Document:

COMMERCIAL LEASE
                                WABASH FOODS, LLC

1.  PARTIES.  This Lease,  dated,  for reference  purposes  only, is made by and
between American Pacific Financial  Corporation,  (herein called "Landlord" and,
Wabash  Foods,  LLC,  a  Delaware  Limited  Liability  Company,  (herein  called
"Tenant").

2. PREMISES.  Landlord does hereby lease to Tenant and Tenant hereby leases from
Landlord that certain space (herein called "Premises",  containing approximately
135,000 square feet of floor area and non-exclusive use of all common areas. The
location and  dimensions of said Premises is 705 W. Dustman Road.  Said Premises
are located in the City of Bluffton, County of Wells, State of Indiana.

3. USE. Tenant shall use the Premises for a snack food  manufacturing  and shall
not use or permit the  Premises  to be used for any other  purpose  without  the
prior written consent of Landlord.

4. TERM. The term of this Lease shall be for twenty years,  commencing on May 1,
1998 (the  "Commencement  Date") and,  unless sooner  terminated as  hereinafter
provided,  ending on April 30, 2018, (the Expiration  Date").  Tenant shall have
the option to extend this lease for two  additional  five (5) year periods.  The
lease  rate for the first  year shall be  fifteen  thousand  and no/100  dollars
($15,000.00)  per month.  The lease rate for the second year shall be  seventeen
thousand  five  hundred  and  no/100  dollars  ($17,500.00  plus the  percentage
difference between the CPI (consumer price index) for Indiana, adjusted annually
from the  Commencement  date.  The lease  rate for the third  year and  extended
period shall be twenty thousand and no/100 dollars  ($20,000.00)  per month plus
the percentage  difference  between the CPI (consumer  price index) for Indiana,
adjusted  annually from the Commencement date to the extension date and annually
thereafter.

5. MINIMUM  RENT.  5.A. For the first year,  Tenant agrees to pay to Landlord as
Minimum Rent,  without notice or demand, the monthly sum of fifteen thousand and
no/100  dollars  ($15,000.00).  For the  second  year,  Tenant  agrees to pay to
Landlord as Minimum Rent, without notice or demand, the monthly sum of seventeen
thousand  five  hundred  and no/100  dollars  ($17,500.00)  plus the  percentage
difference between the CPI (consumer price index) for Indiana, adjusted annually
from the Commencement.  For the remainder of the lease,  Tenant agrees to pay to
Landlord as Minimum Rent,  without  notice or demand,  the monthly sum of twenty
thousand and no/100 dollars ($20,000.00) plus the percentage  difference between
the  CPI  (consumer  price  index)  for  Indiana,  adjusted  annually  from  the
Commencement date to the extension date and annually thereafter.

The appropriate sum for each month, shall be paid, in advance,  on or before the
first day of each and every successive calendar month thereafter during the term
hereof.  Rent for any period  during the term hereof  which is for less than one
(1) month shall be a prorated portion of the monthly installment  herein,  based
upon a thirty (30) day month.  Said rental  shall be paid to  Landlord,  without
deduction or offset,  in lawful money of the United  States of America,  at such
place as Landlord may from time to time designate in writing.

6. ADDITIONAL CHARGES.

6.A. In addition to the Minimum Rent provided in Article 5, and commencing  upon
Landlord's  delivery  to Tenant of the  Premises,  Tenant  shall pay to Landlord
Tenant's Share of Operating  Expenses.  "Tenant's  Share of Operating  Expenses"
shall be the  proportion  derived by  dividing  the  rentable  floor area of the
Premises by the total rentable floor area.

6.B. As used in this Lease,  "Operating  Expenses" shall mean any and all costs,
charges,  expenses and  disbursements  of every kind and nature  which  Landlord
shall  pay or become  obligated  to pay  because  of or in  connection  with the
ownership,  operating,  management,  maintenance  and repair of the Snack Plant,
computed on the cash basis  (except as to taxes,  as to which the accrual  basis
shall be used),  including,  but not  limited  to, the cost or  charges  for the
following  items:  electricity,  water,  fuel,  trash  removal,  sweeping,  snow
removal,  premiums for fire, extended coverage  liability,  rental value and any
other insurance that Landlord deems necessary, interior and exterior maintenance
and  repairs  (ordinary  and  extraordinary,   structural  and   nonstructural),
including   repairs,   replacements,   resurfacing  and  restriping  as  may  be
applicable, of sidewalks, driveways, parking areas, landscaping, and other areas
used in common by  tenants  of the Snack  Plant,  management  fees (if  Landlord
manages the Snack Plant itself,  an amount shall be included for management fees
not exceeding the amount typically charged by independent  management  companies
in the Bluffton  area for buildings of  comparable  size and  quality),  and all
general and special real estate taxes, special assessments,  special district of
improvement  district  assessments,  water taxes, sewer taxes, gross rents taxes
and all other taxes,  charges,  rates, levies and assessments of whatever mature
levied,   assessed  or  collected  by  any  governmental  or  quasi-governmental

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authority  (whether now existing or hereafter  created)  upon or with respect to
the Snack Plant or landlord's  ownership or operation thereof,  and all taxes or
charges imposed in lieu of (or in lieu of any increases in) any such taxes.

6.C.  Landlord  shall,  prior to the  beginning of each  calendar  year (or upon
Landlord's  delivery  of the  Premises  to Tenant  as to the year in which  such
delivery  occurs,  furnish  Tenant with a bona fide  estimate  of the  Operating
Expenses for such  calendar  year and Tenant's  Share of Operating  Expenses for
such year;  provided,  however,  that such  estimate  shall not  constitute  any
representation  or assurance by Landlord of the amount that the actual Operating
Expenses for such year will be. Thereafter, Tenant shall pay to Landlord, on the
first day of each month,  together with  payments of Minimum Rent,  one- twelfth
(1/12th) of Landlord's estimate of Tenant's Share of Operating Expenses for that
calendar year.  Landlord may revise such estimate at any time to more accurately
reflect estimated  Operating Expenses and an appropriate  adjustment of payments
thereafter  due from  Tenant  shall be made.  Landlord  shall each year  provide
Tenant's a statement of the actual  Operating  Expenses  for the prior  calendar
year and a calculation  of Tenant's  Share of Operating  Expenses for such year,
but Landlord's  failure to provide such  statement by any particular  date shall
not constitute a waiver by Landlord of its right to receive payment for Tenant's
Share  of  Operating  Expenses  for such  year or for any  succeeding  year.  If
Tenant's Share of Operating Expenses for such year is greater than the estimated
amounts  previously  paid by Tenant for such year,  Tenant shall pay to Landlord
the full amount of such excess within ten (10) days after  Landlord's  rendering
of the  statement of such amount.  If Tenant's  Share of Operating  Expenses for
such year is less than the estimated amounts  previously paid by Tenant for such
year, Tenant shall receive a refund of the overpayment.

6.D.  Tenant shall give Landlord  written notice of any dispute or  disagreement
(with Tenant's reason therefore state) concerning Operating Expenses or Tenant's
share  thereof for any calendar  year,  within thirty (30) days after receipt of
notice from  Landlord of the matter  giving rise to the dispute,  failing  which
Tenant  shall have waived its right to dispute  such  matter.  If tenant  timely
disputes any  determination  or  calculation  concerning  Operating  Expenses or
Tenant's  share  thereof,  a certified  public  accounting  firm  acceptable  to
Landlord and Tenant shall be final and conclusive. Tenant shall pay the fees and
expenses of the accountants  unless the final  determination  discloses an error
which  favors  Landlord  by more  than five  percent  of the  amount  previously
determined by Landlord. If such determination reveals that the amount previously
determined  by Landlord was  incorrect,  a  correction  shall be made and either
Landlord  shall  promptly  return  to Tenant  any  overpayment  or Tenant  shall
promptly  pay to Landlord  any  underpayment  which was based on such  incorrect
amount. Notwithstanding the tendency of any dispute hereunder, Tenant shall make
payments  based  upon  Landlord's   determination  or  calculation   until  such
determination or calculation has been established hereunder to be incorrect.

7. USES  PROHIBITED.  Tenant  shall not do or permit  anything  to be done in or
about the  premises  nor bring or keep  anything  therein  which will in any way
increase the  existing  rate of or affect any fire or other  insurance  upon the
Building or any of its contents, or cause a cancellation of any insurance policy
covering said Building or as, part thereof or any of its contents.  Tenant shall
not do or permit  anything to be done in or about the Premises which will in any
way obstruct or interfere  with the rights or other  tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for any
improper,  immoral,  unlawful or objectionable  purpose, nor shall Tenant cause,
maintain or permit any  nuisance  in, or about the  Premises.  Tenant  shall not
commit or allow to be committed any waste in or upon the Premises.

8. COMPLIANCE WITH LAW. Tenant shall not use the Premises, or permit anything to
be done in or about the  Premises,  which will in any way conflict with any law,
statute,  ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense,
promptly  comply with all laws,  statutes,  ordinances and  governmental  rules,
regulations or requirements  now in force or which may hereafter be in force and
with the requirements of any board of fire  underwriters or other similar bodies
now or hereafter  constituted  relating to or affecting  the  condition,  use or
occupancy  of the  Premises,  excluding  structural  changes  not  reacted to or
affected  by  Tenant's  improvements  or,  acts.  The  judgment  of any court of
competent  jurisdiction or the admission of Tenant in any action against Tenant,
whether  Landlord be a party  thereto or not,  that Tenant has violated any law,
statute,  ordinance or governmental  rule,  regulation or requirement,  shall be
conclusive of that fact as between the Landlord and Tenant.

9.  ALTERATIONS  AND  ADDITIONS.  Tenant  shall not make or allow to be made any
alterations, additions or improvements to or of the Premises or any part thereof
without the written  consent of Landlord  first  having been  obtained,  and any
alterations,  additions or improvements to or of said Premises,  including,  but
not limited to, wall covering, paneling and built-in cabinet work, but excepting
movable furniture and trade fixtures,  shall at once become a part of the realty
and belong to the Landlord and shall be  surrendered  with the Premises.  In the
event  Landlord  consents  to  the  making  of  any  alterations,  additions  or
improvements  to the  premises  by  Tenant,  the same shall be made by Tenant at
Tenant's sole cost and expense. Upon the expiration or sooner termination of the
term  hereof,  Tenant  shall,  upon written  demand by Landlord,  given at least
thirty  (30)  days  prior to the end of the  term,  at  Tenant's  sole  cost and
expense,  forthwith  and  with  all  due  diligence,   remove  any  alterations,

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additions, or improvements made by Tenant, designated by Landlord to be removed,
and Tenant  shall,  forthwith  and with all due  diligence  at its sole cost and
expense, repair and damage to the Premises caused by such removal.

10. REPAIRS.

10.A. By entry  hereunder,  Tenant shall be deemed to have accepted the Premises
as being in good,  sanitary  order,  condition  and  repair.  Tenant  shall,  at
Tenant's sole cost and expense, keep the Premises and every part thereof in good
condition and repair (except as hereinafter  provided with respect to Landlord's
obligations)  including  without  limitation,  the maintenance,  replacement and
repair of any storefront,  doors, window casements,  glazing,  plumbing,  pipes,
electrical  wiring and  conduits.  Tenant shall,  upon the  expiration or sooner
termination of this Lease hereof, surrender the Premises to the Landlord in good
condition, broom clean, ordinary wear and tear and damage from causes beyond the
reasonable  control of the Tenant  excepted.  Any  damage to  adjacent  premises
caused by Tenant's  use of the  Premises  shall be repaired at the sole cost and
expense of Tenant.

10.B. Notwithstanding the provisions of Article ll.A hereinabove, Landlord shall
repair and maintain  the  structural  portions of the  Building,  including  the
exterior walls and roof,  unless such maintenance and repairs are caused in part
or in whole by the act,  neglect,  fault or  omission of any duty by the Tenant,
its agents, servants, employees,  invitees, or any damage caused by breaking and
entering, in which case Tenant shall pay to Landlord the reasonable cost of such
maintenance and repairs.  Landlord shall, at Tenant's  expense,  provide routine
maintenance,  including  periodic  cleaning  and changing of filters for the air
conditioning/heating  unit  for the  Premises  and  Landlord  may  enter  into a
maintenance  service  agreement for such unit,  Landlord also shall, at Tenant's
expense,  provide any repairs  required for such unit,  within a reasonable time
after  Landlord  has  received  written  notice from Tenant of the need for such
repairs.  Tenant shall pay Landlord,  promptly  upon  billing,  for all costs of
maintenance  and  repair of such unit.  No  failure  of such unit shall  entitle
Tenant to any damages or  abatement of rent or in any way modify any of Tenant's
obligations  under this lease.  Landlord  shall not be liable for any failure to
make any repairs or to perform any  maintenance  required by this Article  ll.B.
unless such failure shall persist for an unreasonable  time after written notice
of the need of such  repairs  or  maintenance  is given to  Landlord  by Tenant.
Except as provided in Article 25 hereof, there shall be no abatement of rent and
no  liability  of  Landlord  by reason of any  injury  to or  interference  with
Tenant's  business  arising  from the  making  of any  repairs,  alterations  or
improvements  in or to any portion of the  Building or the  Premises or in or to
fixtures,  appurtenances and equipment therein.  Tenant waives the right to make
repairs at  Landlord's  expense  under any law,  judicial  decision,  statute or
ordinance now or hereinafter in effect.

