<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] for the fiscal year ended December 30, 1995 or
/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
________ to ________
COMMISSION FILE NUMBER 0-9576
K-TRON INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New Jersey 22-1759452
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Routes 55 and 553
P.O. Box 888
Pitman, New Jersey 08071-0888
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609)589-0500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this annual report on Form 10-K or any amendment to
this annual report on Form 10-K. / /
As of March 15, 1996, the aggregate market value of the Common Stock held by
non-affiliates of the registrant was $14,730,950. Such aggregate market value
was computed by reference to the closing sale price of the Common Stock as
reported on the National Market segment of The Nasdaq Stock Market on such
date. For purposes of making this calculation only, the registrant has defined
affiliates as including all directors and beneficial owners of more than ten
percent of the Common Stock of the Company other than the Estate of Dr. Mario
Gallo.
As of March 15, 1996, there were 3,112,635 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
As stated in Part III of this annual report on Form 10-K, portions of the
following documents are incorporated herein by reference:
Annual Report to Shareholders for the fiscal year ended December 30,
1995.
Definitive proxy statement to be filed within 120 days after the end
of the fiscal year covered by this annual report on Form 10-K.
Unless the context indicates otherwise, the terms "K-Tron" and "Company" refer
to K-Tron International, Inc. and, where appropriate, one or more of its
subsidiaries.
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PART I
Item 1. Business.
General
K-Tron International, Inc. was incorporated in New Jersey in 1964.
Its principal operating businesses are conducted by subsidiaries which design,
produce, market and sell gravimetric and volumetric feeders and related
equipment for the handling of bulk solids in a wide variety of manufacturing
processes. K-Tron has manufacturing facilities in the United States and
Switzerland, and its equipment is sold throughout the world.
K-Tron feeders control by weight or volume the rate at which
ingredients are fed into the manufacturing processes of numerous products,
primarily in the plastics, food, chemical, cement, glass and aluminum
industries. In addition, the Company designs, produces and sells electronic
assemblies and controls, and it provides customer and employee training through
its K-Tron Institute.
In June 1995, the Company sold its Colortronic GmbH subsidiary and
discontinued its other Colortronic business. The Colortronic brand of products
served plastics extrusion, blow molding and injection molding manufacturers
with gravimetric and volumetric feeders, blending equipment, pneumatic
conveyers, dryers and other related plastic auxiliary equipment. In the fourth
quarter of 1995, the Company sold its Hasler France and Brazilian businesses
(collectively with the Colortronic business, the "Discontinued Businesses").
See Note 12 of Notes to consolidated financial statements, included in
Item 8 of this annual report on Form 10-K, for certain financial information
about foreign and domestic operations.
Principal Products
The Company produces, markets and sells its principal products under
two brand names: K-Tron Soder (feeders for other than heavy industries) and
Hasler (feeders for heavy industries). The Company sells these brands on both
an equipment and total system basis.
Feeding Equipment
The Company's feeders control the flow of materials into a
manufacturing process by either mass or weight (gravimetric feeding) or
volume (volumetric feeding). Feeding equipment manufactured by the Company is
used in many industries.
Weigh Belt Feeders. Weigh belt feeders move dry bulk material along a
belt, continuously weighing the material and adjusting the belt speed in order
to control precisely the flow rate of the material being fed into the
manufacturing process. The feeder regulates
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flow according to the set points in its electronic controller. A typical
application would incorporate several feeders, each supplying an ingredient of
the final product, and electronic controllers that determine the feed rate of
each ingredient and are capable of instantly altering individual feed rates to
maintain the desired proportion of each ingredient.
Weigh belt feeders may also be used as batchers, to feed bulk material
into bags, mixers, or as meters, to measure accurately the amount of material
flowing into or out of a container.
Loss-in-Weight Feeders. The loss-in-weight principle involves
weighing the entire feeding system, both equipment and material, which may be
either dry or liquid. The feeding mechanism controls the rate at which
material is discharged into the manufacturing process based upon a change in
the total weight of the system as material flows from the feeder. Electronic
controllers determine the feed rate and are capable of instantly altering feed
rates to maintain an accurate flow of materials. In dry material applications,
loss-in-weight feeders usually utilize an auger or vibratory feeding mechanism,
and in the case of screw feeders (usually single or twin auger-like screws) are
generally associated with low feed rates, where precise control is required or
where material flow is hard to control. The outflow is adjusted continuously
to maintain the desired feed rate. In liquid applications, the flow rate is
maintained by a pump or valve. Loss-in-weight feeders are especially suitable
for applications requiring a very high degree of accuracy, as in adding minor
ingredients to food processes or colorants to plastics, or applications
requiring a closed system, as in feeding dusty materials. Loss-in-weight
feeders virtually never need recalibration and may also be used as batchers.
Volumetric Feeders. Volumetric feeders utilize single or twin screw
feeding mechanisms or other systems to regulate flow by volume instead of
weight, thereby offering an economical method of feeding bulk solids where
demands for accuracy are less stringent. They also can be used to make batches
by feeding sequentially into a hopper which is weighed and using the weight
signal to start and stop each feeder.
K-Tron Soder Brand
The K-Tron Soder brand of products offers feeding equipment and
systems to control precisely the flow of ingredients in the manufacture of
numerous products. K-Tron Soder feeders, including loss-in-weight feeders,
weigh belt feeders, volumetric feeders and related controls, are assembled at
Company facilities in Switzerland and the United States in a complete range of
feeding equipment types and sizes for industries other than heavy industries.
The plastics compounding, food, chemical, detergent and pharmaceutical
industries are among those served by K-Tron Soder feeders.
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Hasler Brand
The Hasler brand of products includes weigh belt feeders, belt scales,
flow meters, electronic ears, loss-in-weight feeders and related controls.
Hasler feeders, like K-Tron Soder feeders, control the flow of ingredients into
a manufacturing process. However, Hasler feeders serve heavy industry
applications requiring high rates of material flow in rugged industrial
environments such as cement mills, mines and quarries and in the fertilizer,
aluminum, coal, glass and steel industries. Hasler feeders are assembled at
Company facilities in Switzerland and the United States.
K-Tron Electronics
K-Tron Electronics designs, assembles and tests electronic circuit
boards for outside customers as well as for use by the Company in its products.
In addition to electronics and electro-mechanical contract assembly
services, K-Tron Electronics offers engineering and development services.
State-of-the-art facilities, which are located in the United States, provide
automated surface mount as well as through-hole assembly capabilities and
testing equipment.
Customers
The Company has over 1,000 customers, including many major
corporations. No single customer accounted for more than 10% of the Company's
total revenues in fiscal 1995, and its five largest customers accounted for
approximately 11.3% of total revenues in that year (without the Discontinued
Businesses).
Manufacturing and Suppliers
The Company's primary manufacturing activities consist of the
assembly, calibration and testing of equipment, the machining and fabrication
of certain components and producing electronic circuit boards and controllers.
The Company also manufactures the weight sensors which are used in most of its
gravimetric feeders. The Company assembles a number of components used in its
products that are manufactured by others to its specifications. These
components include sheet metal parts, screws, castings, integrated circuits,
printed circuit boards and enclosures.
The Company produces a number of basic feeder models and related
equipment. Although feeder units are completed to specific customer orders,
customization is generally limited to combining existing mechanical and
electronic modules to meet a customer's application requirements.
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Although certain components of the Company's products are currently
purchased from sole sources, the Company believes that comparable components
can be obtained readily from alternative suppliers or can be manufactured by
the Company internally, at prices competitive with those of its current
sources. The Company has never had a significant production delay which was
primarily attributable to an outside supplier.
Patents
The Company's technology is protected by numerous patents in the
United States and in other major countries which offer patent protection.
Certain of the United States patents have expired and others expire at various
dates through 2012. The loss of such patent protection is not expected to have
a significant adverse effect on the Company's operations.
Research and Development
The Company invests in research and development to maintain a
technological leadership position for its two product brands.
R&D focuses on new products as well as on refinements to existing
products. Current development efforts are aimed at shortening the development
cycle of new products, recycling existing products by using lower cost designs
and becoming more sensitive to the most optimal price/performance relationship
for both new and existing products.
A centralized electronic R&D department also facilitates the
development of common or compatible controls. The Company now utilizes a
common weighing technology for both of its brands.
The Company's research and development expenses were $3,135,000,
$4,439,000 and $4,938,000 in fiscal years 1995, 1994 and 1993, respectively.
Competition
The Company is a leading world-wide producer of feeders and related
equipment for the handling of bulk solids in manufacturing processes. The
Company believes it has reached this position primarily because of its
innovative use of electronic and digital control technology, its use of
weighing technology and its development of various mechanical design
improvements to its products. The Company also relies on other technological
advantages and on its reputation and experience with over 1,000 customers to
maintain a competitive advantage.
Strong competition exists in every major market that the Company
serves. Competitors range in size from subsidiaries or divisions of large
multinationals with a broad line of products to regional organizations which
often specialize in a limited range of products.
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Backlog
At the end of fiscal year 1995, the Company's backlog of unfilled
orders was approximately $25,488,000, compared to a backlog of approximately
$19,981,000 a year earlier without the Discontinued Businesses, an increase of
approximately 28%. Using the December 30, 1995 exchange rate, last year's
backlog without the Discontinued Businesses was approximately $21,027,000, and
the increase approximately 21%. The backlog of orders increased in 1995
primarily due to strong bookings in the United States and the effect of a
weaker United States dollar relative to the Swiss franc and the Deutsche mark.
The bulk of the Company's backlog represents orders that will be ready
for delivery in less than 120 days. Thus, except for shipments to be made
later in the year at customer requests, it is expected that most of the backlog
as of the end of fiscal 1995 will be shipped prior to April 30, 1996.
Employees
At the end of fiscal 1995, the Company had 466 employees, of which 286
were located in Europe, 169 in the United States and 11 in Singapore.
None of the Company's employees are represented by labor unions. The
Company considers relations with its employees to be good.
Item 2. Properties.
In the United States, the Company owns a 92,000 square foot building
on 17 acres in Pitman, New Jersey where it has manufacturing facilities,
administrative offices, its corporate headquarters, research and development
offices and a tech center for product demonstration and training. A portion
(approximately 10,000 square feet) of the Company's Pitman facility, which
houses its U.S. subsidiary's former sheet metal shop, is leased to a third
party. The Company also has leased facilities in Blackwood, New Jersey where
it assembles electronic circuit boards.
In Niederlenz, Switzerland, the Company owns a 60,000 square foot
building where it has manufacturing facilities and a tech center for product
demonstration, and an adjacent five floor, 40,000 square foot office building
which houses administrative offices, training facilities and research and
development offices. One floor of the office building is leased to a third
party. The Company also has an adjacent leased facility where it manufactures
weight sensors.
In Colombier, Switzerland, the Company leases a 51,000 square foot
building where it has manufacturing facilities, administrative offices,
training facilities and research and development offices.
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Certain sales and service activities are also conducted at
Company-owned facilities in England (20% leased to a third party) and Germany
and from leased office space in Germany, France and Singapore.
The Company believes that its present facilities will be sufficient to
meet its needs for the foreseeable future. Based primarily on a one shift/40
hour week, the Company was operating its current manufacturing facilities
during fiscal 1995 at approximately 70% of their present capacity.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 6, 1995, the Company held its 1995 annual meeting of
shareholders. The shareholders reelected one nominee, Mr. Johannes Wirth,
from the existing Board of Directors to a four-year term expiring in 1999. No
other matters were considered at the meeting. The number of votes cast for and
withheld from the election of Mr. Wirth is set forth below. There were no
votes against, abstentions or broker non-votes in the election of the director.
<TABLE>
<CAPTION>
Election of Director: For Withheld
--- --------
<S> <C> <C>
Johannes Wirth 2,547,378 20,053
</TABLE>
Executive Officers of the Registrant
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Leo C. Beebe 78 Chief Executive Officer and
Chairman of the Board of
Directors
Robert L. Weinberg 59 Senior Executive Vice President,
Chief Financial Officer and
Treasurer
</TABLE>
Leo C. Beebe has been a director since June 1976 and Chairman of the
Board and of the Executive Committee since January 1985, and he was most
recently reelected as a
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director at the 1993 annual meeting of shareholders. Mr. Beebe has been Chief
Executive Officer of the Company since June 30, 1995 and also served as Chief
Executive Officer from July 1985 until August 1992. He was Dean of the School
of Business Administration of Glassboro State College, Glassboro, New Jersey
from July 1977 to July 1985 and a professor of Marketing at Glassboro State
College from 1972 to July 1985. Prior to that time, Mr. Beebe served at Ford
Motor Company for 27 years in various capacities in the United States and
foreign countries, including as General Marketing Manager of Ford's
Lincoln-Mercury Division, Vice President of Marketing and Planning and a
director of Ford Motor Company of Canada, and Executive Vice President and
General Manager of the Consumer Products Division and a director of Philco Ford
Corporation.
Robert L. Weinberg has been Senior Executive Vice President, Chief
Financial Officer and Treasurer of the Company since March 1994. Mr. Weinberg
was Senior Executive Vice President and Chief Administrative Officer of the
Company from November 1993 until March 1994, Executive Vice President -
Strategic Planning and Marketing from May 1993 until November 1993, Executive
Vice President - Strategic Planning, Product Development and Marketing from
August 1991 until May 1993, Vice President - Marketing, Strategic Planning and
Product Development from March 1990 until August 1991, Vice President - Product
Development, Manufacturing and Marketing from April 1989 until March 1990, and
Vice President - Marketing from October 1988 until April 1989. Prior to
joining the Company in October 1988, he served as a consultant to Arthur D.
