<PAGE>

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT (together with all exhibits hereto, the "Agreement"),
made as of the 1st day of December, 2001, between B.W. Elliott Manufacturing
Co., LLC, a Delaware limited liability company (the "Company"), having its
executive offices and principal place of business in Binghampton, New York, and
George M. Scherer, the undersigned individual ("Executive").

         WHEREAS, the successor to the Company and Executive entered into an
Employment Agreement, dated January 16, 1996, as amended on March 15, 1996 and
February 19, 1998 (the "Prior Agreement"); and

         WHEREAS, the Company and Executive wish to enter into a new employment
agreement to replace the Prior Agreement.

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the Company and Executive agree as
follows:

         1.       Agreement Term.

                  The term of this Agreement shall be the period ("Agreement
Term") commencing on the date hereof (the "Employment Date") and ending on the
fifth (5th) anniversary of the date hereof, unless sooner terminated by either
party upon one (1) year's prior written notice ("Voluntary Termination") or
pursuant to the provisions of Section 5 hereof.

         2.       Employment.

                  (a) Employment by the Company. Executive agrees to be employed
by the Company for the Agreement Term upon the terms and subject to the
conditions set forth in this Agreement. Executive shall have the title of
President, and report to the Board of Directors of the Company (the "Board").
Executive shall have such duties as may be prescribed by the Company and shall
serve in such other and/or additional position(s) as the Company may determine
from time to time. If so requested, and for no additional consideration,
Executive will serve as a member of the Board or any affiliate.


<PAGE>

                  (b) Performance of Duties. Throughout the Agreement Term,
Executive shall faithfully and diligently perform Executive's duties in
conformity with the directions of the Company and serve the Company to the best
of Executive's ability. Executive shall devote Executive's entire working time,
attention and energies to the business and affairs of the Company, subject to
vacations and sick leave as provided herein and in accordance with Company
policy.
                  (c) Place of Performance. During the Agreement Term, Executive
shall, subject to travel requirements on behalf of the Company, be based at the
Company's offices in Binghampton, New York and, in this regard, Executive shall
maintain Executive's personal residence in such city or such other location
within reasonable access to Executive's place of employment.

         3.       Compensation and Benefits.

                  (a) Base Salary. The Company agrees to pay to Executive for
employment hereunder a base salary ("Base Salary") at the annual rate of
$254,000, based on the calendar year.

                  (b) Bonus. Executive shall be eligible for an annual cash
bonus to be paid within thirty (30) days after the annual audited financial
statements of the Company are delivered to the Company by the Company's
accountants. Such bonus shall be based on a formula set forth on Exhibit A
hereto with respect to Adjusted EBITDA Targets as set forth on such exhibit. As
used in this Agreement, "Adjusted EBITDA" means net income as set forth on such
financial statements, plus interest, taxes, depreciation, amortization, and any
bonuses and management fees. The Adjusted EBITDA Targets shall be reasonably
adjusted by the Board for any prospective acquisitions.

                  (c) Benefits and Perquisites. Executive shall be entitled to
participate in, to the extent Executive is otherwise eligible under the terms
thereof, the benefit plans and programs, including medical and vacation plans,
and receive the benefits and perquisites, generally provided to employees of the
same level and responsibility as Executive. Nothing in this Agreement shall
preclude the Company from terminating or amending from time to time any employee
benefit plan or program.

                  (d) Travel and Business Expenses. Upon submission of itemized
expense statements in the manner specified by the Company, Executive shall be
entitled to reimbursement for reasonable travel and other reasonable business
expenses duly incurred by Executive in the performance of Executive's duties
under this Agreement in accordance with the policies and procedures established
by the Company from time to time for employees of the same level and
responsibility as Executive.


                                      -2-
<PAGE>

                  (e) Car Allowance. The Company will provide to Executive the
full-time use of one (1) Company-owned or leased automobile, including all
insurance, fuel, maintenance, repair and related costs.

                  (f) Life Insurance. A personal term life insurance policy in
the amount (death benefit) of at least $50,000. Such policy to be assigned to
the Executive, without cost, upon cancellation of his employment.

