate on such basis as it shall reasonably
determine.

          LIBOR RATE LOAN means any Loan (or portion thereof) bearing interest
computed by reference to the LIBOR Rate plus Applicable Margin.

          LIEN means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or security interest or preferential arrangement in the nature of a
security interest of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).

          LOAN ACCOUNT has the meaning set forth in SECTION 6.4.

          LOAN DOCUMENTS means this Agreement, the Letters of Credit, any Notes
executed by any Borrower and payable to any member of the Lender Group, the
Stock Pledge and any other agreement entered into by any Borrower, now or in the
future, in connection with this Agreement.

          LOANS means all Advances made by Lenders under the Revolving Credit
Facility.

          MATERIAL ADVERSE CHANGE means (a) a material adverse change in the
business operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the


                                       8



Borrowers taken as a whole, or (b) the material impairment of the Borrowers'
ability to perform their obligations under the Loan Documents or of Agent's or
the Lender Group's ability to enforce the Obligations.

          MAXIMUM REVOLVING CREDIT FACILITY AMOUNT means $50,000,000.

          MULTIEMPLOYER PLAN means a "multiemployer plan" which is subject to
ERISA and to which any Borrower, any of their Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.

          NET INCOME means income (or loss) of KTI and its Subsidiaries on a
consolidated basis after tax expense and shall have the meaning given such term
by GAAP, provided that there shall be specifically excluded therefrom (a) gains
from the sale of capital assets in excess of $500,000 per annum, (b) net income
of any other Person in which any Borrower or any of its Subsidiaries has an
ownership interest, unless received by such Borrower or any of its Subsidiaries
in a cash distribution, and (c) any gains arising from extraordinary items, as
defined by GAAP.

          NET WORTH means, at any time, net worth as defined by GAAP.

          NOTE means each Revolving Credit Note.

          OBLIGATIONS means (i) means all Loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, liabilities (including all amounts charged to the
Loan Account pursuant hereto), obligations, fees, charges, costs, or Agent's
Fees (including any fees or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued), guaranties, covenants, and duties owing by
any Borrower to Agent or the Lender Group of any kind and description arising
pursuant to or evidenced by the Loan Documents, whether as principal or surety,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and further including all interest not paid when due and
all Lender Group Expenses that any Borrower is required to pay or reimburse by
the Loan Documents, by law, or otherwise, and (ii) all obligations to any Agent
or Lender arising under any Swap Contract, ACH, treasury exposure, or similar
agreements entered into in connection with the Loans.

          OPERATING ACCOUNTS has the meaning given to such term in SECTION 7.1
herein.

          PBGC means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.

          PENSION PLAN means a "defined benefit plan" which is subject to ERISA
and for which any Borrower, any Subsidiary of any Borrower or any ERISA
Affiliate has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.

          PERMITTED ACQUISITION shall mean (i) any acquisition of a business,
whether by merger, stock, asset purchase or otherwise, as provided in ARTICLE 16
of this Agreement, or (ii) any other such acquisition which shall be approved by
Agent in writing.


                                       9



          PERMITTED ACQUISITION AGREEMENT shall mean each stock purchase
agreement, asset purchase agreement or similar agreement setting forth the terms
and conditions of each Permitted Acquisition.

          PERMITTED INVESTMENTS shall mean investments in any of the following:
(a) securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof) having maturities of not more than twelve (12) months from the date of
acquisition ("GOVERNMENT OBLIGATIONS"), (b) Dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, eurodollar time
deposits and eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $250,000,000
or (ii) any bank whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "APPROVED BANK"), in each case with maturities
of not more than 364 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by any
domestic corporation rated A-1 (or equivalent thereof) or better by S&P or P-1
(or the equivalent thereof) or better by Moody's and maturing within six months
of the date of acquisition, (d) repurchase agreements with a bank or trust
company (including any Lender) or a recognized securities dealer having capital
and surplus in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America, (e) obligations of any state of the
United States of America or any political subdivision thereof for the payment of
the principal and redemption price of and interest on which there shall have
been irrevocably deposited Government Obligations maturing as to principal and
interest at times and in amounts sufficient to provide such payment, or (f)
auction preferred stock rated in the highest short-term credit rating category
by S&P or Moody's.

          PERSON means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and any
governments and agencies and political subdivisions thereof.

          PLAN means any employee benefit plan, covered by ERISA and maintained
or contributed to by any Borrower or with respect to which it or they may incur
liability.

          PRIME RATE means the annual interest rate announced from time to time
by Agent and generally known by Agent as its "prime rate", whether published by
it publicly or only for the internal guidance of its loan officers. The Prime
Rate is used merely as a pricing index and is not and should not be considered
to represent the lowest or best rate available to a borrower.

          PRIME RATE LOAN means any Loan (or portion thereof) bearing interest
computed by reference to the Prime Rate plus Applicable Margin.

          PRO-RATA SHARE means, with respect to a Lender, a fraction (expressed
as a


                                       10



percentage), the numerator of which is the amount of such Lender's Commitment
and the denominator of which is the aggregate amount of all of the Commitments.

          RATE PERIOD means for any LIBOR Rate Loan, the period commencing on
the date such LIBOR Rate Loan is made and ending on the date which is one, two,
three or six months later, as may be requested by Borrowing Agent or any
Borrower, provided however,

               (i) any Rate Period which would otherwise end on a day which is
not a Business Day shall end on the next preceding or succeeding Business Day as
is Agent's custom generally in the market to which such LIBOR Rate Loan relates;

               (ii) there remains a minimum of one (1) month prior to the
expiration of the Contract Period;

               (iii) all Rate Periods of the same duration which commence on the
same date shall end on the same date; and

               (iv) each Rate Period which commences before, and would otherwise
end after the last day of the Contract Period, shall end on the last day of the
Contract Period.

          REPORTABLE EVENT means any of the events described in Section 4043(c)
of ERISA or the regulations thereunder, other than events for which notice has
been waived under PBGC regulations.

          REQUIRED LENDERS means, at any time, Agent, together with such other
Lenders whose Pro Rata Shares together with Agent aggregate sixty-six and
two-thirds percent (66 2/3%) or more of the Commitments; provided however, at
such time that only two Lenders are parties to this Agreement, "Required
Lenders" shall mean one hundred percent (100%) of the Commitments.

          REVOLVING CREDIT FACILITY means the revolving credit facility
established for Borrowers under this Agreement.

          REVOLVING CREDIT FACILITY USAGE means, as of the date of
determination, the aggregate amount of (a) all outstanding Advances under the
Revolving Credit Facility, plus (b) the outstanding undrawn amount of Letters of
Credit issued under the Revolving Credit Facility.

          REVOLVING CREDIT NOTE means each promissory note of Borrowers executed
and delivered pursuant to SECTION 2.1.

          SETTLEMENT DATE means the Closing Date and each Business Day of a
Week.

          SOLVENT means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and 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 is able to realize upon its properties and assets and
pay its debts and


                                       11



other liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (d) such Person does not intend to, and does
not believe that it will, incur debts beyond such Person's ability to pay as
such debts mature, and (e) 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 properties and assets would constitute unreasonably small capital
after giving due consideration to the prevailing practices in the industry in
which such Person is engaged. 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 reasonably can be expected to become an actual or
matured liability.

          STOCK PLEDGE means collectively (i) that certain stock pledge
agreement executed by KTAI in favor of Agent evidencing the pledge by KTAI to
Agent for the benefit of the Lenders of 65% of its stock ownership interest in
each of K-Tron Colormax Limited (a United Kingdom company) and K-Tron PCS
Limited (a United Kingdom company), and (ii) that certain stock pledge agreement
executed by KTIC in favor of Agent evidencing the pledge by KTIC to Agent for
the benefit of the Lenders of 65% of its stock ownership interest in K-Tron
(Schweiz) AG (a Swiss company).

          SUBSIDIARY of a Person means a corporation, partnership, joint
venture, limited liability company or other business entity of which a majority
of the shares of securities or other interests having ordinary voting power for
the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
"Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of
Borrowers.

          SWAP CONTRACT means (a) any and all rate swap transactions, basis
swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index
swaps or options, bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency
rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a "MASTER AGREEMENT"), including
any such obligations or liabilities under any Master Agreement.

          SWAP TERMINATION VALUE means, in respect of any one or more Swap


                                       12



Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

          SYNTHETIC LEASE OBLIGATION means the monetary obligation of a Person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations that
do not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

          VOTING STOCK shall mean with respect to any Person (a) one (1) or more
classes of Capital Stock of such Person having general voting powers to elect at
least a majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.

          WEEK means the time period commencing at 12:00 noon on a Monday and
ending at 12:00 noon on the following Monday.

          1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP as in effect at the applicable
date of determination. When used herein, the term "financial statements" shall
include the notes and schedules thereto.

          1.3 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to sections,
subsections, clauses, schedules and exhibits in this Agreement unless otherwise
specified. Any reference in this Agreement or in the Loan Documents to this
Agreement, any of the Loan Documents or any other document or agreement shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, supplements, and restatements thereto and
thereof, as applicable.

          1.4 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement, as they may from time to time be amended or restated, shall
be deemed incorporated herein by reference.

     2. REVOLVING CREDIT FACILITY.


                                       13


          2.1 THE REVOLVING CREDIT FACILITY. Each Lender severally and not
jointly agrees, so long as no Default or Event of Default exists, to make
Advances to Borrowers from time to time, as requested by Borrowing Agent or any
Borrower pursuant to the terms and conditions set forth in this Agreement, up to
a maximum principal amount at any time outstanding equal to such Lender's
Commitment Percentage of the Maximum Revolving Credit Facility Amount. The
Advances shall be evidenced by Borrowers' promissory notes (each, a "REVOLVING
CREDIT NOTE" and collectively, the "REVOLVING CREDIT NOTES") each in form and
substance satisfactory to Lenders.

          2.2 USE OF PROCEEDS. Borrowers agree that proceeds of the Revolving
Credit Facility may be used solely to (i) refinance certain existing
Indebtedness of Borrowers to National City Bank and The Bank on the Closing
Date, (ii) provide for future working capital requirements and for other general
corporate purposes of Borrowers, and (iii) fund Permitted Acquisitions.

     3. LETTERS OF CREDIT.

          3.1 ISSUANCE. Agent agrees, for so long as no Default or Event of
Default exists and if requested by Borrowing Agent or any Borrower, to issue its
Letters of Credit for the account of any Borrower, provided that, in no event
shall the aggregate amount available to be drawn under issued and outstanding
Letters of Credit (a) exceed $10,000,000, or (b), when combined with the
aggregate of all then outstanding Advances, exceed the Maximum Revolving Credit
Facility Amount.

          3.2 REQUEST FOR LETTER OF CREDIT. Borrowing Agent or any Borrower may
request Agent to issue a Letter of Credit by delivering to Agent the applicable
commercial or standby letter of credit application (the "LETTER OF CREDIT
APPLICATION"), completed to the reasonable satisfaction of Agent and such other
certificates, documents and other papers and information as Agent may reasonably
request.

          3.3 DESCRIPTION OF LETTERS OF CREDIT. Each Letter of Credit shall,
among other things, (i) provide for the payment of sight or time drafts when
presented for honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an expiration date
occurring not later than the earlier of (a) thirty (30) days prior to the last
day of the Contract Period or (b) twelve (12) months after such Letter of
Credit's date of issuance.

          3.4 REDUCTION OF AVAILABILITY. Availability under the Revolving Credit
Facility will be reduced by the total outstanding undrawn amount of all Letters
of Credit.

          3.5 INDEMNIFICATION. In connection with the issuance of any Letter of
Credit, Borrowers hereby indemnify, save and hold Agent and each Lender harmless
from any loss, cost, expense or liability, including, without limitation,
payments made by Agent and each Lender, and reasonable expenses and reasonable
attorneys' fees incurred by Agent and each Lender


                                       14



arising out of, or in connection with any Letter of Credit to be issued or
created for any Borrower except to the extent any loss, cost, expense or
liability is attributable to Agent's or any Lender's gross negligence or willful
misconduct. Borrowers shall be bound by Agent's or any Lender's regulations and
good faith interpretations of any Letter of Credit issued or created for any
Borrower's account, although this interpretation may be different from such
Borrower's own, and neither Agent nor any Lender shall be liable for any error,
negligence and/or mistakes, whether of omission or commission, in following any
Borrower's instructions or those contained in any Letter of Credit or any
modifications, amendments or supplements thereto or in creating or paying any
Letter of Credit, except for Agent's or any Lender's gross negligence or willful
misconduct.

          3.6 DISBURSEMENTS. Agent will promptly notify Borrowing Agent of the
presentment for payment under a Letter of Credit, following receipt by it of
such presentment, together with notice of the date such payment was made. All
disbursements under a Letter of Credit shall be deemed irrevocably to be a
request by Borrowers for an Advance on the date such disbursement was made.

          3.7 REIMBURSEMENT OBLIGATIONS. Each Borrower's obligation to reimburse
Agent for disbursements described in SECTION 3.6 shall be absolute and
unconditional under any and all circumstances and regardless of any setoff,
counterclaim or defense to payment which any Borrower may have against Agent,
any Lender, or the beneficiary of the Letter of Credit (except in the event of
any such party's gross negligence or willful misconduct), including, without
limitation, any defense based upon any draft, demand or certificate or other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient, the failure of any disbursement or payment by Agent
under the Letter of Credit ("BANK PAYMENT") to conform to the terms of the
Letter of Credit (if such disbursement or Bank Payment is determined to be
appropriate and other than as a consequence of Agent's gross negligence or
willful misconduct) or any non-application or misapplication by the beneficiary
of the proceeds of such disbursement or Bank Payment or the legality, validity,
form, regularity or enforceability of the Letter of Credit.

          3.8 LENDER'S REIMBURSEMENT OBLIGATIONS. Each Lender shall, to the
extent of the percentage amount equal to the product of such Lender's Commitment
Percentage times the aggregate amount of all disbursements made with respect to
Letters of Credit, be deemed to have irrevocably purchased an undivided
participation in each Advance made as a consequence of such disbursement. In the
event that at the time a disbursement is made the unpaid balance of Advances
exceeds or would exceed, with the making of such disbursement, the Maximum
Revolving Credit Facility Amount and the amount in excess thereof is not
reimbursed by Borrowers within two (2) Business Days, Agent shall promptly
notify each Lender and upon Agent's demand each Lender shall pay to Agent such
Lender's Commitment Percentage of such unreimbursed disbursement together with
such Lender's Commitment Percentage of Agent's unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from Borrowers of any amount disbursed by Agent for which Agent had


                                       15



already been reimbursed by Lenders, Agent shall deliver to each Lender that
Lender's Commitment Percentage of such repayment. Each Lender's participation
commitment with respect to Letters of Credit shall continue until the last to
occur of the following events: (a) Agent ceases to be obligated to issue Letters
of Credit; (b) no Letter of Credit issued hereunder remains outstanding and
uncancelled and (c) all Persons including Agent (other than Borrowers) have been
fully reimbursed for all payments made under or relating to Letters of Credit.

          3.9 CASH COLLATERAL. Upon the occurrence and during the continuation
of any Event of Default, at the option of Agent, Borrowers will pay to Agent,
for the ratable benefit of Lenders, cash in an amount equal to one hundred two
percent (102%) of the undrawn face amount of the Letters of Credit. Such cash
shall be held by Agent in a cash collateral account at Agent, subject to Agent's
sole control (the "CASH COLLATERAL ACCOUNT") and, at such time as no further
Default or Event of Default shall have occurred and be continuing, will be
released to Borrowers to the extent not otherwise applied as provided herein.
Borrowers hereby pledge and grant to Agent a security interest in, all such cash
and other amounts held in the Cash Collateral Account from time to time and all
earnings thereof and Proceeds thereon, as security for the payment of all
Obligations. Agent shall release from the Cash Collateral Account and return to
Borrowers (i) any funds held in the Cash Collateral Account in an amount equal
to one hundred two percent (102%) of any single Letter of Credit as such Letter
of Credit expires and (ii) any funds remaining in the Cash Collateral Account
upon the satisfaction in full of the Obligations. If at any time, and from time
to time, the aggregate amount of the Cash Collateral Account exceeds one hundred
two percent (102%) of the undrawn face amount of all Letters of Credit then
issued and outstanding, Agent shall return any excess to Borrowers.

          3.10 WAIVER OF LIABILITY. Neither Agent nor any Lender shall assume
any risks of the acts, omissions or misuse of any Letter of Credit by the
beneficiary thereof. Neither Agent nor any Lender (except in the event of its
own gross negligence or willful misconduct) shall be responsible for:

               (a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of the Letter of Credit or any document submitted by any party in
connection with the application for and issuance of any Letter of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged;

               (b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting to
transfer or assign the Letters of Credit or the rights or benefits thereunder or
Proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;

               (c) errors, omissions, interruptions or delays in transmission or
delivery of any messages by mail, cable, telegraph, telex or otherwise; or

               (d) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a disbursement.


                                       16



     None of the foregoing shall affect, impair or prevent the vesting of any of
the rights or powers granted Agent hereunder. In furtherance, and not in
limitation or derogation of any of the foregoing, any action taken or omitted to
be taken by Agent or any Lender with such Letters of Credit made in good faith
in the absence of gross negligence or willful misconduct, shall be binding upon
Borrowers and shall not put Agent or any Lender, as the case may be, under any
resulting liability therefor.

     4. INTEREST, FEES AND CHARGES.

          4.1 INTEREST.

               (a) RATES OF INTEREST. Interest shall accrue on the principal
amount of Prime Rate Loans outstanding at the end of each day (computed on the
actual days elapsed over a year of 365/366 days) at a fluctuating rate per annum
equal to the Prime Rate plus the Applicable Margin. After the date hereof, the
foregoing rate of interest shall be increased or decreased, as the case may be,
by an amount equal to any increase or decrease in the Prime Rate, with such
adjustments to be effective as of the opening of business on the day that any
such change in the Prime Rate becomes effective. The Prime Rate in effect on the
date hereof shall be the Prime Rate effective as of the opening of business on
the date hereof. Interest shall accrue on the principal amount of the LIBOR Rate
Loans outstanding at the end of each day (computed on the actual days elapsed
over a year of 360 days) at a fluctuating rate per annum equal to the LIBOR Rate
for the applicable Rate Period plus the Applicable Margin.