11. LIENS. Tenant shall keep the Premises and the property in which the Premises
are situated  free from any liens arising out of any work  performed,  materials
furnished or obligations incurred by Tenant. Landlord may require, at Landlord's
sole option,  that Tenant shall  provide to Landlord,  at Tenant's sole cost and
expense,  a lien and  completion  bond in an amount equal to one and one-half (1
1/2) times the estimated cost of any improvements,  additions, or alterations in
the Premises  which the Tenant desires to make, to insure  Landlord  against any
liability for mechanics'  and material  men's liens and to insure  completion of
the work.

12.  ASSIGNMENT  AND  SUBLETTING.  Tenant  shall not either  voluntarily,  or by
operation of law, assign, transfer,  mortgage,  pledge,  hypothecate or encumber
this Lease or any  interest  therein,  and shall not sublet the  Premises or any
part thereof,  or any right or privilege  appurtent thereto,  or allow any other
person (the  employees,  agents,  servants and  invitees of Tenant  excepted) to
occupy or use the Premises, or any portion thereof,  without the written consent
of Landlord  first had and obtained,  which  consent  shall not be  unreasonably
withheld. In no event shall any subtenant, assignee, or other transferee use, or
be allowed to use, the Premises for any purpose other than the specific  purpose
set  forth in  Article 3 above,  and  Landlord  shall be  deemed  to have  acted
reasonably  in  refusing  to consent to any  sublease,  assignment  or  transfer
involving  any change in the purpose for which the Premises are or will be used.
A consent to one assignment,  subletting,  occupation or use by any other person
shall not be deemed to be a consent to any  subsequent  assignment,  subletting,
occupation  or use by another  person.  Consent to any  assignment,  subletting,
occupation  or use shall in no way relieve  Tenant of any  liability  under this
Lease and Tenant  shall  remain  fully  liable for the payment of the rent under
this Lease and the  performance  of the terms and  provisions  of this Lease and
Landlord  shall not be required to pursue  first any remedies for default it may
have against any  subtenant,  assignee or other  transferee.  Any  assignment or
subletting  without such consent shall be void,  and shall  constitute a default
under the terms of this  lease.  If  Landlord  Shall  consent to a  sublease  or
assignment,  Tenant shall pay Landlord reasonable fees, not to exceed,  incurred
in  connection  with the  processing  of  documents  necessary to giving of such
consent.

13. HOLD HARMLESS. Tenant Shall indemnify and hold harmless Landlord against and
from any and all claims  arising  from  Tenant's use of the Premises or from the
conduct  of its  business  or from an  activity,  work,  or other  things  done,
permitted or suffered by the Tenant in or about the Premises,  and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation of Tenant's part
to be  performed  under  the terms of this  Lease,  or  arising  from any act or
negligence of the Tenant, or any officer, agent, employee,  guest, or invitee of

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Tenant,  and from all costs,  attorney's  fees, and  liabilities  incurred in or
about the defense of Any such claim or any action or proceeding  brought thereon
and in case any action or  proceeding be brought  against  Landlord by reason of
such claim,  Tenant upon notice from Landlord  shall defend the same at Tenant's
expense by counsel  reasonably  satisfactory  to Landlord.  Tenant as a material
part of the  consideration  to  Landlord  hereby  assumes  all risk of damage to
property  or injury to persons in,  upon or about the  Premises,  from any cause
other than Landlord's negligence, and Tenant hereby waives all claims in respect
thereof  against  Landlord.  Landlord or its agents  shall not be liable for any
loss or damage to persons or property  resulting from fire,  explosion,  falling
plaster, steam, gas, electricity,  water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing works therein or from the
roof,  street or subsurface or from any other place  resulting  from dampness or
any  other  cause  whatsoever,  unless  caused  by or due to the  negligence  of
Landlord, its agents servants or employees.  Landlord or its agents shall not be
liable for  interference  with the light,  air, or for any latent  defect in the
Premises.  Tenant  shall give  prompt  notice to Landlord in case of casualty or
accidents in the Premises.

14. SUBROGATION.  As long as their respective  insurers so permit,  Landlord and
Tenant hereby mutually waive their  respective  rights of recovery  against each
other  for any loss  insured  by fire,  extended  coverage  and  other  property
insurance  policies  existing for the benefit of the  respective  parties.  Each
party shall apply to their  insurers  to obtain said  waivers.  Each party shall
obtain any  special  endorsements,  if  required  by their  insurer to  evidence
compliance with the aforementioned waiver.

15. LIABILITY  INSURANCE.  Tenant shall,  Tenant's  expense,  obtain and keep in
force during the term of this Lease a policy of  comprehensive  public liability
insurance  insuring Landlord and Tenant against any liability arising out of the
ownership,   use  occupancy  or  maintenance  of  the  Premises  and  all  areas
appurtenant  thereto.  Such  insurance  shall be in the  amount of not less than
$500,000  combined single limit for death,  personal injury and property damage.
The limit of any such insurance shall not,  however,  limit the liability of the
Tenant  hereunder.  Tenant may provide this  insurance  under a blanket  policy,
provided  that said  insurance  shall  have a  Landlord's  protective  liability
endorsement  attached thereto. If Tenant shall fail to procure and maintain said
insurance,  Landlord  may,  but shall not be required  to,  procure and maintain
same, but at the expense of Tenant.  Insurance  required  hereunder  shall be in
companies  rated  A+AAA or better in  "Best's  Insurance  Guide".  Tenant  shall
deliver to  Landlord,  prior to right of entry,  copies of policies of liability
insurance  required herein or certificates  evidencing the existence and amounts
of such insurance with loss payable clauses satisfactory to Landlord.  No policy
shall be cancelable or subject to reduction of coverage. All such policies shall
be  written  as  primary  policies  not  contributing  with and not in excess of
coverage which Landlord may carry.

16. UTILITIES.  Tenant shall pay for all water, gas, heat, light,  power,  sewer
charges,  telephone service and all other services and utilities supplied to the
Premises,  together  with  any  taxes  thereon.  If any  such  services  are not
separately  metered to Tenant,  Tenant shall pay a reasonable  proportion  to be
determined by Landlord of all charges jointly  metered with other  Premises.  If
separately  metered,  all  utility  meters for the  Premises  shall be placed in
Tenant's name on the Commencement date .

17.  PERSONAL  PROPERTY  TAXES.  Tenant  shall  pay or cause to be paid,  before
delinquency any and all taxes levied or assessed and which become payable during
the term hereof upon all Tenant's leasehold improvements,  equipment, furniture,
fixtures and other personal  property located in the Premises.  In the event any
or all of the Tenant's leasehold improvements,  equipment,  furniture,  fixtures
and other personal  property shall be assessed and taxed with the real property,
Tenant  shall pay to Landlord its share of such taxes within ten (10) days after
delivery  to Tenant by  Landlord of a  statement  in writing  setting  forth the
amount of such taxes applicable to Tenant's property.

18. RULES AND REGULATIONS.  Tenant shall faithfully  observe and comply with the
rules and regulations  that Landlord shall from time to time  promulgate  and/or
modify. The rules and regulations shall be binding upon the Tenant upon delivery
of a copy of them to Tenant. Landlord shall not be responsible to Tenant for the
nonperformance  of any said  rules  and  regulations  by any  other  tenants  or
occupants.

19.  HOLDING OVER.  If Tenant  remains in possession of the Premises or any part
thereof after the expiration of the term hereof with the express written consent
of Landlord,  such occupancy  shall be a tenancy from month to month at a rental
in, the amount of one and one-half (1 1/2) times the last Monthly  Minimum Rent,
plus  all  other  charges  payable  hereunder,  and upon  all the  terms  hereof
applicable to a month to month tenancy .

20. ENTRY BY LANDLORD.  Landlord  reserves,  and shall at any and all times have
the right to enter the Premises to inspect the same,  to submit said Premises to
prospective  purchasers or tenants,  to post notices of  non-responsibility,  to
repair the  Premises and any portion of the Building of which the Premises are a
part that Landlord may deem necessary or desirable,  without  abatement of rent,
and may for that purpose erect scaffolding and other necessary  structures where
reasonably  required  by the  character  of the  work  to be  performed,  always
providing  that the entrance to the Premises shall not be blocked  thereby,  and

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further  providing that the business of the Tenant shall not be interfered  with
unreasonably.  Tenant  hereby  waives any claim for damages or for any injury or
inconvenience to or interference with Tenant's  business,  any loss of occupancy
or quiet enjoyment of the Premises,  excluding Tenant's vaults, safes and files,
and  Landlord  shall have the right to use any and all means which  Landlord may
deem proper to open said doors in an emergency,  in order to obtain entry to the
Premises without liability to Tenant except for any failure to exercise due care
for Tenant's  property and entry to the Premises  obtained by Landlord by any of
said means,  or  otherwise,  shall not under any  circumstances  be construed or
deemed to be a forcible or unlawful  entry into, or a detainer of, the Premises,
or an eviction of Tenant from the Premises or any portion thereof.

21. TENANT'S DEFAULT.  The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant.

21.A. The vacating or abandonment of the Premises by Tenant.

21.B.  The  failure by Tenant to make any  payment of rent or any other  payment
required to be made by Tenant  hereunder,  as and when due,  where such  failure
shall  continue for a period of three (3) days after written  notice  thereof by
Landlord to Tenant.

21.C.  The  failure  by Tenant  to  observe  or  perform  any of the  covenants,
conditions  or  provisions  of this Lease to be  observed  or  performed  by the
Tenant,  other than described in Article 22.B.  above,  where such failure shall
continue  for a period  of thirty  (30)  days  after  written  notice  hereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than thirty (30) days are reasonably  required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said thirty (30) day period and thereafter  diligently  prosecutes  such cure to
completion.

21.D. The making by Tenant of any general assignment or general  arrangement for
the benefit of  creditors;  or the filing by or against  Tenant of a petition to
have Tenant judged as bankrupt,  or petition or  reorganization  or  arrangement
under any law relating to bankruptcy  (unless,  in the case of a petition  filed
against  Tenant,  the  same  is  dismissed  within  sixty  (60)  days);  or  the
appointment of a trustee or a receiver to take possession of  substantially  all
of Tenant's  assets  located at the  Premises  or of  Tenant's  interest in this
Lease,  where  possession  is not restored to Tenant within thirty (30) days; or
the  attachment,  execution or other judicial  seizure of  substantially  all of
Tenant's  assets located at the Premises or of Tenant's  interest in this Lease,
where such seizure is not discharged in thirty (30) days.

22. REMEDIES.  If Tenant shall default under this Lease, Landlord shall have the
following  rights and  remedies,  in  addition  to all other  remedies at law or
equity, and none of the following,  whether or not exercised by Landlord,  still
preclude the exercise of any other right or remedy  whether  herein set forth or
existing at law or equity:

22.A.  Landlord  shall have the right to terminate  this Lease by giving  Tenant
written  notice at any time,  whereupon  this Lease shall  terminate on the date
specified in such notice and Tenant shall  immediately  surrender  possession of
the Premises to Landlord.  No act by or on behalf of Landlord,  such as entry of
the  Premises  to  perform  maintenance  and  repairs  are  efforts to relet the
Premises,  other  than  giving  Tenant  written  notice  of  termination,  shall
terminate this lease. If this Lease is terminated, Landlord shall be entitled to
recover  forthwith  from Tenant as damages an amount  equal to the total of: (1)
all rent and other sums due and unpaid at the time of termination, plus interest
hereon at the rate specified in Article 23.D; and (2) the amount of rent and all
other  sums that  would have been  payable  hereunder  if the Lease had not been
terminated,  less the net  proceeds,  if any, of any  reletting of the Premises,
after  deducting  all  Landlord's  expenses in connection  with such  reletting,
including,  but not limited to, all repossession costs,  brokerage  commissions,
tenant inducements, legal expenses, attorney's fees, and alteration,  remodeling
and repair  costs,  which  damages  Tenant  shall pay to Landlord on the days on
which the rent and other  sums  would  have  been  payable  if the Lease had not
terminated,  or,  alternatively,  at Landlord's  option,  an amount equal to the
present  value  (discounted  at the rate of 6% per annum) of the amount by which
the rent and other sums payable for the remainder of the stated Lease term after
the  termination  date  exceeds the amount of such loss for the same period that
Tenant  proves could be all of  Landlord's  expenses  incurred in reletting  (or
attempting  to relet) the  Premises;  including,  but  without  limitation,  the
expenses  enumerated  above;  and (3) all of  Landlord's  expenses  incurred  in
repossessing the Premises and all other amounts necessary to compensate Landlord
fully for- all damage caused by Tenant's default.

