I am writing this to inform our customers of the current labor unrest at Standard Knapp. But first, let me reassure you that we will continue taking orders and delivering current orders without interruption. Standard-Knapp will continue to serve our customers and provide machinery, spares, service, and technical support.

Given the increased price pressure from the marketplace, Standard-Knapp has made the reduction of operational costs a major initiative. Our efforts to reduce costs in the new contract have been met with stern resistance from the union. After exhaustive efforts to negotiate a fair labor contract, the assemblers and machinists have decided to strike.

Over the past 10 years, Standard-Knapp has developed several very capable subcontractors who collectively have the capacity to fully absorb all machining and assembly work. In 2002, given our robust business level at the time, a significant amount of our output was produced by subcontractors. More than half of our parts were made by subcontractors and our largest product line was fully assembled by subcontractors in 2002. The quality of our subcontractors is excellent and all subcontracted work adheres to our ISO 9000 standards and requirements. Customer inspections at subcontractors' plants have taken place with regular frequency in recent years, and will continue under the current plan.

I also want to emphasize that the strike will not affect the workers or the operation of other parts of our business including field service, training, documentation, sales, engineering, quality, procurement, administration, and accounting. The employees in these areas are non-unionized.

Standard-Knapp has been in business for over 100 years and will continue serving the industry and our customers in a seamless manner. If you should have questions regarding any of the above, or regarding a specific order, you may contact the appropriate sales representative or myself.

Sincerely,

Kris Kolstad
VP Marketing and Sales
Standard-Knapp
860-342-1100 ext. 238

August, 2003