               (b) DEFAULT RATE. Interest will accrue on the principal balance
of the Loans (including any principal balance previously accruing interest at a
LIBOR Rate plus the Applicable Margin) after the occurrence and during the
continuance of an Event of Default at a rate which is two percent (2%) in excess
of the Prime Rate plus the highest Applicable Margin set forth in the pricing
matrix contained in the definition of the term "Applicable Margin" (the "DEFAULT
RATE"). Borrowers acknowledge and agree that the Default Rate is reasonable in
light of the increased risk of collection of the sums due under the Loans after
the occurrence and during the continuance of an Event of Default and the costs
and expenses of Agent related thereto.

               (c) POST JUDGMENT INTEREST. Any judgment obtained for sums due
hereunder or under the Loan Documents will accrue interest at the applicable
Default Rate set forth above until paid.

               (d) MAXIMUM INTEREST. In no event whatsoever shall the aggregate
of all amounts deemed interest hereunder and charged or collected pursuant to
the terms of this Agreement exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If any provisions of this Agreement are in contravention of
any such law, such provisions shall be deemed amended to conform thereto.


                                       17



               (e) COMPUTATION OF INTEREST AND FEES. Interest, Letter of Credit
fees and unused commitment fees and collection charges hereunder shall be
calculated daily and, with respect to interest, shall be computed as provided in
SECTION 4.1 above. For the purpose of computing interest hereunder, all items of
payment received by Agent shall be deemed applied by Agent on account of the
Obligations (subject to final payment of such items) on the Business Day Agent
receives such items in immediately available funds.

          4.2 CLOSING FEE. Borrowers shall pay to Agent for its own account (and
not for the benefit of Lenders) a closing fee equal to $62,500, which shall be
fully earned and nonrefundable on the Closing Date and shall be paid
concurrently with the initial Loans hereunder.

          4.3 LETTER OF CREDIT FEES.

               (a) L/C FEE. For each Letter of Credit, Borrowers will pay to
Agent for the pro-rata benefit of Lenders a letter of credit fee (the "L/C FEE")
in an amount equal to (i) the then Applicable Margin for LIBOR Rate Loans, times
(ii) the average aggregate daily maximum amount available to be drawn under such
Letter of Credit (regardless of whether any conditions for drawing could then be
met and determined as of the close of business on any date of determination).
L/C Fees shall be (i) computed on a quarterly basis in arrears, and (ii) due and
payable on the tenth (10th) Business Day after the end of each March, June,
September and December, commencing with the first such date to occur after the
issuance of such Letter of Credit, on the L/C expiration date and thereafter on
demand.

               (b) FRONTING FEE. Borrowers shall pay or reimburse Agent for its
own account, a fronting fee equal to (A) .125% per annum, times (B) the average
aggregate daily maximum amount available to be drawn under such Letter of
Credit, computed on the daily amount available to be drawn under such Letter of
Credit on a quarterly basis in arrears. Such fronting fee shall be due and
payable on the tenth (10th) Business Day after the end of each March, June,
September and December in respect of the most recently-ended quarterly period
(or portion thereof, in the case of the first payment), commencing with the
first such date to occur after the issuance of such Letter of Credit, on the L/C
expiration date and thereafter on demand.

               (c) OTHER CUSTOMARY FEES. In addition, Borrowers shall pay or
reimburse Agent for its own account such customary administrative, issuance,
amendment, payment and negotiation charges to be mutually agreed upon by
Borrowers and Agent payable in connection with each Letter of Credit. Such
customary fees and standard costs and charges are due and payable on demand and
are nonrefundable.

          4.4 UNUSED COMMITMENT FEE. Borrowers shall pay to Agent for the pro
rata benefit of the Lender Group an unused commitment fee with respect to the
Revolving Credit Facility based upon the Funded Debt to Adjusted EBITDA Ratio on
a quarterly basis as reflected on the quarterly financial statements of KTI and
its consolidated Subsidiaries delivered to Agent pursuant to SECTION 12.3 and
the compliance certificates delivered to Agent pursuant to SECTION


                                       18



12.7 for each quarter year ending after the Closing Date and determined in
accordance with the annual rate contained in the following pricing grid:



Funded Debt to Adjusted EBITDA Ratio   Unused Commitment
- ------------------------------------   -----------------
                                    
            < 1.0 to 1.0                    0.125%*

       > or = 1.0 to 1.0 but                 0.15%*
            < 1.5 to 1.0

       > or = 1.5 to 1.0 but                0.175%*
            < 2.0 to 1.0

       > or = 2.0 to 1.0 but                 0.20%*
            < 2.5 to 1.0


*    times the Average Unused Portion of the Maximum Revolving Credit Facility
     Amount.

     Such fee will be payable (i) quarterly in arrears on the first day of each
quarter beginning with the first day of the first fiscal quarter of 2007, and
(ii) on the date of termination or expiration of the Revolving Credit Facility,
pro-rated for the actual number of days in any partial quarter.

          4.5 AGENCY FEE. Borrowers shall pay to Agent for its own account (and
not for the benefit of Lenders) an annual agency fee equal to $10,000, which
agency fee shall be payable at such time that (i) three or more Lenders
(including Citizens) are parties to this Agreement, and (ii) the Borrowers,
Agent and Lenders have agreed to increase the Maximum Revolving Credit Facility
Amount to an amount exceeding $50,000,000, and on each anniversary date
thereafter.

     5. LOAN ADMINISTRATION.

          5.1 MANNER OF BORROWING. Borrowings under the Revolving Credit
Facility shall be as follows:

               (a) LOAN REQUESTS; PAYMENT.

                    (i) A request for an Advance that is to be a Prime Rate Loan
shall be made, or shall be deemed to be made, in the following manner: (A)
Borrowing Agent or any Borrower may give Agent notice of its intention to
borrow, in which notice Borrowing Agent or Borrower, as applicable, shall
specify to Agent, the amount of the proposed borrowing and the proposed
borrowing date, no later than 11:00 A.M. Philadelphia time on the requested
borrowing date (which shall be a Business Day); provided however, that no such
request may be made at a time when there exists an Event of Default; and (B) the
becoming due of any amount required to be paid under this Agreement, whether as
interest or for any other Obligation, shall


                                       19



be deemed irrevocably to be a request by Borrowers for an Advance on the due
date in the amount required to pay such interest or other Obligation. Advances
that are LIBOR Rate Loans shall be requested in accordance with SECTION 5.4;
provided however, in no event may any Borrower request a LIBOR Rate Loan at any
time when a Default or Event of Default shall have occurred and be continuing.
As an accommodation to Borrowers, Agent may permit telephonic requests for
Advances and electronic transmittal of instructions, authorizations, agreements
or reports to Agent by Borrowing Agent or Borrowers. Unless Borrowing Agent
specifically directs Agent in writing not to accept or act upon telephonic or
electronic communications from Borrowing Agent or any Borrower, Agent shall have
no liability to any Borrower for any loss or damage suffered by any Borrower as
a result of Agent's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Agent by
any Borrower or by Borrowing Agent on behalf of any Borrower and Agent shall
have no duty to verify the origin of any such communication or the authority of
the person sending it.

                    (ii) Each borrowing of Advances shall be advanced according
to the Commitment Percentages of Lenders.

                    (iii) Unless a Default or an Event of Default has occurred
and is continuing, payments shall be applied as designated by Borrowers to Agent
in writing. Otherwise, each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Advances shall be applied first
to Prime Rate Loans pro rata according to the applicable Commitment Percentages
of Lenders, then to LIBOR Rate Loans pro rata according to the applicable
Commitment Percentages of Lenders. After the occurrence and during the
continuance of an Event of Default, Agent may discontinue such arrangement and
may apply such funds to costs, indemnities, fees, interest and principal,
constituting Obligations in such order as Agent, in its discretion elects.

                    (iv) (A) Notwithstanding anything to the contrary contained
in the immediately preceding clauses (ii) and (iii), commencing with the first
Business Day following the Closing Date, each borrowing of Advances shall be
advanced by Agent and each payment by Borrowers on account of Advances shall be
applied first to those Advances made by Agent. On or before 11:00 A.M.,
Philadelphia time, on each Settlement Date commencing with the first Settlement
Date following the Closing Date, Agent and Lenders shall make certain payments
as follows: (I) if the aggregate amount of new Advances made by Agent during the
preceding Business Day exceeds the aggregate amount of repayments applied to
outstanding Advances during such preceding Business Day, then each Lender shall
provide Agent with funds in an amount equal to its Commitment Percentage of the
difference between (w) such Advances and (x) such repayments and (II) if the
aggregate amount of repayments applied to outstanding Advances during such
Business Day exceeds the aggregate amount of new Advances made during such
Business Day, then Agent shall provide each Lender with its Commitment
Percentage of the difference between (y) such repayments and (z) such Advances.


                                       20



                         (B) Each Lender shall be entitled to receive
disbursements of interest from Agent at the applicable rates of interest set
forth herein relating to outstanding Loans which it has funded.

                         (C) Agent shall, on the first Business Day of each
Week, submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Business Day.

                    (v) If any Lender (a "BENEFITED LENDER") shall at any time
receive any payment of all or part of its Loans, or interest thereon, in respect
thereof (whether voluntarily or involuntarily or by set-off) in a greater
proportion than any such payment to any other Lender, if any, in respect of such
other Lender's Loans, or interest thereon, and such greater proportionate
payment is not expressly permitted hereunder, such Benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, as shall be necessary to cause such Benefited Lender to share
the excess payment ratably with each Lender; provided however, that if all or
any portion of such excess payment or benefits is thereafter recovered from such
Benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Each
Lender so purchasing a portion of another Lender's Loans may exercise all rights
of payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.

                    (vi) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrowers a corresponding amount. Agent will promptly notify
Borrowing Agent of its receipt of any such notice from a Lender. If such amount
is made available to Agent on a date after a Settlement Date, such Lender shall
pay to Agent on demand an amount equal to the product of (i) the daily average
Federal Funds Rate (computed on the basis of a year of 365 days) during such
period as quoted by Agent, times (ii) such amount, times (iii) the number of
days from and including such Settlement Date to the date on which such amount
becomes immediately available to Agent. A certificate of Agent submitted to any
Lender with respect to any amounts owing under this paragraph (vi) shall be
conclusive, in the absence of manifest error; provided however, any Lender may,
within three (3) days after its receipt of the same, contest any such
certificate and Agent shall, upon receipt of any such contest, provide such
Lender with supporting documentation relating to the matters contained in such
certificate. If such amount is not in fact made available to Agent by such
Lender within three (3) Business Days after such Settlement Date, Agent shall be
entitled to recover such an amount, with interest thereon at the rate per annum
then applicable to Advances hereunder, on demand from Borrowers; provided
however, that Agent's right to such recovery shall not prejudice or otherwise
adversely affect Borrowers' rights (if any) against such Lender or relieve such
Lender of any obligation it may have to Borrowers.


                                       21



                    (vii) (A) Notwithstanding anything to the contrary contained
herein, in the event any Lender (x) has refused (which refusal constitutes a
breach by such Lender of its obligations under this Agreement) to make available
its portion of any Advance or (y) notifies either Agent or any Borrower that it
does not intend to make available its portion of any Advance (if the actual
refusal would constitute a breach by such Lender of its obligations under this
Agreement) (each, a "LENDER DEFAULT"), all rights and obligations hereunder of
such Lender (a "DEFAULTING LENDER") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this subsection while such Lender Default remains in effect.

                         (B) Loans shall be incurred pro rata from Lenders (the
"NON-DEFAULTING LENDERS") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Loans shall be applied to reduce the applicable Loans
of each Lender pro rata based on the aggregate of the outstanding Loans of that
type of all Lenders at the time of such application; provided that, such amount
shall not be applied to any Loans of a Defaulting Lender at any time when, and
to the extent that, the aggregate amount of Loans of any Non-Defaulting Lender
exceeds such Non-Defaulting Lender's Commitment Percentage of all Loans then
outstanding.

                         (C) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Loan Documents. All amendments,
waivers and other modifications of this Agreement and the Loan Documents may be
made without regard to a Defaulting Lender and, solely for purposes of the
definition of "Required Lenders", a Defaulting Lender shall be deemed not to be
a Lender and not to have Loans outstanding.

                         (D) Other than as expressly set forth herein, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this subsection shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Loan Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any other
Lender may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

                         (E) In the event a Defaulting Lender cures to the
satisfaction of Agent and Borrowers all outstanding breaches which caused a
Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be
a Defaulting Lender and shall be treated as a Lender under this Agreement.

          5.2 DISBURSEMENT. Borrowers hereby irrevocably authorize Agent to
disburse the proceeds of each Advance requested, or deemed to be requested as
provided herein by


                                       22



transferring into the Operating Accounts the amount of the Advance, or otherwise
in accordance with procedures acceptable to Agent.

          5.3 AUTHORIZATION. Borrowers hereby irrevocably authorize Agent, in
Agent's sole discretion, to advance to each Borrower, and to charge to
Borrowers' Loan Account hereunder as an Advance, a sum sufficient to pay all
interest accrued on the Obligations and all principal coming due on the
Obligations during the immediately preceding month and to pay all costs, fees
and expenses at any time owed by Borrowers to Agent and Lenders hereunder to the
extent such amounts are not paid when due.

          5.4 LIBOR RATE LOANS. Notwithstanding the provisions of SECTION
5.1(A)(I) herein, in the event any Borrower desires to obtain a LIBOR Rate Loan,
Borrowing Agent or such Borrower shall give Agent prior written irrevocable
notice no later than 11:00 A.M. Philadelphia time on the 3rd Business Day prior
to the requested borrowing date specifying (i) a Borrower's election to obtain a
LIBOR Rate Loan, (ii) the date of the proposed borrowing (which shall be a
Business Day), (iii) the amount to be borrowed, which amount shall be in a
minimum principal amount of $250,000 and may increase in integral multiples of
$250,000 and (iv) the applicable Rate Period selected by Borrowing Agent or by
such Borrower. In no event shall Borrowers be permitted to have outstanding at
any one time more than ten (10) LIBOR Rate Loans.

          5.5 CONVERSION OF PRIME RATE LOANS. Provided that no Event of Default
has occurred which is then continuing, any Borrower may, on any Business Day,
convert any Prime Rate Loan into a LIBOR Rate Loan. If a Borrower desires to
convert a Prime Rate Loan into a LIBOR Rate Loan, such Borrower or Borrowing
Agent on behalf of such Borrower, shall give Agent not less than three (3)
Business Days' prior written notice (prior to 11:00 A.M. Philadelphia time on
such Business Day), specifying the date of such conversion, the amount to be
converted and the Rate Period selected by the applicable Borrower with respect
to such converted Prime Rate Loan. Each conversion into or conversion of a LIBOR
Rate Loan shall be in a minimum principal amount of $250,000 and may increase in
integral multiples of $250,000 in excess thereof. After giving effect to any
conversion of Prime Rate Loans to LIBOR Rate Loans, Borrowers shall not be
permitted to have outstanding at any one time more than ten (10) LIBOR Rate
Loans.

          5.6 CONTINUATION OF LIBOR RATE LOANS. Borrowers shall have the right
on three (3) Business Days' prior irrevocable written notice given to Agent by
Borrowing Agent, subject to the provisions of SECTION 5.7, to continue any LIBOR
Rate Loan into a subsequent Rate Period of the same or a different permitted
duration, in each case subject to the satisfaction of the following conditions:

               (a) in the case of a continuation of less than all LIBOR Rate
Loans, the LIBOR Rate Loans continued shall each be in a minimum principal
amount of $250,000 and may increase in integral multiples of $250,000;


                                       23


               (b) accrued interest on a LIBOR Rate Loan (or portion thereof)
being continued shall be paid by Borrowers at the time of continuation; and

               (c) no LIBOR Rate Loan (or portion thereof) may be continued as a
LIBOR Rate Loan if an Event of Default has occurred which is then continuing or
if, after giving effect to such continuation, Borrowers shall have outstanding
more than ten (10) separate LIBOR Rate Loans in the aggregate.

     If any Borrower or Borrowing Agent on behalf of a Borrower shall fail to
give timely notice of its election to continue any LIBOR Rate Loan or portion
thereof as provided above, or if such continuation shall not be permitted
hereunder, such LIBOR Rate Loan or portion thereof, unless such LIBOR Rate Loan
shall be repaid, shall automatically be converted into a Prime Rate Loan at the
end of the Rate Period then in effect with respect to such LIBOR Rate Loan.

          5.7 PREPAYMENT. Subject to the provisions of SECTION 5.8, Borrowers
may prepay any Loan in whole at any time or in part from time to time, without
premium or penalty; provided that a LIBOR Rate Loan prepaid, continued or
converted other than on the last Business Day of the then current Rate Period
with respect thereto shall be subject to SECTION 5.8 below. Borrowers shall
specify the date of prepayment of Loans which are LIBOR Rate Loans and the
amount of Loans to be prepaid. In the event that any prepayment of a LIBOR Rate
Loan is made on a date other than the last Business Day of the then current Rate
Period with respect thereto, Borrowers shall indemnify Agent and Lenders
therefor in accordance with SECTION 5.8 hereof.

          5.8 INDEMNIFICATION. Borrowers shall indemnify Agent and Lenders and
hold Agent and Lenders harmless from and against any and all losses or expenses
that Agent and Lenders may sustain or incur as a consequence of any prepayment
on any date other than the last Business Day of the then current Rate Period or
any default by any Borrower in the payment of the principal of or interest on
any LIBOR Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a LIBOR Rate Loan after notice thereof has
been given, including (but not limited to) any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
LIBOR Rate Loans hereunder, and any other loss or expense incurred by Agent and
Lenders by reason of the liquidation or reemployment of deposits or other funds
acquired by Agent and Lenders to make, continue, convert into or maintain, a
LIBOR Rate Loan.