22.B.  Landlord may,  without demand or notice,  re-enter and take possession of
the Premises or any part thereof, and repossess the same as of Landlord's former
estate and expel Tenant and those claiming  through or under Tenant,  and remove
the effects of any and all such persons  (forcibly,  if necessary) without being
deemed  guilty of any manner of trespass  and without  prejudice to any remedies
for arrears of rent or preceding  breach of covenants.  If Landlord elects to so
re-enter or if  Landlord  takes  possession  pursuant  to legal  proceedings  or
pursuant to any notice  provided for by law,  Landlord  may,  from time to time,
without  terminating this Lease, relet the Premises or any part thereof for such
term or terms and at such rental or rentals,  and upon such other  conditions as

                                        5
<PAGE>
Landlord may in its absolute  discretion deem advisable,  with the right to make
alterations  and repairs to the  Premises.  No such  re-entry,  repossession  or
reletting  of the  Premises by  Landlord  shall be  construed  as an election on
Landlord's  part to terminate  this Lease unless a written notice of termination
is given to Tenant by Landlord.  No such re-entry,  repossession or reletting of
the Premises  shall relieve  Tenant of its liability and  obligation  under this
Lease, all of which shall survive such re-entry, repossession or reletting. Upon
the occurrence of such re-enters or repossession,  Landlord shall be entitled to
the amount of the  monthly  rent,  and all other  sums,  which  would be payable
hereunder  if such  re-entry  or  repossession  had not  occurred,  less the net
proceeds,  if any, of any  reletting  of the  Premises  after  deducting  all of
Landlord's  expenses  in  connection  with such  reletting,  including,  but not
limited  to, the  expenses  enumerated  in 23.A.  above.  Tenant  shall pay such
amounts to Landlord  on the days on which the rent and other sums due  hereunder
would have been payable  hereunder if possession  had not been retaken.  If this
Lease is terminated as a result of Landlord's actions in retaking  possession of
the Premises or otherwise,  Landlord  shall be entitled to recover  damages from
Tenant as provided in 23.A. above.

22.C. Landlord shall have the right to recover from Tenant the rents and damages
provided for above by suit or suits  brought from time to time without  Landlord
being  required to wait until the expiration of the lease term, or if this Lease
is terminated,  the date on which such expiration would hove occurred.  Landlord
may,  but shall not be obligated  to, cure,  at any time,  without  notice,  any
default by Tenant under this Lease;  whenever Landlord so elects,  all costs and
expenses  incurred  by  Landlord  in  curing  a  default,   including,   without
limitation,  reasonable attorney's fees, together with interest on the amount of
costs and expenses so incurred at the rate  specified in Article 23.D.  shall be
paid by Tenant to Landlord on demand,  and shall be  recoverable  as  additional
rent.  No such payment or  expenditure  by Landlord  shall be deemed a waiver of
Tenant's  default nor shall it affect any other  remedy of Landlord by reason of
such default.  As used in this Lease,  the term "re-enter",  "take  possession",
"repossess"  and  "repossession"  are not  restricted to their  technical  legal
meaning.  In no event shall Tenant be entitled to receive the excess, if any, of
net rent collected by Landlord as a result of any reletting of the Premises over
the sums payable by Tenant hereunder.

22.D.  If any rent or other sums due from  Tenant are not  received  by Landlord
within ten (10) days after due,  such sums shall bear interest at the rate of 2%
per month from the due date until paid.  In addition,  if any rent or other sums
due from  Tenant is not  received  by  Landlord  within ten (10) days after due,
Tenant shall pay to Landlord a late charge equal to 10% of such overdue  amount.
The parties hereby agree that such late charge  represents a fair and reasonable
estimate  of the costs that  Landlord  will  incur by reason of late  payment by
Tenant, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting costs, and late
charges which may be imposed upon  Landlord  under any mortgage or deed of trust
covered the  Premises,  Acceptance  of any late  charge by Landlord  shall in no
event  constitute  a waiver of Tenant's  default  with  respect to such  overdue
amount, nor prevent Landlord from exercising any other rights and remedies.

22.E. If it should be unnecessary  for Landlord to employ an attorney to enforce
any of the  provisions  of this Lease,  to collect any unpaid sum, or to recover
possession  of the Premises,  Tenant agrees to pay all of Landlord's  attorney's
fees and costs  reasonably  incurred,  whether or not suit is filed. If Landlord
shall  prevail in any action or  proceeding  brought as either party against the
other under this Lease, Tenant agrees to pay all of Landlord's attorney fees and
costs reasonably incurred.

23. DEFAULT BY LANDLORD.  Landlord shall not be in default unless Landlord fails
to perform obligations  required of Landlord within a reasonable time, but in no
event later than thirty (30) days after written notice by Tenant to Landlord and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address  shall have  theretofore  been  furnished to Tenant in writing,
specifying  wherein  Landlord has failed to perform such  obligation;  provided,
however,  that if the  nature of  Landlord's  obligation  is such that more than
thirty (30) days are  required for  performance  then  Landlord  shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter  diligently  prosecutes  the same to  completion.  In no event  shall
Tenant have the right to terminate this Lease as a result of Landlord's  default
and Tenant's remedies shall be limited to damages and/or an injunction.

24.  RECONSTRUCTION.  In the event the  Premises  are  damaged  by fire or other
perils  covered by extended  coverage  insurance,  Landlord  agrees to forthwith
repair same,  and this Lease shall remain in full force and effect,  except that
Tenant shall be entitled to a  proportionate  reduction of the Minimum Rent from
the date of damage and while such  repairs  are being made,  such  proportionate
reduction  to be based  upon the  extent to which the  damage and making of such
repairs shall reasonably interfere with the business carried on by the Tenant in
the  Premises.  If the  damage is due to the fault or  neglect  of Tenant or its
employees,  there shall be no abatement  of rent.  In the event the Premises are
damaged  as a result of any cause  other  than the  perils  covered  by fire and
extended coverage insurance, then Landlord shall forthwith repair same, provided
the extent of the  destruction  be less than ten (10%)  percent of the then full
replacement  cost of the Premises.  In the event the destruction of the Premises
is to an  extent  of ten  (10%)  percent  or more of the  replacement  cost then
Landlord shall have the option: (1) to repair or restore such damage, this Lease
continuing in full force and effect,  but the Minimum Rent to be proportionately
reduced as hereinabove in this Article provided; or (2) give notice to Tenant at

                                        6
<PAGE>
any time within sixty (60) days after such damage,  terminating this Lease as of
the date specified in such notice,  which date shall be no more than thirty (30)
days after giving of such notice. In the event of giving such notice, this lease
shall expire and all interest of the Tenant in the Premises  shall  terminate on
the  date so  specified  in such  notice  and the  Minimum  Rent,  reduced  by a
proportionate  reduction,  based upon the  extent,  if any, to which such damage
interfered with the business carried on by the Tenant in the Premises,  shall be
paid up to date of said such termination.

Notwithstanding  anything to the contrary  contained in this  Article,  Landlord
shall not have any obligation  whatsoever to repair,  reconstruct or restore the
Premises when the damage  resulting from any casualty covered under this article
occurs  during  the last  twenty-four  months  of the term of this  Lease or any
extension thereof.

Landlord  shall not be  required to repair any injury or damage by fire or other
cause,  or to make any repairs or  replacements  of any leasehold  improvements,
fixtures, or other personal property of Tenant.

25. EMINENT DOMAIN. If more than twenty-five (25%) percent of the Premises shall
be taken or appropriated by the public or qwasi-public authority under the power
of eminent  domain,  either party  hereto  shall have the right,  at its option,
within  sixty (60) days after said taking,  to terminate  this lease upon thirty
(30) days written  notice.  If either less than or more than  twenty-five  (25%)
percent of the  Premises  are taken (and  neither  party  elects to terminate as
herein  provided),  the Minimum  Rent  thereafter  to be paid shall be equitably
reduced.  If any part of the Snack Plant other than the Premises may be so taken
or appropriated,  Landlord shall within 60 days of said taking have the right at
its option to terminate this Lease upon written  notice to Tenant.  In the event
of any taking or appropriation whatsoever, Landlord shall be entitled to any and
all awards and/or  settlements which may be given and Tenant shall have no claim
against Landlord for the value of any unexpired term of this Lease.

26. TENANT 'S STATEMENT.  Tenant shall at any time and from time to time upon no
less than three days prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement  in writing  (R)  certifying  that this Lease is
unmodified and in full force and effect (or, if modified,  stating the nature of
such modification and certifying that this Lease us so modified is in full force
and  effect),  and the date to which the  rental and other  charges  are paid in
advance,  if any,  and  (b)  acknowledging  that  there  are  not,  to  Tenant's
knowledge,  may  incurred  defaults on the part of the  Landlord  hereunder,  or
specifying  such defaults if any are claimed,  and (c) setting forth the date of
commencement of rents and expiration of the term hereof.  Any such statement may
be  relied  upon by any  prospective  purchaser  or  encumbrances  of all or any
portion of the real property of which the Premises are a part.

27. PARKING AND COMMON AREAS.  Landlord  covenants  that upon  completion of the
Snack Plant an area approximately equal to the common and parking areas as shown
on  the  attached   Exhibit  "A"  shall  be  at  all  times  available  for  the
non-exclusive  use of Tenant during the full term of this Lease or any extension
of the term hereof, provided that the condemnation of other taking by any public
authority,  or sale  in lieu of  condemnation,  of any or all  such  common  and
parking  areas shall not  constitute  a  violation  of this  covenant.  Landlord
reserves the right to change the entrances,  exits, traffic lanes and boundaries
and locations of such parking area or areas, provided, however, that anything to
the contrary  notwithstanding  contained in the Article 28, said parking area or
areas shall at all times be  substantially  equal or equivalent to that shown on
attached Exhibit "A".

27.A.  Prior to the date of  Tenant's  opening  for  business  in the  Premises,
Landlord  shall  cause  said  common  and  parking  area or areas to be  graded,
surfaced, marked and landscaped at no expense to Tenant.

27.B.  The  Landlord  shall keep said  automobile  perking and common areas in a
neat, clean and orderly condition, and shall repair any damage to the facilities
thereof,  but all expenses in connection with said automobile parking and common
areas  shall be  charged  and  prorated  in the manner as set forth in Article 7
hereof.

27.C.  Tenant,  for  the  use and  benefit  of  Tenant,  its  agents  employees,
customers,  licensees  and  subtenants,  shall have the  non-exclusive  right in
common with  Landlord,  and other present and future  owners,  tenants and their
agents, employees,  customers,  licensees and subtenants, to use said common and
parking areas during the entire term of this Lease,  and any extension  thereof,
for ingress and egress, and automobile parking.

27.D. The Tenant, in the use of said common and parking areas,  agrees to comply
with such reasonable rules,  regulations and charges for parking as the Landlord
may adopt from time to time for the orderly and proper operations of said common
and  parking  area.  Such  rules may  include  but shall not be  limited  to the
following: (1) The restricting of employee parking to a limited, designated area
or areas;  and (2) The  regulations  of the  removal,  storage  and  disposal of
Tenant's refuse and other rubbish at the sole cost and expense of Tenant.

                                        7
<PAGE>
28. AUTHORITY OF PARTIES.

28.A. Corporate Authority. If Tenant is a corporation, each individual executing
this Lease on behalf of said corporation represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said  corporation,  in
accordance  with a duly  adopted  resolution  of the board of  directors of said
corporation,  and that this Lease is binding upon said corporation in accordance
with its terms.

28.B. Limited Partnerships.  If the Landlord herein is a limited partnership, it
is understood  and agreed that any claims by Tenant on Landlord shall be limited
to the assets of the  limited  partnership  and  furthermore,  Tenant  expressly
waives any and all rights to proceed  against the  individual  partners,  or the
officers,  directors or  shareholders  of any corporate  partner,  except to the
extent of their interest in said limited partnership.