Little, Inc. from 1986 until 1988, and in various executive positions with
marketing and strategic planning responsibilities at RCA Corporation and Philco
Ford Corporation from 1962 until 1986.
The executive officers are elected or appointed by the Board of
Directors to serve until the appointment or election and qualification of their
successors or their earlier death, resignation or removal.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Stock trades on the National Market segment of
The Nasdaq Stock Market under the symbol "KTII." The following table sets
forth the high and low sales prices for each quarter in 1994 and 1995 as quoted
on The Nasdaq Stock Market.
<TABLE>
<CAPTION>
Fiscal Year 1994 High Low
---------------- ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.25 $ 8.25
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00 8.25
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.50 9.75
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 12.25 10.50
</TABLE>
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<TABLE>
<CAPTION>
Fiscal Year 1995 High Low
---------------- ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.50 $ 5.625
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 7.00 4.50
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.25 5.25
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 7.25 5.375
</TABLE>
On March 15, 1996, the closing sale price for a share of Common Stock
as reported by The Nasdaq Stock Market was $6.25.
The number of record holders of the Company's Common Stock as of March
15, 1996 was 383.
Dividend Policy
The Company has never paid a cash dividend on its Common Stock, and it
currently intends to retain all earnings for use in its business. The
declaration and payment of dividends in the future will be determined by the
Board of Directors in light of conditions then existing, including the
Company's earnings, financial condition, capital requirements and other
factors. At the current time, the Company's U.S. loan agreement prohibits
payment of dividends by the Company.
Item 6. Selected Financial Data.
The selected consolidated financial data presented below for, and as
of the end of, each of the Company's last five fiscal years have been derived
from and are qualified by reference to the Company's consolidated financial
statements. The consolidated financial statements of the Company for the
fiscal years ended December 30, 1995 and December 31, 1994 have been audited by
Arthur Andersen LLP, independent public accountants. The consolidated
financial statements of the Company for each of the three fiscal years in the
period ended January 1, 1994 have been audited by Deloitte & Touche LLP,
independent public accountants.
This information should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein.
The Company has not paid any cash dividends on its shares of Common
Stock during the periods presented.
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<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------------------
PRO FORMA DEC. 30 DEC. 31 JAN. 1 JAN. 2 JAN. 4
1995(1) 1995 1994 1994 1993(2) 1992(3)
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<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SUMMARY($000):
Revenues $89,640 $110,394 $104,772 $107,966 $118,859 $81,520
Income (loss) before loss on disposition
of businesses, cumulative effect of
accounting changes 2,717 834 (6,200) (1,784) 6,170 5,250
and taxes
Income (loss) on disposition of businesses
and cumulative effect of accounting
changes (4) (11,278) (852) 854 --- ---
Net income (loss) 1,408 (9,294) (6,826) (1,065) 3,870 3,653
Total assets 69,296 109,950 101,296 114,891 71,022
Working capital 23,114 (549) 17,216 5,432 19,547
Additions to property, plant and equipment 370 2,467 3,062 5,901 1,278
Depreciation and amortization 4,844 6,314 6,562 5,991 3,519
PER SHARE ($):
Income (loss) before cumulative effect of
accounting changes $.45 $(3.00) $(2.22) $(0.62) $1.27 $1.23
Net earnings (loss) .45 (3.00) (2.22) (0.35) 1.27 1.23
Book value 3.03 6.00 8.08 8.71 8.24
CAPITALIZATION ($000):
Shareholders' equity $9,421 $18,521 $24,694 $26,424 $24,619
Long-term debt 35,004 27,413 38,571 29,566 21,399
Short-term debt (5) 2,133 32,512 14,565 27,109 5,513
RATIOS:
Return on average shareholders' equity (%) 10.1 N/A N/A N/A 15.1 15.9
Return on revenues (%) 1.6 N/A N/A N/A 3.3 4.5
Long-term debt to shareholders' equity (%) 371.6 148.0 156.2 111.9 87.0
Current assets to current liabilities 2.05 .99 1.53 1.10 1.96
Average inventory turnover 2.9 2.9 3.0 2.8 2.6
Average accounts receivable turnover 4.3 3.8 3.8 4.3 4.1
OTHER DATA:
Shares outstanding (000) (6) 3,113 3,088 3,056 3,035 2,986
Shareholders of record (7) 383 423 437 449 547
Number of employees 466 683 724 804 573
</TABLE>
(1) Reflects pro forma adjustments for loss on disposition of businesses
described in (4) and the discontinuance of the Company's other
Colortronic brand business, all as more fully explained in Note 3 of
the Company's 1995 consolidated financial statements as if such
dispositions and discontinuances were consummated as of the
beginning of the 1995 fiscal year.
(2) The 1992 consolidated financial statements include the acquisition of
Colortronic GmbH and Colortronic, Inc. from April 30, 1992.
(3) 1991 was a 53-week year.
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(4) 1995 - loss on disposition of businesses of $10,529 from sale of
Colortronic GmbH and rights to several related patents and patent
applications and $749 loss on the sale of Hasler France and
Brazilian businesses; 1994 - reserves established for the
anticipated sale of Hasler France and Brazilian businesses; 1993 -
cumulative effect of changes in accounting principles for the cost
of inventory of $504, net of tax, and for income taxes of $350.
(5) Including current portion of long-term debt.
(6) Net of treasury stock of 1,063 shares.
(7) Does not include shareholders whose shares are held in street name.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
In 1995, the Company reported a pre-tax loss of $10,444,000. The
principal components of this loss were a second quarter loss of $10,529,000
recorded in connection with the sale of Colortronic GmbH ("Colortronic"), a
German subsidiary, and related patent and patent applications and third and
fourth quarter losses totaling $749,000 resulting from the sale of the
Company's Brazilian and Hasler France businesses. On a pro forma basis,
assuming that these transactions, and the discontinuance of the Company's other
Colortronic brand business, had occurred at the beginning of the 1995 fiscal
year, the Company had 1995 pre-tax income of $2,717,000 and net income of
$1,408,000.
As reported in Item 7 of the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1994, and in subsequent Form 10-Q filings,
the Company and its U.S. manufacturing subsidiary are in default under several
financial covenants contained in their loan agreement with three U.S. banks.
These defaults are continuing and have not been waived. On April 28, 1995, the
Company and its several U.S. subsidiaries entered into a forbearance agreement
with the U.S. banks in which such banks agreed to forbear for a period of time
in the exercise of their rights and remedies under the loan documents. On June
22, 1995, this forbearance agreement was amended and extended through the
earlier of February 28, 1996 or the occurrence of a new event of default
thereunder. The forbearance agreement also modified the loan documents in
certain respects, including the granting of additional collateral. On February
28, 1996, this forbearance agreement was further amended and extended until
January 31, 1997. Certain terms of the current U.S. bank forbearance agreement
are described in more detail below under "Liquidity and Capital Resources." At
February 29, 1996, the principal amount outstanding under the Company's U.S.
loan agreement was $7,680,000.
On June 23, 1995, subsidiaries of K-Tron sold Colortronic and rights
to several related patents and patent applications to an investment group for
$9,000,000. As noted above, this divestiture generated a pre-tax loss of
$10,529,000, representing primarily a non-cash write-off of goodwill. As a
result of the sale of Colortronic, K-Tron's bank debt decreased by $24,200,000
as of July 1, 1995.
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The loss on the sale of Colortronic caused the equity of K-Tron's
principal Swiss subsidiary to fall below certain equity guarantees contained in
its loan agreements with several Swiss lenders, resulting in a default under
those loan agreements. In early 1996, an agreement was entered into among the
Company's Swiss subsidiary, several other K-Tron companies and the lenders to
the Swiss subsidiary under which such lenders have agreed to defer until March
31, 1997 the repayment of credit lines and the principal payments on fixed
loans that become due prior to that date. Certain other terms of that
agreement are described in more detail below under "Liquidity and Capital
Resources." At February 29, 1996, the principal amount outstanding under the
Swiss loan agreements was $27,364,000.
The Company is seeking alternative debt or equity financing and has
received written proposals from other financial institutions to replace its
U.S. bank debt. Due diligence has begun with two prospective new lenders, but
there can be no assurance that this will result in new U.S. borrowing
arrangements. The Company is also exploring ways to reduce its bank
indebtedness in Switzerland.
The Company's results have improved significantly since the sale of
Colortronic, and it reported net income of $375,000 and $561,000 for the third
and fourth quarters of 1995, respectively. Cash flow from operations has also
improved, enabling the Company to reduce bank debt in the second half of 1995
by $5,368,000.
While the Company has no borrowing availability under its U.S. loan
agreement and only very modest availability under certain of its Swiss loan
agreements, management believes that cash flow will be sufficient in 1996 to
sustain the business and further that the Company and its subsidiaries will be
able to comply with all of the covenants and payment provisions contained in
the both the U.S. and Swiss forbearance agreements. Management further
believes that through the successful completion of new financings in 1996 and
operating performance, the Company will be able to either refinance or extend
the maturities of the two forbearance agreements before they expire in 1997,
but there can be no assurance that this will happen.
K-Tron is an international company with more than 70 percent of its
business arising from sources outside the United States, primarily in Europe.
As such, the financial position and performance of the Company is sensitive to
both translation and transaction fluctuations in foreign exchange rates.
Results of Operations
The following table sets forth the Company's results of operations
expressed as a percentage of total revenues for the periods indicated. The
1995 pro forma results illustrate the estimated effects on operations of the
disposition of the Colortronic, Brazilian and Hasler
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France businesses noted above, and the discontinuance of the Company's other
Colortronic brand businesses, as if the dispositions and discontinuance
(previously defined as "Discontinued Businesses") were consummated as of the
beginning of the 1995 fiscal year:
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------------------------
Pro Forma
---------
1995 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 58.9 61.3 64.1 61.9
------ ------ ------ ------
Gross Profit 41.1 38.7 35.9 38.1
Selling, General and
Administrative 32.1 31.4 33.3 31.3
Research and Development 2.8 2.8 4.2 4.6
Loss on disposition of
businesses -- 10.2 0.8 --
Interest 3.2 3.7 4.3 3.9
------ ------ ------ ------
Income (loss) before income taxes and
accounting changes 3.0% (9.4%) (6.7%) (1.7%)
===== ======= ======= =======
Year-end backlog after excluding the
Discontinued Businesses (at a
constant foreign exchange rate in
thousands) $25,500 $25,500 $21,000 $15,500
======= ======= ======= =======
</TABLE>
Translation of the Company's foreign revenues and earnings into U.S.
dollars is affected by changes in foreign exchange rates, particularly with
respect to the Swiss franc and the Deutsche mark. Revenues and earnings in
1995 were affected by changes in the average U.S. dollar/Swiss franc exchange
rate, which increased 16% to $.848 per Swiss franc in 1995 from $.730 in 1994
after an 8% increase from $.676 in 1993, and by a change in the U.S.
dollar/Deutsche mark exchange rate, which increased 14% to $.699 per Deutsche
mark in 1995 from $.615 in 1994 after a 2% increase from $.604 in 1993.
-14-
<PAGE> 15
Total revenues increased by $5,600,000 or 5.4% (while decreasing by
4.6% when using a constant foreign exchange rate) in 1995 as compared to 1994.
Total revenues increased in 1995 compared to 1994 due to the strong European
and United States backlog at the end of 1994, continued strong 1995 order
in-flow and the effect of a weaker U.S. dollar relative to the Swiss franc and
Deutsche mark, offset in part by the effect on revenues in the second half of
1995 of the June 1995 sale of Colortronic. Total revenues in 1995 and 1994
without the Discontinued Businesses would have been $89,600,000 and
$69,500,000, respectively, an increase of $20,100,000 or 28.9% (a $13,000,000
increase or 16.9% when using a constant foreign exchange rate).
Total revenues decreased $3,200,000 or 3% (8% when using a constant
foreign exchange rate) in 1994 as compared to 1993. Total revenues decreased
in 1994 compared to 1993 primarily due to the continuing effects of the
European recession, which lasted until 1994, offset in part by the decline in
the U.S. dollar which increased the translation of foreign revenues.
Gross margin as a percent of revenues improved to 38.7% (41.1% after
excluding the Discontinued Businesses) in 1995 as compared to 35.9% in 1994 and
38.1% in 1993. The improvement in gross margin in 1995 was due to volume and
price increases and cost reductions in the United States as well as the sale
and discontinuance of the Colortronic business which had low margins, offset in
part by an increase in warranty costs and the inability to pass on increased
costs caused by the appreciation of the Swiss franc to customers in certain
European countries. In addition, the 1995 margins were negatively affected by
heavily discounted orders booked in 1994 but not shipped until 1995. The
decline in 1994 was primarily attributable to the significant fourth quarter
loss which was due to strong competitive pressure which reduced selling prices,
higher-than-forecasted production and materials costs and the delayed
introduction of several important new products. In addition, increased
material costs due to the appreciation of the Swiss franc versus other European
currencies also substantially lowered the profit margins of products
manufactured in Switzerland to fill orders sold in other currencies. Partially
offsetting the impact of these items was the effect of actions taken in 1993 to
reduce annual fixed costs by more than 15%, including reducing the European
work force by more than 13%, divesting the Company's Spanish subsidiary and
consolidating or combining operations in France, Germany, Switzerland,
Singapore and the United States.