          5.9 INABILITY TO MAKE LIBOR RATE LOANS. Notwithstanding any other
provision hereof, if any applicable law, treaty, regulation or directive, or any
change therein or in the interpretation or application thereof, shall make it
unlawful for any Lender to make or maintain its LIBOR Rate Loans, or if with
respect to any Rate Period, any Lender is unable to determine the LIBOR Rate
relating thereto prior to such Rate Period, or prior to any Rate Period, adverse
or unusual conditions in, or changes in applicable law relating to, the London
interbank eurodollar market make it, in the reasonable judgment of any Lender,
impracticable to fund therein any of the LIBOR Rate Loans or make the projected
LIBOR Rate unreflective of the


                                       24



actual costs of funds therefor to any Lender, the obligation of any Lender to
make LIBOR Rate Loans hereunder shall forthwith be suspended during the pendency
of such circumstances and each Borrower shall, if any affected LIBOR Rate Loans
are then outstanding, promptly upon written request from any such Lender,
convert such affected LIBOR Rate Loans into Prime Rate Loans at the end of the
then-current Rate Period with respect thereto, or sooner if required by law,
treaty, regulation or directive or the interpretation or application thereof as
herein provided; provided however, in the event any such sooner conversion is
required, no Borrower shall be required to indemnify Agent and Lenders pursuant
to SECTION 5.8 herein with respect to such conversion; but provided further,
nothing contained herein shall be deemed to alter or affect any obligations that
any Borrower may have to any Lender under any interest rate protection
agreement.

          5.10 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the
event that Agent or the Required Lenders shall have determined prior to the
first day of any Rate Period that (a) reasonable means do not exist for
ascertaining the LIBOR Rate for such Rate Period, or (b) Dollar deposits in the
principal amount of the relevant Loan and for such Rate Period are generally not
available in the London interbank eurodollar market with respect to a proposed
LIBOR Rate Loan, or a proposed conversion of a Prime Rate Loan into a LIBOR Rate
Loan, Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of the determination of such effect. If such notice is given, (i) any
such requested LIBOR Rate Loan shall be made as a Prime Rate Loan, unless
Borrowing Agent shall notify Agent no later than 11:00 A.M. Philadelphia time
three (3) Business Days prior to the date of such proposed borrowing that the
request for such borrowing shall be canceled or made as an unaffected type of
LIBOR Rate Loan, and (ii) any Prime Rate Loan which was to have been converted
to an affected type of LIBOR Rate Loan shall be continued as or converted into a
Prime Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 11:00
A.M. Philadelphia time three (3) Business Days prior to the proposed conversion,
shall be maintained as an unaffected type of LIBOR Rate Loan. Nothing in this
section shall affect the interest payable on, or the Rate Period in effect with
respect to, any LIBOR Rate Loan during any Rate Period which commenced prior to
the date of such written notice.

          5.11 CAPITAL ADEQUACY.

               (a) DETERMINATION. In the event that Agent or any Lender shall
have determined that any change in, or the introduction, adoption,
effectiveness, interpretation, re-interpretation or phase-in after the date
hereof of any applicable law or guideline regarding capital adequacy, or any
change after the date hereof in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency after
the date hereof, has or would have the effect of reducing the rate of return on
Agent's or any Lender's capital as a consequence of its obligations hereunder to
a level below that which Agent or any Lender could have achieved but


                                       25



for such adoption, change or compliance (taking into consideration Agent's and
each Lender's policies with respect to capital adequacy) by an amount deemed by
Agent or any Lender to be material, then, from time to time, upon written demand
not later than thirty (30) days following such Lender's or Agent's making such
determination (which demand shall be accompanied by a certification
demonstrating the calculation of such amounts in reasonable detail) by Agent or
such Lender, Borrowers shall pay to Agent or such Lender such additional amount
or amounts as will compensate Agent or such Lender for such reduction as shall
be set forth in such written demand. In determining such amount or amounts,
Agent or such Lender may use any reasonable averaging or attribution methods.
The protection of this section shall be available to Agent or any Lender
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law or condition.

               (b) CERTIFICATE. A certificate of an officer of Agent or such
Lender setting forth such amount or amounts as shall be necessary to compensate
Agent or such Lender pursuant to this section and the calculation thereof and
the reasons therefor when delivered to Borrowing Agent shall be conclusive
absent manifest error.

          5.12 INCREASED COSTS. In the event that any change, after the date of
this Agreement, in any applicable law or treaty, or in the interpretation or
application thereof, or compliance by Agent or any Lender with any request or
directive (whether or not having the force of law) from any central bank or
other financial, monetary or other regulatory authority after the date hereof,
shall:

               (a) (1)subject Agent or any Lender to any tax with respect to
this Agreement (other than (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without limitation, any
franchise tax or any similar tax based on capital, net worth or comparable basis
for measurement and (b) any tax collected by a withholding on payments and which
neither is computed by reference to the net income of the payee nor is in the
nature of an advance collection of a tax based on or measured by the net income
of the payee) or (2) change the basis of taxation of payments to Agent or any
Lender of principal, fees, interest or any other amount payable hereunder or
under any Loan Documents (other than in respect of (a) any tax based on or
measured by net income or otherwise in the nature of a net income tax,
including, without limitation, any franchise tax or any similar tax based on
capital, net worth or comparable basis for measurement and (b) any tax collected
by a withholding on payments and which neither is computed by reference to the
net income of the payee nor is in the nature of an advance collection of a tax
based on or measured by the net income of the payee);

               (b) impose, modify or hold applicable any reserve (except any
reserve taken into account in the determination of the applicable LIBOR Rate),
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Agent or any Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or


                                       26



               (c) impose on Agent or any Lender or the London interbank
eurodollar market any other condition with respect to any Loan Document;

and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Loans hereunder by an amount that
Agent or such Lender deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any of the Loans by
an amount that Agent or such Lender deems to be material, then, in any such
case, Borrowers shall pay Agent or such Lender, upon its demand and
certification not later than thirty (30) days following its receipt of written
notice of the imposition of such increased costs, such additional amount as will
compensate Agent or such Lender for such additional cost or such reduction, as
the case may be, to the extent Agent or such Lender has not otherwise been
compensated, with respect to a particular Loan, for such increased cost as a
result of an increase in the Prime Rate or LIBOR Rate. An officer of Agent or
such Lender shall determine the amount of such additional cost or reduced amount
using reasonable averaging and attribution methods and shall certify the amount
of such additional cost or reduced amount to Borrowers, which certification
shall include a written explanation of such additional cost or reduction to
Borrowers and the calculation thereof. Such certification shall be conclusive
absent manifest error.

     6. PAYMENTS.

          6.1 INTEREST PAYMENTS. Borrowers will pay to Agent (for the pro rata
benefit of Lenders) interest on the principal balance of Prime Rate Loans on the
tenth (10th) day of each calendar month, commencing on November 10, 2006 and on
the expiration of the Contract Period. Borrowers will pay (for the pro rata
benefit of Lenders) interest on the principal balance of LIBOR Rate Loans on the
last day of each Rate Period; provided that, for any LIBOR Rate Loan with a Rate
Period in excess of three (3) months, Borrowers will pay (for the pro rata
benefit of Lenders) interest on the principal balance of such LIBOR Rate Loan on
the three (3) month anniversary of the extension of such LIBOR Rate Loan and on
the last day of the applicable Rate Period.

          6.2 PRINCIPAL PAYMENTS. Principal payable on account of Advances shall
be payable by Borrowers to Agent immediately upon the earliest of (a) the
occurrence of an Event of Default in consequence of which Agent accelerates the
maturity and payment of the Obligations as expressly permitted hereunder, or (b)
the expiration of the Contract Period.

          6.3 PAYMENT METHOD. Borrowers irrevocably authorize Agent to debit all
payments required to be made by Borrowers hereunder, under the Loans or under
any of the Loan Documents, on the date due, from any deposit or checking account
maintained by any Borrower with Agent (including without limitation, the
Operating Accounts). If there are insufficient funds in such accounts, or Agent
for any reason does not debit such accounts and provides notice of such intent
not to debit such accounts to Borrowers two (2) Business Days in advance,
Borrowers will make such payments directly to Agent at the offices of Agent
located at 2001 Market Street, Suite 600, Philadelphia, PA 19103, or such other
place as Agent may from time to time specify in writing. All payments are to be
made in immediately available funds, without counterclaim or setoff and free and
clear of, and without any deduction or withholding for, any taxes or other
payments. If Agent accepts payment in any other form, such payment


                                       27



shall not be deemed to have been made until the funds comprising such payment
have actually been received by or made available to Agent.

          6.4 MAINTENANCE OF LOAN ACCOUNTS; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrowers (a "LOAN
ACCOUNT") on which the applicable Borrowers will be charged with all Loans to
such Borrowers or for such Borrowers' account, including, accrued interest,
Lender Group Expenses, and any other Obligations of Borrowers. Agent shall
render statements regarding the Loan Account to Borrowing Agent, including
principal, interest, fees, and including an itemization of all charges and
expenses constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate, and shall constitute an
account stated between Borrowers and the Lender Group, subject only to manifest
error, unless, within thirty (30) days after receipt thereof by Borrowing Agent,
Borrowing Agent shall deliver to Agent written objection thereto describing the
error or errors contained in any such statements.

     7. COLLECTION OF RECEIVABLES.

          7.1 GENERAL. Borrowers will collect their Accounts only in the
ordinary course of business. All Account collections of Borrowers will be
deposited in one or more operating account(s) maintained by Borrowers at Agent
(the "OPERATING ACCOUNTS"); provided, however, that Borrowers shall be entitled
to maintain their existing operating accounts, if any, for a period of six (6)
months from the Closing Date.

          7.2 REMITTANCE OF ITEMS; ENDORSEMENTS. Following the occurrence and
during the continuance of an Event of Default, immediately upon receipt of any
notes, instruments or chattel paper, each Borrower, and such other persons shall
remit the same or cause the same to be remitted, in kind, to Agent. Each
Borrower shall, following the occurrence and during the continuance of an Event
of Default, deliver or cause to be delivered to Agent, with appropriate
endorsement and assignment to Agent with full recourse to Borrowers, all
instruments, notes and chattel paper constituting an Account or proceeds
thereof. Agent is hereby authorized, following the occurrence and during the
continuance of an Event of Default, to open all mail addressed to any Borrower
and endorse all checks, drafts or other items for payment on behalf of any
Borrower. Agent (and Agent's officers, employees and agents) are granted a power
of attorney by each Borrower with full power of substitution to execute,
following the occurrence and during the continuance of an Event of Default, on
behalf of each Borrower and in any Borrower's name or to endorse any Borrower's
name on any check, draft, Instrument, note or other item of payment or to take
any other action or sign any document in order to effectuate the foregoing. Such
power of attorney being coupled with an interest is irrevocable.

     8. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to
enter into this Agreement, Borrowers, jointly and severally, make the following
representations and warranties which shall be true, correct, and complete in all
respects as of the date hereof, and shall be true, correct, and complete in all
respects as of the Closing Date, and at


                                       28



and as of the date of the making or entering into each Advance or Letter of
Credit, thereafter, as though made on and as of the date of such Advance or
Letter of Credit (except to the extent that such representations and warranties
relate solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement.

          8.1 VALID ORGANIZATION, GOOD STANDING AND QUALIFICATION.

               (a) Each Borrower is a corporation or limited liability company
duly incorporated or formed, validly existing and in good standing under the
laws of its jurisdiction of incorporation or formation (or, as to foreign
Subsidiaries, comparable status), as set forth on SCHEDULE 8.1, has full power
and authority to execute, deliver and comply with the Loan Documents, and to
carry on its business as it is now being conducted and is duly licensed or
qualified as a foreign corporation or limited liability company in good standing
under the laws of each other jurisdiction in which the character or location of
the properties owned by it or the business transacted by it requires such
licensing or qualification, except where the failure to be so licensed or
qualified could not reasonably be expected to cause a Material Adverse Change.

               (b) Each of Borrowers' Subsidiaries is a corporation or limited
liability company duly incorporated or formed, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation (or,
as to foreign Subsidiaries, comparable status), as set forth on SCHEDULE 8.1,
has full power and authority to carry on its business as it is now being
conducted and is duly licensed or qualified as a foreign corporation or limited
liability company in good standing under the laws of each other jurisdiction in
which the character or location of the properties owned by it or the business
transacted by it requires such licensing or qualification, except where the
failure to be so licensed or qualified could not reasonably be expected to cause
a Material Adverse Change.

          8.2 LICENSES. Each Borrower and each of its employees, servants and
agents have all licenses, registrations, approvals and other authority as may be
necessary to enable them to own and operate their business and perform all
services and business which they have agreed to perform in any state,
municipality or other jurisdiction, except where the failure to maintain such
licenses, registrations, approvals or other authority could not reasonably be
expected to cause a Material Adverse Change.

          8.3 OWNERSHIP INTERESTS. As of the date hereof, the ownership of all
stock, options, warrants and other equity securities of each Borrower (other
than KTI) and all pledges, proxies, voting trusts, powers of attorney and other
agreements affecting the ownership or voting rights of said interests is as set
forth on SCHEDULE 8.3 attached hereto.

          8.4 SUBSIDIARIES. As of the date hereof, except as set forth on
SCHEDULE 8.4 attached hereto, no Borrower owns any shares of stock or other
equity interests in any Person, directly or indirectly (by any Subsidiary or
otherwise) except for immaterial equity interests distributed in connection with
bankruptcy or reorganization cases. No capital stock (or any securities,
Instruments, warrants, options, purchase rights, conversion or exchange rights,
calls,


                                       29



commitments or claims of any character convertible into or exercisable for
capital stock) of any direct or indirect Subsidiary of any Borrower is subject
to the issuance of any security, instrument, warrant, option, purchase right,
conversion or exchange right, call, commitment or claim of any right, title, or
interest therein or thereto.

          8.5 FINANCIAL STATEMENTS. Borrowers have furnished to Agent (i) the
audited consolidated and unaudited consolidating financial statements of KTI and
its consolidated Subsidiaries as of December 31, 2005, together with all
management and comment letters from accountants in connection therewith, (ii)
management prepared consolidated financial statements of KTI and its
consolidated Subsidiaries for the quarterly and consecutive twelve (12) month
period ending June 30, 2006, and (iii) fiscal year 2007 projections of the
consolidated statement of profits and loss of KTI and its consolidated
Subsidiaries for fiscal year 2007. Such financial statements (which for the
purposes of this sentence only shall not include the projections referred to
herein), together with the related notes and comments, are correct and complete,
fairly present the financial condition and the assets and liabilities of KTI and
its consolidated Subsidiaries at such dates, and have been prepared in
accordance with GAAP. With respect to the interim statements, such statements
are subject to year-end adjustment and any accompanying footnotes.

          8.6 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. There has been
no Material Adverse Change in the financial condition of Borrowers since June
30, 2006.

          8.7 PENDING LITIGATION OR PROCEEDINGS. Except as set forth on SCHEDULE
8.7 attached hereto, as of the date hereof, there are no judgments outstanding
or actions, suits or proceedings pending or, to the best of Borrowers'
knowledge, threatened against or affecting any Borrower, at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign which
could reasonably be expected to cause a Material Adverse Change.

          8.8 DUE AUTHORIZATION; NO LEGAL RESTRICTIONS. The execution and
delivery by Borrowers of the Loan Documents, the consummation of the
transactions contemplated by the Loan Documents and the fulfillment and
compliance with the respective terms, conditions and provisions of the Loan
Documents: (a) have been duly authorized by all requisite corporate or member
(as the case may be) action of each Borrower, (b) will not conflict with or
result in a breach of, or constitute a default (or might, upon the passage of
time or the giving of notice or both, constitute a default) under, any of the
terms, conditions or provisions of any applicable statute, law, rule, regulation
or ordinance or any Borrower's Certificate or Articles of Incorporation, By-Laws
or Operating Agreement or any lease, indenture, mortgage, loan or credit
agreement or instrument to which any Borrower is a party or by which any of them
may be bound or affected, or any judgment or order of any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (c) will not result in the creation or imposition of any Lien of any
nature whatsoever upon any of the property or assets of any Borrower under the
terms or provisions of any such agreement or instrument, and (d) does not
require any consent or approval of the stockholders or members of any Borrower,
or any other Person except such consents or approvals as have been obtained.


                                       30



          8.9 ENFORCEABILITY. The Loan Documents have been duly executed by
Borrowers and delivered to Agent and constitute legal, valid and binding
obligations of Borrowers, enforceable in accordance with their terms.

          8.10 NO DEFAULT UNDER OTHER OBLIGATIONS, ORDERS OR GOVERNMENTAL
REGULATIONS. No Borrower is in violation of its Certificates or Articles of
Incorporation or Formation or in default in the performance or observance of any
of its obligations, covenants or conditions contained in any indenture or other
agreement creating, evidencing or securing any Indebtedness or pursuant to which
any such Indebtedness is issued, except where such violation could not
reasonably be expected to cause a Material Adverse Change. No Borrower is in
violation of or in default under any other agreement or instrument or any
judgment, decree, order, statute, rule or governmental regulation, applicable to
it or by which its properties may be bound or affected, except where such
violation or default could not reasonably be expected to cause a Material
Adverse Change.

          8.11 GOVERNMENTAL CONSENTS. No consent, approval or authorization of
or designation, declaration or filing with or notice to any governmental
authority on the part of any Borrower is required in connection with the
execution, delivery or performance by any Borrower of the Loan Documents or the
consummation of the transactions contemplated thereby, except for filings
required under the Exchange Act.