29. SIGNS. On or before the date Tenant opens the Premises for business,  Tenant
shall erect one sign on the front of the Premises, such sign to be in accordance
with a design to be prepared by Tenant and approved in writing by Landlord. Such
sign must conform to the sign criteria attached hereto and incorporated  herein.
Except  for such  sign,  Tenant  shall  not  affix,  attach,  install,  paint or
otherwise place any signs, advertising placards, names, insignia,  trademarks or
other material upon the exterior walls of the Premises without the express prior
written  approval of Landlord  in each  instance.  Anything in this Lease to the
contrary notwithstanding, Tenant shall never affix any sign or other material to
the  roof.  Landlord  may,  at any  time and at  Tenant's  expense,  remove  any
unapproved or unauthorized sign or other material,  and Landlord's failure to do
so at any particular time shall never constitute a waiver of Landlord's right to
do so at a later time.

30. HOURS OF BUSINESS.  Subject to the  provisions of Article 25 hereof,  Tenant
shall  continuously  during the entire term hereof conduct and carry on Tenant's
business in the premises and shall keep the Premises open for business and cause
Tenant's  business to be conducted  therein  during the usual  business hours of
each and every  business day as is customary  for business of like  character in
the city in which the  Premises are located to be open for  business;  provided,
however,  that this provision  shall not apply if the Premises  should be closed
and the  business  of Tenant  temporarily  discontinued  therein  on  account of
strikes,  lockouts or similar causes beyond the reasonable  control of Tenant or
closed  for not more than  three (3) days out of  respect  to the  memory of any
deceased  officer or employee of Tenant,  or the relative or any such officer or
employee.  Tenant shall keep the Premises  adequately  stocked with merchandise,
and with sufficient  sales  personnel to care for the patronage,  and to conduct
said business in accordance with solid business practice.

31. GENERAL PROVISIONS.

(i) Plats and Riders.  Clauses,  plats, riders and addendums, if any, affixed to
this Lease are a part hereof.

(ii) Waiver.  The Waiver by Landlord of any term,  covenant or condition  herein
contained  shall  not be  deemed  to be a  waiver  of  such  term,  covenant  or
conditions or any subsequent  breach of the same or any other term,  covenant or
condition  herein  contained.  The  subsequent  acceptance of rent  hereunder by
Landlord  shall not be deemed to be a waiver of any preceding  default by Tenant
or any term,  covenant or condition of this Lease, other than the failure of the
Tenant  to pay the  particular  rental so  accepted,  regardless  of  Landlord's
knowledge of such preceding default at the time of the acceptance of such rent.

(iii)  Joint  Obligation.  If there  be more  than one  Tenant  the  obligations
hereunder imposed shall be joint and several.

(iv) Marginal Headings. The Marginal headings and article titles to the articles
of this  Lease are not a part of this  Lease and shall  have no effect  upon the
construction of interpretation of any part hereof.

(v)  Time.  Time  is of the  essence  of  this  Lease  and  each  and all of its
provisions in which performance is a factor.

(vi) Successors and Assignees.  The covenants and conditions  herein  contained,
subject  to the  provisions  as to  assignment,  apply to and  bind  the  heirs,
successors, executors, administrators and assigns of the parties hereto.

(vii)  Recordation.  Tenant shall not record this Lease.  Tenant shall execute a
short form memorandum hereof at the request of Landlord.

(viii) Quiet  Possession.  Upon Tenant  paying the rent  reserved  hereunder and
observing and  performing  all of the  covenants,  conditions  and provisions of
Tenant shall have quiet  possession  of the Premises for the entire term hereof,
subject to all the provisions of this Lease.

                                        8
<PAGE>
(ix)  Lender's  Approval.  This Lease is subject to the  approval  of the lender
furnishing the loan for the Snack Plant. If such lender  disapproves  this Lease
within ten (10) days after the execution hereof, Landlord may cancel this Lease,
without any liability  whatsoever,  by written notice of  cancellation  given to
Tenant within five (5) days thereafter.

(x) Prior  Agreements.  This lease contains all of the agreements of the parties
hereto with  respect to any matter  covered or  mentioned  in the Lease,  and no
prior  agreements  or  understanding  pertaining  to any such  matters  shall be
effective for any purpose. No provision of this Lease may be amended or added to
except  by an  agreement  in  writing  signed  by the  parties  hereto  or their
respective successors in interest.  This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

(xi)  Inability  to  Perform.  This  Lease  and the  obligations  of the  Tenant
hereunder  shall not be affected or impaired  because the  Landlord is unable to
fulfill  any of its  obligations  hereunder  or is  delayed in doing so, if such
inability or delay is caused by reason of strike,  labor troubles,  acts of God,
or any other cause beyond the reasonable control of the Landlord.

(xii)  Partial  Invalidity.  Any provision of this Lease which shall prove to be
invalid, void, or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.

(xiii)  Cumulative  Remedies.  No remedy or election  hereunder  shall be deemed
exclusive but shall, whenever possible, be cumulative with all other remedies at
law or in equity.

(xiv)  Choice of Law.  This Lease  shall be governed by the laws of the State in
which the Premises are located.

(xv) Sale of Premises by  Landlord.  In the event of any sale of the Premises by
Landlord,  Landlord  shall be and is hereby  entirely  freed and relieved of all
liability  under any and all of its  covenants and  obligations  contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the  consummation  of such sale;  and the  purchaser,  at such sale or any
subsequent sale of the Premises shall be deemed,  without any further  agreement
between the parties and any such  purchaser  to have assumed and agreed to carry
out any and all of the  covenants  and  obligations  of the Landlord  under this
Lease.

(xvi)  Subordination;  Attornment.  This Lease,  including the covenant of quiet
enjoyment,  is and shall be subject and subordinate to all ground and underlying
leases,  all mortgages,  deeds of trust or other  encumbrances,  and any and all
conditions, renewals, extensions, modifications, consolidations and replacements
of any or all of the  foregoing,  now or  hereafter  affecting  such  leases  or
Premises of the real  property of which the  Premises  are a part (except to the
extent any such instrument  shall expressly  provide that this Lease is superior
thereto).  This clause  shall be  self-operative  and no further  instrument  of
subordination shall be required in order to effectuate it. Nevertheless,  Tenant
shall,  within five (5) days after  request  therefore,  execute and deliver any
certificate or other assurance in confirmation of such  subordination  requested
by any  lessor,  mortgagee  or by  Landlord.  In the event any  proceedings  are
brought for default under any ground or underlying  lease or for the foreclosure
of, or in the event of the  exercise of the power of sale under,  any  mortgage,
deed of  trust  or  other  encumbrance  to  which  this  Lease  is  subject  and
subordinate,  Tenant shall, upon request of the party succeeding to the interest
of Landlord as a result of such proceedings,  automatically attorn to and become
the Tenant of such  successor  in interest  without  change in the terms of this
Lease. Tenant shall,  within five (5) days after request therefore,  execute and
deliver any instruments confirming such attornment requested by Landlord or such
successor  in  interest.   Tenant  hereby  irrevocably  appoints  Landlord,  its
successors and assigns as Tenant's  attorney-in-fact  to execute and deliver any
certificates or other assurances of subordination  and/or attornment required by
this Article,  for and on behalf of Tenant, if Tenant fails to do so as provided
herein. The provisions of this Article to the contrary  notwithstanding,  and so
long as Tenant is not in  default  hereunder,  this Lease  shall  remain in full
force and effect for the full term thereof.

(xvii)  Notices.  All  notices  and  demands  which may or are to be required or
permitted  to be  given  by  either  party on the  other  hereunder  shall be in
writing.  All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail,  postage  prepaid,  addressed to the Tenant at the Premises,
and to the address  hereinbelow,  or to such other place as Tenant may from time
to time  designate in a notice to the  Landlord.  All notices and demands by the
Tenant to the  Landlord  shall be sent by United  States Mail  postage  prepaid,
addressed  to the  Landlord at the address set forth  herein,  and to such other
person or place as the Landlord  may from time to time  designate in a notice to
the Tenant.

To LANDLORD at: 225 W. Hospitality, San Bernardino, CA 92408

To TENANT at: 705 W. Dustman Road, Bluffton, Indiana

                                        9
<PAGE>
31.  BROKERS.  Tenant  warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease.

LANDLORD: American Pacific Financial Corporation

BY:
    -------------------------------------
    Bradley J. Crandall, Vice President

TENANT: Wabash Foods, LLC

BY:
    -------------------------------------
    Larry R. Polhill, Manager

                                       10CREDIT AGREEMENT

     THIS  AGREEMENT is entered  into as of November  24,  1999,  by and between
KNIGHT  TRANSPORTATION,  INC., an Arizona  corporation  ("Borrower"),  and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank").

                                     RECITAL

     Borrower has requested from Bank the credit accommodations  described below
(each,  a "Credit"  and  collectively,  the  "Credits"),  and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.

     NOW, THEREFORE, for valuable consideration,  the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:

                                    ARTICLE I
                                   THE CREDITS

     SECTION 1.1. LINE OF CREDIT.

     (a) LINE OF CREDIT.  Subject to the terms and conditions of this Agreement,
Bank hereby  agrees to make  advances  to  Borrower  from time to time up to and
including  July 15,  2001,  not to  exceed at any time the  aggregate  principal
amount  of Forty  Million  Dollars  ($40,000,000.00)  ("Line  of  Credit"),  the
proceeds  of  which  shall  be  used  to  finance   Borrower's  working  capital
requirements.  Borrower's  obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note  substantially  in the form of Exhibit A
attached  hereto ("Line of Credit  Note"),  all terms of which are  incorporated
herein by this reference.

     (b) LETTER OF CREDIT SUBFEATURE.  As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue  standby  letters
of credit for the  account of  Borrower to finance  Borrower's  working  capital
requirements (each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however,  that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion;  and provided further, that
the aggregate  undrawn amount of all outstanding  Letters of Credit shall not at
any time exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00).  Each
Letter of Credit  shall be issued for a term not to exceed three  hundred  sixty
(360) days,  as  designated  by Borrower;  provided  however,  that no Letter of
Credit shall have an expiration date subsequent to the maturity date of the Line
of Credit.  The undrawn  amount of all Letters of Credit shall be reserved under
<PAGE>
the Line of Credit and shall not be available for  borrowings  thereunder.  Each
Letter of Credit shall be subject to the additional  terms and conditions of the
Letter of Credit Agreement and related  documents,  if any,  required by Bank in
connection with the issuance  thereof (each, a "Letter of Credit  Agreement" and
collectively,  "Letter of Credit  Agreements").  Each draft paid by Bank under a
Letter of Credit  shall be deemed an advance  under the Line of Credit and shall
be repaid by  Borrower  in  accordance  with the  terms and  conditions  of this
Agreement applicable to such advances;  provided however, that if advances under
the Line of Credit are not available,  for any reason,  at the time any draft is
paid by Bank,  then Borrower  shall  immediately  pay to Bank the full amount of
such draft,  together with interest thereon from the date such amount is paid by
Bank to the  date  such  amount  is fully  repaid  by  Borrower,  at the rate of
interest applicable to advances under the Line of Credit. In such event Borrower
agrees that Bank, in its sole  discretion,  may debit any demand deposit account
maintained by Borrower with Bank for the amount of any such draft.

     (c) BORROWING AND REPAYMENT. Borrower may from time to time during the term
of the  Line of  Credit  borrow,  partially  or  wholly  repay  its  outstanding
borrowings,  and  reborrow,  subject  to  all  of  the  limitations,  terms  and
conditions  contained  herein or in the Line of Credit Note;  provided  however,
that the total outstanding  borrowings under the Line of Credit shall not at any
time exceed the maximum  principal  amount  available  thereunder,  as set forth
above.

     SECTION 1.2. TERM LOAN.

     (a) TERM LOAN. Subject to the terms and conditions of this Agreement,  Bank
hereby  agrees  to make a loan to  Borrower  in the  principal  amount  of Eight
Million  Seventy-three  Thousand  Six  Hundred  Eight-nine  and  28/100  Dollars
($8,073,689.28)  ("Term  Loan"),  the proceeds of which shall be used to finance
Borrower's working capital requirements. Borrower's obligation to repay the Term
Loan  shall be  evidenced  by a  promissory  note  substantially  in the form of
Exhibit B attached  hereto ("Term  Note"),  all terms of which are  incorporated
herein  by this  reference.  Bank's  commitment  to grant  the Term  Loan  shall
terminate on December 24, 1999.

     (b)  REPAYMENT.  The  principal  amount of the Term Loan shall be repaid in
accordance with the provisions of the Term Note.

     (c)  PREPAYMENT.  Borrower may prepay  principal on the Term Loan solely in
accordance with the provisions of the Term Note.