Selling, general and administrative (SG&A) expense decreased by
$300,000 or 0.1% in 1995 as compared to 1994 after a $1,100,000 or 3% increase
in 1994 as compared to 1993. The marginal reduction in SG&A expenditures was
due to the business dispositions that took place in 1995, offset in part by
higher foreign exchange translation rates, higher commissions and selling
expenses related to the increased sales volume and costs incurred related to
the U.S. and Swiss forbearance agreements. As a percent of sales, SG&A was
31.4% in 1995 (32.1% after excluding the Discontinued Businesses) compared to
33.3% in 1994 and 31.3% in 1993. The 1994 increase over 1993 was primarily due
to higher than anticipated commission expense in the United States.
-15-
<PAGE> 16
Research and development (R&D) expenditures in 1995 decreased
$1,300,000 or 29% from 1994 levels due to the elimination of Colortronic
expenses in the second half of 1995, offset in part by using for other purposes
certain resources previously allocated to Colortronic and higher foreign
exchange translation rates. R&D expenditures in 1994 decreased $500,000 from
1993 levels due to synergies realized from the integration of the Company's R&D
efforts, offset in part by the higher foreign exchange translation rate. R&D
expense as a percent of revenues was 2.8% in 1995 (2.8% excluding Colortronic
for 1995), 4.2% in 1994 and 4.6% in 1993.
The loss on the disposition of businesses includes a pre-tax loss of
$10,529,000 from the June 1995 sale of Colortronic and rights to several
related patents and patent applications, as well as a pre-tax loss of $749,000
from the fourth quarter sale of the Company's Brazilian and Hasler France
operations. The $852,000 loss incurred in 1994 related to reserves established
in connection with the anticipated sales of the Brazilian and Hasler France
operations. The 1994 losses were previously included in SG&A.
Interest expense in 1995 decreased by $300,000 from 1994 due to lower
debt levels following the sale of Colortronic offset in part by increased
interest rates in the United States and higher foreign exchange translation
rates. Interest expense increased in 1994 as compared to 1993 primarily due to
increased European borrowings and higher interest rates in the United States
offset in part by reduced interest rates in Europe. Interest expense as a
percent of sales was 3.7% in 1995 (3.2% after excluding the Discontinued
Businesses), 4.3% in 1994 and 3.9% in 1993.
The loss before income taxes and accounting changes was $10,444,000,
$7,052,000 and $1,784,000 in 1995, 1994 and 1993, respectively. The increased
losses during the periods was the result of the items discussed above.
The Company's 1995 net income tax benefit was comprised of a fourth
quarter $400,000 provision on U.S. operations and a $1,550,000 benefit
recognized on European losses. The Company's income tax benefit in 1994 was
primarily due to the results of the United States operations as no tax benefit
was recognized for the European losses, since realization was not assured. The
Company has available New Jersey state and foreign tax loss carry forwards that
total $5,400,000 and $20,800,000, respectively, which have estimated future
benefits of $300,000 and $5,200,000, respectively.
The Company was required to adopt Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes," which was effective
January 3, 1993 and was recorded in the three months ended April 3, 1993. The
cumulative effect of this adoption was to increase 1993 income by $350,000
($0.11 per share). (See Note 2 Summary of Significant Accounting Policies --
Income Taxes, to the accompanying consolidated financial statements.)
-16-
<PAGE> 17
Effective for the fiscal year beginning January 3, 1993, the Company
also modified its method of accounting for certain costs of inventory by its
European subsidiaries by capitalizing certain inventory procurement and other
indirect production costs. The cumulative effect of this change increased
income by $504,000 ($0.16 per share) but also increased 1993 cost of sales
which resulted in a reduction in income of $113,000 ($.04 per share). This
change, which was reflected in adjusted 1993 first quarter results, was made so
that the Company would have a uniform method of accounting for material
handling costs in valuing its inventory for all of its operations which would
result in a better matching of costs with related revenues. (See Note 2
Summary of Significant Accounting Policies -- Inventory, to the accompanying
consolidated financial statements.)
The Company does not believe that inflation has had a material impact
on the results of operations during the last three years.
The Company's backlog (excluding the Discontinued Businesses and at a
constant foreign exchange rate) increased in 1995 primarily due to strong
bookings in the United States. The backlog increased in 1994 primarily due to
the beginning of the European economic recovery and strong bookings in the
United States.
Liquidity and Capital Resources
In the fourth quarter of 1994, the Company reported a net loss of
$6,261,000. As a result of this loss, at December 31, 1994 the Company was in
default under several financial covenants contained in its U.S. loan agreement
with three banks. As noted earlier under "Overview," these defaults are
continuing and have not been waived; however, the Company and its U.S.
subsidiaries are parties to a forbearance agreement with the U.S. banks which
continues until January 31, 1997, subject to certain financial covenants,
restrictions on intercompany transactions with K-Tron's foreign subsidiaries
and an obligation to pursue a refinancing of the U.S. bank debt, including a
requirement, which has been satisfied, that on or before March 15, 1996, the
Company shall enter into an agreement with a financial institution pursuant to
which such entity shall commence due diligence to determine whether to issue a
commitment for a refinancing of the U.S. bank debt. The U.S. forbearance
agreement calls for monthly payments of principal, as follows: $100,000 in
each of March, April, May, June and July 1996; $225,000 in each of August,
September and October 1996; and $275,000 in each of November and December 1996
and January 1997. The balance of the U.S. bank debt is due on January 31,
1997. In addition, if the Company and its U.S. subsidiaries have cash flow
during this period which constitutes excess cash flow as defined in the
forbearance agreement, then the U.S. banks are also entitled to receive a
substantial portion of this excess cash flow. Interest is payable monthly at
prime plus 1.5% through February 29, 1996; prime plus 1.75% from March 1
through June 14, 1996; prime plus 2.5% from June 15 through July 14, 1996;
prime plus 3% from July 15 through October 14, 1996; and prime plus 3.5% from
October 15, 1996 through January 31, 1997. At February 29, 1996, the principal
amount outstanding under the Company's U.S. loan agreement was $7,680,000.
-17-
<PAGE> 18
As a result of the second quarter loss of $10,529,000 recorded in
connection with the sale of Colortronic and certain related assets, the equity
of the Company's principal Swiss subsidiary fell below certain equity
guarantees contained in its loan agreements with several Swiss lenders,
resulting in a default under those loan agreements. In early 1996, a
forbearance agreement was entered into among the Company's Swiss subsidiary,
several other K-Tron companies and the lenders to the Swiss subsidiary under
which such lenders have agreed to defer until March 31, 1997 the repayment of
credit lines and the principal payments on fixed loans that become due prior to
that date. As part of that agreement, the board of directors of the Swiss
subsidiary was expanded from one director to three directors, with one of the
directors being designated by the Swiss lenders. In addition, the Swiss
lenders have imposed a number of limitations and requirements on the Swiss
subsidiary, including certain restrictions on intercompany transactions with
K-Tron's U.S. companies and a prohibition on the payment of management fees to
the Company after March 1, 1996. While the Company expects to be able to
operate within the constraints of this forbearance agreement, under certain
circumstances they might make it more difficult for the Company to operate in a
unified manner throughout the world. At February 29, 1996, the principal
amount outstanding under the Swiss loan agreements was $27,364,000.
The Company is seeking alternative debt or equity financing and has
received written proposals from other financial institutions to replace its
U.S. bank debt. Due diligence has begun with two prospective new lenders, but
there can be no assurance that this will result in new U.S. borrowing
arrangements. The Company is also exploring ways to reduce its bank
indebtedness in Switzerland.
While the Company has no borrowing availability under its U.S. loan
agreement and only very modest availability under certain of its Swiss loan
agreements, management believes that cash flow will be sufficient in 1996 to
sustain the business and further that the Company and its subsidiaries will be
able to comply with all of the covenants and payment provisions contained in
the both the U.S. and Swiss forbearance agreements. Management further
believes that through the successful completion of new financings in 1996 and
operating performance, the Company will be able to refinance or extend the
maturities of the two forbearance agreements before they expire in 1997, but
there can be no assurance that this will happen.
-18-
<PAGE> 19
The Company's capitalization as of the end of fiscal years 1995, 1994
and 1993 is set forth below:
<TABLE>
<CAPTION>
($'s in thousands)
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-term debt including current
portion of long-term debt $ 2,133 $32,512 $14,565
Long-term debt 35,004 27,413 38,571
------- ------- -------
Total debt 37,137 59,925 53,136
Shareholders' equity 9,421 18,521 24,694
----- ------- -------
Total debt and shareholders' equity $46,558 $78,446 $77,830
======= ======= =======
Percent debt to total capitalization 80% 76% 68%
Percent long-term debt to equity 372% 148% 156%
</TABLE>
Total debt decreased in 1995 by $22,788,000, of which $22,928,000
(from the beginning of the year) was due to the sale of Colortronic and
$4,359,000 was from cash provided by operations, offset by a $4,499,000
increase due to the effect of foreign exchange translation. Total debt without
the effect of the foreign exchange translation decreased by $27,287,000. Total
debt increased in 1994 by $6,789,000, of which $5,016,000 was due to the effect
of foreign exchange translation. Total debt without the effect of the foreign
exchange translation increased in 1994 by $1,773,000. The increase, primarily
in Europe, supported 1994 working capital needs.
The decrease in short-term debt of $30,379,000 in 1995 is primarily
due to the reclassification of the U.S. and Swiss bank debt to long-term as a
result of the maturity in the first quarter of 1997 of the debt in accordance
with the forbearance agreements discussed above.
At the end of 1995 and 1994, working capital was $23,114,000 and
($549,000), respectively, and the ratio of current assets to current
liabilities was 2.05 and .99, respectively. Working capital increased in 1995
primarily due to the reclassification of short-term debt to long-term debt as
discussed above.
In 1995, the Company utilized internally generated funds to meet its
working capital needs. In 1994, the Company met its working capital needs by
utilizing short and long-term borrowings as well as by increasing the aging of
accounts payable.
-19-
<PAGE> 20
Net cash provided by operating activities was $6,111,000 in 1995,
$82,000 in 1994, and $3,501,000 in 1993. The increase in operating cash flow
was primarily the result of operating profits generated in the second half of
1995 and reduction of accounts receivable and inventory levels, offset in part
by a reduction in accounts payable and accrued expenses. The significant loss
in 1995 was offset by the noncash loss on the sale of the Discontinued
Businesses.
Excluding the effect of foreign currency translation and the
disposition of businesses, receivables and inventory provided cash of
$3,155,000 while payables and accrued expenses decreased $2,121,000 during
1995. Improved asset management enabled the Company to reduce accounts
receivable and inventory thereby allowing it to reduce accounts payable and
accrued expenses.
The average number of days to convert accounts receivable to cash was
84 days in 1995 compared to 95 days in each of 1994 and 1993. The average
number of days to convert inventory into accounts receivable was 126 days in
each of 1995 and 1994 and 122 days in 1993.
Net cash provided by (used in) investing activities was $8,943,000,
($2,578,000) and ($1,814,000) in 1995, 1994 and 1993, respectively. The 1995
proceeds from the sale of Colortronic (and related patents and patent
applications) and the Brazilian and Hasler France businesses were $9,000,000
and $320,000, respectively. Capital expenditures were $370,000, $2,467,000 and
$3,062,000 in 1995, 1994 and 1993, respectively. The Company has no
outstanding material commitments for capital improvements, but does expect to
make normal capital expenditures to maintain and enhance its operations.
Proceeds from the sale of property were $1,329,000 in 1993.
Cash used in financing activities in 1995, which was primarily used
for the reductions of debt, was obtained from the proceeds from the disposition
of businesses discussed above as well as from the strong cash flow provided by
operations. Cash provided by or used in financing activities in 1994 and 1993
was primarily the result of changes required to support working capital needs.
Cash and short-term investments increased to $3,239,000 at the end of fiscal
1995 from $1,086,000 a year earlier.
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and Deutsche mark, caused translation adjustment increases in
shareholders' equity of $78,000 in 1995 and $377,000 in 1994, following a
decrease of $872,000 in 1993.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the Company and its
subsidiaries and supplementary data required by this item are attached to this
annual report on Form 10-K beginning on page F-1.
-20-
<PAGE> 21
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information concerning directors called for by Item 10 of Form
10-K will be set forth under the captions "Election of Directors" and "Other
Matters" in the Company's definitive proxy statement, to be filed within 120
days after the end of the fiscal year covered by this annual report on Form
10-K, and is incorporated herein by reference.
The information concerning executive officers called for by Item 10 of
Form 10-K is set forth in Item 4 of this annual report on Form 10-K.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Item 13. Certain Relationships and Related Transactions.
The information called for by Items 11, 12 and 13 of Form 10-K will be
set forth under the captions "Executive Compensation", "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Relationships and
Related Transactions", respectively, in the Company's definitive proxy
statement, to be filed within 120 days after the end of the fiscal year covered
by this annual report on Form 10-K, and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) 1. Financial Statements. Financial Statements listed in the
accompanying Index to Financial Statements and Financial Statement Schedules
appearing on page F-1 are filed as part of this annual report on Form 10-K.