          8.12 TAXES. Borrowers' FEINs are as set forth on SCHEDULE 8.12. As of
the date hereof, each Borrower has filed all tax returns which it was required
to file prior to the date hereof and has paid, or made provision for the payment
of, all taxes which have or may have become due pursuant to such returns or
reasonably expected to be paid pursuant to any assessment received by it. Such
tax returns are complete and accurate in all material respects and no Borrower
knows of any proposed additional assessment or basis for any assessment of
additional taxes.

          8.13 NAMES AND ADDRESSES. During the past five (5) years, no Borrower
has been known by any names (including trade names) other than those set forth
in SCHEDULE 8.13 attached hereto and its chief executive office has not been
located at any addresses other than those set forth on SCHEDULE 8.13 attached
hereto. SCHEDULE 8.13 identifies the chief executive offices of each Borrower.

          8.14 CURRENT COMPLIANCE. Each Borrower is currently in compliance with
all of the terms and conditions of the Loan Documents.

          8.15 PENSION AND BENEFIT PLANS.

               (a) Except as disclosed on SCHEDULE 8.15 hereto, (a) no Borrower
has any obligations with respect to any Pension Plan, (b) no ERISA Events,
including, without limitation, any "Reportable Event" or "Prohibited
Transaction" (as those terms are defined under ERISA), have occurred in
connection with any Pension Plan of any Borrower which might


                                       31



constitute grounds for the termination of any Pension Plan by the PBGC or for
the appointment by any United States District Court of a trustee to administer
any such Pension Plan, (c) all of Borrowers' Pension Plans meet with the minimum
funding standards of Section 302 of ERISA, if applicable, and (d) no Borrower
has any existing liability to the PBGC. Except as disclosed on SCHEDULE 8.15
hereto, no Borrower is subject to or bound to make contributions to any
Multi-Employer Plan.

               (b) The present value of the aggregate benefit liabilities under
any of the Pension Plans (other than a Multi-Employer Plan), determined as of
the end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities. The term "benefits
liabilities" has the meaning specified in Section 4001 of ERISA and the terms
"current value" and "present value" have the meanings specified in Section 3 of
ERISA. No Borrower nor any ERISA Affiliates have incurred withdrawal liability
(and are not subject to contingent withdrawal liability) under Section 4201 or
4204 of ERISA.

          8.16 LEASES AND CONTRACTS. Each Borrower has complied with the
provisions of all leases, contracts or commitments of any kind (such as
employment agreements, collective bargaining agreements, powers of attorney,
distribution agreements, patent license agreements, contracts for future
purchase or delivery of goods or rendering of services, bonus, pension and
retirement plans or accrued vacation pay, insurance and welfare agreements) to
which any Borrower is a party and is not in default thereunder, except where
such failure to comply or default could not reasonably be expected to cause a
Material Adverse Change. To the best of each Borrower's knowledge, no other
party is in default under any such leases, contracts or other commitments and no
event has occurred which, but for the giving of notice or the passage of time or
both, would constitute an event of default thereunder, except where such default
or potential event of default could not reasonably be expected to cause a
Material Adverse Change.

          8.17 INTELLECTUAL PROPERTY. Each Borrower, to the best of its
knowledge, owns or possesses the right to use all of the patents, trademarks,
service marks, trade names, copyrights, licenses, franchises and permits (which
for the purposes hereof, shall be deemed to exclude professional licenses and
permits) and rights with respect to the foregoing necessary to own and operate
such Borrower's properties and to carry on its business as presently conducted
and presently planned to be conducted without conflict with the rights of
others, except where the failure to own or possess such rights could not
reasonably be expected to cause a Material Adverse Change.

          8.18 BUSINESS INTERRUPTIONS. Within five (5) years prior to the date
hereof, neither the business nor operations of any Borrower has been materially
and adversely affected in any way by any casualty, strike, lockout, combination
of workers, order of the United States of America, or any state or local
government, or any political subdivision or agency thereof, directed against any
Borrower. As of the date hereof, there are no pending or, to the best of each


                                       32



Borrower's knowledge, threatened labor disputes, strikes, lockouts or similar
occurrences or grievances against the business being operated by any Borrower.

          8.19 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty by any Borrower contained herein or in any certificate or other
document furnished by any Borrower pursuant hereto or in connection herewith
fails to contain any statement of material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made. As of the date hereof, there is no material fact which any
Borrower knows and has not disclosed to Agent, which does or may materially and
adversely affect any Borrower or any of its or their operations taken as a
whole.

          8.20 SOLVENCY. As of the date hereof, each Borrower is Solvent. No
transfer of property is being made by any Borrower and no obligation is being
incurred by any Borrower in connection with the transactions contemplated by
this Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Borrower.

          8.21 COMMON ENTERPRISE. The successful operation and condition of each
Borrower is dependent on the continued successful performance of the functions
of all of the Borrowers as a whole. Each Borrower expects to derive benefit (and
its board of directors has determined that it may reasonably be expected to
derive benefit), directly and indirectly, from successful operations of its
Affiliates and Subsidiaries. Each Borrower expects to derive benefit (and the
boards of directors of each Borrower have determined that they may reasonably be
expected to derive benefit), directly and indirectly, from the credit extended
by Lenders hereunder, both in their separate capacities and as members with the
other Borrowers of an interrelated group of companies. Each Borrower has
determined that the execution, delivery and performance of this Agreement and
any other Loan Documents to be executed by it as a Borrower is within its
corporate purposes and will be of direct and indirect benefit to such Borrower
and is in its best interest.

     9. AFFIRMATIVE COVENANTS. Each Borrower, jointly and severally, covenants
and agrees that, so long as any Lender has any commitment to lend hereunder and
until full and final payment of the Obligations, and unless Agent shall
otherwise consent in writing, each Borrower shall comply with the following:

          9.1 PAYMENT OF PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE. Borrowers
will pay when due all Obligations without setoff, deduction or counterclaim.

          9.2 CLAIMS FOR LABOR AND MATERIALS. Each Borrower will pay or cause to
be paid when due all taxes, assessments, governmental charges or levies imposed
upon it or its income, profits, payroll or any property belonging to it
including without limitation all withholding taxes and all claims for labor,
materials and supplies which, if unpaid, might become a lien or charge upon any
of its properties or assets, except to the extent that such a failure to pay or
cause to be paid would not constitute an Event of Default under SECTION 17.1(D)
of this Agreement and except and to the extent any such amounts are being
actively contested in


                                       33



good faith and by appropriate proceedings and Borrowers maintain adequate
reserves on their books therefor.

          9.3 EXISTENCE; APPROVALS; QUALIFICATION; BUSINESS OPERATIONS;
COMPLIANCE WITH LAWS. Each Borrower will, and will cause all of its Subsidiaries
formed in the United States and the first tier foreign Subsidiaries to obtain,
preserve and keep in full force and effect its separate corporate or limited
liability company existence, except as otherwise permitted by SECTION 10.5 of
this Agreement. Each Borrower will, and will cause all of its Subsidiaries
formed in the United States and the first tier foreign Subsidiaries to (as
applicable): (a) obtain, preserve and keep in full force and effect all rights,
franchises, permits, licenses, registrations and franchises necessary to the
proper conduct of their business or affairs, (b) qualify and remain qualified as
a foreign corporation or limited liability company in each jurisdiction in which
the character or location of the properties owned by it or the business
transacted by them requires such qualification, (c) continue to operate its
business as presently operated and maintain in full force and effect all
licenses and other qualifications to do business as shall be required to do so,
and (d) comply with the requirements of all applicable laws and all rules,
regulations (including without limitation environmental statutes and
regulations, the Fair Labor Standards Act and the Americans With Disabilities
Act) and orders of regulatory agencies and authorities having jurisdiction over
it; all except where any such failure could not reasonably be expected to cause
a Material Adverse Change.

          9.4 MAINTENANCE OF PROPERTIES. Each Borrower will maintain, preserve,
protect and keep or cause to be maintained, preserved, protected and kept its
real and personal property used or useful in the conduct of its business in good
working order and condition, reasonable wear and tear excepted, and will pay and
discharge when due the cost of repairs to and maintenance of the same.

          9.5 INSURANCE.

               (a) At their expense, Borrowers shall keep their property insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, as are ordinarily insured against by other owners in similar
businesses, in amounts and with such companies as are reasonably acceptable to
Agent, but in any event in amounts sufficient to prevent Borrowers from becoming
a co-insurer under such policies and in addition, will carry business
interruption insurance in such amounts as may be reasonably required by Agent.
Any material decrease of any insurance policy or coverage requested by any
Borrower must be approved by Agent in writing prior to the effective date of
such modification.

               (b) Borrowers shall cause to be delivered to Agent the insurance
policies and all endorsements thereto and evidence of insurance utilizing a
current ACORD 27 Evidence of Property Insurance as of the Closing Date.

               (c) Borrowers shall bear the full risk of loss from any loss of
any nature whatsoever with respect to their property.


                                       34



          9.6 INSPECTIONS; EXAMINATIONS.

               (a) Each Borrower hereby irrevocably authorizes and directs all
accountants and auditors employed by any Borrower to exhibit and deliver to
Agent copies of any and all of Borrowers' financial statements, trial balances
or other accounting records of any sort in the accountant's or auditor's
possession and copies of all reports submitted to Borrowers by such accountants
or auditors, including management letters, "comment" letters and audit reports,
and to disclose to Agent any information they may have concerning any Borrower's
financial status and business operations, as to each and every one of which
actions each Borrower hereby expressly consents. After the occurrence and during
the continuance of an Event of Default, each Borrower further authorizes all
federal, state and municipal authorities to furnish to Agent copies of reports
or examinations relating to any Borrower, whether made by a Borrower or
otherwise.

               (b) If a Default or an Event of Default has occurred which is
then continuing, (i) the officers of Agent, or such Persons as Agent may
designate, may visit and inspect any of the properties of any Borrower, examine
(either by Agent's employees or by independent accountants) any of the assets of
Borrowers, including the Books of Borrowers, and discuss the affairs, finances
and accounts of Borrowers with their officers and with their independent
accountants at such times as Agent may desire; and (ii) Agent may conduct, at
any time and from time to time, and Borrowers will fully cooperate with, a field
examination of the Accounts and business affairs of Borrowers. Provided that no
Event of Default or Default has occurred and is continuing, such visits,
inspections and field examinations shall be at reasonable times and upon
reasonable notice by Agent. If a Default or an Event of Default has occurred
which is then continuing, Borrowers will pay all costs and expenses of Agent
related to such visits, inspections and field examinations.

          9.7 PENSION PLANS. Each Borrower will (a) keep in full force and
effect any and all Pension Plans which are presently in existence or may, from
time to time, come into existence under ERISA, unless such Pension Plans can be
terminated without material liability to Borrowers in connection with such
termination (as distinguished from any continuing funding obligation); (b) make
contributions to all of each Borrower's Pension Plans in a timely manner and in
a sufficient amount to comply with the requirements of ERISA; (c) comply with
all material requirements of ERISA which relate to such Pension Plans so as to
preclude the occurrence of any Reportable Event, Prohibited Transaction or
material "accumulated funding deficiency" as such term is defined in ERISA; and
(d) notify Agent immediately upon receipt by any Borrower of any notice of the
institution of any proceeding or other action which may result in the
termination of any Pension Plan and deliver to Agent, promptly after the filing
or receipt thereof, copies of all reports or notices which any Borrower files or
receives under ERISA with or from the Internal Revenue Service, the PBGC, or the
U.S. Department of Labor with respect to any Pension Plan.

          9.8 BANK ACCOUNTS. Within one-hundred eighty (180) days of the date
hereof, each Borrower other than KTIC will maintain its primary deposit account
and main


                                       35



disbursement accounts with Agent, including without limitation, its operating
and cash management services with Agent, unless otherwise agreed by Agent in
writing. Borrowers will notify Agent in writing and on a continuing basis, of
all Deposit Accounts and certificates of deposit (including the numbers thereof)
maintained with or purchased from any other depository institutions.

          9.9 [INTENTIONALLY OMITTED].

          9.10 INDEBTEDNESS WITH AFFILIATES. Each Borrower will cause all of its
Indebtedness at any time owed to any Subsidiary, Affiliate, shareholder,
director and officer that is not a Borrower hereunder to be subordinated in all
respects to all Obligations and will not make any payments thereon, except as
approved by Agent in writing.

          9.11 ADDITIONAL DOCUMENTS AND FUTURE ACTIONS. Each Borrower will, at
its sole cost, take such actions and provide Agent from time to time with such
agreements, documents or information as Agent may in its reasonable discretion
deem necessary or advisable to carry out the terms of the Loan Documents.

          9.12 TAXES. Each Borrower will cause all material assessments and
taxes, whether real, personal, or otherwise, due or payable by, or imposed,
levied, or assessed against any Borrower or any of its property to be paid in
full, before delinquency or before the expiration of any extension period,
except and to the extent any such amounts are being actively contested in good
faith and by appropriate proceedings and Borrowers maintain adequate reserves on
their books therefor. Each Borrower shall make due and timely payment or deposit
of all such material federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Agent, on
demand, appropriate certificates attesting to the payment thereof or deposit
with respect thereto, except and to the extent any such amounts are being
actively contested in good faith and by appropriate proceedings and Borrowers
maintain adequate reserves on their books therefor. Each Borrower will make
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that Borrowers have made such payments or deposits, except and to the extent any
such amounts are being actively contested in good faith and by appropriate
proceedings and Borrowers maintain adequate reserves on their books therefor.

          9.13 LEASES. Each Borrower will pay when due all rents and other
amounts payable under any leases to which any Borrower is a party or by which
any Borrower's properties and assets are bound, except where the failure to pay
such amounts could not reasonably be expected to cause a Material Adverse Change
and except and to the extent any such amounts are being actively contested in
good faith and by appropriate proceedings and Borrowers maintain reasonable
reserves on their books therefor.


                                       36



          9.14 NOTICES. Borrowing Agent will promptly notify Agent of (a) any
action or proceeding brought against any Borrower wherein such action or
proceeding would, if determined adversely to such Borrower, be reasonably
expected to result in a Material Adverse Change, (b) the occurrence of any
Default or Event of Default, (c) the failure of any Borrower to observe any of
its undertakings under the Loan Documents, (d) the occurrence of any Material
Adverse Change, (e) the receipt of any notice of the institution or proceeding
or other action which may result in the termination of any Pension Plan; and (f)
any notice of material litigation or proceedings, material environmental actions
and liabilities, material ERISA and tax events and liabilities, and any material
reports to members or other creditors, except where the occurrence of such
events could not reasonably be expected to cause a Material Adverse Change.

     10. NEGATIVE COVENANTS. Each Borrower, jointly and severally, covenant and
agree that, so long as any Lender has any commitment to lend hereunder and until
full and final payment of the Obligations, and unless Agent shall otherwise
consent in writing, each Borrower shall comply with the following:

          10.1 LIMITATION ON SALE AND LEASEBACK. No Borrower will enter into any
arrangement whereby any of them will sell or transfer any real property or
improvements thereon or other fixed assets owned by any of them and then or
thereafter rent or lease as lessee such property, improvements or assets or any
part thereof, or other property which any of them shall intend to use for
substantially the same purposes as the property sold or transferred.

          10.2 LIMITATION ON INDEBTEDNESS. No Borrower will have at any time
outstanding to any Person other than another Borrower, Agent or Lenders, any
Indebtedness for borrowed money, Capitalized Lease Obligations, or any
outstanding letters of credit, except:

               (a) Existing Indebtedness for borrowed money, Capitalized Lease
Obligations and outstanding letters of credit described on SCHEDULE 10.2;

               (b) Future purchase money Indebtedness and Capitalized Lease
Obligations incurred to finance Capital Expenditures;

               (c) Indebtedness owed by any Borrower to any other Person;
provided that, such Indebtedness shall be subordinated to the Obligations
pursuant to a subordination agreement with term and conditions acceptable to
Agent; and

               (d) other unsecured Indebtedness not to exceed $1,000,000 at any
time outstanding.

     Except for a refinancing or replacement of such permitted Indebtedness on
similar material terms and conditions, such existing permitted Indebtedness may
not be refinanced or replaced without the consent of Agent, which consent shall
not be unreasonably withheld.


                                       37



          10.3 INVESTMENTS AND LOANS. No Borrower will have or make any
investments in all or a material portion of the capital stock or securities of
any Person, or any loans, advances or extensions of credit of greater than
$10,000 to any Person, except (i) investments and loans listed on SCHEDULE 10.3
attached hereto, (ii) investments and loans permitted pursuant to SECTION 10.6
of this Agreement, (iii) future investments in any other Borrower, (iv) future
investments in any non-Borrower Subsidiaries, not to exceed $2,000,000 in the
aggregate, and (v) Permitted Investments and with respect to Permitted
Acquisitions.

          10.4 GUARANTIES. No Borrower will directly or indirectly guarantee,
endorse (other than for collection or deposit in the ordinary course of
business), discount, sell with recourse or for less than the face value or agree
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
otherwise become directly or indirectly liable for, or agree (contingently or
otherwise) to supply or advance funds (whether by loan, stock purchase, capital
contribution or otherwise) in respect of, any Indebtedness, obligations or
liabilities of any Person except and to the extent that such guaranty,
endorsement, discount, sale or agreement is in support of any Borrower for
Indebtedness not otherwise prohibited under this Agreement.

          10.5 DISPOSITION OF ASSETS. No Borrower will sell, lease, license,
transfer or otherwise dispose of any of its property or assets, except for (i)
sales of Inventory in the ordinary course of Borrowers' business, (ii)
dispositions of worn out or obsolete equipment in the ordinary course of
Borrowers' business, (iii) sales, transfers or dispositions of assets to any
other Borrower or any Subsidiary of any other Borrower, and (iv) other sales,
leases, licenses, transfers or dispositions of assets not in excess of $500,000
in the aggregate in respect of all such sales, leases, transfers or dispositions
pursuant to this clause (iv) during any fiscal year.