                  (g) No Other Compensation or Benefits; Payment. The
compensation and benefits specified in Sections 3 and 5 hereof shall be in lieu
of any and all other compensation and benefits. Payment of all compensation and
benefits to Executive hereunder shall be made in accordance with the relevant
Company policies in effect from time to time, including normal payroll
practices, and shall be subject to all applicable employment and withholding
taxes.
                  (h) Cessation of Employment. In the event Executive shall
cease to be employed by the Company for any reason, Executive's compensation and
benefits shall cease on the date of such event, except as otherwise provided
herein or in any applicable employee benefit plan or program.

         4.       Exclusive Employment; Noncompetition.

                  (a) No Conflict; No Other Employment. During the period of
Executive's employment with the Company, Executive shall not: (i) engage in any
activity which conflicts or interferes with or derogates from the performance of
Executive's duties hereunder nor shall Executive engage in any other business
activity, whether or not such business activity is pursued for gain or profit,
except as approved in advance in writing by the Board; or (ii) accept any other
full-time or substantially full-time employment, whether as an executive or
consultant or in any other capacity, and whether or not compensated therefor.

                  (b) No Competition. Without limiting the generality of the
provisions of Sections 2(b) or 4(a) hereof, during the period of Executive's
employment with the Company, and for a period of three (3) years thereafter but
in no event less than five (5) years from the date of execution of this
Agreement (the "Restricted Period"), Executive shall not, directly or
indirectly, own, manage, operate, join, control, participate in, invest in or
otherwise be connected or associated with, in any manner, including as an
officer, director, employee, partner, member, stockholder, joint venturer,
lender, consultant, advisor, agent, proprietor, trustee or investor, any
Competing Business (as defined below) located in the United States or in any
other location where the Company or any affiliate of the Company which engages
in any business similar to that of the Company or over which Executive exercises
executive or supervisory authority (collectively, the "Companies") operate or
sell their products or services; provided, however, that if Executive's
employment hereunder is terminated by the Company under Section 5(d) below, then
the provisions of this Section 4(b) shall remain in effect only so long as the
Company continues to pay to Executive amounts as severance pursuant to Section
5(d) below.

                                      -3-
<PAGE>

                           (i) As used in this Agreement, the term "Competing
         Business" means any business or venture which engages in any business
         or sells or provides products or services that compete or overlap with
         any business in which the Companies engage or contemplate engaging in,
         or the products or services as sold or provided, or as contemplated to
         be sold or provided, by the Companies.

                           (ii) For purposes of this Section 4(b), the term
         "invest" shall not preclude an investment in not more than one percent
         (1%) of the outstanding capital stock of a corporation whose capital
         stock is listed on a national securities exchange or included in the
         NASDAQ Stock Market, so long as Executive does not have the power to
         control or direct the management of, or is not otherwise associated
         with, such corporation.

                  (c) No Solicitation of Employment. During the Restricted
Period, Executive shall not solicit or encourage any employee of any of the
Companies to leave the employ, or cease his or her relationship with, any of the
Companies for any reason, nor employ such an employee in a Competing Business or
any other business.

                  (d) Company Customers. Executive shall not, during the
Restricted Period, directly or indirectly, contact, solicit or do business with
any "customers" (as defined below) of any of the Companies for the purpose of
selling or providing any product or service then sold or provided by any of the
Companies to such customers or proposed to be sold or provided to such customers
during Executive's employment with the Company or at the time of termination of
Executive's employment hereunder.

                                      -4-
<PAGE>

                  For the purposes of the provisions of this Section 4(d), the
term "customer" includes any entity that purchased any product or service from
any of the Companies within eight (8) months of the termination of Executive's
employment hereunder, without regard to the reason for such termination. The
term "customer" also includes any former customer or potential customer of any
of the Companies which any of the Companies have solicited within eight (8)
months of such termination for the purpose of selling or providing any product
or service then sold or provided, or then contemplated to be sold or provided,
by any of the Companies.

                  (e) Modification of Covenants. The restrictions against
competition set forth in this Section 4 are considered by the parties to be
reasonable for the purposes of protecting the business of the Companies.
However, if any such restriction is found by any court of competent jurisdiction
to be unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of activities
or geographic area as to which it may be enforceable.

         5.       Termination of Employment.

                  (a) Termination. The Company may terminate Executive's
employment for Cause (as defined below) or for any breach of this Agreement, in
which case the provisions of Section 5(b) below shall apply. The Company may
also terminate Executive's employment in the event of Executive's Disability (as
defined below), in which case the provisions of Section 5(c) below shall apply.
If Executive's employment is terminated by reason of Executive's death,
retirement or Voluntary Termination, the provisions of Section 5(b) below shall
apply.
                  (b) Termination for Cause; Termination by Reason of Death or
Retirement or Voluntary Termination. (1) In the event that Executive's
employment hereunder is terminated during the Agreement Term (x) by the Company
for Cause, (y) by reason of Executive's death or retirement or (z) by reason of
Voluntary Termination, then the Company shall pay to Executive, within thirty
(30) days of the date of such termination, only the Base Salary through such
date of termination.