2. Financial Statement Schedules. Financial Statement
Schedules listed in the accompanying Index to Financial Statements and
Financial Statement Schedules appearing on page F-1 are filed as part of this
annual report on Form 10-K.
3. Exhibits. (see (c) below).
-21-
<PAGE> 22
(b) Reports on Form 8-K.
The Company did not file a report on Form 8-K during the
quarter ended December 30, 1995.
(c) Exhibits, Including Those Incorporated by Reference.
The following is a list of exhibits filed as part of this
annual report on Form 10-K. Where so indicated by footnote, exhibits which
were previously filed are incorporated by reference. For exhibits incorporated
by reference, the location of the exhibit in the previous filing is indicated
in parentheses.
2.1 Share Purchase Agreement, dated as of June 23, 1995, by and
among K-Tron Holding AG, K-Tron Deutschland GmbH and Dr.
Dolemeyer GmbH (12) (Exhibit 2.1)
3.1 Restated Certificate of Incorporation (7) (Exhibit 3.1)
3.2 By-Laws, as amended (8) (Exhibit 3.2)
4.1 Form of Certificate for Shares of Common Stock (8) (Exhibit
4.1)
4.2 Rights Agreement dated as of October 3, 1991 with First
Interstate Bank of Arizona, N.A., as Rights Agent (6)
(Exhibit 1)
10.1.1 Revolving Credit and Term Loan Agreement, dated June 28, 1993,
between K-Tron North America, Inc. and K-Tron International,
Inc. and First Fidelity Bank, N.A., New Jersey (9) (Exhibit
10.1.1)
10.1.2 First Amendment to Loan Agreement dated as of June 30, 1994,
to Revolving Credit and Term Loan Agreement dated as of June
28, 1993 by and among K-Tron International, Inc. and K-Tron
America, Inc., First Fidelity Bank, N.A., PNC Bank, National
Association and United Jersey Bank/South N.A. (10) (Exhibit
10.1)
10.1.3 Forbearance Agreement and Second Amendment to Revolving Credit
and Term Loan Agreement dated April 28, 1995 by and among
K-Tron International, Inc., K-Tron America, Inc., K-Tron
Technologies, Inc., K-Tron Investment Co., K-Tron Patent,
Inc., First Fidelity Bank, N.A., PNC Bank, N.A. and United
Jersey Bank (11) (Exhibit 10.1)
10.1.4 Forbearance Agreement and Third Amendment to Revolving Credit
and Term Loan Agreement dated June 22, 1995 by and among
K-Tron International, Inc., K-Tron America, Inc., K-Tron
Technologies, Inc., K-Tron Investment
-22-
<PAGE> 23
Co., K-Tron Patent, Inc., First Fidelity Bank, N.A., PNC Bank,
N.A. and United Jersey Bank/South, N.A. (12) (Exhibit 10.1)
10.1.5 Forbearance Agreement and Fourth Amendment to Revolving Credit
and Term Loan Agreement dated February 28, 1996 by and among
K-Tron International, Inc., K-Tron America, Inc., K-Tron
Technologies, Inc., K-Tron Investment Co., K-Tron Patent,
Inc., First Union National Bank, PNC Bank, N.A. and United
Jersey Bank*
10.1.6 Forbearance Agreement by and among Swiss Bank Corp. Aarau,
Credit Suisse Aarau, Swiss Volksbank, Union Bank of
Switzerland, Banque Cantonale Neuchateloise, CS Immobilien
Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Vertech Ltd.,
K-Tron Patent Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron
International Inc. and K-Tron Investment Co.*
10.2.1 1986 Stock Option Plan, as amended and restated (7) (Exhibit
10.2.1)**
10.2.2 1988 Stock Option Plan for Non-Employee Directors (2) (Exhibit
10.2.4)**
10.2.3 K-Tron International, Inc. 1996 Equity Compensation Plan* **
10.2.4 K-Tron International, Inc. Employee Stock Purchase Plan, as
amended and restated* **
10.2.5 K-Tron International, Inc. Profit-Sharing and Thrift Plan, as
amended and restated (3) (Exhibit 10.2.5)**
10.2.6 Amendment No. 1992-1 to K-Tron International, Inc.
Profit-Sharing and Thrift Plan (7) (Exhibit 10.2.6)**
10.2.7 K-Tron International, Inc. Supplemental Executive Retirement
Plan (7) (Exhibit 10.2.7)**
10.2.8 Employment Agreement with Ronald G. Larson, dated as of
January 1, 1992, and Schedule 10.2.13 listing other employment
agreements which are identical in all material respects except
for the employee and the amount of salary to be paid (7)
(Exhibit 10.2.13)**
10.2.9 First Amendment to Employment Agreement with Ronald G. Larson,
dated as of February 11, 1992, and Schedule 10.2.14 listing
other first amendments to employment agreements which are
identical in all material respects except for the employee (7)
(Exhibit 10.2.14)**
-23-
<PAGE> 24
10.2.10 Indemnification Agreement with Leo C. Beebe, dated March 23,
1987, and Schedule 10.2.9 listing other indemnification
agreements which are identical in all material respects except
for the director or officer who is a party thereto (1)
(Exhibit 10.2.9)**
10.2.11 Schedule 10.2.11 listing other indemnification agreements
which are dated November 18, 1988 and are identical in all
material respects to the Indemnification Agreement set forth
in Exhibit 10.2.14 except for the director or officer who is a
party thereto (2) (Exhibit 10.2.11)**
10.2.12 Schedule 10.2.16 listing other indemnification agreements
which are dated September 20, 1993, November 12, 1993 and
January 14, 1994 and are identical in all material respects to
the Indemnification Agreement set forth in Exhibit 10.2.14
except for the director or officer who is a party thereto (9)
(Exhibit 10.2.16)**
10.3.1 Leasing Agreement, dated October 30, 1990, between CS
Immobilien Leasing AG, Zurich and Hasler Freres SA, with
limited guaranty of K-Tron Soder AG (4) (Exhibit 10.1(b))
10.3.2 Amendment, dated January 25, 1991, to Leasing Agreement, dated
October 30, 1990, between CS Immobilien Leasing AG, Zurich and
Hasler Freres SA and to the related limited guaranty of K-Tron
Soder AG (5) (Exhibit 10.3.3)
11.1 Computation of (Loss) Earnings per Common and Common
Equivalent Share*
21.1 Subsidiaries*
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (Included on Signature Page)
- --------------------
* Filed herewith
** Management contract or compensatory plan or arrangement required to be
filed or incorporated as an exhibit
(1) Filed as an exhibit to annual report on Form 10-K for the year ended
January 2, 1988 File No. 0-9576 and incorporated herein by reference.
(2) Filed as an exhibit to annual report on Form 10-K for the year ended
December 31, 1988 File No. 0-9576 and incorporated herein by
reference.
-24-
<PAGE> 25
(3) Filed as an exhibit to annual report on Form 10-K for the year ended
December 30, 1989 File No. 0-9576 and incorporated herein by
reference.
(4) Filed as an exhibit to report on Form 8-K dated October 30, 1990 File
No. 0-9576 and incorporated herein by reference.
(5) Filed as an exhibit to annual report on Form 10-K for the year ended
December 29, 1990 File No. 0-9576 and incorporated herein by
reference.
(6) Filed as an exhibit to report on Form 8-K dated October 3, 1991 File
No. 0-9576 and incorporated herein by reference.
(7) Filed as an exhibit to annual report on Form 10-K for the year ended
January 4, 1992 File No. 0-9576 and incorporated herein by reference.
(8) Filed as an exhibit to annual report on Form 10-K for the year ended
January 2, 1993 File No. 0-9576 and incorporated herein by reference.
(9) Filed as an exhibit to annual report on Form 10-K for the year ended
January 1, 1994 File No. 0-9576 and incorporated herein by reference.
(10) Filed as an exhibit to quarterly report on Form 10-Q for the fiscal
quarter ended October 1, 1994 File No. 0-9576 and incorporated herein
by reference.
(11) Filed as an exhibit to quarterly report on Form 10-Q for the fiscal
quarter ended April 1, 1995 File No. 0-9576 and incorporated herein by
reference.
(12) Filed as an exhibit to report on Form 8-K dated June 23, 1995 File No.
0-9576 and incorporated herein by reference.
COPIES OF THE EXHIBITS ARE AVAILABLE TO SHAREHOLDERS (UPON PAYMENT OF
A $.20 PER PAGE FEE TO COVER THE COMPANY'S EXPENSES IN FURNISHING THE
EXHIBITS) FROM ROBERT L. WEINBERG, SENIOR EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, K-TRON INTERNATIONAL, INC., ROUTES 55 AND
553, P.O. BOX 888, PITMAN, NEW JERSEY 08071-0888.
-25-
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
K-TRON INTERNATIONAL, INC.
Date: March 28, 1996 By /s/ Leo C. Beebe
--------------------------------
Leo C. Beebe
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Each person, in so signing also makes, constitutes and appoints Leo C.
Beebe, Chairman and Chief Executive Officer of K-Tron International, Inc., and
Robert L. Weinberg, Senior Executive Vice President, Chief Financial Officer and
Treasurer of K-Tron International, Inc., and each of them acting alone, as his
true and lawful attorneys-in-fact, in his name, place and stead, to execute and
cause to be filed with the Securities and Exchange Commission any or all
amendments to this report.
<TABLE>
<CAPTION>
Signature Date Capacity
--------- ---- --------
<S> <C> <C>
/s/ Leo C. Beebe March 28, 1996 Chief Executive Officer (principal
--------------------------------- executive officer) and Chairman of the
Leo C. Beebe Board of Directors
/s/ Robert L. Weinberg March 28, 1996 Senior Executive Vice President, Chief
--------------------------------- Financial Officer and Treasurer
Robert L. Weinberg (principal financial officer)
/s/ Alan R. Sukoneck March 28, 1996 Vice President and Controller
--------------------------------- (principal accounting officer)
Alan R. Sukoneck
/s/ Edward B.Cloues, II March 28, 1996 Director
---------------------------------
Edward B. Cloues, II
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C>
/s/ Norman Cohen March 28, 1996 Director
---------------------------------
Norman Cohen
/s/ Richard J. Pinola March 28, 1996 Director
-----------------------------------
Richard J. Pinola
/s/ Hans-Jurg Schurmann March 28, 1996 Director
--------------------------------
Hans-Jurg Schurmann
/s/ Jean Head Sisco March 28, 1996 Director
-----------------------------------
Jean Head Sisco
/s/ Johannes Wirth March 28, 1996 Director
-----------------------------------
Johannes Wirth
</TABLE>
<PAGE> 28
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 29
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - ARTHUR ANDERSEN LLP F-2
INDEPENDENT AUDITORS' REPORT - DELOITTE & TOUCHE LLP F-3
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES:
Consolidated Balance Sheets--December 30, 1995 and December 31, 1994 F-4
Consolidated Statements of Operations for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994 F-6
Consolidated Statements of Changes in Shareholders' Equity for the
fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994 F-7
Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994 F-8
Notes to Consolidated Financial Statements F-10
Independent Auditors' Report on Schedules -- Deloitte & Touche LLP S-1
Schedule I--Condensed Financial Information of Registrant S-2
Schedule II--Valuation Reserves S-6
</TABLE>
F-1
<PAGE> 30
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
K-Tron International, Inc.:
We have audited the accompanying consolidated balance sheets of K-Tron
International, Inc. (a New Jersey corporation) and subsidiaries as of December
30, 1995 and December 31, 1994, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for the years then
ended. These financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of K-Tron
International, Inc. and subsidiaries as of December 30, 1995 and December 31,
1994, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index to financial
statements as of December 30, 1995 and December 31, 1994, and for the years
then ended are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 28, 1996
F-2
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
K-Tron International, Inc.