                                       -2-
<PAGE>
     SECTION 1.3. INTEREST/FEES.

     (a) INTEREST.  The outstanding  principal balance of the Line of Credit and
Term Loan shall bear  interest at the rate of interest  set forth in the Line of
Credit Note and Term Note (collectively, the "Notes").

     (b) COMPUTATION  AND PAYMENT.  Interest shall be computed on the basis of a
360-day year,  actual days elapsed.  Interest  shall be payable at the times and
place set forth in the Notes.

     (c)  UNUSED  COMMITMENT  FEE.  Borrower  shall  pay to Bank a fee  equal to
sixty-two  hundredths  percent  (.0620)  per annum  (computed  on the basis of a
360-day  year,  actual days  elapsed) on the average  daily unused amount of the
Line of Credit,  which fee shall be calculated on a quarterly  basis by Bank and
shall be due and payable by Borrower in arrears on the 15th day of each January,
April, July and October.

     (d)  LETTER OF CREDIT  FEES.  Borrower  shall pay to Bank (i) fees upon the
issuance of each  Letter of Credit  equal to nine tenths  percent  (0.9000)  per
annum (computed on the basis of a 360-day year, actual days elapsed) of the face
amount  thereof,  and (ii) fees upon the payment or  negotiation by Bank of each
draft  under  any  Letter of Credit  and fees upon the  occurrence  of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer,  amendment  or  cancellation  of any Letter of Credit)  determined  in
accordance  with  Bank's  standard  fees and  charges  then in  effect  for such
activity.

     SECTION 1.4.  COLLECTION OF PAYMENTS.  Borrower  authorizes Bank to collect
all principal and interest due under each Credit by charging  Borrower's  demand
deposit  account  number  4159-518950  with Bank,  or any other  demand  deposit
account  maintained by Borrower with Bank, for the full amount  thereof.  Should
there be  insufficient  funds in any such demand deposit account to pay all such
sums when due, the full amount of such  deficiency  shall be immediately due and
payable by Borrower.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

     Borrower makes the following  representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall  continue in full force and effect until the full and final  payment,  and
satisfaction  and discharge,  of all  obligations of Borrower to Bank subject to
this Agreement.

                                       -3-
<PAGE>
     SECTION 2.1. LEGAL STATUS.  Borrower is a  corporation,  duly organized and
existing  and in good  standing  under the laws of the state of Arizona,  and is
qualified  or  licensed  to do  business  (and is in good  standing as a foreign
corporation,  if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.

     SECTION 2.2.  AUTHORIZATION  AND VALIDITY.  This Agreement,  the Notes, and
each other  document,  contract and  instrument  required  hereby or at any time
hereafter  delivered to Bank in  connection  herewith  (collectively,  the "Loan
Documents") have been duly authorized,  and upon their execution and delivery in
accordance with the provisions hereof will constitute  legal,  valid and binding
agreements  and  obligations  of Borrower or the party which  executes the same,
enforceable in accordance with their respective terms.

     SECTION 2.3. NO  VIOLATION.  The  execution,  delivery and  performance  by
Borrower of each of the Loan  Documents do not violate any  provision of any law
or regulation,  or contravene any provision of the Articles of  Incorporation or
By-Laws of Borrower,  or result in any breach of or default  under any contract,
obligation,  indenture or other  instrument  to which  Borrower is a party or by
which Borrower may be bound.

     SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened,  actions, claims, investigations,  suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which  could  have a  material  adverse  effect on the  financial  condition  or
operation of Borrower other than those  disclosed by Borrower to Bank in writing
prior to the date hereof.

     SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower  dated  September 30, 1999, a true copy of which has been  delivered by
Borrower  to Bank prior to the date  hereof,  (a) is  complete  and  correct and
presents  fairly  the  financial  condition  of  Borrower,   (b)  discloses  all
liabilities  of Borrower  that are required to be reflected or reserved  against
under  generally   accepted   accounting   principles,   whether  liquidated  or
unliquidated,  fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such  financial  statement  there  has been no  material  adverse  change in the
financial condition of Borrower, nor has Borrower mortgaged,  pledged, granted a
security  interest in or otherwise  encumbered  any of its assets or  properties
except in favor of Bank or as otherwise permitted by Bank in writing.

                                       -4-
<PAGE>
     SECTION 2.6.  INCOME TAX RETURNS.  Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

     SECTION 2.7. NO SUBORDINATION.  There is no agreement,  indenture, contract
or  instrument  to which  Borrower is a party or by which  Borrower may be bound
that  requires  the  subordination  in right  of  payment  of any of  Borrower's
obligations subject to this Agreement to any other obligation of Borrower.

     SECTION 2.8. PERMITS,  FRANCHISES.  Borrower possesses,  and will hereafter
possess, all permits, consents, approvals,  franchises and licenses required and
rights to all trademarks,  trade names,  patents,  and fictitious names, if any,
necessary  to enable it to conduct  the  business  in which it is now engaged in
compliance with applicable law.

     SECTION 2.9. ERISA. Borrower is in compliance in all material respects with
all  applicable  provisions of the Employee  Retirement  Income  Security Act of
1974, as amended or  recodified  from time to time  ("ERISA");  Borrower has not
violated any provision of any defined  employee pension benefit plan (as defined
in ERISA)  maintained  or  contributed  to by  Borrower  (each,  a  "Plan");  no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any  Plan  initiated  by  Borrower;  Borrower  has  met its  minimum  funding
requirements  under ERISA with respect to each Plan;  and each Plan will be able
to fulfill its benefit  obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

     SECTION  2.10.  OTHER  OBLIGATIONS.  Borrower  is  not  in  default  on any
obligation  for borrowed  money,  any purchase  money  obligation or any.  other
material lease, commitment, contract, instrument or obligation.

     SECTION  2.11.  ENVIRONMENTAL  MATTERS.  Except as disclosed by Borrower to
Bank in writing  prior to the date  hereof,  Borrower  is in  compliance  in all
material respects with all applicable federal or state environmental,  hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto,  which govern or affect any of Borrower's operations and/or properties,
including  without  limitation,   the  Comprehensive   Environmental   Response,
Compensation   and  Liability  Act  of  1980,   the  Superfund   Amendments  and
Reauthorization Act of 1986, the Federal Resource  Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended,  modified or supplemented  from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any  remedial  action involving a material expenditure is needed to respond to a

                                       -5-
<PAGE>
release  of any toxic or  hazardous  waste or  substance  into the  environment.
Borrower has no material contingent  liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

                                   ARTICLE III
                                   CONDITIONS

     SECTION 3.1.  CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of
Bank to grant  any of the  Credits  is  subject  to the  fulfillment  to  Bank's
satisfaction of all of the following conditions:

     (a) APPROVAL OF BANK COUNSEL.  All legal matters incidental to the granting
of each of the Credits shall be satisfactory to Bank's counsel.

     (b)  DOCUMENTATION.  Bank  shall  have  received,  in  form  and  substance
satisfactory to Bank, each of the following, duly executed:

     (i)   This Agreement and the Notes.
     (ii)  Articles of Incorporation.
     (iii) Corporate Resolution: Borrowing.
     (iv)  Certificate of Incumbency.
     (v)   Such other documents as Bank may require  under any other  Section of
           this Agreement.

     (c) FINANCIAL CONDITION.  There shall have been no material adverse change,
as determined by Bank, in the financial  condition or business of Borrower,  nor
any  material  decline,  as  determined  by  Bank,  in the  market  value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.

     SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each  extension  of credit  requested  by  Borrower  hereunder  shall be
subject  to the  fulfillment  to Bank's  satisfaction  of each of the  following
conditions:

     (a) COMPLIANCE.  The representations and warranties contained herein and in
each of the  other  Loan  Documents  shall  be true on and as of the date of the
signing of this  Agreement  and on the date of each  extension of credit by Bank
pursuant  hereto,  with the same  effect  as  though  such  representations  and
warranties  had been made on and as of each such date, and on each such date, no
Event of Default as defined  herein,  and no condition,  event or act which with
the giving of notice or the  passage of time or both  would  constitute  such an
Event of Default, shall have occurred and be continuing or shall exist.

                                       -6-
<PAGE>
     (b) DOCUMENTATION.  Bank shall have received all additional documents which
may be required in connection with such extension of credit.

                                   ARTICLE IV
                              AFFIRMATIVE COVENANTS

     Borrower  covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto,  or any liabilities  (whether direct or contingent,
liquidated or  unliquidated) of Borrower to Bank under any of the Loan Documents
remain  outstanding,  and until payment in full of all  obligations  of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

     SECTION 4.1.  PUNCTUAL  PAYMENTS.  Punctually pay all principal,  interest,
fees or other  liabilities  due under any of the Loan Documents at the times and
place and in the manner specified therein.

     SECTION 4.2.  ACCOUNTING  RECORDS.  Maintain  adequate books and records in
accordance with generally accepted accounting  principles  consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records,  to make copies of the same,  and to inspect
the properties of Borrower.

     SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in
form and detail satisfactory to Bank:

     (a) not later than 120 days after and as of the end of each fiscal year, an
audited  financial  statement  of  Borrower,  prepared  by  a  certified  public
accountant  acceptable  to Bank, to include  balance  sheet,  income  statement,
statement of cash flow and all footnotes;

     (b) not later than 60 .days after and as of the end of each fiscal quarter,
a financial  statement of Borrower,  prepared by  Borrower,  to include  balance
sheet, income statement, statement of cash flow and all footnotes;

     (c)  from  time to time  such  other  information  as Bank  may  reasonably
request.

     SECTION 4.4.  COMPLIANCE.  Preserve and  maintain  all  licenses,  permits,
governmental  approvals,  rights,  privileges and  franchises  necessary for the
conduct  of its  business;  and  comply  with the  provisions  of all  documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws,  rules,  regulations and orders
of any governmental authority applicable to Borrower and/or its business.

                                       -7-
<PAGE>
     SECTION 4.5.  INSURANCE.  Maintain and keep in force insurance of the types
and in  amounts  customarily  carried  in lines of  business  similar to that of
Borrower,   including  but  not  limited  to  fire,  extended  coverage,  public
liability,  flood,  property  damage and  workers'  compensation,  with all such
insurance  carried  with  companies  and in amounts  satisfactory  to Bank,  and
deliver to Bank from time to time at Bank's request  schedules setting forth all
insurance then in effect.

     SECTION  4.6.  FACILITIES.  Keep all  properties  useful  or  necessary  to
Borrower's  business  in good repair and  condition,  and from time to time make
necessary  repairs,  renewals and  replacements  thereto so that such properties
shall be fully and efficiently preserved and maintained.

     SECTION 4.7.  TAXES AND OTHER  LIABILITIES.  Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without  limitation federal and state income taxes and state and local
property  taxes and  assessments,  except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction,  for eventual payment thereof in the
event Borrower is obligated to make such payment.

     SECTION  4.8.  LITIGATION.  Promptly  give notice in writing to Bank of any
litigation pending or threatened against Borrower.

     SECTION 4.9. FINANCIAL  CONDITION.  Maintain Borrower's financial condition
as follows using generally accepted accounting  principles  consistently applied
and used consistently with prior practices (except to the extent modified by the
definitions herein):

     (a) Net Worth not less than  $70,000,000.00 plus 50% of positive net income
and not reduced for any net losses,  measured quarterly commencing September 30,
1999, with "Net Worth" defined as total stockholders' equity.

     (b)  EBITDA  Coverage  Ratio not less  than  3.00 to 1.0 as of each  fiscal
quarter end,  determined on a rolling  four-quarter basis, with "EBITDA" defined
as net profit  before tax plus  interest  expense (net of  capitalized  interest
expense),  depreciation  expense  and  amortization  expense,  and with  "EBITDA
Coverage  Ratio"  defined as EBITDA  divided by the aggregate of total  interest
expense plus the prior period  current  maturity of long-term debt and the prior
period current maturity of subordinated debt plus dividends and distributions.

                                       -8-
<PAGE>
     (c) Funded Debt to EBITDA  ratio not at any time  greater than 1.50 to 1.0,
on a trailing  four-quarter  basis,  as of each fiscal quarter end, with "Funded
Debt to EBITDA Ratio" defined as Funded Debt divided by EBITDA, and with "Funded
Debt"  defined as the  aggregate  of both the  long-term  and  current  portions
(without  duplication)  of  all  indebtedness  or  liabilities.  resulting  from
borrowings, loans or advances and capitalized lease obligations, plus the stated
amounts of any issued and  outstanding  Letters of Credit,  and with "EBITDA" as
defined and calculated above.