                  (2) For purposes of this Agreement, "Cause" means (i)
conviction of any crime (whether or not involving the Company) constituting a
felony in the jurisdiction involved; (ii) engaging in any act which subjects, or
if generally known would subject, any of the Companies to public ridicule or
embarrassment; (iii) gross neglect or misconduct in the performance of
Executive's duties hereunder; (iv) willful or repeated failure or refusal to
perform such duties as may be relegated to Executive commensurate with
Executive's position; or (v) breach of any provision of this Agreement by
Executive.

                                      -5-
<PAGE>

                  (3) In the event the Company desires to terminate Executive's
employment for Cause as defined in clauses (iii), (iv) or (v) of the definition
thereof, the Company shall first attempt to resolve the matter(s) at issue
through a meeting between Executive and the President of Key Components, Inc.,
the indirect parent of the Company ("KCI"). If such meeting fails to resolve the
matter(s), then Executive and the President of KCI will meet with the Board and
attempt to resolve the matter(s). The decision of the Board as to the matter(s)
shall be final and binding on the parties and not subject to review or appeal by
any other person.

                  (c) Disability. If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have been absent from Executive's
duties hereunder on a full time basis for either (i) ninety (90) days within any
six-month period, or (ii) sixty (60) consecutive days, and within thirty (30)
days after written notice of termination is given shall not have returned to the
performance of Executive's duties hereunder on a full time basis, the Company
may terminate Executive's employment hereunder for "Disability". In the event
that the Company terminates Executive's employment hereunder for Disability, the
Company shall pay to Executive, within thirty (30) days of the date of such
termination, only the Base Salary through such date of termination. During any
period that Executive fails to perform Executive's duties hereunder as a result
of incapacity due to physical or mental illness (a "Disability Period"),
Executive shall continue to receive the compensation and benefits provided by
Section 3 hereof until Executive's employment hereunder is terminated; provided,
however, that the amount of compensation and benefits received by Executive
during the Disability Period shall be reduced by the aggregate amounts, if any,
payable to Executive under disability benefit plans and programs of the Company
or under the Social Security disability insurance program.

                  (d) No Further Liability; Release. Payment made and
performance by the Company in accordance with this Section 5 shall operate to
fully discharge and release the Company and its directors, officers, employees,
subsidiaries, affiliates, members, successors, assigns, agents and
representatives from any further obligation or liability with respect to
Executive's employment and termination of employment. Other than paying
Executive's Base Salary through the date of termination of Executive's
employment and making any severance payment and continuing benefits and
perquisites pursuant to and in accordance with this Section 5 (as applicable),
the Company and its directors, officers, employees, subsidiaries, affiliates,
members, successors, assigns, agents and representatives shall have no further
obligation or liability to Executive or any other person under this Agreement.


                                      -6-
<PAGE>

         6.       Confidential Information.

                  (a) Existence of Confidential Information. Each of the
Companies owns and has developed and compiled, and will develop and compile,
certain proprietary technology, know-how and confidential information which have
great value to its business (referred to in this Agreement, collectively, as
"Confidential Information"). Confidential Information includes not only
information disclosed by any of the Companies to Executive, but also information
developed or learned by Executive during the course or as a result of employment
with the Company, which information shall be the property of the Companies.
Confidential Information includes all information that has or could have
commercial value or other utility in the business in which the Companies are
engaged or contemplate engaging, and all information of which the unauthorized
disclosure could be detrimental to the interests of the Companies, whether or
not such information is specifically labeled as Confidential Information by the
Companies. By way of example and without limitation, Confidential Information
includes any and all information developed, obtained, licensed by or to or owned
by any of the Companies concerning trade secrets, techniques, know-how
(including research data, designs, plans, procedures, merchandising, marketing,
distribution and warehousing know-how, processes, and research records),
software, computer programs, and any other intellectual property created, used
or sold (through a license or otherwise) by any of the Companies, product
know-how and processes, innovations, discoveries, improvements, research,
development, test results, reports, specifications, data, formats, marketing
data and plans, business plans, strategies, forecasts, unpublished financial
information, orders, agreements and other forms of documents, price and cost
information, merchandising opportunities, expansion plans, budgets, projections,
customer, supplier, licensee, licensor and subcontractor identities,
characteristics, agreements and operating procedures, and salary, staffing and
employment information.