Cherry Hill, New Jersey
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity, and cash flows of K-Tron International, Inc. and
subsidiaries (the "Company") for the fiscal year ended January 1, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of K-Tron
International, Inc. and subsidiaries for the fiscal year ended January 1, 1994
in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in the fiscal
year ended January 1, 1994 the Company changed its method of accounting for
certain costs of inventory and for income taxes.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 11, 1994
F-3
<PAGE> 32
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
---------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,239 $ 1,086
Accounts receivable (less allowance for doubtful
accounts of $1,077 and $1,523) 20,849 29,214
Inventories 18,534 25,458
Income tax refund receivable -- 442
Deferred income taxes 1,088 328
Prepaid expenses and other current assets 1,512 1,145
------------- -------------
Total current assets 45,222 57,673
PROPERTY, PLANT AND EQUIPMENT, net
of accumulated depreciation of $26,756 and $32,097 17,595 31,673
PATENTS AND LICENSES, net of accumulated
amortization of $4,644 and $7,657 480 908
EXCESS OF COST OVER NET ASSETS ACQUIRED, net
of accumulated amortization of $3,009 and $4,888 5,597 18,661
OTHER ASSETS 402 650
DEFERRED INCOME TAXES -- 385
------------- -------------
Total assets $ 69,296 $ 109,950
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 33
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(dollars in thousands except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ -- $ 31,175
Current portion of long-term debt 2,133 1,337
Accounts payable 9,250 12,251
Accrued expenses and other current liabilities 2,558 2,469
Accrued payroll 1,459 2,211
Accrued commissions 2,523 3,039
Customer advances 2,612 2,720
Accrued warranty 893 930
Income taxes payable 680 1,241
Deferred income taxes -- 849
------------- --------------
Total current liabilities 22,108 58,222
------------- --------------
LONG-TERM DEBT, net of current portion 35,004 27,413
------------- --------------
DEFERRED INCOME TAXES 466 399
------------- --------------
OTHER NONCURRENT LIABILITIES 2,297 5,395
------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 11)
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES,
$.01 par value, authorized 50,000 shares; none issued -- --
------------- --------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 950,000
shares; none issued -- --
Common stock, $.01 par value; authorized 15,000,000
shares; issued 4,175,585 shares and 4,150,887 shares 42 41
Paid-in capital 13,980 13,865
Retained earnings 5,776 15,070
Cumulative translation adjustments 187 109
------------- --------------
19,985 29,085
Treasury stock, 1,062,950 shares, at cost (10,564) (10,564)
------------- --------------
Total shareholders' equity 9,421 18,521
------------- --------------
Total liabilities and shareholders' equity $ 69,296 $ 109,950
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 34
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES $ 110,394 $ 104,772 $ 107,966
COST OF REVENUES 67,658 67,145 66,846
------------- ------------- -------------
Gross profit 42,736 37,627 41,120
OPERATING EXPENSES:
Selling, general and administrative 34,625 34,916 33,774
Research and development 3,135 4,439 4,938
Loss on disposition of businesses 11,278 852 --
------------- ------------- ----------
49,038 40,207 38,712
------------- ------------- -------------
OPERATING (LOSS) PROFIT (6,302) (2,580) 2,408
INTEREST EXPENSE 4,142 4,472 4,192
------------- ------------- -------------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (10,444) (7,052) (1,784)
INCOME TAX (BENEFIT) PROVISION (1,150) (226) 135
------------- ------------- -------------
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES (9,294) (6,826) (1,919)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- 854
------------- ------------- -------------
Net loss $ (9,294) $ (6,826) $ (1,065)
============= ============= =============
LOSS PER SHARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGES $ (3.00) $ (2.22) $ (0.62)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- 0.27
------------- ------------- -------------
LOSS PER SHARE $ (3.00) $ (2.22) $ (0.35)
============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 3,096,000 3,079,000 3,075,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 35
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Cumulative Treasury Stock
------------------------ Paid-in Retained Translation ---------------------
Shares Amount Capital Earnings Adjustments Shares Amount Total
--------- ------- --------- -------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 2, 1993 4,097,923 $ 41 $ 13,382 $ 22,961 $ 604 1,062,950 $(10,564) $ 26,424
Issuance of common
stock 21,305 -- 207 -- -- -- -- 207
Net loss -- -- -- (1,065) -- -- -- (1,065)
Translation
adjustments -- -- -- -- (872) -- -- (872)
--------- ------- -------- -------- ---------- -------- -------- --------
BALANCE,
JANUARY 1, 1994 4,119,228 41 13,589 21,896 (268) 1,062,950 (10,564) 24,694
Issuance of
common stock 31,659 -- 276 -- -- -- -- 276
Net loss -- -- -- (6,826) -- -- -- (6,826)
Translation
adjustments -- -- -- -- 377 -- -- 377
--------- ------- -------- -------- ----------- -------- -------- --------
BALANCE,
DECEMBER 31, 1994 4,150,887 41 13,865 15,070 109 1,062,950 (10,564) 18,521
Issuance of
common stock 24,698 1 115 -- -- -- -- 116
Net loss -- -- -- (9,294) -- -- -- (9,294)
Translation
adjustments -- -- -- -- 78 -- -- 78
--------- -------- ------- -------- ---------- --------- -------- --------
BALANCE,
DECEMBER 30, 1995 4,175,585 $ 42 $ 13,980 $ 5,776 $ 187 1,062,950 $(10,564) $ 9,421
========= ======= ======== ======== ========== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 36
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (9,294) $ (6,826) $ (1,065)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Loss on disposition of businesses 11,278 852 --
Depreciation and amortization 4,844 6,314 6,562
Amortization of deferred gain on
sale/leaseback transaction (468) (403) (379)
Deferred income taxes (1,651) (14) (292)
Gain on sale of property, plant and
equipment -- -- (231)
Cumulative effect of accounting changes -- -- (854)
Changes in assets and liabilities excluding
effects of dispositions-
Accounts receivable, net 1,802 (1,965) 4,136
Inventories 1,353 (2,709) 2,951
Prepaid expenses and other current
assets (678) 284 143
Other assets 739 (194) (526)
Accounts payable (5) 4,074 (1,030)
Accrued expenses and other current
liabilities (2,317) 1,993 (5,009)
Accrued warranty 201 (124) (496)
Income taxes 307 (1,200) (409)
------------- ------------- -------------
Net cash provided by
operating activities 6,111 82 3,501
------------- ------------- -------------
INVESTING ACTIVITIES:
Proceeds from disposition of businesses 9,320 -- --
Capital expenditures (370) (2,467) (3,062)
Proceeds from the sale of property, plant
and equipment -- -- 1,329
Investment in patents and licenses (7) (111) (81)
------------- ------------- -------------
Net cash provided by (used in)
investing activities 8,943 (2,578) (1,814)
------------- ------------- -------------
</TABLE>
(continued)
F-8
<PAGE> 37
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
------------- ------------- -------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net (re-payments) borrowings under notes payable to
banks (12,224) 4,176 (12,897)
Net borrowings under long-term lines
of credit -- -- 8,558
Proceeds from issuance of long-term debt -- -- 5,508
Principal payments on long-term debt (1,013) (2,403) (3,381)
Proceeds from issuance of common stock 116 276 207
------------- ------------- -------------
Net cash (used in) provided by
financing activities (13,121) 2,049 (2,005)
------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 220 (110) (27)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,153 (557) (345)
CASH AND CASH EQUIVALENTS:
Beginning of year 1,086 1,643 1,988
------------- ------------- -------------
End of year $ 3,239 $ 1,086 $ 1,643
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 3,597 $ 4,412 $ 4,033
============= ============= =============
Income taxes $ 345 $ 575 $ 823
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 38
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEAR ENDED DECEMBER 30, 1995
1. NATURE OF OPERATIONS AND MATURITY OF DEBT:
Nature of Operations
K-Tron International, Inc. (the "Company") and its subsidiaries design,
produce, market, and sell gravimetric and volumetric feeders and related
equipment for the handling of bulk solids in a wide variety of manufacturing
processes. The Company has manufacturing facilities in the United States and
Switzerland and its equipment is sold throughout the world.
Maturity of Debt
As discussed in Note 6, the Company is currently operating under the U.S. and
Swiss forbearance agreements. These forbearance agreements are scheduled to
expire in the first quarter of fiscal 1997. Management's current projections
indicate that there will not be sufficient cash flow from operations to fund
these obligations when they come due in 1997. As a result, the Company will
need to refinance the outstanding debt that is covered by these forbearance
agreements or extend the term of these agreements. Management continues to hold
discussions with various financial institutions and equity investors to
refinance the Company's debt.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All material intercompany
accounts and transactions have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year is reported on a fifty-two/fifty-three week period.
The fiscal years ended December 30, 1995 (referred to herein as "1995"),
December 31, 1994 (referred to herein as "1994"), and January 1, 1994 (referred
to herein as "1993") each include fifty-two weeks.
F-10
<PAGE> 39
Cash and Cash Equivalents
Cash equivalents represent all highly liquid, interest-bearing investments
purchased with maturities of three months or less.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Effective January 3, 1993, the Company, to be consistent with the
United States policy, changed its method of accounting for the nonperiod cost
of inventory at its European manufacturing facilities by capitalizing certain
inventory procurement and other indirect production costs which were previously
charged to expense. The Company believes that it is preferable because it
provides a better matching of costs with related revenues and will result in a
consistent use of the same method of valuation. The cumulative effect of this
change for the periods prior to January 3, 1993, which amounted to $504,000
($.16 per share), net of applicable income taxes of $68,000, is included in the
Cumulative Effect of Accounting Changes in the statement of operations.
Property, Plant and Equipment
Property, plant and equipment is carried at cost and is depreciated and
amortized on a straight-line basis over the following estimated useful lives:
buildings and improvements, 30 to 50 years; automotive equipment, 3 years;
machinery and equipment, 3 to 10 years; furniture and fixtures, 5 to 7 years.
Leasehold improvements are amortized over the shorter of the estimated useful
lives of such assets or the remaining term of the applicable lease.
Patents and Licenses
Patents and license agreements are stated at cost less accumulated
amortization. The costs of patents and license agreements are amortized on a
straight-line basis over the remaining economic life of the respective asset,
but in no event longer than the remaining legal life.
Excess of Cost Over Net Assets Acquired
Excess of cost over net assets acquired is being amortized on a straight-line
basis over 15 years. Subsequent to its acquisition, the Company continually
evaluates whether later events and circumstances have occurred that indicate
the remaining estimated useful life of this asset may warrant revision or that
the remaining balance may not be recoverable. When factors indicate that this
asset should be evaluated for possible impairment, the Company uses an estimate
of fair market value in measuring whether the asset is recoverable.
F-11
<PAGE> 40
Income Taxes
Beginning in 1993, income taxes are accounted for in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 109 Accounting for Income Taxes.
Deferred income taxes are provided for differences between amounts shown for
financial reporting purposes and those included with tax return filings that
will reverse in future periods. Additionally, the effects of income taxes are
measured based upon effective tax laws and rates. The cumulative effect of
adopting SFAS No. 109 on the Company's financial statements was to increase
income by $350,000 ($.11 per share) for the year ended January 1, 1994.
Deferred income taxes are provided for temporary differences between financial
and tax reporting.
Research and Development
Expenditures for research, development and engineering of products are expensed
as incurred.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated to U.S.
dollars at current rates of exchange. Revenues and expenses are translated at
average rates prevailing during the year. The Company incurred foreign
currency losses amounting to approximately $1,279,000, $324,000, and $82,000,
for 1995, 1994 and 1993, respectively. Translation gains and losses are
recorded as a separate component of shareholders' equity.
Earnings (Loss) Per Share
Earnings (loss) per common share are based on the weighted average number of
common and common equivalent shares outstanding during each year. Such average
shares include the weighted average number of common shares outstanding plus
the shares issuable upon exercise of stock options after the assumed repurchase
of common shares with the related proceeds.
Fair Value Disclosures
The carrying value of financial instruments such as cash, accounts receivables
and payables and other current assets and liabilities approximate their fair
value, based on the short-term nature of these instruments. The carrying
amount of the Company's long-term debt and notes payable approximates its fair
value. The fair value is estimated based on the current rates offered to the
Company for debt and notes payable of the same remaining maturities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
F-12
<PAGE> 41
New Accounting Pronouncements
In 1996 the Company is required to adopt the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company
does not anticipate that the adoption will have a material impact on the
consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
3. DISPOSITION OF BUSINESSES:
In June 1995, the Company sold Colortronic GmbH and rights to several related
patents and patent applications to an investment group including former members
of the Company's management for $9,000,000, resulting in a pre-tax loss of
$10,529,000 on the sale. The sale reduced consolidated debt by the amount of
Colortronic bank debt which was $15,154,000. Proceeds from the sale were used
to pay down non-U.S. and U.S. borrowings. The Company discontinued its other
Colortronic brand business.
Additionally, in the fourth quarter of 1995, the Company sold certain
operations in France to a former member of the Company's management and its
operation in Brazil to a third party for a total of $951,000, resulting in a
pretax loss of $749,000 in 1995. The loss of $852,000 incurred in 1994 related
to reserves established in connection with the anticipated sales of the French
and Brazilian operations.
The following unaudited pro forma consolidated statement of operations for 1995
illustrate the estimated effects of the dispositions and the application of the
net proceeds, and the discontinuance of the other Colortronic brand business,
as if the transactions were consummated as of the beginning of 1995 (in
thousands except per share data):
<TABLE>
<S> <C>
Revenues $ 89,640
Cost of revenues 52,819
--------------
Gross profit 36,821
Operating expenses 31,236
--------------
Operating income 5,585
Interest expense 2,868
--------------
Income before taxes 2,717
Income taxes 1,309
--------------
Net income $ 1,408
==============
Earnings per share $ .45
==============
</TABLE>
Pro forma adjustments include only the effects of events directly attributable
to the transactions and are expected to have a continuing impact. The above
unaudited pro forma financial information is not necessarily indicative of the
results that would actually have been obtained if the transactions had been
effected at the beginning of 1995 or that may be obtained in the future.
F-13
<PAGE> 42
4. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- ----------------
(in thousands)
<S> <C> <C>
Components $ 13,527 $ 20,315
Work-in-process 4,135 3,920
Finished goods 872 1,223
------------- -------------
$ 18,534 $ 25,458
============= =============
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- ----------------
(in thousands)
<S> <C> <C>
Land $ 1,414 $ 2,025
Buildings and improvements 18,637 30,490
Automotive equipment 736 1,347
Machinery and equipment 11,390 13,555
Furniture and fixtures 12,174 16,353
------------- -------------
44,351 63,770
Less- Accumulated depreciation
and amortization (26,756) (32,097)
------------- -------------
$ 17,595 $ 31,673
============= =============
</TABLE>
Property includes assets acquired under capital leases, principally furniture
and fixtures in 1995 and a building and furniture and fixtures in 1994, of
$583,000 and $3,002,000 at December 30, 1995 and December 31, 1994,
respectively. Related accumulated depreciation and amortization was $409,000
and $1,648,000, respectively.