     SECTION 4.10. NOTICE TO BANK.  Promptly (but in no event more than five (5)
days after the  occurrence of each such event or matter) give written  notice to
Bank in reasonable  detail of: (a) the occurrence of any Event of.  Default,  or
any  condition,  event or act which with the giving of notice or the  passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational  structure of Borrower;  (c) the occurrence and nature of any
Reportable  Event or Prohibited  Transaction,  each as defined in ERISA,  or any
funding  deficiency  with  respect  to any  Plan;  or  (d)  any  termination  or
cancellation of any insurance policy which Borrower is required to maintain,  or
any uninsured or partially  uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.

     SECTION 4.11. YEAR 2000 COMPLIANCE.  Perform all acts reasonably  necessary
to  ensure  that  (a)  Borrower  and any  business  in  which  Borrower  holds a
substantial  interest,  and (b) all  customers,  suppliers  and vendors that are
material to Borrower's business,  become Year 2000 Compliant in a timely manner.
Such acts shall include,  without limitation,  performing a comprehensive review
and assessment of all of Borrower's  systems and adopting a detailed plan,  with
itemized budget, for the remediation, monitoring and testing of such systems. As
used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software,  hardware,  firmware,  equipment,  goods  or  systems  utilized  by or
material to the business  operations or financial condition of such entity, will
properly  perform date  sensitive  functions  before,  during and after the year
2000.   Borrower  shall,   immediately  upon  request,   provide  to  Bank  such
certifications or other evidence of Borrower's  compliance with the terms hereof
as Bank may from time to time require.

                                    ARTICLE V
                               NEGATIVE COVENANTS

     Borrower further covenants that so long as Bank remains committed to extend
credit to  Borrower  pursuant  hereto,  or any  liabilities  (whether  direct or
contingent,  liquidated  or  unliquidated)  of Borrower to Bank under any of the
Loan Documents remain outstanding,  and until payment in full of all obligations
of Borrower  subject  hereto,  Borrower  will not without  Bank's prior  written
consent:

                                       -9-
<PAGE>
     SECTION  5.1.  USE OF FUNDS.  Use any of the proceeds of any of the Credits
except for the purposes stated in Article I hereof.

     SECTION 5.2. OTHER INDEBTEDNESS.  Create,  incur, assume or permit to exist
any indebtedness or liabilities  resulting from  borrowings,  loans or advances,
whether secured or unsecured, matured or unmatured,  liquidated or unliquidated,
joint or several in excess of an  aggregate  of  $10,000,000.00,  except (a) the
liabilities  of  Borrower  to Bank,  and (b) any other  liabilities  of Borrower
existing as of, and disclosed to Bank prior to, the date hereof.

     SECTION  5.3.  MERGER,  CONSOLIDATION,  TRANSFER  OF ASSETS.  Merge into or
consolidate with any other entity;  make any substantial change in the nature of
Borrower's  business  as  conducted  as of  the  date  hereof;  acquire  all  or
substantially all of the assets of any other entity;  nor sell, lease,  transfer
or otherwise  dispose of all or a substantial or material  portion of Borrower's
assets except in the ordinary course of its business.

     SECTION 5.4.  GUARANTIES.  Guarantee or become liable in any way as surety,
endorser  (other  than as  endorser  of  negotiable  instruments  for deposit or
collection  in the  ordinary  course of  business),  accommodation  endorser  or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity,  except any of the
foregoing in favor of Bank.

     SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Bank-prior to, the date hereof.

     SECTION  5.6.  DIVIDEND,  DISTRIBUTIONS.  Declare  or pay any  dividend  or
distribution  in excess of fifty percent  (50%) of Borrower's  net income in any
fiscal year either in cash,  stock or any other property on Borrower's stock now
or  hereafter  outstanding,   nor  redeem,  retire,   repurchase  in  excess  of
$15,000,000.00  in  any  12  month  period  effective  as of the  date  of  this
Agreement,  or otherwise acquire any shares of any class of Borrower's stock now
or hereafter outstanding.

     SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security  interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except for transaction currently being contemplated
between KTI and Volvo and approved by Bank.

                                      -10-
<PAGE>
                                   ARTICLE VI
                                EVENTS OF DEFAULT

     SECTION 6.1. The  occurrence  of any of the following  shall  constitute an
"Event of Default" under this Agreement:

     (a) Borrower  shall fail to pay when due any principal,  interest,  fees or
other amounts payable under any of the Loan Documents.

     (b) Any financial statement or certificate  furnished to Bank in connection
with,  or any  representation  or  warranty  made by Borrower or any other party
under this  Agreement or any other Loan  Document  shall prove to be  incorrect,
false or misleading in any material respect when furnished or made.

     (c) Any default in the  performance of or compliance  with any  obligation,
agreement  or other  provision  contained  herein or in any other Loan  Document
(other  than those  referred  to in  subsections  (a) and (b)  above),  and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.

     (d) Any default in the payment or  performance  of any  obligation,  or any
defined event of default,  under the terms of any contract or instrument  (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Bank.

     (e) The filing of a notice of  judgment  lien  against .  Borrower;  or the
recording  of any abstract of judgment  against  Borrower in any county in which
Borrower  has an interest in real  property;  or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process,  against the
assets of Borrower; or the entry of a judgment against Borrower.

     (f) Borrower shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or
any of its  property,  or shall  generally  fail to pay its debts as they become
due, or shall make a general  assignment for the benefit of creditors;  Borrower
shall file a voluntary  petition in bankruptcy,  or seeking  reorganization,  in
order to effect a plan or other  arrangement  with creditors or any other relief
under the Bankruptcy  Reform Act, Title 11 of the United States Code, as amended
or  recodified  from  time to time  ("Bankruptcy  Code"),  or under any state or
federal law granting relief to debtors,  whether now or hereafter in effect;  or
any  involuntary  petition or proceeding  pursuant to the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy,  reorganization or
other relief for debtors is filed or  commenced  against  Borrower,  or Borrower

                                      -11-
<PAGE>
shall file an answer  admitting the  jurisdiction  of the court and the material
allegations  of any  involuntary  petition;  or Borrower  shall be adjudicated a
bankrupt,  or an order for relief shall be entered against Borrower by any court
of competent  jurisdiction.  under the Bankruptcy  Code or any other  applicable
state or federal law relating to bankruptcy,  reorganization or other relief for
debtors.

     (g) There  shall exist or occur any event or  condition  which Bank in good
faith believes impairs,  or is substantially  likely to impair,  the prospect of
payment or  performance  by  Borrower of its  obligations  under any of the Loan
Documents.

     (h) The  dissolution or liquidation of Borrower;  or Borrower or any of its
directors,  stockholders  or members,  shall take.  action seeking to effect the
dissolution or liquidation of Borrower.

     (i) Any change in ownership during the term of this Agreement.

     SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan  Documents,  any term thereof to
the contrary  notwithstanding,  shall at Bank's option and without notice become
immediately due and payable without  presentment,  demand,  protest or notice of
dishonor,  all of which are hereby  expressly  waived by each Borrower;  (b) the
obligation,  if any, of Bank to extend any further  credit under any of the Loan
Documents  shall  immediately  cease and terminate;  and (c) Bank shall have all
rights,  powers and  remedies  available  under each of the Loan  Documents,  or
accorded by law,  including without limitation the right to resort to any or all
security  for any of the Credits  and to exercise  any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights,  powers and
remedies  of Bank may be  exercised  at any  time by Bank and from  time to time
after the  occurrence of an Event of Default,  are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

                                   ARTICLE VII
                                  MISCELLANEOUS

     SECTION  7.1. NO WAIVER.  No delay,  failure or  discontinuance  of Bank in
exercising  any right,  power or remedy  under any of the Loan  Documents  shall
affect or operate  as a waiver of such  right,  power or  remedy;  nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise  affect any other or further  exercise  thereof or the exercise of any
other right,  power or remedy.  Any waiver,  permit,  consent or approval of any

                                      -12-
<PAGE>
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

     SECTION 7.2. NOTICES. All notices,  requests and demands which any party is
required or may desire to give to any other party  under any  provision  of this
Agreement must be in writing delivered to each party at the following address:

     BORROWER:     KNIGHT TRANSPORTATION, INC.
                   5601 W. Buckeye Road
                   Phoenix, AZ 85043

     BANK:         WELLS FARGO BANK, NATIONAL ASSOCIATION
                   Arizona RCBO
                   100 West Washington
                   Phoenix, AZ 85003

or to such other  address as any party may  designate  by written  notice to all
other  parties.  Each such  notice,  request and demand shall be deemed given or
made as follows:  (a) if sent by hand delivery,  upon  delivery;  (b) if sent by
mail,  upon the earlier of the date of receipt or three (3) days after  deposiin
the U.S.  mail,  first class and postage  prepaid;  and (c) if sent by telecopy,
upon receipt.

     SECTION 7.3.  COSTS,  EXPENSES AND ATTORNEYS'  FEES.  Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses,  including  reasonable  attorneys'  fees (to include outside
counsel fees and all allocated  costs of Bank's in-house  counsel),  expended or
incurred by Bank in connection  with (a) the negotiation and preparation of this
Agreement and the other Loan Documents,  Bank's continued  administration hereof
and  thereof,  and the  preparation  of any  amendments  and waivers  hereto and
thereto,  (b) the  enforcement  of Bank's  rights  and/or the  collection of any
amounts  which become due to Bank under any of the Loan  Documents,  and (c) the
prosecution  or  defense  of any  action in any way  related  to any of the Loan
Documents,  including  without  limitation,  any action for declaratory  relief,
whether incurred at the trial or appellate  level, in an arbitration  proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding  (including without limitation,  any adversary proceeding,
contested  matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.

     SECTION 7.4. SUCCESSORS,  ASSIGNMENT.  This Agreement shall be binding upon
and  inure  to  the  benefit  of the  heirs,  executors,  administrators,  legal
representatives,  successors and assigns of the parties;  provided however, that
Borrower may not assign or transfer its interest  hereunder without Bank's prior

                                      -13-
<PAGE>
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant  participations  in all or any part of, or any interest in,  Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose  all  documents  and  information  which Bank now has or may  hereafter
acquire relating to any of the Credits, Borrower or its business, [any guarantor
hereunder  or the  business  of  such  guarantor,]  or any  collateral  required
hereunder.

     SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to the Credits and supersede all prior negotiations, communications, discussions
and correspondence  concerning the subject matter hereof.  This Agreement may be
amended or modified only in writing signed by each party hereto.

     SECTION  7.6.  NO THIRD PARTY  BENEFICIARIES.  This  Agreement  is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party  beneficiary of, or have any direct or indirect cause of action
or claim in connection  with,  this Agreement or any other of the Loan Documents
to which it is not a party.

     SECTION 7.7.  TIME.  Time is of the essence of each and every  provision of
this Agreement and each other of the Loan Documents.

     SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under  applicable law, such provision shall be
ineffective  only  to the  extent  of such  prohibition  or  invalidity  without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

     SECTION 7.9. COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

     SECTION  7.10.  GOVERNING  LAW.  This  Agreement  shall be  governed by and
construed in accordance with the laws of the State of Arizona.

     SECTION 7.11. ARBITRATION.

     (a)  ARBITRATION.  Upon the  demand  of any  party,  any  Dispute  shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement.  A "Dispute"  shall mean any action,  dispute,

                                      -14-
<PAGE>
claim or  controversy  of any kind,  whether in contract or tort,  statutory  or
common law,  legal or equitable,  now existing or hereafter  arising under or in
connection with, or in any way pertaining to, any of the Loan Documents,  or any
past, present or future extensions of credit and other activities,  transactions
or  obligations  of any kind related  directly or  indirectly to any of the Loan
Documents,  including  without  limitation,  any of  the  foregoing  arising  in
connection  with the  exercise of any  self-help,  ancillary  or other  remedies
pursuant  to any of the Loan  Documents.  Any party may by  summary  proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and  expenses  incurred by such other  party in  compelling
arbitration of any Dispute.

     (b) GOVERNING RULES.  Arbitration  proceedings shall be administered by the
American  Arbitration  Association  ("AAA") or such other  administrator  as the
parties  shall  mutually  agree  upon in  accordance  with  the  AAA  Commercial
Arbitration  Rules. All Disputes  submitted to arbitration  shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding  any  conflicting  choice  of law  provision  in any of the Loan
Documents.  The arbitration shall be conducted at a location in Arizona selected
by the AAA or other  administrator.  If there is any  inconsistency  between the
terms hereof and any such rules, the terms and procedures set forth herein shall
control. A11 statutes of limitation applicable to any Dispute shall apply to any
arbitration  proceeding.  All discovery activities shall be expressly limited to
matters  directly  relevant to the Dispute being  arbitrated.  Judgment upon any
award  rendered  in  an   arbitration   may  be  entered  in  any  court  having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections  afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.