          10.6 MERGER; CONSOLIDATION; BUSINESS ACQUISITIONS; SUBSIDIARIES. No
Borrower will merge into or consolidate with any Person, acquire all or a
material portion of the stock or ownership interests, or all or substantially
all of the assets or business of any Person, permit any Person to merge into it
other than pursuant to (i) a transaction or series of transactions in which a
Borrower is the surviving corporation, or (ii) a Permitted Acquisition, provided
that, (i) KTI will not at any time be merged into any Person, and (ii) Borrowers
shall have provided Agent with not less than thirty (30) days prior written
notice of any such merger. No Borrower shall form any Subsidiaries under the
laws of the United States or any state thereof other than Subsidiaries that are
joined as Borrowers hereunder; provided however, if any Borrower forms a first
tier Subsidiary under the laws of any foreign jurisdiction (other than the
United States or any state thereof), Borrowers shall pledge to Agent for the
benefit of the Lenders 65% of its stock ownership interest in such Subsidiary;
provided, however, that no Borrower shall be required to pledge any of its stock
or ownership interest in any Subsidiary organized under the laws of the People's
Republic of China. No Borrower will materially change the principal nature of
its Business or engage in any business other than the Business.

          10.7 TAXES; CLAIMS FOR LABOR AND MATERIALS. No Borrower will file or
consent to the filing of, any consolidated income tax return with any Person
other than another Borrower or any Subsidiary of a Borrower.


                                       38



          10.8 LIENS. No Borrower will create, incur or permit to exist any Lien
of any kind on its property or assets, whether now owned or hereafter acquired,
or upon any income, profits or proceeds therefrom, except:

               (a) Liens held by Agent;

               (b) Deposits made in the ordinary course of business (i) in
connection with worker's compensation, unemployment insurance, social security
and other like laws or (ii) to secure the performance of statutory obligations,
leases and other contractual arrangements, not incurred in connection with
either (A) the borrowing of money or (B) the deferred purchase price of goods or
inventory;

               (c) Encumbrances consisting of zoning restrictions, easements,
restrictions on the use of real property or minor irregularities of title
thereto, none of which impairs the use of such property by such Borrower in the
operation of its business;

               (d) Liens listed on SCHEDULE 10.8 attached hereto;

               (e) Liens for taxes, assessments or other governmental charges
the payment of which is not yet due or which is being contested in good faith;

               (f) Liens securing performance bonds;

               (g) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business, the payment of which is not yet required or which is being contested
in good faith; or

               (h) Purchase money Liens or Capitalized Leases, provided that:

                    (i) the property subject to any of the foregoing is acquired
or leased by such Borrower in the ordinary course of its business and the Lien
on any such property is created contemporaneously with or within twenty (20)
days following such acquisition;

                    (ii) the purchase money Indebtedness or principal portion of
the Capitalized Lease Obligations so created shall not exceed 100% of the cost
of the property covered thereby as of the time of acquisition or lease;

                    (iii) the purchase money Indebtedness or Capitalized Lease
Obligations shall only be secured by the property so acquired or leased; and

                    (iv) the purchase money Indebtedness or Capitalized Lease
Obligations are permitted by the provisions of SECTION 10.2.

     No Borrower shall enter into any agreement with any other Person which
shall prohibit any Borrower from granting, creating or suffering to exist, or
otherwise restrict in any way


                                       39



(whether by covenant, by identifying such event as a default under such
agreement or otherwise) the ability of any Borrower to grant, create or suffer
to exist, any lien, security interest or other charge or encumbrance upon or
with respect to any of its assets in favor of Agent, other than Capitalized
Lease Obligations and purchase money Liens.

          10.9 TRANSACTIONS WITH AFFILIATES. No Borrower will enter into or
conduct any transaction with any Affiliate (excluding another Borrower or any
Subsidiary) other than on terms and conditions substantially as favorable as
would be obtainable in a comparable arm's-length transaction with a Person other
than an Affiliate.

          10.10 [INTENTIONALLY OMITTED]

          10.11 NAME CHANGE; GOVERNING DOCUMENTS. No Borrower will change its
name or FEIN number except upon thirty (30) days prior written notice to Agent.
No Borrower will amend any of their Governing Documents in any respect adverse
to the interest of the Agent or any Lender.

          10.12 RESTRICTIONS ON USE OF PROCEEDS. No Borrower will carry or
purchase with the proceeds of the Revolving Credit Facility any "margin
security" within the meaning of Regulations U, T or X of the Board of Governors
of the Federal Reserve System.

          10.13 PROHIBITED EVENTS UNDER ERISA. No Borrower will directly or
indirectly:

               (a) engage, or permit any Subsidiary of any Borrower to engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Section 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;

               (b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;

               (c) fail, or permit any Subsidiary of any Borrower to fail, to
pay timely required contributions or annual installments due with respect to any
waived funding deficiency to any Pension Plan;

               (d) terminate, or permit any Subsidiary of any Borrower to
terminate, any Pension Plan where such event would result in any liability of
any Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;

               (e) fail, or permit any Subsidiary of any Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;


                                       40



               (f) fail, or permit any Subsidiary of any Borrower to fail, to
pay any required installment or any other payment required under Section 412 of
the IRC on or before the due date for such installment or other payment;

               (g) amend, or permit any Subsidiary of any Borrower to amend, a
Pension Plan resulting in an increase in current liability for the plan year
such that either of any Borrower, any Subsidiary of any Borrower or any ERISA
Affiliate is required to provide security to such Plan under Section 401(a)(29)
of the IRC; or

               (h) withdraw, or permit any Subsidiary of any Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA.

     11. FINANCIAL COVENANTS. Except with the prior written consent of Agent,
Borrowers will comply with the following:

          11.1 FIXED CHARGE COVERAGE RATIO. KTI and its Subsidiaries will
maintain on a consolidated, rolling four (4) fiscal quarter basis a Fixed Charge
Coverage Ratio of not less than 1.5:1.0 to be tested as of the fiscal quarter
ending December 30, 2006 and each fiscal quarter end thereafter.

          11.2 FUNDED DEBT TO ADJUSTED EBITDA RATIO. KTI and its Subsidiaries
will maintain on a consolidated, trailing twelve (12) month basis a ratio of
Funded Debt to Adjusted EBITDA of not more than 2.5 to 1.0 to be tested as of
the fiscal quarter ending December 30, 2006 and each fiscal quarter end
thereafter.

          11.3 NET WORTH. KTI and its Subsidiaries will maintain Net Worth on a
consolidated basis as of July 1, 2006 in an amount of not less than $51,916,500.
For each fiscal quarter ending after July 1, 2006, KTI and its Subsidiaries will
maintain Net Worth on a consolidated basis of not less than the minimum required
Net Worth for the immediately preceding fiscal quarter end, plus fifty percent
(50%) of Net Income for the fiscal quarter then ended.

          11.4 CAPITAL EXPENDITURES. KTI and its Subsidiaries will not cause,
suffer or permit KTI's and its Subsidiaries' aggregate annual Capital
Expenditures to exceed $7,000,000 in the aggregate for the fiscal year ending
December 30, 2006 and for each fiscal year thereafter. To the extent that the
permitted amount of Capital Expenditures are not used in any one fiscal year,
the unused portion for such year may not be utilized in the following fiscal
year.

     12. ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS. Borrowers will
maintain books of record and account in which full, correct and current entries
in accordance with GAAP will be made of all of their dealings, business and
affairs, and Borrowers will deliver to Agent the following:


                                       41



          12.1 ANNUAL STATEMENTS. As soon as available and in any event within
one hundred twenty (120) days after the end of each fiscal year of KTI:

               (a) the consolidated and consolidating income and retained
earnings statements of KTI and its consolidated Subsidiaries for such fiscal
year,

               (b) the consolidated and consolidating balance sheet of KTI and
its consolidated Subsidiaries as at the end of such fiscal year,

               (c) the consolidated and consolidating statement of cash flow of
KTI and its consolidated Subsidiaries for such fiscal year, and

               (d) setting forth in comparative form the corresponding figures
as at the end of the previous fiscal year, all in reasonable detail, including
all supporting schedules and comments. The foregoing statements and balance
sheets shall be prepared in accordance with GAAP, with the consolidated
statements and balance sheet being audited by independent certified public
accountants of recognized standing acceptable to Agent in the reasonable
exercise of its discretion with respect to which such accountants shall deliver
their unqualified opinion. Agent agrees that the current accountants of
Borrowers, Grant Thornton LLP, is acceptable to Agent.

          12.2 PROJECTIONS AND CASH FLOW. Within thirty (30) days following the
commencement of each fiscal year of KTI, the updated projections of profit and
loss statements, balance sheets, cash flows and availability for such fiscal
year, prepared by the chief financial officer of KTI. KTI has furnished to Agent
initial projections dated as of the date hereof containing the information
required by this Section for 2007. Borrowers represent and covenant that (a) the
initial projections have been and all projections required by this Section shall
be prepared by the chief financial officer of KTI and represent and in the
future shall represent, the good faith estimate of Borrowers at the time of such
projections regarding the course of Borrowers' business for the periods covered
thereby, and (b) the initial projections are and the future projections
delivered hereafter shall be based upon assumptions Borrowers believe or shall
believe at the time to be reasonable.

          12.3 QUARTERLY STATEMENTS. As soon as available and in any event
within sixty (60) days after the end of each fiscal quarter:

               (a) the unaudited, internally-prepared consolidated and
consolidating income and retained earnings statements of KTI and its
consolidated Subsidiaries for such quarter,

               (b) the unaudited, internally-prepared consolidated and
consolidating balance sheet of KTI and its consolidated Subsidiaries as of the
end of such quarter, and


                                       42



               (c) the unaudited, internally-prepared consolidated and
consolidating statement of cash flow of KTI and its consolidated Subsidiaries
for such quarter,

setting forth (as to the consolidated statements) in comparative form the
corresponding figures as at the end of the corresponding quarter of the previous
fiscal year (if applicable), all in reasonable detail, subject to year-end
adjustments, prepared in accordance with GAAP and certified by the chief
financial officer or chief accounting officer of KTI to be accurate.

The quarterly financial statement to be delivered to Agent in accordance with
this SECTION 12.3 will be consistent with the form of such statements filed with
the quarterly Form 10Q filing of KTI with the Securities and Exchange Commission
or any national securities exchange.

          12.4 AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
management letter submitted to any Borrower by independent accountants in
connection with any annual, interim or special audit report made by them of the
books of any Borrower.

          12.5 REPORTS TO GOVERNMENTAL AGENCIES AND OTHER CREDITORS. Upon
Agent's request or, if any of the following shall report or reflect information
that could reasonably be expected to cause a Material Adverse Change, without a
request by Agent, in any case, with reasonable promptness, copies of all such
financial reports, statements and returns which any Borrower shall file with any
federal or state department, commission, board, bureau, agency or
instrumentality and any report or statement delivered by any Borrower to any
supplier or other creditor in connection with any payment restructuring.

          12.6 REQUESTED INFORMATION. With reasonable promptness, all such other
data and information in respect of the condition, operation and affairs of any
Borrower as Agent may reasonably request from time to time.

          12.7 COMPLIANCE CERTIFICATES. At the time of delivery of the financial
statements required by SECTIONS 12.1 and 12.3 above, a certificate of the chief
financial officer of KTI (a) setting forth the information and computations (in
sufficient detail) required in order to establish whether Borrowers were
operating in compliance with the financial covenants in SECTION 11 of this
Agreement, and (b) certifying that as of the date of such certification, there
does not exist any Default or Event of Default. Such certificate will be in the
form of EXHIBIT A attached hereto.

          12.8 OTHER REPORTING. Borrowers shall promptly after sending or filing
thereof furnish or cause to be furnished to Agent copies of all reports which
any Borrower sends to its stockholders generally and copies of all other
periodic or episodic reports and registration statements which KTI files with
the Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.

     13. ENVIRONMENTAL REPRESENTATIONS AND COVENANTS. Except as disclosed in
SCHEDULE 13 hereof:


                                       43


          13.1 REPRESENTATIONS. Each Borrower represents as follows: (a) the
Environmental Affiliates are in material compliance with all Environmental
Requirements and no Borrower has any knowledge of any circumstances which may
prevent or interfere with such material compliance in the future; (b) the
Environmental Affiliates have or are in the process of obtaining all material
licenses, permits, approvals and authorizations required under applicable
Environmental Requirements; (c) there are no pending or threatened claims
against any of the Environmental Affiliates or any of their assets related to
the failure to comply with any Environmental Requirements which could result in
a Material Adverse Change, or any facts or circumstances which could give rise
to such a claim; (d) no facility or property now or previously owned, operated
or leased by any Environmental Affiliate is an Environmental Cleanup Site; (e)
no Environmental Affiliate has treated, stored, transported, handled or disposed
of Special Materials at any Environmental Cleanup Site in violation of the
Environmental Requirements which could result in a Material Adverse Change; and
(f) there are no liens or claims for cost reimbursement outstanding or
threatened against any Environmental Affiliate or any of their assets which
could result in a Material Adverse Change, or to the best of each Borrower's
knowledge, any facts or circumstances which could give rise to such a lien or
claim.

          13.2 REAL PROPERTY. Each Borrower warrants and represents that there
are no Special Materials presently located on or near any real property owned,
leased or operated by any Environmental Affiliate (collectively, "REAL
PROPERTY") except for Special Materials which are and have at all times been
treated, stored, transported, handled, and disposed of in material compliance
with all Environmental Requirements. Each Borrower represents to Lenders that to
the best of each Borrower's knowledge, the Real Property is not now being used
nor, to the best of each Borrower's knowledge, has it ever been used in the past
for activities involving Special Materials, including but not limited to the
use, generation, collection, storage, treatment, or disposal of any Special
Materials except for Special Materials which are and have at all times been
treated, stored, transported, handled and disposed of in material compliance
with all Environmental Requirements. Without limiting the generality of the
foregoing, the Real Property is not being used nor, to the best of each
Borrower's knowledge, has it ever been used in the past for a landfill, surface
impoundment or other area for the treatment, storage or disposal of solid waste
(including solid waste such as sludge), except with respect to such solid waste
to be stored or processed for recycling and/or beneficial reuse, in material
compliance with Environmental Requirements.

          13.3 COVENANT REGARDING COMPLIANCE. Each Borrower shall take or cause
all Environmental Affiliates to take, at Borrower's and such Environmental
Affiliate's sole expense, such actions as may be necessary to materially comply
with all Environmental Requirements. If any Environmental Affiliate shall fail
to take such action or fail to assert a defense to an allegation by a
governmental agency that a Borrower and/or an Environmental Affiliate has
violated an Environmental Requirement, and such failure may reasonably be
expected to result in a Material Adverse Change in Borrower's operations, Lender
may make advances or payments towards performance or satisfaction of the same
but shall be under no obligation to do so. All sums so advanced or paid,
including all sums advanced or paid by Lender in connection with any


                                       44



judicial or administrative investigation or proceeding relating thereto,
including, without limitation, attorney's fees, fines, or other penalty
payments, shall be at once repayable by Borrowers and all sums so advanced or
paid shall become a part of the Lender Indebtedness.

     The Environmental Affiliates will maintain all material licenses, permits,
approvals and authorizations required under applicable Environmental
Requirements.

          13.4 NOTICES. In the event any Borrower becomes aware of any past,
present or future facts or circumstances not identified on SCHEDULE 13, which
have given rise or could give rise to a claim against any Environmental
Affiliate related to a failure to comply with any Environmental Requirements,
and that could reasonably be anticipated to result in a Material Adverse Change,
Borrowers will promptly give Lender notice thereof, together with a written
statement of an officer of Borrowers setting forth the details thereof and the
action with respect thereto taken or proposed to be taken by the Environmental
Affiliates.

          13.5 INDEMNITY. Each Borrower agrees to indemnify, defend and hold
harmless Agent and the Lender Group, their parents, subsidiaries, successors and
assigns, and any officer, director, shareholder, employee, Affiliate or agent of
Agent or the Lender Group, for all loss, liability, damage, cost and expenses,
including, without limitation, attorney's fees and disbursements (including the
reasonable allocated cost of in-house counsel and staff) arising from or related
to (a) the release of any Special Materials in violation of the Environmental
Requirements at any facility at any time owned, leased or operated by any
Borrower or any Environmental Affiliate, (b) the release of any Special
Materials in violation of the Environmental Requirements treated, stored,
transported, handled, generated or disposed of by or on behalf of any Borrower
or any Environmental Affiliate at any third party owned site, (c) any claim
against any Borrower or any Environmental Affiliate that they have failed to
comply with all Environmental Requirements, and (d) the breach by any Borrower
of any representation or covenant in this ARTICLE 13.

          13.6 TESTING. After the occurrence of a Default or an Event of Default
and during the continuance thereof, Agent shall have the right from time to time
to designate such persons ("ENVIRONMENTAL CONSULTANTS") as Agent may select to
visit, inspect, examine and test all properties owned or operated by and all
products and wastes generated, treated, stored, transported, handled or disposed
of by or on behalf of any Environmental Affiliate, for the purpose of
investigating compliance with Environmental Requirements, any actual or
potential claims related thereto, and any condition which could result in
potential liability, cost or expenses to any Lender if Lender has a reasonable
basis to suspect such non-compliance, actual or potential claim, and/or such
condition. Subject to the limitations set forth in the first sentence of this
paragraph, each Borrower will permit, and will cause all Environmental
Affiliates to permit, such Environmental Consultants to have access to all of
such properties, products and wastes and all books, records and reports related
to compliance by the Environmental Affiliates with all Environmental
Requirements. Subject to the limitations set forth in the first sentence of this
paragraph, each Borrower will supply, and will cause all Environmental
Affiliates to supply, Agent or the Environmental Consultants with all
non-privileged information, records,


                                       45



correspondence, audits, reviews and materials related to compliance by the
Environmental Affiliates with all Environmental Requirements and will make
available to Lender or the Environmental Consultants appropriate personnel
employed by or consultants retained by the Environmental Affiliates having
knowledge of such matters.