Depreciation of property, plant and equipment for 1995, 1994, and 1993 was
$3,521,000, $4,088,000, and $4,284,000, respectively.
6. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT:
Notes Payable to Banks
Loan arrangements have been established with banks outside the United States
under which the Company's foreign subsidiaries are able to borrow up to
$21,121,000 under unsecured and secured short-term lines of credit. At
December 30, 1995, the Company had borrowed $18,030,000 from these banks at
rates ranging from 4.25% to 7.25%. At December 31, 1994, the Company had
borrowed $16,897,000 at rates ranging from 5.38% to 10.25%.
F-14
<PAGE> 43
In the United States, at December 30, 1995, the Company has a line-of-credit
arrangement aggregating $5,005,000 and, as of December 30, 1995, $5,005,000 was
outstanding. Borrowings are secured by substantially all assets of a United
States subsidiary, totaling $17,888,000. In 1994, the United States banks
notified the Company that they would not extend the line of credit beyond its
July 31, 1995 expiration (see below). Effective September 1, 1994, the
interest rates on the line of credit and mortgage (see below) were increased to
prime plus 3/4% (9.25% at December 31, 1994) and prime plus 1% (9.5% at
December 31, 1994), respectively. Effective June 23, 1995, the interest rates
on the line of credit and the mortgage were increased to prime plus 2% and
subsequently reduced at the end of 1995 to prime plus 1.5% (10% at December 30,
1995).
As a result of the losses incurred in 1994, the Company was in violation of
certain financial covenants under the U.S. credit agreements as of December 31,
1994. The sale of Colortronic in June 1995, at a significant loss (see Note 3),
caused the Company to be in violation of the non-U.S. credit agreements. As a
result of these violations, the Company was in default of the credit agreements
in 1995. During 1995 and early 1996, the Company negotiated forbearance
agreements with both the U.S. and non-U.S. banks expiring in January 1997 and
March 1997, respectively. These forbearance agreements subject the Company to
certain financial covenants including levels of net worth and restrictions on
intercompany transactions. The U.S. forbearance agreement also requires the
Company to pursue alternative replacement financing during 1996 but does not
require the Company to consummate a refinancing. The non-U.S. credit agreement
also requires the streamlining of the organization, the addition of a new Swiss
Board member, the prohibition of the payment of the management fees from the
subsidiaries to K-Tron International, Inc. after March 1, 1996, and other
covenants. Management believes they will be able to comply with these
covenants.
The U.S. forbearance agreement requires monthly principal payments ranging from
$50,000 in January 1996 to $275,000 in December 1996, with the remaining
balance due at January 1997. Total required principal payments in fiscal 1996
under the U.S. agreement are $1,825,000. Interest is payable monthly at prime
plus 1.5% through February 29, 1996, prime plus 1.75% through June 14, 1996,
prime plus 2.5% through July 14, 1996, prime plus 3% through October 14, 1996,
and prime plus 3.5% through January 1997. The non-U.S. forbearance agreement
does not require any principal payments until March 1997. As a result of the
defaults under the U.S. credit agreement as of December 31, 1994, $10,850,000
outstanding under the U.S. credit agreement and $3,428,000 of U.S mortgages
were classified as short-term.
As discussed above, a significant amount of debt will mature in the first
quarter of 1997. Management has begun to implement steps to address this
issue. Through the disposition of various businesses in 1995 (see Note 3), the
Company has returned to profitability and positive operating cash flow in the
last half of 1995. Management is currently holding discussions with various
parties to refinance the Company's U.S. debt and is continuing to evaluate
other debt and equity alternatives to further strengthen the Company's
financial position and comply with the provisions of both forbearance
agreements. Management believes that through the successful completion of new
financings in 1996 and operating performance, they will be able to refinance or
extend the maturities of the forbearance agreements as they occur in 1997.
F-15
<PAGE> 44
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
-------------- -------------
(in thousands)
<S> <C> <C>
Non-US long-term lines of credit $ 18,030 $ 11,496
U.S. long-term line of credit 5,005 --
U.S. mortgage 2,828 --
European mortgages, interest at market rates (6.5% to 8.9% at
December 30, 1995 and 5.75% to 8.9% at December 31, 1994)
payable annually 10,173 14,535
Capital lease obligations, interest at 6.5% at December 30,
1995, and 6.5% to 8.5% at December 31, 1994, payable monthly
through 1998 174 1,879
Other 927 840
-------------- -------------
37,137 28,750
Less- Current portion (2,133) (1,337)
-------------- -------------
$ 35,004 $ 27,413
============== =============
</TABLE>
Foreign fixed assets with a net book value of approximately $8,089,000 at
December 30, 1995, are pledged as collateral for the European mortgages. In
addition, foreign receivables of $7,913,000 are pledged as collateral under the
non-U.S. forbearance agreement. Domestic assets with a net book value of
approximately $3,665,000 at December 30, 1995, are pledged as collateral for
the U.S. mortgage.
Maturities of long-term debt will approximate $2,133,000 in 1996, $34,982,000
in 1997 and $22,000 in 1998.
7. EMPLOYEE BENEFIT PLANS:
The Company has a profit-sharing and thrift plan for all domestic employees who
have worked for the Company for at least one year and who are employed at the
end of the year. All Company contributions to the plan are at the discretion
of the Board of Directors. The Company's profit sharing contribution vests
over a seven-year period. In addition, employees may voluntarily participate
in the thrift plan and authorize payroll deductions ranging from 1% to 15% of
their compensation. Related matching Company contributions are vested
immediately. The Board of Directors did not authorize any 1995, 1994 or 1993
contribution to the profit-sharing portion of the plan.
Substantially all foreign employees participate in defined-contribution insured
group pension plans. Contributions are paid by the employee and employer at a
percentage that varies according to age and other factors.
Colortronic GmbH employees participated in an unfunded defined benefit plan.
The net periodic pension cost for the unfunded defined benefit plan was
$177,000, $353,000 and $278,000 for 1995, 1994, and 1993 respectively.
F-16
<PAGE> 45
The expense associated with the domestic profit-sharing and thrift plan for
1995, 1994 and 1993 was $225,000, $285,000, and $153,000, respectively. The
foreign pension expense for 1995, 1994 and 1993 was $1,402,000, $1,607,000, and
$1,221,000, respectively.
In June 1981, the Company adopted an employee stock purchase plan under which
eligible employees of the Company may elect to participate through payroll
deductions for up to 10% of their gross compensation. Such deductions are used
to purchase common stock of the Company at a price equal to 85% of the market
value. Under this plan, the Company issued 24,698 shares of common stock at an
average price of $4.68 in 1995, 29,159 shares of common stock at an average
price of $8.75 in 1994, and 21,305 shares of common stock at an average price
of $9.69 in 1993.
8. SHAREHOLDERS' EQUITY:
In 1991, the Board of Directors determined the rights on 50,000 shares of the
authorized preferred stock as the Series A Junior Participating Preferred
Shares (the "Series A Preferred Shares"). Each one one-hundredth of a share of
the Series A Preferred Shares carries voting and dividend rights that are
equivalent to one share of the common stock. The voting and dividend rights
are subject to adjustment in the event of a dividend on common stock which is
payable in common stock or any subdivisions or combinations with respect to the
outstanding shares of common stock (see Note 9).
The Board of Directors has not determined the rights on the remaining 950,000
shares of the authorized preferred stock as of December 30, 1995.
The Company has a stock option plan for nonemployee directors (the "1989
nonemployee directors' plan"). The plan provides that each eligible director
is granted a single option to purchase 10,000 shares of the Company's common
stock at a price equal to the fair market value at the date of grant. The
aggregate number of shares which may be issued under the plan is 100,000.
These options have a term of 10 years and become exercisable in four equal
annual installments beginning on the date of the grant.
Under the Company's 1986 Stock Option Plan, as amended (the "1986 plan"), key
employees of and consultants to the Company may be granted options to purchase
shares of the Company's common stock. Options granted under the 1986 plan may
be either incentive stock options or nonqualified stock options. The Stock
Option Committee (the "Committee") determines the term of each option, but no
option will be exercisable more than 10 years from the date the option is
granted. The Committee determines the option exercise price per share. With
respect to incentive stock options, the exercise price must at least equal the
fair market value of a share of common stock as of the date the option is
granted. The aggregate number of shares which may be issued under the plan is
600,000. This plan expired in January 1996.
F-17
<PAGE> 46
A summary of the Company's stock option activity for its stock option plans for
the three years ended December 30, 1995, is as follows:
<TABLE>
<CAPTION>
Options
--------------------------------------------
Average
Shares Price
Reserved Outstanding Per Share Available
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE,
JANUARY 2, 1993 555,815 193,409 362,406
Granted -- 55,000 $11.74 (55,000)
Canceled -- (12,450) 10.75 12,450
------------ ------------ -------------
BALANCE,
JANUARY 1, 1994 555,815 235,959 319,856
Granted -- 70,584 11.50 (70,584)
Canceled -- (16,500) 10.92 16,500
Exercised (2,500) (2,500) 8.50 --
------------ ------------ -------------
BALANCE,
DECEMBER 31, 1994 553,315 287,543 265,772
Granted -- 74,000 6.25 (74,000)
Canceled -- (107,859) 10.50 107,859
------------ ------------ -------------
BALANCE,
DECEMBER 30, 1995 553,315 253,684 299,631
============ ============ =============
</TABLE>
As of December 30, 1995, 62 employees held options under the 1986 plan for an
aggregate of 203,684 shares at exercise prices from $6.25 to $14.00 with a
weighted average option price of $8.77. These options expire in varying
amounts through the year 2005.
As of December 30, 1995, under the 1989 nonemployee directors' plan, five
directors held options for an aggregate of 50,000 shares at exercise prices
from $9.25 to $11.00 with a weighted average option price of $10.53. These
options expire in varying amounts through the year 2004.
As of December 30, 1995 and December 31, 1994, under all stock option plans,
options for 127,600 shares and 161,959 respectively were exercisable at prices
ranging from $6.25 to $14.00.
9. SHAREHOLDER RIGHTS PLAN:
The Company has a Shareholder Rights Plan (the "Rights Agreement") which was
adopted by the Board of Directors on October 3, 1991. The Rights Agreement
provides that each share of the Company's common stock outstanding as of
October 14, 1991, has associated with it one Right to purchase one
one-hundredth of a share of the Series A Preferred Shares at an exercise price
of $40 per share. Such exercise price is subject to adjustment as described in
the Rights Agreement.
The Rights will be exercisable only if a person or group obtains the right to
acquire beneficial ownership of 20% or more of the outstanding common stock of
the Company, or after the commencement of a tender offer or an exchange offer
that would result in a person
F-18
<PAGE> 47
or group beneficially owning 20% or more of the outstanding common stock. If
anyone acquires 20% or more of the Company's outstanding common stock, the
Rights would entitle shareholders (other than the 20% acquiror) to purchase for
$40 the number of shares of the Company's common stock which would have a
market value of $80. In the event that the Company is acquired in a merger or
other business combination, the Rights would entitle the shareholders (other
than the acquiror) to purchase securities of the surviving company at a similar
discount. In lieu of requiring payment of the exercise price of the Rights
upon the occurrence of the above-noted events, the Company may permit the
holders to simply surrender the Rights and receive the number of shares of the
Company's common stock which would have a market value of $40.
The Company can redeem the Rights at $.01 per Right at any time until the
twentieth day following a public announcement that a person or a group has
acquired or obtained the right to acquire beneficial ownership of at least 20%
of the Company's outstanding common stock. Under certain circumstances set
forth in the Rights Agreement, the decision to redeem shall require the
concurrence of a majority of the Continuing Directors, as defined in the Rights
Agreement. The redemption period may be extended by the Board of Directors as
long as the Rights are still redeemable. The Rights expire October 14, 2001.
10. INCOME TAXES:
Following are the domestic and foreign components of the loss before income
taxes and cumulative effect of accounting changes:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
--------------- ------------ -----------
(in thousands)
<S> <C> <C> <C>
United States $ 756 $ (994) $ 644
Foreign (11,200) (6,058) (2,428)
------------ ----------- --------
Loss before income taxes and
cumulative effect
of accounting change $ (10,444) $ (7,052) $ (1,784)
============ =========== ========
</TABLE>
F-19
<PAGE> 48
The income tax (benefit) provision consists of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
--------------- ------------ -------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ 501 $ (374) $ 139
Foreign -- 136 144
------------- ----------- ---------
Total current 501 (238) 283
------------- ----------- ---------
Deferred:
Federal (106) 108 20
Foreign (526) (96) (168)
Benefit of foreign net operating
loss carryforwards (1,019) -- --
------------- ----------- ---------
Total deferred (benefit) (1,651) 12 (148)
------------- ----------- ---------
Total income tax (benefit) provision $ (1,150) $ (226) $ 135
============= =========== =========
</TABLE>
Significant components of the deferred tax accounts at December 30, 1995 and
December 31, 1994, are as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
---------------- --------------
<S> <C> <C>
Deferred tax assets:
Patent costs 44 175
Accrued liabilities 388 192
Net operating loss carryforwards 6,108 6,621
Other 210 755
----------- -----------
6,750 7,743
Valuation allowance (5,478) (6,613)
----------- -----------
Total assets 1,272 1,130
----------- -----------
Deferred tax liabilities:
Inventory basis differences -- (747)
Depreciation (280) (400)
Other (370) (518)
----------- -----------
Total liabilities (650) (1,665)
----------- -----------
Net deferred asset (liability) $ 622 $ (535)
=========== ===========
</TABLE>
Foreign and U.S. state operating loss carryforwards as of December 30, 1995,
were $20.8 and $5.4 million, respectively. Of the $20.8 million of foreign
losses, $17.2 million are available to offset future income through 2002. The
balance of $3.6 million has an unlimited carryforward period. U.S. state
operating losses are available through 2002.