                                      -7-
<PAGE>

                  (b) Protection of Confidential Information. Executive
acknowledges and agrees that in the performance of duties hereunder Executive
develops and acquires, and the Companies disclose to and entrusts Executive
with, Confidential Information which is the exclusive property of the Companies
and which Executive may possess or use only in the performance of duties for the
Company. Executive also acknowledges that Executive is aware that the
unauthorized disclosure of Confidential Information, among other things, may be
prejudicial to the Companies' interests, an invasion of privacy and an improper
disclosure of trade secrets. Executive shall not, directly of indirectly, use,
make available, sell, disclose or otherwise communicate to any corporation,
partnership, individual or other third party, other than in the course of
Executive's assigned duties and for the benefit of the Companies, any
Confidential Information, either during the Agreement Term or thereafter. In the
event Executive desires to publish the results of Executive's work for the
Company or experiences with the Companies through literature, interviews or
speeches, Executive will submit requests for such interviews or such literature
or speeches to the Board at least fourteen (14) days before any anticipated
dissemination of such information for a determination of whether such disclosure
is in the best interests of the Companies, including whether such disclosure may
impair trade secret status or constitute an invasion of privacy. Executive
agrees not to publish, disclose or otherwise disseminate such information
without the prior written approval of the Board.

                  (c) Delivery of Records, Etc. In the event Executive's
employment with the Company ceases for any reason, Executive will not remove
from any of the Companies' premises without such company's prior written consent
any records, notes, notebooks, files, drawings, documents, equipment, materials
and writings received from, created for or belonging to such company, including
those which relate to or contain Confidential Information, or any copies
thereof. Upon request or when employment with the Company terminates, Executive
will immediately deliver the same to the Company.



                                      -8-
<PAGE>

         7.       Invention and Patents.

                  (a) Executive will promptly and fully disclose to the Company
any and all inventions, discoveries, trade secrets and improvements, whether or
not patentable or whether or not they are made, conceived or reduced to practice
during working hours or using any of the Companies' data or facilities, which
Executive shall develop, make, conceive or reduce to practice during Executive's
employment with the Company, either solely or jointly with others (collectively,
"Developments"). All such Developments shall be the sole property of the
Companies, and Executive hereby assigns to the Companies, without further
compensation, all his right, title and interest in and to such Developments and
any and all related patents, patent applications, copyrights, copyright
applications, trademarks and trade names in the United States and elsewhere.

                  (b) Executive shall keep and maintain adequate and current
written records of all Developments (in the form of notes, sketches, drawings
and as may be specified by the Company), which records shall be available to and
remain the sole property of the Companies at all times.

                  (c) Executive shall assist the Company in obtaining and
enforcing patent, copyright and other forms of legal protection for the
Developments in any country. Upon request, Executive shall sign all
applications, assignments, instruments and papers and perform all acts necessary
or desired by the Company and to enable the Company its successors, assigns and
nominees, to secure and enjoy the full exclusive benefits and advantages
thereof.

                  (d) Executive understands that Executive's obligations under
this section will continue after the termination of his employment with the
Company and that during his employment Executive shall perform such obligations
without further compensation, except for reimbursement of expenses incurred at
the request of the Company. Executive further understands that if he is not
employed by the Company as an employee at the time he is requested to perform
any obligations under this section, Executive shall receive for such performance
a reasonable per diem fee, as well as reimbursement of any expenses incurred at
the request of the Company.

         8.       Assignment and Transfer.

                  (a) Company. This Agreement shall inure to the benefit of and
be enforceable by, and may be assigned by the Company to, any purchaser of all
or substantially all of the Company's business or assets, any successor to the
Company or any assignee thereof (whether direct or indirect, by purchase,
merger, consolidation or otherwise). The Company will require any such
purchaser, successor or assignee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase, succession or assignment had taken
place.

                                      -9-
<PAGE>

                  (b) Executive. Executive's rights and obligations under this
Agreement shall not be transferable by Executive by assignment or otherwise, and
any purported assignment, transfer or delegation thereof shall be void;
provided, however, that if Executive shall die, all amounts then payable to
Executive hereunder shall be paid in accordance with the terms of this Agreement
to Executive's devisee, legatee or other designee or, if there be no such
designee, to Executive's estate.