     The cost of such visits, inspections, examination and tests shall be borne
by Borrowers. In the event Agent or any Lender pays such costs, such sums shall
be at once repayable by Borrowers and all sums so advanced or paid by Agent or
any Lender, shall become part of the Obligations. Notwithstanding the foregoing,
neither Agent nor any Lender shall have any obligation to perform any tests,
examinations or inspections or to monitor the Environmental Affiliates'
compliance with all Environmental Requirements. Upon request from Borrowers,
Agent shall, after receipt by Agent, deliver complete copies of all findings,
tests/sampling results and reports, regarding the activities undertaken by or on
behalf of or at the request of Agent at the properties. Agent agrees to cause
any Environmental Consultant prior to accessing any of Borrowers' properties to
maintain commercial general liability insurance against all claims for bodily
injury, death or property damage resulting from activities described in this
ARTICLE 13 in form, content and amount acceptable to Agent in its reasonable
discretion and consistent with industry standards for such parties.

          13.7 SURVIVAL. The representations and covenants of Borrowers
contained in this ARTICLE 13, including without limitation the indemnification
obligation of Borrowers, shall survive the occurrence of any event whatsoever,
including the payment of the Lender Indebtedness or any investigation by or
knowledge of Agent or any Lender.

          13.8 DEFINITIONS. For purposes of the foregoing:

               (a) "ENVIRONMENTAL AFFILIATE" means each Borrower and any other
Person for whom any Borrower at any time has any liability (contingent or
otherwise) with respect to any claims arising out of the failure of any Borrower
or such Person to comply with all applicable Environmental Requirements (as
defined herein).

               (b) "ENVIRONMENTAL CLEANUP SITE" shall mean any location which is
listed or proposed for listing on the National Priorities List, or which, to the
best of each Borrower's knowledge, is the subject of any pending or threatened
action, suit, proceeding or investigation related to or arising from any alleged
violation of any Environmental Requirements.

               (c) "ENVIRONMENTAL REQUIREMENTS" means any and all applicable
federal, state or local laws, statutes, ordinances, regulations or standards,
administrative or court orders or decrees or common law doctrines, relating to
(i) pollution or protection of the environment and natural resources, (ii)
exposure of employees or other persons to Special Materials, (iii) protection of
the public health and welfare from the effects of Special Materials and their
products, by-products, wastes, emissions, discharges or releases, and (iv)
regulation,


                                       46



licensing, approval or authorization of the manufacture, generation, use,
formulation, packaging, labeling, transporting, distributing, handling, storing
or disposing of any Special Materials.

               (d) "SPECIAL MATERIALS" means any and all materials which, under
Environmental Requirements, require special handling in use, generation,
collection, storage, treatment or disposal, or payment of costs associated with
responding to the lawful directives of any court or agency of competent
jurisdiction. Special Materials shall include, without limitation: (i) any
flammable substance, explosive, radioactive material, hazardous material,
hazardous waste, toxic substance, solid waste, pollutant, contaminant or any
related material, raw material, substance, product or by-product of any
substance specified in or regulated or otherwise affected by any Environmental
Requirements (including but not limited to any "hazardous substance" as defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended or any similar state or local law), (ii) any toxic chemical or
other substance from or related to industrial, commercial or institutional
activities, and (iii) asbestos, gasoline, diesel fuel, motor oil, waste and used
oil, heating oil and other petroleum products or compounds, polychlorinated
biphenyls in regulated concentrations exceeding 50 ppm, non-naturally occurring
radon, urea formaldehyde and lead-containing materials, except to the extent
that the same are being used in the ordinary course of business by Borrowers and
in compliance with all applicable Environmental Requirements.

     14. CONDITIONS PRECEDENT TO THE INITIAL ADVANCE OR LETTER OF CREDIT. The
obligation of (a) Agent or Lenders to make the initial Advance or (b) Agent to
issue the initial Letter of Credit is subject to the fulfillment, to the
satisfaction of Agent, of each of the following conditions on or before the
Closing Date. All of such agreements, documents and other items must be in form,
content and all other respects satisfactory to Agent.

          14.1 SEARCHES. Agent shall have received copies of record searches
(including Uniform Commercial Code financing statement searches and judgments,
suits, tax and other lien searches) together with all such termination
statements and releases as Agent shall require with regard to any Liens set
forth on any such searches.

          14.2 LOAN DOCUMENTS. Agent shall have received duly executed copies of
this Agreement and the other Loan Documents, including without limitation, the
Notes and the Stock Pledges, together with such additional documents,
instruments and certificates as Agent shall require in connection therewith from
time to time.

          14.3 RESOLUTIONS, ETC. Agent shall have received a certificate from
the Secretary of each Borrower attesting to the resolutions of each Borrower's
Board of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which each Borrower, respectively is a
party, authorizing specific officers of each Borrower to execute the same, and
attesting as to the true signatures of each such officer who executes a Loan
Document.


                                       47



          14.4 GOVERNING DOCUMENTS. Agent shall have received copies of each
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of each Borrower.

          14.5 GOOD STANDING. Agent shall have received a certificate of status
with respect to each Borrower, dated within thirty (30) days of the Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of each Borrower, which certificate shall indicate
that each Borrower is in good standing in such jurisdiction.

          14.6 FOREIGN QUALIFICATION. Agent shall have received certificates of
status with respect to each Borrower, each dated within thirty (30) days of the
Closing Date, such certificates to be issued by the appropriate officer of each
jurisdiction in which such Borrower is required to be qualified or licensed,
other than jurisdictions in which the failure to be so qualified or licensed
could not reasonably be expected to cause a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions.

          14.7 INSURANCE. Agent shall have received evidence of insurance as is
required by SECTION 9.5.

          14.8 OPINIONS. Agent shall have received opinions of Borrowers'
counsel and other parties covering such matters incident to the transactions
contemplated by this Agreement, including without limitation, the opinion of
local counsel in Switzerland with respect to the Stock Pledge solely as it
relates to that certain stock pledge agreement executed by KTIC in favor of
Agent evidencing the pledge by KTIC to Agent for the benefit of the Lenders of
65% of its stock ownership interest in K-Tron (Schweiz) AG (a Switzerland
company).

          14.9 NO CHANGES. No Material Adverse Change shall have occurred since
June 30, 2006.

          14.10 NO LITIGATION. No pending or threatened litigation,
investigation or proceeding before or by any arbitrator or governmental body
shall be continuing or threatened against any Borrower (a) in connection with
the Loan Documents or any of the transactions contemplated thereby and which, in
the opinion of Agent, is deemed material, or (b) which if adversely determined,
could reasonably be expected to result in a Material Adverse Change, and (ii) no
injunction, writ, restraining order or other order of any nature materially
adverse to any Borrower or the conduct of its business or inconsistent with the
due consummation of the transactions contemplated herein shall have been issued
by any governmental body.

          14.11 FINANCIAL REPORTING. Agent shall have received (i) the audited
consolidated financial statements of KTI and its Subsidiaries for the fiscal
year ended December 31, 2005, (ii) the most recent unaudited consolidated and
consolidating quarterly and annual financial statements of KTI and it
Subsidiaries, and (iii) projections of the consolidated and consolidating
financial statements of KTI and its Subsidiaries for the 2007 fiscal year.


                                       48



          14.12 ADDITIONAL INFORMATION. Agent shall have received all financial,
business, and other information regarding Borrowers as Agent shall have
requested and the results of which shall be satisfactory in form and substance
to Lenders.

          14.13 DUE DILIGENCE. Agent shall have completed a due diligence
investigation of Borrowers in scope, and with results, satisfactory to the
Agent.

          14.14 CAPITALIZATION. Agent and Lenders shall have approved the
organizational and legal structure and capitalization of Borrowers (including
without limitation the terms and conditions of the Governing Documents of and
each class of Equity Interests in each Borrower, and of each agreement or
instrument relating to such structure or capitalization).

          14.15 EXISTING INDEBTEDNESS. Agent shall have received evidence
satisfactory to it that all existing Indebtedness (other than as permitted by
SECTION 10.2 herein) shall have been paid in full, or shall, concurrently with
the initial Advance under the Revolving Credit Facility be paid in full.

          14.16 FEES. Agent shall have received payment of all fees and expenses
of Agent and Lenders (including without limitation, attorney's fees and expenses
subject to SECTION 17.9) on or prior to the Closing Date pursuant to this
Agreement.

          14.17 LICENSES; PERMITS. Agent shall have received any and all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and other third parties, domestic or foreign
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the other Loan Documents (without imposition of any conditions
that are not acceptable to Agent or Lenders).

          14.18 MISCELLANEOUS. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded.

          14.19 NON-WAIVER OF RIGHTS. By completing the closing hereunder, or by
making advances hereunder, the Lender Group does not thereby waive a breach of
any warranty or representation made by any Borrower hereunder or any agreement,
document, or instrument delivered to Agent or any Lender or otherwise referred
to herein, and any claims and rights of the Lender Group resulting from any
breach or misrepresentation by any Borrower are specifically reserved by Agent.

     15. CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT. In addition
to, but not in limitation of, any other conditions set forth in this Agreement,
the obligation of (a) Agent or any Lender to make any Advance, or (b) Agent to
issue any Letter of Credit is subject to the fulfillment, to the satisfaction of
Agent, of each of the following conditions:


                                       49



          15.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Agreement and the other Loan Documents shall be
true and correct in all material respects on and as of the date of such
extension of credit, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date);

          15.2 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on the date of such extension of credit,
nor shall either result from the making thereof; provided however, that Agent in
its sole discretion, may continue to make Advances notwithstanding the existence
of a Default or an Event of Default and that any Advances so made shall not be
deemed a waiver of any such Default or Event of Default; and

          15.3 NO INJUNCTION OR ORDER. No injunction, writ, restraining order,
or other order of any nature prohibiting, directly or indirectly, the extending
of such credit shall have been issued and remain in force by any governmental
authority against any Borrower, the Lender Group, or any of their Affiliates.

          15.4 MAXIMUM REVOLVING CREDIT FACILITY AMOUNT. The sum of the then
existing Revolving Credit Facility Usage plus such requested Advance or Letter
or Credit issuance does not exceed the Maximum Revolving Credit Facility Amount.

     16. CONDITIONS PRECEDENT TO MAKING REVOLVING CREDIT LOANS FOR PERMITTED
ACQUISITIONS. The Agent and Lenders shall not be obligated to make any Revolving
Credit Loan under this Agreement for a Permitted Acquisition unless the (a)
Agent has consented to such Permitted Acquisition pursuant to clause (ii) of the
definition of such term or (b) Agent shall have received the following, all in
form and substance satisfactory to the Agent:

          16.1 Receipt by the Agent from KTI of a written request to fund an
Advance for such Permitted Acquisition at least ten (10) calendar days in
advance of the requested funding date, setting forth the date and amount of the
requested Advance, which shall be at least thirty (30) Business Days prior to
the expiration of the Contract Period, together with copies of the proposed
Permitted Acquisition Agreement (or then current draft thereof) relating to such
Permitted Acquisition and all schedules, appendices, exhibits, amendments,
modifications and supplements thereto then available;

          16.2 Receipt by the Agent of all subordination agreements reasonably
required by the Agent in connection with the Permitted Acquisition, in form and
substance satisfactory to the Agent;

          16.3 Evidence that the business of the target of the Permitted
Acquisition is related to the Business;


                                       50



          16.4 Evidence that the target of the Permitted Acquisition has
generated a positive EBITDA calculated on a pro forma adjusted basis for the
trailing twelve (12) month period prior to the consummation of such acquisition,
which trailing twelve (12) month EBITDA shall be agreed upon by Borrowers and
Agent;

          16.5 Evidence that Borrowers will be in compliance with the financial
covenants set forth in ARTICLE 11 after the consummation of such Permitted
Acquisition on a pro-forma basis;

          16.6 Evidence that immediately after the consummation of such
Permitted Acquisition, the Borrowers will have the availability to request
Revolving Loan Advances in an amount not less than $5,000,000; and

          16.7 The total cash consideration paid for any and all Permitted
Acquisitions will not exceed $15,000,000 in any twelve (12) month period
(provided however, such $15,000,000 limitation will exclude up to an amount not
to exceed $15,000,000 of stock or other equity consideration paid by any
Borrower to the seller as partial payment of the purchase price payable under
such Permitted Acquisition); provided that, an amount not to exceed 50% of any
unused portion of such total cash consideration limitation may be carried over
by Borrowers for an additional twelve (12) month period on a non-cumulative
basis.

     17. DEFAULT AND REMEDIES.

          17.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event or Events of Default hereunder:

               (a) The failure of Borrowers to pay when due and payable or when
declared due and payable, any portion of the Obligations, whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees, costs, indemnities, or other
amounts constituting Obligations);

               (b) The failure of any Borrower to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in ARTICLES 10 OR
11 OR SECTIONS 9.3(C), 9.5, 9.6, 9.8, 9.9, 9.12 AND 9.14 of this Agreement;

               (c) The failure of any Borrower to perform, keep, or observe any
other term, provision, condition, covenant or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between any Borrower and the Lender Group or Citizens other than those
specifically set forth in this SECTION 17.1 and the continuation of the same for
thirty (30) days after Agent shall have provided Borrowers with written notice
thereof;

               (d) The failure of Borrowers to pay any Indebtedness for borrowed
money due in an amount in excess of $1,000,000 to any third Person or the
existence of any


                                       51



other event of default under any loan, security agreement, mortgage or other
agreement pertaining thereto binding any Borrower relating to Indebtedness in
excess of $1,000,000, after the expiration of any notice and/or grace periods
permitted in such documents, which event of default entitles such third Person
to cause such Indebtedness to become due prior to the stated maturity thereof;

               (e) The failure of any Borrower to pay or perform any other
obligation to any Lender under any other agreement or note or otherwise arising,
whether or not related to this Agreement, after the expiration of any notice
and/or grace periods permitted in such documents, which failure could be
reasonably expected to cause a Material Adverse Change;

               (f) The adjudication of any Borrower as a bankrupt or insolvent,
or the entry of an Order for Relief against any Borrower or the entry of an
order appointing a receiver or trustee for any Borrower of any of its property
or approving a petition seeking reorganization or other similar relief under the
Bankruptcy Code or other similar laws of the United States or any state or any
other competent jurisdiction;

               (g) A proceeding under any bankruptcy, reorganization,
arrangement of debt, insolvency, readjustment of debt, debt moratorium or
receivership law is filed by or against any Borrower and, if such proceeding was
involuntary, such proceeding remains undismissed, undischarged or unbonded for a
period of forty-five (45) days, or any Borrower makes an assignment for the
benefit of creditors, or any Borrower takes any action to authorize any of the
foregoing;

               (h) The termination or suspension of any Borrower's present
business, which termination or suspension could reasonably be expected to cause
a Material Adverse Change;

               (i) Any Borrower becomes unable to meet its debts as they mature,
or the admission in writing by any Borrower to such effect, or any Borrower
calling any meeting of all or any material portion of its creditors for the
purpose of debt restructure or moratorium;

               (j) The entry of a final judgment for the payment of money in an
amount in excess of $1,000,000 and not covered by insurance against any Borrower
which, within thirty (30) days after such entry, shall not have been discharged
or execution thereof stayed or bonded pending appeal or shall not have been
discharged within five (5) days after the expiration of any such stay or bond;

               (k) Any representation or warranty of any Borrower in any of the
Loan Documents is discovered to be untrue in any material respect or any
statement, certificate or data furnished by any Borrower pursuant hereto is
discovered to be untrue in any material respect as of the date as of which the
facts therein set forth are stated or certified;


                                       52



               (l) Any Borrower voluntarily or involuntarily dissolves or is
dissolved, terminates or is terminated;

               (m) Any Borrower is enjoined, restrained, or in any way prevented
by the order of any court or any administrative or regulatory agency, the effect
of which order restricts such Borrower from conducting all or any material part
of its business and which restriction could reasonably be expected to result in
a Material Adverse Change;

               (n) A breach by any Borrower occurs under any material agreement,
document or instrument, whether heretofore, now or hereafter existing between
any Borrower and any other Person where such breach could reasonably be expected
to result in a Material Adverse Change;

               (o) A Material Adverse Change occurs;

               (p) Any strike, lockout, labor dispute, embargo, condemnation,
act of God or public enemy, or other casualty loss occurs resulting in the
cessation or substantial curtailment of production or other revenue producing
activities at any facility of any Borrower for more than thirty (30) consecutive
days and resulting in a Material Adverse Change;

               (q) The loss, suspension, revocation or failure to renew any
license or permit now held or hereafter acquired by any Borrower, which loss,
suspension, revocation or failure to renew would result in a Material Adverse
Change;

               (r) The validity or enforceability of this Agreement, or any of
the Loan Documents, is contested by any Borrower, or any Borrower denies that it
has any or any further liability or obligation hereunder or thereunder;

               (s) A Reportable Event shall occur which Agent, in its sole
discretion, shall determine constitutes grounds for the termination by the PBGC
of any Pension Plan or for the appointment by the appropriate United States
District Court of a trustee for any Pension Plan, or any Pension;

               (t) A Change of Control occurs;

               (u) Any Plan shall be terminated or any such trustee shall be
requested or appointed, or if any Borrower is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Borrower's complete or partial withdrawal from such Plan; or

               (v) Any Borrower shall be criminally indicted or convicted under
any law that could reasonably be expected to lead to a forfeiture of any
material property or assets of such Borrower.