F-20
<PAGE> 49
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The Company
has established valuation allowances for substantially all foreign and state
net operating loss carryforwards generated from losses prior to 1995 for which
realization is dependent on future taxable earnings. In 1995, the Company
decreased its valuation reserves on Swiss operating loss carryforwards that are
now expected to be realized based on the of improved earnings of the non-U.S.
operations.
At December 30, 1995, retained earnings include $4.2 million of undistributed
net income of foreign subsidiaries. Management considers such income to have
been permanently invested and, therefore, no federal income taxes have been
provided for these items.
A reconciliation of the provision for income taxes and the amounts that would
be computed using the statutory federal income tax rates is set forth below:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
-------------- ------------ -------------
(in thousands)
<S> <C> <C> <C>
Income tax benefit on loss before income tax at
statutory federal income tax rates $ (3,551) $ (2,376) $ (607)
Foreign tax rate differential 918 74 898
State tax, net of federal benefit (27) 6 --
Goodwill amortization 175 13 13
Change in valuation allowance 1,345 1,986 (158)
Other (10) 71 (11)
------------- ----------- -----------
Income tax (benefit) provision $ (1,150) $ (226) $ 135
============= =========== ===========
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
The Company leases certain office and plant facilities and equipment under
non-cancelable leases. These leases expire in periods ranging from one to five
years and, in certain instances, provide for purchase options.
Immediately prior to the acquisition of Hasler, the Company's large heavy duty
feeder division, the acquired company entered into a sale/leaseback agreement
on its real property in Switzerland. The net proceeds of this transaction were
distributed to the seller as a dividend. The gain from this transaction has
been classified as Other Noncurrent Liabilities in the Company's consolidated
balance sheets. This deferred gain is being amortized over the life of the
resulting operating lease (10 years). Amortization of the deferred gain for
1995, 1994 and 1993 was $468,000, $403,000, and $379,000, respectively.
F-21
<PAGE> 50
As of December 30, 1995, future minimum payments under capital and operating
leases having noncancelable terms in excess of one year are summarized below.
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------------- --------------
(in thousands)
<S> <C> <C>
1996 $ 121 $ 971
1997 81 781
1998 -- 649
1999 -- 562
2000 -- 454
---------- -----------
202 $ 3,417
============
Less- Amount representing interest (28)
----------
Present value of net minimum lease payments $ 174
==========
</TABLE>
Rent expense for 1995, 1994 and 1993 was $1,719,000, $1,551,000 and $1,300,000,
respectively.
K-Tron America, Inc. (a wholly owned subsidiary of the Company) has entered
into an inventory purchase agreement with one of its major suppliers. Under
this agreement, K-Tron America, Inc., has committed to purchase component
inventory of $1,000,000 and $320,000 during 1996 and 1997, respectively.
The Company has one year employment agreements with six executives totaling
$642,000 for 1996.
F-22
<PAGE> 51
12. GEOGRAPHIC AREA INFORMATION:
The Company is engaged in one business segment, the development, manufacturing
and marketing of gravimetric and volumetric feeders, blenders and related
industrial control equipment. No single customer accounted for more than 10%
of total sales.
<TABLE>
<CAPTION>
United Western Elimi- Consoli-
States Europe nations dated
--------- --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 30, 1995:
Revenues-
Sales to unaffiliated customers $32,156 $78,238 $ -- $110,394
Sales to affiliates 3,445 4,034 (7,479) --
------- ------- ------- --------
Total sales $35,601 $82,272 $(7,479) $110,394
======= ======= ======= ========
Operating income (loss) $ 2,014 $(8,282) $ (34) $ (6,302)
======= ======= =======
Interest expense (4,142)
--------
Loss before income taxes $(10,444)
========
Total assets $21,553 $47,843 $ (100) $ 69,296
======= ======= ======= ========
FISCAL YEAR ENDED DECEMBER 31, 1994:
Revenues-
Sales to unaffiliated customers $28,969 $75,803 $ -- $104,772
Sales to affiliates 3,995 4,833 (8,828) --
------- ------- ------- --------
Total sales $32,964 $80,636 $(8,828) $104,772
======= ======= ======= ========
Operating income (loss) $ 276 $(2,865) $ 9 $ (2,580)
======= ======= =======
Interest expense (4,472)
--------
Loss before income taxes $ (7,052)
========
Total assets $27,647 $82,315 $ (12) $109,950
======= ======= ======= ========
FISCAL YEAR ENDED JANUARY 1, 1994:
Revenues-
Sales to unaffiliated customers $30,399 $77,567 $ -- $107,966
Sales to affiliates 2,553 1,905 (4,458) --
------- ------- ------- --------
Total sales $32,952 $79,472 $(4,458) $107,966
======= ======= ======= ========
Operating income $ 1,737 $ 711 $ (40) $ 2,408
======= ======= =======
Interest expense (4,192)
--------
Loss before income taxes and cumulative effect of
accounting changes $ (1,784)
========
Total assets $27,945 $73,423 $ (72) $101,296
======= ======= ======= ========
</TABLE>
F-23
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
K-Tron International, Inc.
Cherry Hill, New Jersey
We have audited the consolidated financial statements of K-Tron International,
Inc. and subsidiaries for the fiscal year ended January 1, 1994, and have
issued our report thereon dated March 11, 1994; such report is included
elsewhere in this Form 10-K. Our audit also included the financial statement
schedule of K-Tron International, Inc. and subsidiaries, listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 11, 1994
S-1
<PAGE> 53
SCHEDULE I
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF
REGISTRANT BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(dollars in thousands except share data)
<TABLE>
<CAPTION>
December 30, December 31,
ASSETS 1995 1994
---------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 45 $ 8
Income tax receivable -- 442
Deferred income taxes 482 328
Prepaid expenses and other current assets 113 143
------------- -------------
Total current assets 640 921
PROPERTY, PLANT AND EQUIPMENT, NET 187 360
INVESTMENT IN SUBSIDIARIES 21,514 29,805
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET -- 245
OTHER ASSETS -- 38
------------- -------------
Total assets $ 22,341 $ 31,369
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $ -- $ 10,850
Current portion of long-term debt -- 83
Accrued expenses and other current liabilities 1,189 801
Intercompany payables, net 6,491 788
------------- -------------
Total current liabilities 7,680 12,522
-------------
LONG-TERM DEBT, NET OF CURRENT PORTION 5,005 138
------------- -------------
DEFERRED INCOME TAXES 235 188
------------- -------------
COMMITMENTS AND CONTINGENCIES -- --
------------- -------------
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value,
authorized 50,000 shares;
none issued -- --
------------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
950,000 shares; none issued -- --
Common stock, $.01 par value; authorized
15,000,000 shares; issued 4,175,585 shares
and 4,150,887 shares 42 41
Paid-in capital 13,980 13,865
Retained earnings 5,776 15,070
Cumulative translation adjustments 187 109
------------- -------------
Total 19,985 29,085
Treasury stock, 1,062,950 shares, at cost (10,564) (10,564)
------------- -------------
Total shareholders' equity 9,421 18,521
------------- -------------
Total liabilities and shareholders' equity $ 22,341 $ 31,369
============= =============
</TABLE>
The accompanying note is an integral part of these financial statements.
S-2
<PAGE> 54
SCHEDULE I
(Continued)
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT INCOME STATEMENT
DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994
(dollars in thousands except share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
December 30, December 31, January 1
1995 1994 1994
--------------- ----------------- ------------
<S> <C> <C> <C>
REVENUES:
Management fees $ 4,393 $ 4,444 $ 5,055
Other income, net 10 24 43
------------- ------------- ------------
Total revenues 4,403 4,468 5,098
------------- ------------- ------------
OPERATING EXPENSES:
Selling, general and administrative 3,385 3,459 4,076
Research and development 95 194 195
Loss on disposition of business 1,045 -- --
------------- ------------- ------------
4,525 3,653 4,271
------------- ------------- ------------
OPERATING (LOSS) INCOME (122) 815 827
INTEREST EXPENSE 803 988 931
------------- ------------- ------------
Loss before income taxes and net
loss of subsidiaries and
cumulative effect of accounting changes (925) (173) (104)
INCOME TAX BENEFIT (314) (59) (35)
------------- ------------- ------------
Loss before net loss of subsidiaries
and cumulative
effect of accounting changes (611) (114) (69)
EQUITY IN NET LOSS OF SUBSIDIARIES (8,683) (6,712) (1,850)
------------- ------------- ------------
Loss before cumulative
effect of accounting changes (9,294) (6,826) (1,919)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- 854
------------- ------------- ------------
Net loss $ (9,294) $ (6,826) $ (1,065)
============= ============= ============
LOSS PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES $ (3.00) $ (2.22) $ (.62)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- .27
------------- ------------- ------------
LOSS PER SHARE $ (3.00) $ (2.22) $ (.35)
============= ============= ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING 3,096,000 3,079,000 3,075,000
============= ============= ============
</TABLE>
The accompanying note is an integral part of these financial statements.
S-3
<PAGE> 55
SCHEDULE I
(Continued)
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
December 30, December 31, January 1
1995 1994 1994
----------------- ----------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,294) $ (6,826) $ (1,065)
Equity in net loss of subsidiaries 8,683 6,712 1,850
Depreciation and amortization 129 579 625
Cumulative effect of accounting changes -- -- (854)
Other, primarily working capital changes 6,273 (1,483) 3,788
-------------- -------------- ------------
Net cash provided by (used in)
operating activities 5,791 (1,018) 4,344
-------------- -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25) (43) (439)
-------------- -------------- ------------
Net cash used in investing activities (25) (43) (439)
-------------- -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
bank agreements (5,845) 1,495 (1,854)
Principal payments on long-term debt -- (811) (2,149)
Proceeds from issuance of common stock 116 276 207
-------------- -------------- ------------
Net cash (used in) provided by
investing activities (5,729) 960 (3,796)
-------------- -------------- ------------
Net increase (decrease) in cash
and cash equivalents 37 (101) 109
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8 109 --
-------------- -------------- ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 45 $ 8 $ 109
============== ============== ============
</TABLE>
The accompanying note is an integral part of these financial statements.
S-4
<PAGE> 56
SCHEDULE I
(Continued)
K-TRON INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE TO FINANCIAL STATEMENTS
DECEMBER 30, 1995
Note 1: These statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto beginning on
page F-4.
S-5
<PAGE> 57
SCHEDULE II
K-TRON INTERNATIONAL, INC.
VALUATION RESERVES
<TABLE>
<CAPTION>
Balance at Additions
Beginning Charged Balance at
of Period Disposed(2) to Income Deductions (1) End of Period
------------- ------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended 12/30/95:
Allowance for doubtful accounts $ 1,523,000 $ (956,000) $ 564,000 $ 54,000 $ 1,077,000
Fiscal year ended 12/31/94:
Allowance for doubtful accounts $ 1,342,000 -- 329,000 148,000 1,523,000
Fiscal year ended 1/1/94:
Allowance for doubtful accounts $ 1,406,000 -- 135,000 199,000 1,342,000
</TABLE>
(1) Accounts written off less recoveries, net of foreign exchange translation
adjustment.
(2) Reduction due to sale of subsidiaries.
S-6
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.1.5 Forbearance Agreement and Fourth Amendment to Revolving Credit and Term Loan
Agreement dated February 28, 1996 by and among K-Tron International, Inc., K-Tron
America, Inc., K-Tron Technologies, Inc., K-Tron Investment Co., K-Tron Patent,
Inc., First Union National Bank, PNC Bank, N.A. and United Jersey Bank
10.1.6 Forbearance Agreement by and among Swiss Bank Corp. Aarau, Credit Suisse Aarau,
Swiss Volksbank, Union Bank of Switzerland, Banque Cantonale Neuchateloise, CS
Immobilien Leasing Ltd., K-Tron (Switzerland) Ltd., K-Tron Vertech Ltd., K-Tron
Patent Ltd., K-Tron Asia Pacific Pte Ltd, K-Tron International Inc. and K-Tron
Investment Co.