     (c) NO WAIVER; PROVISIONAL REMEDIES SELF-HELP AND FORECLOSURE. No provision
hereof shall limit the right of any party to exercise self-help remedies such as
setoff,  foreclosure against or sale of any real or personal property collateral
or security,  or to obtain provisional or ancillary remedies,  including without
limitation  injunctive  relief,  sequestration,  attachment,  garnishment or the
appointment of a receiver,  from a court of competent jurisdiction before, after
or during the pendency of any arbitration or other  proceeding.  The exercise of
any such  remedy  shall not  waive the right of any party to compel  arbitration
hereunder.

     (d)  ARBITRATOR  OUALIFICATIONS  AND POWERS;  AWARDS.  Arbitrators  must be
active  members  of the  Arizona  State  Bar or  retired  judges of the state or

                                      -15-
<PAGE>
federal judiciary of Arizona with expertise in the substantive law applicable to
the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes
by summary  rulings in response to motions filed prior to the final  arbitration
hearing.  Arbitrators  (I) shall  resolve all  Disputes in  accordance  with the
substantive  law of the state of  Arizona,  (ii) may grant any  remedy or relief
that a court of the  state of  Arizona  could  order or grant  within  the scope
hereof and such  ancillary  relief as is necessary to make  effective any award,
and (iii)  shall  have the  power to award  recovery  of all costs and fees,  to
impose  sanctions and to take such other  actions as they deem  necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure,  the
Arizona Rules of Civil  Procedure or other  applicable law. Any Dispute in which
the  amount  controversy  is  $5,000,000  or less  shall be  decided by a single
arbitrator who shall not render an award of greater than  $5,000,000  (including
damages, costs, fees and expenses).  By submission to a single arbitrator,  each
party expressly waives any right or claim to recover more than  $5,000,000.  Any
Dispute in which the amount in controversy  exceeds  $5,000,000 shall be decided
by majority vote of a panel of three  arbitrators;  provided  however,  that all
three arbitrators must actively participate in all hearings and deliberations.

     (e) JUDICIAL REVIEW.  Notwithstanding  anything herein to the contrary,  in
any  arbitration in which the amount in  controversy  exceeds  $25,000,000,  the
arbitrators  shall be required to make  specific,  written  findings of fact and
conclusions of law. In such  arbitrations (I) the arbitrators shall not have the
power to make any award which is not supported by substantial  evidence or which
is based on legal  error,  (ii) an award  shall not be binding  upon the parties
unless the  findings  of fact are  supported  by  substantial  evidence  and the
conclusions of law are not erroneous  under the  substantive law of the state of
Arizona, and (iii) the parties shall have in addition to the grounds referred to
in the Federal  Arbitration  Act for vacating,  modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators  are  supported  by  substantial  evidence,   and  (B)  whether  the
conclusions  of law are  erroneous  under  the  substantive  law of the state of
Arizona.  Judgment  confirming an award in such a proceeding may be entered only
if a court  determines  the award is supported by  substantial  evidence and not
based on legal error under the substantive law of the state of Arizona.

     (f)  MISCELLANEOUS.  To  the  maximum  extent  practicable,  the  AAA,  the
arbitrators  and the parties  shall take all action  required  to  conclude  any
arbitration  proceeding  within 180 days of the filing of the  Dispute  with the
AAA. No arbitrator or other party to an arbitration  proceeding may disclose the
existence,  content or results thereof, except for disclosures of information by

                                      -16-
<PAGE>
a party  required in the ordinary  course of its business,  by applicable law or
regulation,  or to the extent  necessary to exercise any judicial  review rights
set forth herein.  If more than one agreement for  arbitration by or between the
parties  potentially  applies  to a  Dispute,  the  arbitration  provision  most
directly  related to the Loan  Documents  or the  subject  matter of the Dispute
shall control. This arbitration  provision shall survive termination,  amendment
or  expiration  of any of the Loan  Documents  or any  relationship  between the
parties.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed as of the day and year first written above.

                                        WELLS FARGO BANK,
KNIGHT TRANSPORTATION, INC.               NATIONAL ASSOCIATION

By: /s/ Clark Jenkins                   By: /s/ Jeffrey Lowe
    ---------------------------------       ---------------------------------
    Title: CFO                              Jeffrey Lowe
                                            Vice President

                                      -17-
<PAGE>
WELLS FARGO BANK                                   REVOLVING LINE OF CREDIT NOTE

$40,000,000.00                                                  Phoenix, Arizona
                                                               November 24, 1999

     FOR VALUE RECEIVED, the undersigned KNIGHT TRANSPORTATION, INC. (Borrower')
promises to pay to the order of WELLS FARGO BANK, NATIONAL  ASSOCIATION ("Bank')
at its office at ARIZONA RCBO #03839, 100 WEST WASHINGTON, PHOENIX, AZ 85003, or
at such other place as the holder hereof may  designate,  in lawful money of the
United States of America and in immediately  available  funds, the principal sum
of  $40,000,000.00,  or so much thereof as may be advanced  and be  outstanding,
with  interest  thereon,  to be  computed on each  advance  from the date of its
disbursement as set forth herein.

DEFINITIONS:

     As used herein, the following terms shall have the meanings set forth AFTER
each,  and any other term  defined in this Note shall have the meaning set forth
at the place defined:

     (a) "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in Arizona are authorized or required by law to close.

     (b)  "Fixed  Rate Term"  means a period  commencing  on a Business  Day and
continuing for 1, 2, 3 OR 6 MONTHS, as designated by Borrower,  during which all
or a portion of the  outstanding  principal  balance of this Note bears interest
determined in relation to LIBOR;  provided however,  that no Fixed Rate Term may
be selected for a principal amount less than $100,000.00;  and provided further,
that no Fixed Rate Term shall extend beyond the scheduled  maturity date hereof,
If any Fixed  Rate Term would end on a day which is flat a  Business  Day,  then
such Fixed Rate term shall be extended to the next succeeding Business Day.

     (c) "USDA" means the rate per annum (rounded upward,  if necessary,  to the
nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal
to 100% less any LIBOR Reserve Percentage.

     (i) "Base LIBOR" means the rate per annum for United States dollar deposits
quoted by Bank as the  Inter-Sank  Market Offered Rate,  with the  understanding
that such rate is quoted by Bank for the purpose of calculating  effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the  number of days in such  Fixed  Rate Term and in an amount  approximately
equal to the principal  amount to which such Fixed Rate Term  applies.  Borrower
understands and agrees that Sank may base its quotation of the Inter-Bank Market
Offered  Rate upon such  offers or other  market  indicators  of the  Inter-Bank
Market as Bank in its discretion deems  appropriate  including,  but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market,

     (ii) "LIBOR Reserve Percentage" means the reserve percentage  prescribed by
the Board of  Governors of the Federal  Reserve  System (or any  successor)  for
"Eurocurrency  Liabilities"  (as defined in Regulation 0 of the Federal  Reserve
Board,  as  amended),  adjusted  by Bank for  expected  changes in such  reserve
percentage during the applicable Fixed Rate Term.

     (d)  "Prime  Rate"  means at any time the rate of  interest  most  recently
announced  within  Bank at its  principal  office  as its Prime  Rate,  with the
understanding  that the Prime Rate is one of Bank's base rates and serves as the
basis upon which  effective  rates of interest  ate  calculated  for those loans
making reference  thereto,  and is evidenced by the recording  thereof after its
announcement in such internal publication or publications as Bank may designate.

INTEREST:

    (a)  INTEREST.  The  outstanding  principal  balance of this Note shall bear
interest (computed,  on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating  rate per annum EQUAL TO the Prime Rate in effect from time
to time,  or (ii) at a fixed rate per annum  determined  by Bank to be  .62500%,
above LIBOR in effect on the first day of the applicable  Fixed Rate Term.  When
interest is determined in relation to the Prime Rate, each change in the rate of
interest  hereunder shall become effective on the date each Prime Rate change is
announced  within Bank.  With respect to each LIBOR  selection  option  selected
hereunder,  Bank is  hereby  authorized  to note  the  date,  principal  amount,
interest  rate and Fixed Rate Term  applicable  thereto  and any  payments  made
thereon on Bank's books and records  (either  manually or by  electronic  entry)
and/or on any schedule  attached to this Note,  which  notations  shall be prima
facie evidence of the accuracy of the information noted.

     (b)  SELECTION OF INTEREST  RATE  OPTIONS.  At any time any portion of this
Note bears  interest  determined  in relation to LIBOR,  it may be  continued by
Borrower at the end of the Fixed Rate Term  applicable  thereto so that all or a
portion  thereof bears  interest  determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion
of this Note bears interest  determined in relation to the Prime Rate,  Borrower
may convert all or a portion  thereof so that it bears  interest  determined  in
relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as
Borrower  requests an advance  hereunder  or wishes to select a LIBOR option for
all or a portion of the outstanding  principal balance hereof, and at the end of
<PAGE>
each Fixed Rate  Term,  Borrower  shall  give Bank  notice  specifying:  (i) the
interest rate option  selected by Borrower;  (ii) the principal  amount  subject
thereto; and (iii) for each LIBOR selection,  the length of the applicable Fixed
Rate Term.  Any such notice may lie given by  telephone so long as, with respect
to each LIBOR selection,  (A) Bank receives written  confirmation  from Borrower
not later than 3 Business  Days after such  telephone  notice is given,  and (B)
such notice is given to Bank prior to 10:00 am.,  California  time, on the first
day of the Fixed Rate Term. For each LIBOR option requested hereunder, Bank will
quote the  applicable  fixed  rate to  Borrower  at  approximately  10:00  n.m.,
California  time,  on the first day of the Fixed Rate Term. If Borrower does not
immediately  accept  the rate  quoted  by Bank,  any  subsequent  acceptance  by
Borrower shall be subject to a  redetermination  by Bank of the applicable fixed
rate; provided however,  that if Borrower fails to accept any such rate by 11:00
am.,  California  time,  on the Business Day such  quotation is given,  then the
quoted  rate shall  expire and Bank shall have no  obligation  to permit a LIBOR
option to be selected on such day.  If no  specific  designation  of interest is
made at the time any advance is  requested  hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection
for such advance or the principal amount to which such Fixed Rate Term applied.

     (c) ADDITIONAL LIBOR PROVISIONS.

     (i) If Bank at any time shall  determine  that for any reason  adequate and
reasonable means do not exist for ascertaining  LIBOR,  then Bank shall promptly
give notice  thereof to Borrower.  If such notice is given and until such notice
has been  withdrawn  by Bank,  then (A) no new LIBOR  option may be  selected by
Borrower,  and (B) any portion of the outstanding principal balance hereof which
bears  interest  determined  in relation to LIBOR,  subsequent to the end of the
Fixed Rate Term applicable  thereto,  shall bear interest determined in relation
to the Prime Rate.

     (ii) If any law,  treaty,  rule,  regulation or determination of a court or
governmental  authority  or  any  change  therein  or in the  interpretation  or
application  thereof  (each,  a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest rates
based  on  LIBOR,  then in the  former  event,  any  obligation  of Bank to make
available such unlawful LIBOR options shall immediately be cancelled, and in the
latter event,  any such unlawful  LIBOR-based  interest  rates then  outstanding
shall be  converted,  at Bank's  option,  so that interest on the portion of the
outstanding  principal  balance subject thereto is determined in relation to the
Prime Rate;  provided  however,  that if any such Change in Law shall permit any
LIBOR-based interest rates to remain in effect until the expiration of the Fixed
Rate Term applicable  thereto,  then such permitted  LIBOR-based  interest rates
shall continue in effect until the expiration of such Fixed Rate Term.  Upon the
occurrence  of  any  of  the  foregoing  events,  Borrower  shall  pay  to  Bank
immediately  upon demand such amounts as may be necessary to compensate Bank for
any fines, fees,  charges,  penalties or other costs incurred or payable by Bank
as a result  thereof  and  which are  attributable  to any  LIBOR  options  made
available to Borrower  hereunder,  and any  reasonable  allocation  made by Bank
among its operations shall be cortclusive and binding upon Borrower.