         9.       Miscellaneous.

                  (a) Other Obligations. Executive represents and warrants that
he is not a party to any other employment agreement and that neither Executive's
employment with the Company nor Executive's performance of Executive's
obligations hereunder will conflict with or violate or otherwise be inconsistent
with any other agreements to which Executive is or has been a party or with any
other obligations, legal or otherwise, which Executive may have.

                  (b) Nondisclosure; Other Employers. Executive will not
disclose to the Company, or use, or induce the Company to use, any proprietary
information, trade secrets or confidential business information of others.
Executive represents and warrants that Executive has returned all property,
proprietary information, trade secrets and confidential business information
belonging to all prior employers.

                  (c) Cooperation. Following termination of employment with the
Company, Executive shall cooperate with the Company, as requested by the
Company, to affect a transition of Executive's responsibilities and to ensure
that the Company is aware of all matters being handled by Executive.

                  (d) Protection of Reputation. During the Agreement Term and
thereafter, Executive agrees that he will take no action which is intended, or
could reasonably be expected, to harm the Company or its reputation or which
could reasonably be expected to lead to unwanted or unfavorable publicity to the
Company.

                                      -10-
<PAGE>

                  (e) Governing Law. This Agreement, including the validity,
interpretation, construction and performance of this Agreement, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts applicable to agreements made and to be performed in such
commonwealth without regard to such commonwealth's conflicts of law principles.
All actions and proceedings relating directly or indirectly to this Agreement
shall be litigated in any state court or federal court located in New York, New
York. The parties hereto expressly consent to the jurisdiction of any such court
and to venue therein and consent to the service of process in any such action or
proceeding by certified or registered mailing of the summons and complaint
therein directed to Executive at the address as provided in Section 9(l) hereof
and to the Company's designated agent for service of process (which initially
shall be which agent may be changed by the Company upon thirty (30) days' prior
written notice to Executive).

                  (f) Entire Agreement. This Agreement (including the Exhibits
hereto) contains the entire agreement and understanding between the parties
hereto in respect of the subject matter hereof and supersedes, cancels and
annuls any prior or contemporaneous written or oral agreements, understandings,
commitments and practices between them respecting the subject matter hereof,
including all prior employment agreements, if any, between the Company and
Executive, which agreement(s) hereby are terminated and shall be of no further
force or effect.

                  (g) Amendment. This Agreement may be amended only by a writing
which makes express reference to this Agreement as the subject of such amendment
and which is signed by Executive and, on behalf of the Company, by its duly
authorized officer.

                  (h) Severability. If any term, provision, covenant or
condition of this Agreement or part thereof, or the application thereof to any
person, place or circumstance, shall be held to be invalid, unenforceable or
void, the remainder of this Agreement and such term, provision, covenant or
condition shall remain in full force and effect, and any such invalid,
unenforceable or void term, provision, covenant or condition shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited to the extent necessary to render the same and the remainder of this
Agreement valid, enforceable and lawful. In this regard, Executive acknowledges
that the provisions of Sections 4 and 6 hereof are reasonable and necessary for
the protection of the Company.

                                      -11-
<PAGE>

                  (i) Construction. The headings and captions of this Agreement
are provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement. The language in all parts of this
Agreement shall be in all cases construed according to its fair meaning and not
strictly for or against the Company or Executive. The use herein of the word
"including," when following any general provision, sentence, clause, statement,
term or matter, shall be deemed to mean "including, without limitation". As used
herein, "Company" shall mean the Company and its subsidiaries and any purchaser
of, successor to or assignee (whether direct or indirect, by purchase, merger,
consolidation or otherwise) of all or substantially all of the Company's
business or assets which is obligated to perform this Agreement by operation of
law, agreement, pursuant to Section 8 hereof or otherwise. As used herein, the
words "day" or "days" shall mean a calendar day or days.

                  (j) Nonwaiver. Neither any course of dealing nor any failure
or neglect of either party hereto in any instance to exercise any right, power
or privilege hereunder or under law shall constitute a waiver of any other
right, power or privilege or of the same right, power or privilege in any other
instance. All waivers by either party hereto must be contained in a written
instrument signed by the party to be charged and, in the case of the Company, by
its duly authorized officer.