                                       53



          17.2 REMEDIES. After the occurrence and during the continuance of an
Event of Default, Agent may (and if directed by the Required Lenders shall), at
its election, without notice of its election and without demand, do any one or
more of the following, all of which are authorized by Borrowers:

               (a) Declare the entire unpaid principal of the Loans, all other
Obligations (including without limitations all contingent reimbursement
obligations under any Letters of Credit), or any part thereof, all interest
accrued thereon, all fees due hereunder and all other obligations of Borrowers
to Lenders hereunder or under any other Loan Document otherwise arising
immediately due and payable;

               (b) Cease advancing money, issuing Letters of Credit or otherwise
extending credit to or for the benefit of Borrowers under this Agreement, under
any of the Loan Documents, or under any other agreement between Borrowers and
the Lender Group;

               (c) Convert any Loans earning interest at LIBOR Rate plus
Applicable Margin to Loans earning interest at the Prime Rate plus Applicable
Margin and require Borrowers to indemnify each Lender against any loss, cost or
expense which such Lender has sustained or incurred as a consequence of such
conversion in accordance with SECTION 5.8;

               (d) Charge interest at the Default Rate;

               (e) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Agent or Lenders, but without
affecting the Obligations;

               (f) Hold, as cash collateral, any and all balances and deposits
of Borrowers held by the Lender Group, and any amounts received in the Operating
Account, to secure the full and final repayment of all of the Obligations;
and/or

               (g) Exercise each and every right and remedy granted to it under
the Loan Documents and under any other applicable law or at equity.

     If an Event of Default occurs under SECTIONS 17.1(F) OR (G), all of the
Obligations shall become immediately due and payable.

          17.3 SET-OFF. Without limiting the rights of each member of the Lender
Group under applicable law, each Borrower grants to each member of the Lender
Group and agrees that each member of the Lender Group may without notice to any
Borrower (such notice being expressly waived), and without constituting a
retention of any collateral in satisfaction of any Obligations (within the
meaning of Section 9-620 of the Uniform Commercial Code), at any time and from
time to time following the occurrence and during the continuance of an Event of
Default, exercise a right of set-off, a lien against and a security interest in
all property of Borrowers now or at any time in such member of the Lender
Group's possession in any capacity whatsoever, including but not limited to any
balance of any deposit, trust or agency account, or


                                       54



any other account with any member of the Lender Group, including Deposit
Accounts, as security for the Obligations. At any time and from time to time
following the occurrence and during the continuance of an Event of Default, any
member of the Lender Group may without notice or demand, set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such member of the
Lender Group to or for the credit of any Borrower against any or all of the
Obligations.

          17.4 TURNOVER OF PROPERTY HELD BY LENDER. Each Borrower irrevocably
authorizes any Affiliate of any member of Lender Group, following the occurrence
and during the continuance of an Event of Default, at the request of any member
of the Lender Group and without further notice, to turn over to Agent any
property of any Borrower held by such Affiliate, including without limitation,
funds and securities for any Borrower's account and to debit, for the benefit of
the Lender Group, any Deposit Account maintained by any Borrower with such
Affiliate (even if such Deposit Account is not then due or there results a loss
or reduction of interest or the imposition of a penalty in accordance with law
applicable to the early withdrawal of time deposits), in the amount requested by
Agent up to the amount of the Obligations, and to pay or transfer such amount or
property to Agent (for the pro-rata benefit of the Lender Group) for application
to the Obligations.

          17.5 DELAY OR OMISSION NOT WAIVER. Neither the failure nor any delay
on the part of Agent or any Lender to exercise any right, remedy, power or
privilege under the Loan Documents upon the occurrence of any Event of Default
or otherwise shall operate as a waiver thereof or impair any such right, remedy,
power or privilege. No waiver of any Event of Default shall affect any later
Event of Default or shall impair any rights of Agent or any Lender. No single,
partial or full exercise of any rights, remedies, powers and privileges by Agent
or any Lender shall preclude further or other exercise thereof. No course of
dealing between Agent or any Lender and any Borrower shall operate as or be
deemed to constitute a waiver of Agent's or any Lender's rights under the Loan
Documents or affect the duties or obligations of Borrowers.

          17.6 REMEDIES CUMULATIVE. The rights, remedies, powers and privileges
provided for herein shall not be deemed exclusive, but shall be cumulative and
shall be in addition to all other rights, remedies, powers and privileges in
Agent's or any Lender's favor at law or in equity.

          17.7 CONSENTS, APPROVALS AND DISCRETION. Except as otherwise expressly
provided herein, whenever Agent's or any Lender's consent or approval is
required or permitted or any documents are required to be acceptable to Agent or
any Lender, such consent, approval or acceptability shall be at the sole and
absolute discretion of Agent or such Lender. Except as otherwise expressly
provided herein, whenever any determination or act is at Agent's or any Lender's
discretion, such determination or act shall be at Agent's or such Lender's sole
and absolute discretion.


                                       55



          17.8 CERTAIN FEES, COSTS, EXPENSE EXPENDITURES. Each Borrower agrees
to pay on demand the following cost and expenses of the Lender Group (the
"LENDER GROUP EXPENSES"):

               (a) all out-of-pocket costs, expenses and fees (including
reasonable attorneys' fees and other legal costs, expenses and charges) incurred
or paid by (i) Agent in connection with advising, structuring, drafting,
preparing, reviewing, negotiating the Loan Documents or any waivers, consents,
amendments, extensions, modifications or restatements related thereto; (ii) any
member of the Lender Group in connection with enforcing, protecting, preserving,
defending or terminating any of the Loan Documents or any of the Lender Group's
rights and remedies related thereto, irrespective of whether suit is brought
(including without limitation, all costs and expenses and attorneys' fees
related to any "workout," "restructuring," insolvency or similar proceeding
involving any Borrower); and (iii) any member of the Lender Group in connection
with negotiations regarding or the defense or prosecution of any legal
proceedings involving, any claim (including third-party claims) made or
threatened against any member of the Lender Group related to or involving the
Loan Documents, the transactions contemplated under the Loan Documents or any
actions taken pursuant to the Loan Documents by the Lender Group;

               (b) all out-of-pocket costs, expenses and fees incurred or paid
by Agent for administering the Loan Documents, including photocopying;
notarization; couriers; messengers; telecommunications; public record searches
(including without limitation, real estate, tax lien, litigation, UCC,
bankruptcy, patent, trademark, copyright or motor vehicle department searches);
filing; recording; publication; environmental audits; and accounting or other
professional advisors;

               (c) all out-of-pocket costs, expenses and fees incurred or paid
by any member of the Lender Group in connection with the disbursement of funds
under the Loan Documents (by wire transfer or otherwise); the dishonoring of
checks, drafts or other items of payment; correction or cure of any Default or
Event of Default or enforcement of the Loan Documents; or exercising any rights
or remedies under the Loan Documents; and

               (d) any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of the Loan Documents, and
all liabilities to any member of the Lender Group may become subject as the
result of delay in paying or omission to pay such taxes.

     In the event any Borrower shall fail to pay taxes, insurance, assessments,
fees, costs or expenses which it is required to pay hereunder, Agent in its sole
discretion, may make expenditures for such purposes and the amount so expended
(including attorney's fees and expenses, filing fees and other charges) shall be
payable by Borrowers on demand and shall constitute part of the Obligations.


                                       56



     With respect to any amount required to be paid by Borrowers under this
Section, in the event Borrowers fail to pay such amount on demand, at Agent's
option, all of said amounts required to be paid by Borrowers, may be charged by
Agent as a Prime Rate Loan and Borrowers shall also pay to Agent interest
thereon at the Default Rate. Each Lender shall reimburse Agent for such Lender's
Pro-Rata Share of such Loan in accordance with the terms of SECTION 5.1. If any
Lender fails to reimburse Agent for such Lender's Pro Rata Share, such Lender
shall be deemed a Defaulting Lender or be subject to the Defaulting Lender
provisions set forth in SECTION 5.1(A)(VII)(A).

     Notwithstanding the foregoing, Agent agrees that Borrowers will not be
obligated to pay to Agent or any Lender an amount in excess of $50,000 for
attorneys' fees incurred or paid by Agent or any member of the Lender Group in
connection with advising, structuring, drafting, preparing, reviewing and/or
negotiating the Loan Documents for any period up to and including the Closing
Date.

     18. REGARDING AGENT.

          18.1 APPOINTMENT. Each Lender hereby designates Citizens to act as
Agent for such Lender under this Agreement and the other Loan Documents. Each
Lender hereby irrevocably authorizes Agent to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of Agent by the terms hereof and thereof
and such other powers as are reasonably incidental thereto and Agent shall hold
all collateral, payments of principal and interest, fees, charges and
collections received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agent
or employees. As to any matters not expressly provided for by this Agreement,
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided however, that Agent
shall not be required to take any action which exposes Agent to liability or
which is contrary to this Agreement or the other Loan Documents or applicable
law unless Agent is furnished with an indemnification reasonably satisfactory to
Agent with respect thereto.

          18.2 NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross negligence (but not mere
negligence) or willful misconduct or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement or in any other Loan Documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any of
the other Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any of the other


                                       57



Loan Documents or for any failure of any Borrower to perform its obligations
hereunder or thereunder. Agent shall not be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any of the other
Loan Documents, or to inspect the properties, books or records of any Borrower.
The duties of Agent as respects the Loans to Borrowers shall be mechanical and
administrative in nature and shall be performed by Agent with the same care and
skill as it would exercise in its capacity as agent when dealing with loans of
similar size and complexity for other lenders; Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender; and nothing in
this Agreement, expressed or implied, is intended to or shall be so construed as
to impose upon Agent any obligations in respect of this Agreement except as
expressly set forth herein.

          18.3 LACK OF RELIANCE ON AGENT AND RESIGNATION.

               (a) Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each Borrower in
connection with the making and the continuance of the Loans hereunder and the
taking or not taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of Borrowers. Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before making of the Loans or at any time or times thereafter
except as shall be provided by Borrowers pursuant to the terms hereof. Agent
shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties herein or in any agreement, document,
certificate or a statement delivered in connection with or for the execution,
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Agreement or any of the other Loan Documents, or of the
financial condition of any Borrower, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the other Loan Documents or the
financial condition of any Borrower, or the existence of any Event of Default or
any Default.

               (b) Agent may resign upon written notice to each of Lenders and
Borrowing Agent. The Required Lenders will promptly designate a successor Agent
which in the absence of an Event of Default shall be reasonably satisfactory to
Borrowers. Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment. Effective upon its resignation the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent. After any Agent's resignation as
Agent, the provisions of this SECTION 18.3 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

          18.4 CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Loan Document, Agent shall be
entitled to refrain from such act or


                                       58



taking such action unless and until Agent shall have received instructions from
the Required Lenders; and Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, Lenders shall not have
any right of action whatsoever against Agent as a result of its acting or
refraining from acting hereunder in accordance with the instructions of the
Required Lenders.

          18.5 RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or facsimile message, cablegram, order or other
document or telephone message believed in good faith by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and the
other Loan Documents and its duties hereunder, upon advice of counsel selected
by it. Agent may employ agents and attorneys-in-fact and shall not be liable for
the default or misconduct of any such agents or attorneys-in-fact selected by
Agent with reasonable care.

          18.6 NOTICE OF DEFAULT. Except as specifically set forth in this
SECTION 18.6, Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under the other Loan
Documents, unless Agent has received written notice from a Lender or from a
Borrower or Borrowing Agent referring to this Agreement or the other Loan
Documents, describing such Default or Event of Default. In the event that Agent
receives such a notice, or to the extent that Agent shall otherwise have actual
knowledge that an Event of Default has occurred, Agent shall give notice thereof
to Lenders. Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders; provided
that, unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of Lenders. Agent shall, upon the taking of any such
action(s), provide Lenders with notice (which may be by telephone) of the same.

          18.7 INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by the Borrowers, each Lender will reimburse and indemnify Agent
according to its Commitment Percentage from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Agent in performing its duties hereunder, or
in any way relating to or arising out of this Agreement or any other Loan
Document; provided that, Lenders shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence (but
not mere negligence) or willful misconduct.

          18.8 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation
of Agent to lend under this Agreement, the Loans made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise


                                       59



indicates, include Agent in its individual capacity as a Lender. Agent may
engage in business with any Borrower ("OTHER TRANSACTIONS") as if it were not
performing the duties specified herein and may accept fees and other
consideration from any Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.

          18.9 BORROWERS' UNDERTAKING TO AGENT. Without prejudice to its
obligations to Lenders under the other provisions of this Agreement, each
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrowers' obligations to make payments for the account of the Lender
Group or the relevant one or more of them pursuant to this Agreement.

     19. INDEMNIFICATION AND OTHER PROVISIONS.

          19.1 INDEMNIFICATION. Each Borrower agrees to indemnify and hold
harmless, the Lender Group, their Affiliates and their officers, directors,
shareholders, employees and agents (collectively, the "INDEMNIFIED PARTIES"),
from and against any and all claims, liabilities, losses, damages, costs and
expenses (whether or not such Indemnified Party is a party to any litigation),
including without limitation reasonable attorney's fees and costs, settlement
costs and costs of investigation, document production, attendance at depositions
or other discovery, incurred by any Indemnified Party with respect to, arising
out of or as a consequence of (a) this Agreement or any of the other Loan
Documents, including without limitation, any failure of Borrowers to pay when
due (at maturity, by acceleration or otherwise) any principal, interest, fee or
any other amount due under this Agreement or the other Loan Documents, or any
other Event of Default; (b) the use by Borrowers of any proceeds advanced
hereunder; (c) the transactions contemplated hereunder; or (d) any claim,
demand, action or cause of action being asserted against (i) any Borrower or any
of its Affiliates by any other Person, or (ii) any Indemnified Party by any
Borrower in connection with the transactions contemplated hereunder.
Notwithstanding anything herein or elsewhere to the contrary, no Borrower shall
be obligated to indemnify or hold harmless any Indemnified Party from any
liability, loss or damage resulting from the willful misconduct, gross
negligence or unlawful actions of such Indemnified Party. Any amount payable to
the Lender Group under this Section will bear interest at the Default Rate from
the due date until paid.

          Borrowers' obligations under this Section shall survive termination of
this Agreement and repayment of the Obligations.

          19.2 TIME IS OF THE ESSENCE. Time is of the essence in Borrowers'
performance of their obligations under the Loan Documents.

     20. COMMUNICATIONS AND NOTICES. All notices, requests and other
communications made or given in connection with the Loan Documents shall be in
writing and, unless receipt is stated herein to be required, shall be deemed to
have been validly given if


                                       60



delivered personally to the individual or division or department to whose
attention notices to a party are to be addressed, or by private carrier, or
registered or certified mail, return receipt requested, or by electronic mail or
facsimile with the original forwarded by first-class mail, in all cases, with
charges prepaid, addressed as follows, until some other address (or individual
or division or department for attention) shall have been designated by notice
given by one party to the other:

          To Borrowers:

             K-Tron International, Inc.
             Route 55 & 553
             P.O. Box 888
             Pitman, New Jersey  08071-0888
             Attention: Chief Financial Officer

          With a copy to (for informational purposes only):

             Morgan, Lewis & Bockius LLP
             1701 Market Street
             Philadelphia, PA  19103
             Attention: Michael J. Pedrick, Esquire
             Email: MPedrick@morganlewis.com

          To  Agent:

             Citizens Bank of Pennsylvania
             2001 Market Street, Suit 600
             Philadelphia, PA   19103
             Attention: Derrick R. Davis, Senior Vice President
             Telephone: (267) 671-1723
             Telecopier: (215) 751-1516
             E-Mail: derrick.davis@citizensbank.com

ALL "PAYMENT IN FULL" CHECKS OR OTHER MEDIA OF PAYMENT MUST BE SENT TO AGENT
ONLY TO THE ABOVE ADDRESS. Agent will endeavor to provide to Borrowers and its
counsel electronic mail copies of any notices hereunder, but the failure to do
so will not result in any liability or obligation of Agent to Borrowers.

     21. WAIVERS.


                                       61


          21.1 WAIVERS. IN CONNECTION WITH ANY PROCEEDINGS UNDER THE LOAN
DOCUMENTS, INCLUDING WITHOUT LIMITATION ANY ACTION BY ANY MEMBER OF THE LENDER
GROUP IN REPLEVIN, FORECLOSURE OR OTHER COURT PROCESS OR IN CONNECTION WITH ANY
OTHER ACTION RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREUNDER, EACH BORROWER WAIVES:

               (a) ALL ERRORS, DEFECTS AND IMPERFECTIONS IN SUCH PROCEEDINGS;

               (b) ALL BENEFITS UNDER ANY PRESENT OR FUTURE LAWS EXEMPTING ANY
PROPERTY, REAL OR PERSONAL, OR ANY PART OF ANY PROCEEDS THEREOF FROM ATTACHMENT,
LEVY OR SALE UNDER EXECUTION, OR PROVIDING FOR ANY STAY OF EXECUTION TO BE
ISSUED ON ANY JUDGMENT RECOVERED UNDER ANY OF THE LOAN DOCUMENTS OR IN ANY
REPLEVIN OR FORECLOSURE PROCEEDING, OR OTHERWISE PROVIDING FOR ANY VALUATION,
APPRAISAL OR EXEMPTION;

               (c) ALL RIGHTS TO INQUISITION ON ANY REAL ESTATE, WHICH REAL
ESTATE MAY BE LEVIED UPON PURSUANT TO A JUDGMENT OBTAINED UNDER ANY OF THE LOAN
DOCUMENTS AND SOLD UPON ANY WRIT OF EXECUTION ISSUED THEREON IN WHOLE OR IN
PART, IN ANY ORDER DESIRED BY AGENT;

               (d) PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF DEMAND, NOTICE OF
NONPAYMENT, PROTEST AND NOTICE OF PROTEST OF ANY OF THE LOAN DOCUMENTS,
INCLUDING THE NOTES; AND

               (e) ANY REQUIREMENT FOR BONDS, SECURITY OR SURETIES REQUIRED BY
STATUTE, COURT RULE OR OTHERWISE.

     22. SUBMISSION TO JURISDICTION. Each Borrower hereby consents to the
exclusive jurisdiction of any state or federal court located within the
Commonwealth of Pennsylvania, and irrevocably agrees that, subject to Agent's
election, all actions or proceedings relating to the Loan Documents or the
transactions contemplated hereunder shall be litigated in such courts, and each
Borrower waives any objection which it may have based on lack of personal
jurisdiction, improper venue or forum non conveniens to the conduct of any
proceeding in any such court and waives personal service of any and all process
upon it and consents that all such service of process be made by mail or
messenger directed to it at the address set forth in SECTION 20. Nothing
contained in this Section shall affect the right of Agent or any Lender to serve
legal process in any other manner permitted by law or affect the right of Agent
or any Lender to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdiction.