     (iii) If any  Change  in Law or  compliance  by Bank  with any  request  or
directive  (whether  or not  having the force of law) from any  central  bank or
other governmental authority shall:

     (A)  subject  Bank to any tax,  duty or other  charge  with  respect to any
          LIBOR options, or. change the basis of taxation of payments to Bank of
          principal,  interest,  fees  or any  other  amount  payable  hereunder
          (except  for  changes in the rate of tax on the  overall net income of
          Bank); or

     (B)  impose,  modify  or hold  applicable  any  reserve,  special  deposit,
          compulsory  loan  or  similar  requirement  against  assets  held  by,
          deposits or other  liabilities  in or for the account of,  advances or
          loans by, or any other acquisition of funds by any office of Bank; or

     (C)  impose on Bank any other condition;

and the  result  of any of the  foregoing  is to  increase  the  cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount  receivable  by Bank in  connection  therewith,  then in any  such  case,
Borrower  shall pay to Bank  immediately  upon  demand  such  amounts  as may be
necessary to compensate  Bank for any  additional  costs incurred by Bank and/or
reductions  in amounts  received  by Bank which are  attributable  to such LIBOR
options.  In  determining  which costs  incurred by Bank  and/or  reductions  in
amounts received by Bank are attributable to any LIBOR options made available to
Borrower hereunder,  any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.

     (d) PAYMENT OF INTEREST.  Interest accrued on this Note shall be payable on
the 15TH day of each MONTH, commencing DECEMBER 15, 1999.

     (e) DEFAULT  INTEREST.  From and after the maturity  date of this Note,  or
such earlier date as all principal  owing  hereunder  becomes due and payable by
acceleration or otherwise,  the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day  year,  actual  days  elapsed)  equal to 4% above the rate of
interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

     (a) BORROWING AND REPAYMENT. Borrower may from time to time during the term
of this Note borrow,  partially or wholly repay its outstanding borrowings,  and
reborrow,  subject to all of the limitations,  terms and conditions of this Note
<PAGE>
and of the Credit Agreement  between  Borrower and Bank defined below;  provided
however, that the total outstanding  borrowings under this Note shall not at any
time exceed the principal amount stated above.  The unpaid principal  balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder  hereof less the amount of principal  payments  made hereon by or for any
Borrower,  which balance may be endorsed hereon from time to time by the holder.
The outstanding  principal balance of this Note shall be due and payable in full
on JULY 15, 2001.

     (b) ADVANCES.  Advances hereunder, to the total amount of the principal sum
available hereunder, may be made by the holder at the oral or written request of
(i) L. RANDY KNIGHT OR KEVIN P. KNIGHT OR CLARK JENKINS OR GARY KNIGHT,  any one
acting alone,  who are authorized to request advances and direct the disposition
of any advances  until written  notice of the  revocation  of such  authority is
received by the holder at the office designated above, or (ii) any person,  with
respect to advances  deposited to the credit of any account of any Borrower with
the holder, which advances, when so deposited, shall be conclusively presumed to
have been made to or for the  benefit of each  Borrower  regardless  of the fact
that persons other than those  authorized to request advances may have authority
to draw against such  account.  The holder shall have no obligation to determine
whether  any  person  requesting  an advance  is or has been  authorized  by any
8orrower.

    (c)  APPLICATION  OF  PAYMENTS.  Each  payment  made on this  Note  shall be
credited  first,  to any  interest  then  due  and  second,  to the  outstanding
principal  balance hereof.  All payments  credited to principal shall be applied
first,  to the outstanding  principal  balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal  balance of this Note which bears  interest  determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

     (a) PRIME RATE.  Borrower may prepay  principal on any portion of this Note
which bears  interest  determined  in relation to the Prime Rate at any time, in
any amount and without penalty.

     (b) LIBOR.  Borrower may prepay principal on any portion of this Note which
bears  interest  determined  in relation to LIBOR at any time and in the minimum
amount of  $100,000.00;  provided  however,  that if the  outstanding  principal
balance  of such  portion  of this Note is less than said  amount,  the  minimum
prepayment amount shall be the entire outstanding  principal balance thereof. In
consideration  of Bank providing this prepayment  option to Borrower,  or if any
such  portion of this Note shall become due and payable at any time prior to the
last day of the Fixed Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted  monthly  differences  for each  month  from the month of  prepayment
through the month in which such Fixed Rate Term  matures,  calculated as follows
for each such month:

     (i) DETERMINE the amount of interest which would have accrued each month on
the  amount  prepaid  at the  interest  rate  applicable  to such  amount had it
remained  outstanding  until  the last day of the  Fixed  Rate  Term  applicable
thereto.

     (ii)  SUBTRACT  from the  amount  determined  in (i)  above  the  amount of
interest  which would have accrued for the same month on the amount  prepaid for
the  remaining  term of such  Fixed  Rate Term at LIBOR in effect on the date of
prepayment  for new loans made for such term and in a principal  amount equal to
the amount prepaid.

     (iii) If the result  obtained  in (ii) for any month is greater  than zero,
discount that difference by LIBOR used in (ii) above.

Each  Borrower  acknowledges  that  prepayment of such amount may result in Bank
incurring  additional  costs,  expenses  and/or  liabilities,  and  that  it  is
difficult  to  ascertain  the  full  extent  of  such  costs,   expenses  and/or
liabilities.  Each  Borrower,  therefore,  agrees  to  pay  the  above-described
prepayment fee and agrees that said amount  represents a reasonable  estimate of
the prepayment costs,  expenses and/or liabilities of Bank. If Borrower fails to
pay any  prepayment  fee when  due,  the  amount  of such  prepayment  fee shall
thereafter  bear interest  until paid at a rate per annum 2.000% above the Prime
Rate in effect  from  time to time  (computed  on the  basis of a 360-day  year,
actual days  elapsed).  Each change in the rate of interest on any such past due
prepayment  fee shall  become  effective  on the date each Prime Rate  change is
announced within Bank.

EVENTS OF DEFAULT:

     This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of NOVEMBER 24,
1999, as amended from time to time (the "Credit  Agreement).  Any default in the
payment or performance  of any obligation  under this Note, or any defined event
of default under the Credit  Agreement,  shall  constitute an "Event of Default"
under this Note.

MISCELLANEOUS:

     (a) REMEDIES. Upon the occurrence of any Event of Default as defined in the
Credit Agreement,  the holder of this Note, at the holder's option,  may declare
all sums of principal and interest  outstanding  hereunder to be immediately due
and payable without  presentment,  demand,  notice of nonperformance,  notice of
protest,  protest or notice of dishonor,  all of which are  expressly  waived by
each Borrower,  and the obligation,  if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate.  Each Borrower shall pay
to the holder immediately upon demand the full amount of all payments, advances,
<PAGE>
charges,  costs and expenses,  including reasonable  attorneys' fees (to include
outside counsel fees and all allocated costs of the holder's in-house  counsel),
expended or incurred by the holder in  connection  with the  enforcement  of the
holder's  rights  and/or the  collection  of any amounts which become due to the
holder under this Note, and the  prosecution or defense of any action in any way
related to this Note,  including without limitation,  any action for declaratory
relief,  whether  incurred at the trial or appellate  level,  in an  arbitration
proceeding  or  otherwise,  and  including  any of  the  foregoing  incurred  in
connection with any bankruptcy  proceeding  (including without  limitation,  any
adversary  proceeding,  contested  matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.

     (b)  OBLIGATIONS  JOINT AND SEVERAL.  Should more than one person or entity
sign this Note as a Borrower,  the  obligations  of each such Borrower  shall be
joint and several.

     (c)  GOVERNING  LAW.  This  Note  shall be  governed  by and  construed  in
accordance with the laws of the state of Arizona.

     IN WITNESS  WHEREOF,  the undersigned has executed this Note as of the date
first written above.

KNIGHT TRANSPORTATION, INC.

By: /s/ Clark Jenkins
   ------------------------
Title: CFO
      ---------------------
<PAGE>
WELLS FARGO BANK                                 CORPORATE RESOLUTION: BORROWING

TO: WELLS FARGO BANK, NATIONAL ASSOCIATION

     RESOLVED: That this corporation,  Knight Transportation,  Inc., proposes to
obtain credit from time to time, or has obtained credit,  from Wells Fargo Bank,
National Association ("Bank').

     BE IT FURTHER RESOLVED, that any one of the following officers:

     Chairman or Chief Executive Officer or President or Chief Financial Officer

     together with any one of the following officers:

     None

of this  corporation be and they are hereby  authorized and empowered for and on
behalf of and in the name of this corporation and as itp corporate act and deed:

     (a) To borrow  money from Bank and to assume any  liabilities  of any other
person or entity to Bank, in such form and on such terms and conditions as shall
be agreed upon by those  authorized  above and Bank,  and to sign and deliver to
Bank such  promissory  notes  and  other  evidences  of  indebtedness  for money
borrowed or advanced and/or for indebtedness assumed as Bank shall require: such
promissory notes or other evidences of indebtedness may provide that advances be
requested by telephone  communication  and by any officer,  employee or agent of
this  corporation so long as the advances are deposited into any deposit account
of this corporation  with Bank; this corporation  shall be bound to Bank by, and
Bank  may  rely   upon,   any   communication   or  act,   including   telephone
communications,  purporting to be done by any officer, employee or agent of this
corporation provided that Bank believes, in good faith, that the same is done by
such person.

     (b) To contract for the issuance by Bank of letters of credit,  to discount
with Bank notes,  acceptances  and evidences of  indebtedness  payable to or due
this corporation, to endorse the same and execute such contracts and instruments
for repayment  thereof to Bank as Bank shall require,  and to enter into foreign
exchange transactions with or through Bank.

     (c) To  mortgage,  encumber,  pledge,  convey,  grant,  assign or otherwise
transfer all or any part of this corporation's real or personal property for the
purpose of  securing  the  payment of any of the  promissory  notes,  contracts,
instruments and `other':  evidences of indebtedness  authorized hereby,, and to.
execute and deliver to Bank such deeds of trust,  mortgages,  pledge agreements,
security agreements' and/or other related documents as Bank shall require.

     (d) To perform all acts and to execute and deliver all documents  described
above and all other  contracts  and  instruments  which Bank deems  necessary or
convenient to accomplish  the purposes of this  resolution  and/or to perfect or
continue  the  rights,  remedies  and  security  interests  to be  given to Bank
pursuant hereto,  including  without  limitation,  any  modifications,  renewals
and/or  extensions  of any of this  corporations  obligations  to Bank,  however
evidenced; provided that the aggregate principal amount of all sums borrowed and
credits established pursuant to this resolution shall not at any time exceed the
sum of $49,000,000.00 outstanding and unpaid.

     Loans made  pursuant to a special  resolution  and loans made by offices of
Bank other than the office to which this  resolution  is  delivered  shall be in
addition to foregoing limitation.

     BE IT FURTHER RESOLVED,  that the authority hereby conferred is in addition
to that conferred by any other resolution  heretofore or hereafter  delivered by
this  corporation to Bank and shall continue in full force and effect until Bank
shall have  received  notice in  writing,  certified  by the  Secretary  of this
corporation,  of the revocation hereof by a resolution duly adopted by the Board
of Directors of this corporation. Any such revocation shall be effective only as

CORPORATE RESOLUTION: BORROWING (11/97)                                   PAGE 1
<PAGE>
to credit which is extended or committed by Bank,  or actions which are taken by
this corporation  pursuant to the resolutions  contained  herein,  subsequent to
Bank's receipt of such notice.  The authority  hereby  conferred shall be deemed
retroactive,  and any and all acts authorized  herein which were performed prior
to the passage of this resolution are hereby approved and ratified.

                                  CERTIFICATION

     I, Clark Jenkins , Secretary of Knight Transportation,  Inc., a corporation
created and existing  under the laws of the state of Arizona,  do hereby certify
and  declare  that  the  foregoing  is a  full,  true  and  correct  copy of the
resolutions  duly  passed  and  adopted  by  the  Board  of  Directors  of  said
corporation,  by written  consent of all Directors of said  corporation  or at a
meeting  of  said  Board  duly  and  regularly  called,   noticed  and  held  on
_______________________________,  at  which  meeting  a quorum  of the  Board of
Directors  was  present  and  voted  in  favor of said  resolutions;  that  said
resolutions are now in full force and effect;  that there is no provision in the
Articles of  Incorporation  or Bylaws of said  corporation,  or any  shareholder
agreement,  limiting the power of the Board of Directors of said  corporation to
pass the foregoing  resolutions and that such resolutions are in conformity with
the  provisions  of such  Articles  of  Incorporation  and  Bylaws;  and that no
approval  by  the  shareholders  of,  or of  the  outstanding  shares  of.  said
corporation is required with respect to the matters which are the subject of the
foregoing resolutions.

     IN WITNESS  WHEREOF,  I have  hereunto set my hand and, if required by Bank
affixed    the    corporate     seal    of    said     corporation,     as    of

----------------------------.

                                        /s/ Clark Jenkins
                                        ----------------------------------------
                                                                     Secretary
(SEAL)

CORPORATE RESOLUTION: BORROWING (11/97)                                   Page 2

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