                  (k) Remedies for Breach. The parties hereto agree that
Executive is obligated under this Agreement to render personal services during
the Agreement Term of a special, unique, unusual, extraordinary and intellectual
character, thereby giving this Agreement peculiar value, and, in the event of a
breach or threatened breach of any covenant of Executive herein, the injury or
imminent injury to the value and the goodwill of the Company's business could
not be reasonably or adequately compensated in damages in an action at law.
Accordingly, Executive expressly acknowledges that the Company shall be entitled
to specific performance, injunctive relief or any other equitable remedy against
Executive, without the posting of a bond, in the event of any breach or
threatened breach of any provision of this Agreement by Executive (including
Sections 4 and 6 hereof). Without limiting the generality of the foregoing, if
Executive breaches Sections 4 or 6 hereof, such breach will entitle the Company
to enjoin Executive from disclosing any Confidential Information to any
Competing Business, to enjoin such Competing Business from receiving Executive
or using any such Confidential Information and/or to enjoin Executive from
rendering personal services to or in connection with such Competing Business.
The rights and remedies of the parties hereto are cumulative and shall not be
exclusive, and each such party shall be entitled to pursue all legal and
equitable rights and remedies and to secure performance of the obligations and
duties of the other under this Agreement, and the enforcement of one or more of
such rights and remedies by a party shall in no way preclude such party from
pursuing, at the same time or subsequently, any and all other rights and
remedies available to it.

                                      -12-
<PAGE>

                  (l) Notices. Any notice, request, consent or approval required
or permitted to be given under this Agreement or pursuant to law shall be
sufficient if in writing, and if and when sent by certified or registered mail,
return receipt requested, with postage prepaid, to Executive's residence (as
reflected in the Company's records or as otherwise designated by Executive on
thirty (30) days' prior written notice to the Company) or to the Company's
principal executive office, attention: Alan L. Rivera, as the case may be. All
such notices, requests, consents and approvals shall be effective upon being
deposited in the United States mail. However, the time period in which a
response thereto must be given shall commence to run from the date of receipt on
the return receipt of the notice, request, consent or approval by the addressee
thereof. Rejection or other refusal to accept, or the inability to deliver
because of changed address of which no notice was given as provided herein,
shall be deemed to be receipt of the notice, request, consent or approval sent.

                  (m) Assistance in Proceedings, Etc. Executive shall, without
additional compensation, during and after expiration of the Agreement Term, upon
reasonable notice, furnish such information and proper assistance to the Company
as may reasonably be required by the Company in connection with any legal or
quasi-legal proceeding, including any external or internal investigation,
involving the Company or any of its affiliates or in which any of them is, or
may become, a party.

                  (n) Survival. Cessation or termination of Executive's
employment with the Company shall not result in termination of this Agreement.
The respective obligations of Executive and rights and benefits afforded to the
Company as provided in this Agreement shall survive cessation or termination of
Executive's employment hereunder. This Agreement shall not terminate upon, and
shall remain in full force and effect following, expiration of the Agreement
Term and all rights and obligations of the parties hereto as and to the extent
provided herein shall survive such expiration.

                                      -13-
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed on its behalf by an officer thereunto duly authorized and Executive has
duly executed this Agreement, all as of the date and year first written above.

                                            B.W. Elliott Manufacturing Co., LLC


                                            By: /s/ Robert B. Kay
                                                --------------------------------
                                                Name:  Robert B. Kay
                                                Title: President

                                            /s/ George Scherer
                                            ------------------------------------
                                            George Scherer



                                      -14-
<PAGE>


                                    Exhibit A

For Year Ending 12/31/01:


Adjusted EBITDA Targets                                     Bonus(1)
-----------------------                                     --------

$6,000,000                                                  $15,000

$6,300,000                                                  $30,000

$6,750,000                                                  $40,000

Greater than $7,000,000                                     $50,000

Lower than $6,000,000                                       $0


For Years Ending 12/31/02 and beyond, the bonus will be based on achieving
Adjusted EBITDA Targets approved by the President of KCI. The schedule for each
year's bonus plan will be submitted to Executive after the final budget is
approved.

----------
(1)      Bonuses shall be prorated to the extent that the Adjusted EBITDA falls
         within the Adjusted EBITDA Target numbers, except for Adjusted EBITDA
         below $6 Million in which case, as provided above, the bonus is $0.