     23. SALE AND ASSIGNMENT.

          23.1 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.


                                       62



               (a) This Agreement shall be binding upon and inure to the benefit
of Borrowers, Agent, each Lender, all future holders of the Notes and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.

               (b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Loans to other financial institutions
(each such transferee or purchaser of a participating interest, a "TRANSFEREE").
Each Lender shall provide written notice to Agent and Borrowing Agent of any
sales of participating interests made by each Lender. In the event of any such
sale by a Lender of participating interests to a Transferee, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any Note for all
purposes under this Agreement, and the Borrowers and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Each Transferee may exercise all
rights of payment (including without limitation rights of set-off) with respect
to the portion of such Loans held by it or other Obligations payable hereunder
as fully as if such Transferee were the direct holder thereof provided that no
Borrower shall be required to perform any of its obligations under any Loan
Documents (including, without limitation, any payment obligations) to, or take
any direction from, any Transferee and in no event shall any Borrower be
required to pay to Agent, any Lender or any other Person for the benefit of any
Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Loans or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the Loans
hereunder or other Obligations payable hereunder and in no event shall any
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Loans or other Obligations payable hereunder to
both such Lender and such Transferee. Each Borrower hereby grants to any
Transferee a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Transferee as security for the
Transferee's interest in the Loans. No such participation shall create a direct
contractual relationship between any Borrower and any such Transferee, and no
Transferee shall be given (i) the right to instruct the Lender to take or to
refrain from taking any action hereunder, or (ii) any voting rights hereunder
(other than for reductions or postponements of any amounts constituting
principal or interest on any Loans payable hereunder).

               (c) Any Lender may sell, assign or transfer its rights under this
Agreement and the other Loan Documents to one or more additional banks or
financial institutions reasonably acceptable to Agent and Borrowers, and one or
more additional banks or financial institutions may commit to make Loans
hereunder (each a "PURCHASING LENDER"); provided however that Borrowers shall
have no right to approve a Purchasing Lender following the occurrence and during
the continuance of a Default or an Event of Default, pursuant to a Commitment
Transfer Supplement in form substantially similar to that set forth on EXHIBIT B
hereto (each, a "COMMITMENT TRANSFER SUPPLEMENT"), executed by a Purchasing
Lender, the


                                       63



transferor Lender, and Agent and delivered to Agent for recording, provided
however that any transfer of less than all of any Lender's rights hereunder or
any transfer to a Person who is not a Lender hereunder shall be in minimum
amounts of not less than $10,000,000. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose (it being understood that all
outstanding obligations of the transferor Lender shall either be satisfied by
such transferor Lender or assumed by the Purchasing Lender). Such Commitment
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Lender
and the resulting adjustment of the Commitment Percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the other Loan
Documents. Borrowers hereby consent to the addition of such Purchasing Lender
and the resulting adjustment of the Commitment Percentages arising from the
purchase by such Purchasing Lender in accordance with the terms of this SECTION
23.1(C) of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the other Loan Documents. Borrowers shall, to
the extent reasonable, execute and deliver such further documents and do such
further reasonable acts and things in order to effectuate the foregoing.

               (d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "REGISTER") for the
recordation of the names and addresses of each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrowers, Agent and Lenders may treat each Person whose name is recorded in
the Register as the owner of the Loan recorded therein for the purposes of this
Agreement. The Register shall be available for inspection by Borrowers or any
Lender at any reasonable time and from time to time upon reasonable prior
notice. Agent shall receive a fee in the amount of $5,000 payable by the
applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.

               (e) Each Borrower authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrowers which has been delivered to such Lender by or on behalf of Borrowers
pursuant to this Agreement or in connection with such Lender's credit evaluation
of such Borrowers.

               (f) Each Borrower agrees to take all actions that Agent may
reasonably request in attempting to sell, transfer or assign any of its rights
or interest under this Agreement. Such actions include, but are not limited to,
(a) Borrowers causing senior management and representatives of Borrowers to be
available to participate in information


                                       64



meetings with prospective Purchasing Lenders at such times and places as Agent
may reasonably request, and (b) Borrowers providing Agent with all information
reasonably requested by Agent in order to accomplish such sale, transfer or
assignment.

               (g) In addition to the foregoing provisions, any Lender may at
any time pledge or assign all or any portion of its rights under the Loan
Documents (including any portion of any Note) to any of the twelve (12) Federal
Reserve Banks organized under Section 4 of the Federal Reserve Act, 12, U.S.C.
Section 341. No such pledge or assignment or enforcement thereof shall release
any Lender from its obligations under any of the Loan Documents or substituting
any such assignee for such Lender as a party hereto.

     24. BORROWING AGENCY.

          24.1 BORROWING AGENCY PROVISIONS.

               (a) Each Borrower hereby irrevocably designates Borrowing Agent
to be its attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.

               (b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to Borrowers as a result thereof. To induce
Agent and Lenders to do so and in consideration thereof, each Borrower hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this SECTION 24.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party.

               (c) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted by
Agent or any Lender to any Borrower, failure of Agent or any Lender to give any
Borrower notice of borrowing or any other notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, and such agreement
by each Borrower to pay upon any notice issued pursuant thereto is unconditional
and unaffected by prior recourse by Agent or any Lender to the other Borrowers
or the lack thereof.

          24.2 SUBROGATION. Each Borrower expressly waives any and all rights of
subrogation, reimbursement , indemnity, exoneration, contribution of any other
claim which such


                                       65



Borrower may now or hereafter have against the other Borrowers or other Person
directly or contingently liable for the Obligations hereunder, or against or
with respect to the other Borrowers' property, arising from the existence or
performance of this Agreement, until termination of this Agreement and repayment
in full of the Obligations.

     25. MISCELLANEOUS.

          25.1 MODIFICATION OF AGREEMENT.

               (a) The Required Lenders and Borrowers may, subject to the
provisions of this SECTION 25.1, from time to time enter into written
supplemental agreements to this Agreement or the other Loan Documents executed
by Borrowers, for the purpose of adding or deleting any provisions or otherwise
changing, varying or waiving in any manner the rights of Lenders, Agent or
Borrowers thereunder or the conditions, provisions or terms thereof or waiving
any Default or Event of Default thereunder, but only to the extent specified in
such written agreements; provided however, that no such supplemental agreement
shall without the consent of Agent and the Lender Group (i) increase the
Commitment Percentage of any Lender, (ii) extend the final maturity of any Note
or any scheduled due date under SECTION 2.1 hereof, or decrease the rate of
interest or reduce any fee payable by any Borrower to any such Lender pursuant
to this Agreement, (iii) alter the definition of the term Required Lenders or
alter, amend or modify this SECTION 25.1, (iv) change the rights and duties of
Agent, (v) increase the Loans; or (vi) release any Borrower from any of its
obligations hereunder or under any of the other Loan Documents.

               (b) Any such supplemental agreement shall apply equally to each
Lender and shall be binding upon Borrower, Lenders and Agent and all future
holders of the Obligations. In the case of any waiver, Borrowers, Agent and
Lenders shall be restored to their former positions and rights, and any Event of
Default waived shall be deemed to be cured and not continuing, but no waiver of
a specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right resulting from such subsequent
Event of Default.

          25.2 BROKERS. The transaction contemplated hereunder was brought about
and entered into by the Lender Group and Borrowers acting as principals and
without any brokers, agents or finders being the effective procuring cause
hereof. Each Borrower represents to the Lender Group that no Borrower has
committed the Lender Group to the payment of any brokerage fee or commission in
connection with this transaction. If any such claim is made against the Lender
Group by any broker, finder or agent or any other Person, each Borrower agrees
to indemnify, defend and hold the Lender Group harmless against any such claim,
at Borrowers' own cost and expense, including the Lender Group's attorneys'
fees. Each Borrower further agrees that until any such claim or demand is
adjudicated in the Lender Group's favor, the amount claimed and/or demanded
shall be deemed part of the Obligations.


                                       66



          25.3 USE OF AGENT'S OR LENDER'S NAME. No Borrower shall use the name
of any member of the Lender Group or the name of any Affiliate of any member of
the Lender Group in connection with any of their business or activities except
as may otherwise be required by the rules and regulations of the Securities and
Exchange Commission or any like regulatory body and except as may be required in
their dealings with any governmental agency.

          25.4 NO JOINT VENTURE. Nothing contained herein is intended to permit
or authorize any Borrower to make any contract on behalf of the Lender Group,
nor shall this Agreement be construed as creating a partnership, joint venture
or making the Lender Group an investor in any Borrower.

          25.5 SURVIVAL. All covenants, agreements, representations and
warranties made by any Borrower in the Loan Documents or made by or on their
behalf in connection with the transactions contemplated herein shall be true at
all times this Agreement is in effect and shall survive the execution and
delivery of the Loan Documents, any investigation at any time made by the Lender
Group or on their behalf and the making by the Lender Group of the loans or
advances to Borrowers. All statements contained in any certificate, statement or
other document delivered by or on behalf of any Borrower pursuant hereto or in
connection with the transactions contemplated hereunder shall be deemed
representations and warranties by Borrowers.

          25.6 NO ASSIGNMENT. No Borrower may assign any of its rights hereunder
without the prior written consent of Agent.

          25.7 PUBLICITY. Agent may use its discretion in disclosing the fact,
but not the terms and conditions, of the financing under this Agreement to any
public forum including, without limitations, "tombstone" announcements in the
print media whether individually or part of a general advertisement.

          25.8 BINDING EFFECT. This Agreement and all rights and powers granted
hereby will bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.

          25.9 SEVERABILITY. The provisions of this Agreement and all other Loan
Documents are deemed to be severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.

          25.10 NO THIRD PARTY BENEFICIARIES. The rights and benefits of this
Agreement and the Loan Documents shall not inure to the benefit of any third
party.

          25.11 HOLIDAYS. If the day provided herein for the payment of any
amount or the taking of any action falls on a Saturday, Sunday or public holiday
at the place for payment or action, then the due date for such payment or action
will be the next succeeding Business Day.


                                       67



          25.12 LAW GOVERNING. This Agreement has been made, executed and
delivered in the Commonwealth of Pennsylvania and will be construed in
accordance with and governed by the laws of such Commonwealth, without regard to
any rules or principles regarding conflicts of law or any rule or canon of
construction which interprets agreements against the draftsman.

          25.13 INTEGRATION. The Loan Documents shall be construed as integrated
and complementary of each other, and as augmenting and not restricting the
Lender Group's rights, powers and remedies. The Loan Documents contain the
entire understanding of the parties thereto with respect to the matters
contained therein and supersede all prior agreements and understandings between
the parties with respect to the subject matter thereof and do not require parol
or extrinsic evidence in order to reflect the intent of the parties. In the
event of any inconsistency between the terms of this Agreement and the terms of
the other Loan Documents, the terms of this Agreement shall prevail.

          25.14 EXHIBITS AND SCHEDULES. All exhibits and schedules attached
hereto are hereby made a part of this Agreement.

          25.15 HEADINGS. The headings of the Articles, Sections, paragraphs and
clauses of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.

          25.16 COUNTERPARTS. The Loan Documents and any notice or communication
under the Loan Documents may be executed in one or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument. Delivery of a photocopy or telecopy of an executed
counterpart of a signature page to any Loan Document shall be effective as
delivery of a manually executed counterpart of such Loan Document.

          25.17 JOINT AND SEVERAL. The obligations of Borrowers under this
Agreement shall be joint and several obligations.

          25.18 LIMITATION ON DAMAGES. Each Borrower and the Lender Group agree
that, in any action, suit or proceeding, in respect of or arising out of this
Agreement, the Loan Documents or the transactions contemplated hereunder, each
mutually waives to the fullest extent permitted by law, any claim for
consequential, punitive or special damages.

          25.19 WAIVER OF RIGHT TO TRIAL BY JURY. EACH BORROWER AND THE LENDER
GROUP WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER ANY OF THE LOAN DOCUMENTS OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER OR ANY MEMBER OF THE
LENDER GROUP WITH RESPECT TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. EACH BORROWER AND


                                       68



THE LENDER GROUP AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWERS AND THE LENDER GROUP
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. EACH BORROWER ACKNOWLEDGES THAT
IT HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION, THAT
IT FULLY UNDERSTANDS ITS TERMS, CONTENT AND EFFECT, AND THAT IT VOLUNTARILY AND
KNOWINGLY AGREES TO THE TERMS OF THIS SECTION.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       69



     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date indicated above.

                                        BORROWERS:

                                        K-TRON INTERNATIONAL, INC.


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Senior Vice President and
                                               Chief Financial Officer
                                               ---------------------------------


                                        K-TRON INVESTMENT CO.


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Vice President and Treasurer
                                               ---------------------------------


                                        K-TRON TECHNOLOGIES, INC.


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Vice President and Treasurer
                                               ---------------------------------


                                        K-TRON AMERICA, INC.


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Vice President and Treasurer
                                               ---------------------------------


                                        GUNDLACH EQUIPMENT CORPORATION


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Vice President and Treasurer
                                               ---------------------------------



                                        PENNSYLVANIA CRUSHER CORPORATION


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Vice President and Treasurer
                                               ---------------------------------


                                        JEFFREY SPECIALTY EQUIPMENT CORPORATION


                                        By: /s/ Ronald R. Remick
                                            ------------------------------------
                                        Name: Ronald R. Remick
                                              ----------------------------------
                                        Title: Vice President and Treasurer
                                               ---------------------------------



                                        LENDERS:

                                        CITIZENS BANK OF PENNSYLVANIA


                                        By: /s/ Derrick R. Davis
                                            ------------------------------------
                                        Name: Derrick R. Davis
                                        Title: Senior Vice President

                                        Commitment Percentage -
                                        Revolving Credit Facility: 100%
                                        Amount: $50,000,000


                                        AGENT:

                                        CITIZENS BANK OF PENNSYLVANIA


                                        By: /s/ Derrick R. Davis
                                            ------------------------------------
                                        Name: Derrick R. Davis
                                        Title: Senior Vice President

EX-99.1

Exhibit 99.1

K-TRON INTERNATIONAL, INC.
Routes 55 & 553, PO Box 888
Pitman, NJ 08071-0888
(856) 589-0500
FAX (856) 582-7968
www.ktron.com
E-mail: ktii@ktron.com

For Release:	Immediately
Contact:	Ronald Remick, Senior Vice President and Chief Financial Officer
	Tel: (856) 256-3311          E-mail: rremick@ktron.com

K-TRON ACQUIRES PREMIER PNEUMATICS, INC.

Pitman, New Jersey — October 5, 2006 — K-Tron International, Inc. (NASDAQ-KTII) today announced the acquisition of all of the stock of privately-held Premier Pneumatics, Inc. (“Premier”), a leading manufacturer of pneumatic conveying and bulk handling equipment for the North American market. The purchase price was $27.565 million, all of which was paid in cash, including a $2 million escrow. The purchase price is subject to adjustment based on Premier’s net working capital on the closing date.

Premier, which is based in Salina, Kansas, manufactures and markets a complete line of components for pneumatic conveying systems. Premier and its predecessors have been in the pneumatic conveying business for over 50 years, and the company is well-known for its Aerolock^® rotary valve, Series II 2400 vacuum receiver, blower package and diverter valve product lines. Premier is also known for its engineered systems for rail car and truck unloading, as well as for its storage-to-production-line transfer systems which are used in the plastics, compounding, food and chemical industries. The company has a large installed base of systems, resulting in significant repeat business from established customers. For the trailing 12-month period ended August 31, 2006, Premier’s unaudited revenues were approximately $25.8 million.

Top operating management of Premier is expected to remain following the acquisition, including Mike Wedel, Vice President Sales and Marketing, Todd Smith, Vice President Engineering and Manufacturing, and Gary Lee, Vice President Finance. Kevin Bowen, Senior Vice President of K-Tron responsible for the K-Tron Process Group, will also serve as President of Premier.

Commenting on the acquisition, K-Tron Chairman and Chief Executive Officer Edward B. Cloues, II said, “The acquisition of Premier significantly expands the scope of K-Tron’s activities in the pneumatic conveying business, which we entered in 1997, and in the solids feeding business where K-Tron has been a global leader for many years with its volumetric and gravimetric screw and belt feeders. The combination of these two market leaders will enable both K-Tron and Premier to offer their customers integrated pneumatic conveying and feeding systems with engineering, manufacturing, commissioning and after-sale services from a single source, something that is not widely available today. In addition, K-Tron’s extensive global network of wholly-owned subsidiaries and independent sales representatives is an ideal platform on which to expand Premier’s scope beyond the North American market.” Robert Korbelik, the

previous owner and retiring President of Premier, added, “We view the fit of our Premier business with K-Tron as being ideal for our company and our employees since we are each a market leader and serve many of the same customers. I am also enthusiastic about the combination because both businesses are known for their high standards when it comes to product quality and customer satisfaction.”

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 to be accretive to earnings per share in the fourth quarter of 2006.

On a related matter, K-Tron also announced that on September 29, it and its U.S. subsidiaries entered into a Loan Agreement with Citizens Bank of Pennsylvania. This credit facility provides K-Tron and these subsidiaries until September 29, 2011 with a $50 million unsecured revolving line of credit. The $27.565 million purchase price for Premier was borrowed under this new facility, and the Company also borrowed $9.7 million thereunder to repay all of its other bank indebtedness, except for a mortgage note with a principal balance of $1.6 million.

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 and the United Kingdom, 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 Premier, including the retention of top management of Premier, its and the Company’s future prospects and opportunities, including in foreign markets, Premier’s expected contribution to the Company’s fourth quarter 2006 earnings 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 Premier’s equipment, the failure of bookings for new equipment and systems 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.

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