10.2.3 K-Tron International, Inc. 1996 Equity Compensation Plan
10.2.4 K-Tron International, Inc. Employee Stock Purchase Plan, as amended and restated
11.1 Computation of (Loss) Earnings per Common and Common Equivalent Share
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1.5
FORBEARANCE AGREEMENT AND FOURTH AMENDMENT
TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Forbearance Agreement and Fourth Amendment to Revolving
Credit and Term Loan Agreement (the "Forbearance Agreement and Fourth
Amendment") dated February 28, 1996, is by and among K-Tron International,
Inc., a New Jersey corporation ("K-Tron International") and K-Tron America,
Inc. (formerly known as K-Tron North America, Inc.), a Delaware corporation
("K-Tron America") (each individually, a "Borrower" and collectively, the
"Borrowers"); and also K-Tron Technologies, Inc., a Delaware corporation
("K-Tron Technologies"), K-Tron Investment Co., a Delaware corporation ("K-Tron
Investment"), and K-Tron Patent, Inc., a Delaware corporation ("K-Tron
Patent"), (each individually a "Surety" and collectively, along with K-Tron
International, the "Sureties") (the Borrowers and Sureties are collectively
referred to herein as the "Obligors"); and First Union National Bank (formerly
known as First Fidelity Bank, N.A., which was successor-by-merger to First
Fidelity Bank, N.A., New Jersey) ("First Union"), PNC Bank, N.A. ("PNC"), and
United Jersey Bank (successor-by-merger to United Jersey Bank/South,
N.A.)("UJB") (each individually, a "Bank" and collectively, the "Banks"); and
First Union as agent for the Banks (First Union in such capacity, the "Agent").
BACKGROUND
1. The Borrowers, the Banks and the Agent have entered
into that certain Revolving Credit and Term Loan Agreement dated June 28, 1993
(the "Original Loan Agreement"), as amended by that certain First Amendment to
Loan Agreement dated as of June 30, 1994 (the "First Amendment"), and as
further amended by that certain Forbearance Agreement and Second Amendment to
Revolving Credit and Term Loan Agreement dated April 28, 1995 (the "Forbearance
Agreement and Second Amendment"), and as further amended by that certain
Forbearance Agreement and Third Amendment to Revolving Credit and Term Loan
Agreement, dated June 22, 1995 (the "Forbearance Agreement and Third
Amendment") (collectively, the "Existing Loan Agreement").
2. K-Tron Technologies has executed that certain
Suretyship Agreement dated June 28, 1993, as subsequently amended, in favor of
the Agent (the "Technologies Suretyship Agreement"), pursuant to which K-Tron
Technologies guaranteed and became the surety for the Guaranteed Obligations
(as such term is defined in the 1993 Suretyship Agreement).
3. The Borrowers notified the Banks in December, 1994
that they were projecting certain financial covenant defaults under the
Existing Loan Agreement to occur as of December 31, 1994.
1
<PAGE> 2
4. Pursuant to the Forbearance Agreement and Second
Amendment, the Agent and the Banks agreed to forbear from exercising their
rights under the Original Loan Agreement, as amended by the First Amendment and
the other Loan Documents, upon the terms and conditions contained therein,
until not later than July 31, 1995.
5. On April 28, 1995, in conjunction with the execution
of the Forbearance Agreement and Second Amendment, K-Tron International, K-Tron
Patent and K-Tron Investment each executed those certain Guarantee and
Suretyship Agreements (the "KTI Suretyship Agreement", the "KTP Suretyship
Agreement" and the "KTInv Suretyship Agreement", respectively) in favor of the
Agent pursuant to which each Surety guaranteed and became the surety for the
Guaranteed Obligations (as defined in each Surety's respective suretyship
agreement).
6. The Term Loan and the Revolving Credit Loans (as such
terms are defined in the Existing Loan Agreement) matured on July 31, 1995, and
the Obligors, acknowledging that they could not pay the Loans in full on that
date, sought and obtained from the Agent and the Banks their agreement to
continue to forbear from exercising their rights under the Original Loan
Agreement, as amended and the other Loan Documents until February 28, 1996,
upon the terms and conditions contained in the Forbearance Agreement and Third
Amendment.
7. Under the terms of the Existing Loan Agreement, the
Obligors are required to pay to the Agent for the benefit of the Banks all
outstanding principal and accrued interest on the Term Loan and the Revolving
Credit Loans on or before February 28, 1996. The Obligors have informed the
Agent and the Banks that they will be unable to make the required payments by
February 28, 1996.
8. Certain European affiliates of the Obligors, namely
K-Tron (Switzerland) Ltd., K-Tron Vertech Ltd., K-Tron Patent, Ltd., and K-Tron
Asia Pacific Pte. Ltd. (collectively "K-Tron Europe") have recently entered
into a forbearance agreement (the "Swiss Forbearance Agreement") with Swiss
Bank Corp. Aarau ("SBC"), as lead bank, and several other European lenders
(collectively, with SBC, the "Swiss Banks"). The Swiss Forbearance Agreement
imposes certain requirements with regard to transactions between the Obligors
and K-Tron Europe after February 28, 1996 that would violate certain covenants
in the Existing Loan Agreement if such covenants are not amended.
9. Events of Default under the Existing Loan Agreement
have occurred, are now continuing and will continue, the Borrowers believe,
throughout the Forbearance Period (defined hereafter) as a result of, inter
alia, the Borrowers' failure to comply with various covenants in the Existing
Loan Agreement, as
2
<PAGE> 3
more fully described on Exhibit 3.1 to the Forbearance Agreement and Second
Amendment (collectively, the "Existing Defaults").
10. The Agent and the Banks have agreed to continue to
forbear for a limited period of time, from exercising their rights under the
Existing Loan Agreement and the other Loan Documents upon the terms and
conditions contained herein.
NOW, THEREFORE, incorporating the Background herein, and for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the Borrowers, the
Sureties, the Banks and the Agent, agree as follows:
ARTICLE 1 - CAPITALIZED TERMS
All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Existing Loan
Agreement as amended by the provisions of Article 2 of this Forbearance
Agreement and Fourth Amendment.
ARTICLE 2 - AMENDMENTS TO LOAN AGREEMENT
2.1 Amendments to Existing Loan Agreement. The Existing
Loan Agreement is hereby amended as set forth in this Section 2.1. This
Section 2.l amends, restates and supersedes, but shall not be deemed a
satisfaction or cancellation of, the prior amendments to the Original Loan
Agreement set forth in Section 2 of the First Amendment and Section 2.1 in each
of the Forbearance Agreement and Second Amendment and the Forbearance Agreement
and Third Amendment.
(a) The first paragraph of the Original Loan
Agreement is hereby amended by replacing the term "First Fidelity Bank, N.A.
(successor-by-merger to First Fidelity Bank, N.A., New Jersey) with the term,
"First Union National Bank, formerly First Fidelity Bank, N.A.,
successor-by-merger to First Fidelity Bank, N.A., New Jersey." All references
in the Loan Documents to "First Fidelity Bank, N.A." or "FFB" or "First
Fidelity Bank, N.A. New Jersey" are hereby deemed references to "First Union
National Bank".
(b) The first paragraph of the Original Loan
Agreement was amended previously by replacing the term "K-Tron North America,
Inc." with the term "K-Tron America, Inc.," and by replacing the defined term
"K-Tron, N.A." with "K-Tron America"; and the new defined term "K-Tron America"
has replaced the term "K-Tron, N.A." wherever such term appears in the Existing
Loan Agreement and the other Loan Documents.
3
<PAGE> 4
(c) The first paragraph of the Original Loan
Agreement was amended previously by replacing the term "United Jersey
Bank/South, N.A." with the term "United Jersey Bank".
(d) The following defined terms and their
definitions in Section 1.1 of the Original Loan Agreement either have been or
are hereby amended and restated in their entirety as follows:
Debt to Net Worth Ratio" means the ratio of Total
Liabilities to Net Worth. For purposes of calculating the
Debt to Net Worth Ratio, (1) the term "Net Worth" of any
Person means consolidated shareholders' equity, computed in
accordance with GAAP and (2) the line item referred to in the
consolidated balance sheets of K-Tron International and
Subsidiaries as "Cumulative translation adjustments" shall be
excluded from shareholders' equity.
"Loan Documents" means the Loan Agreement, the Notes,
the Suretyship Agreement, the Mortgage, the Bank Assignment
Agreements, the Security Agreements, all other Supplemental
Loan Documents and all of the documents, instruments and
agreements executed in connection with any of the foregoing,
together with all amendments and modification thereto.
"Surety" means collectively K-Tron International (in
its capacity as surety for K-Tron America), K-Tron
Technologies, K-Tron Investment and K-Tron Patent.
"Suretyship Agreement" means collectively that
certain Suretyship Agreement dated June 28, 1993 executed by
K-Tron Technologies in favor of the Agent for the benefit of
the Banks, as amended and restated by that certain Amended and
Restated Guaranty and Suretyship Agreement dated April 28,
1995 executed by K-Tron Technologies in favor of the Agent for
the benefit of the Banks, that certain Guaranty and Suretyship
Agreement dated April 28, 1995 executed by K-Tron
International in favor of the Agent for the benefit of the
Banks, that certain Guaranty and Suretyship Agreement dated
April 28, 1995 executed by K-Tron Patent in favor of the Agent
for the benefit of the Banks, and that certain Guaranty and
Suretyship Agreement dated April 28, 1995 executed by K-Tron
Investment in favor of the Banks and the Agent for the benefit
of the Banks.
"Term Loan Maturity Date" means July 31, 1995.
4
<PAGE> 5
(e) Section 1.1 of the Original Loan Agreement
either has been amended previously or is hereby amended by adding the following
new defined terms in the appropriate alphabetical order:
"Bank Assignment Agreements" means, collectively,
that certain Assignment and Acceptance Agreement dated August
24, 1993 among K-Tron America, K-Tron International, UJB and
FFB and accepted by FFB on August 24, 1993, and that certain
Assignment and Acceptance Agreement dated August 24, 1993
among K-Tron America, K-Tron International, PNC and FFB and
accepted by FFB on August 24, 1993.
"Collateral" means all property and assets of the
Obligors (and each of them) now or hereafter in the
possession, custody or control of the Agent, the Banks and/or
any Affiliate, in any capacity whatsoever including, but not
limited to, any balance or share of any deposit, trust or
agency account, and all property and assets of the Obligors
(and each of them) now or hereafter subject to a security
agreement, pledge, mortgage, assignment or other document or
agreement granting the Agent and/or the Banks a security
interest therein or lien or encumbrance thereon including,
without limitation, the Collateral (as such term is defined in
each of the Security Agreements) and the Mortgaged Premises.
"First Amendment" means that certain First Amendment
to Loan Agreement dated as of June 30, 1994 by and among the
Borrowers, the Banks and the Agent, together with all
amendments and modifications thereto.
"Forbearance Agreement" means collectively the
Forbearance Agreement and Second Amendment, the Forbearance
Agreement and Third Amendment and the Forbearance Agreement
and Fourth Amendment.
"Forbearance Agreement and Fourth Amendment" means
that certain Forbearance Agreement and Fourth Amendment to
Revolving Credit and Term Loan Agreement dated February 28,
1996, by and among the Borrowers, the Sureties, the Banks and
the Agent, together with all amendments and modifications
thereto.
"Forbearance Agreement and Second Amendment" means
that certain Forbearance Agreement and Second Amendment to
Revolving Credit and Term Loan Agreement dated April 28, 1995,
by and among the Borrowers, the Sureties, the Banks and the
Agent, together with all amendments and modifications thereto.
5
<PAGE> 6
"Forbearance Agreement and Third Amendment" means
that certain Forbearance Agreement and Third Amendment to
Revolving Credit and Term Loan Agreement dated June 22, 1995,
by and among the Borrowers, the Sureties, the Banks and the
Agent, together with all amendments and modifications thereto.
"Forbearance Termination Date" shall have the meaning
given to such term in the Forbearance Agreement and Fourth
Amendment.
"K-Tron Investment" means K-Tron Investment Co., a
Delaware corporation.
"K-Tron Patent" means K-Tron Patent, Inc., a Delaware
corporation.
"Loan Agreement" means this Agreement, as amended by
the First Amendment, and as further amended by the Forbearance
Agreement and Second Amendment, and as further amended by the
Forbearance Agreement and Third Amendment, and as further
amended by the provisions of Article 2 of the Forbearance
Agreement and Fourth Amendment.
"Obligors" means the Borrowers and the Surety.
"PNC Bank, N.A." or "PNC" means PNC Bank, N.A., a
national banking association.
"Pro Rata Share" means for each Bank the percentage
set forth opposite such Bank's name on Exhibit 2.1 hereto and
incorporated herein by reference.
"Security Agreements" means collectively that certain
Security Agreement dated as of May 11, 1994 by K-Tron America
in favor of the Agent, as amended and restated by that certain
Amended and Restated Security Agreement dated as of April 28,
1995 by K-Tron America in favor of the Agent for the benefit
of the Banks; that certain General Security Agreement dated as
of April 28, 1995 by K-Tron International in favor of the
Agent for the benefit of the Banks; that certain General
Security Agreement dated as of April 28, 1995 by K-Tron
Technologies in favor of the Agent for the benefit of the
Banks; that certain General Security Agreement dated as of
April 28, 1995, by K-Tron Patent in favor of the Agent for the
benefit of the Banks; that certain General Security Agreement
dated as of April 28, 1995, by K-Tron Investment in favor of
the Agent for the benefit of the Banks; and any and all
6
<PAGE> 7
other security agreements executed and/or delivered to the
Agent in connection with the Loan Agreement together with all
amendments and modifications thereto.
"Supplemental Loan Documents" means the Forbearance
Agreement and all documents, instruments and agreements
executed and delivered in connection therewith and as required
thereby.
"United Jersey Bank" or "UJB" means United Jersey
Bank, successor by merger to United Jersey Bank/South N.A., a
New Jersey state chartered bank.
(f) The defined terms "Affiliate" and
"Subsidiary" in Section 1.1 of the Original Loan Agreement were amended
previously by replacing the word "Borrowers" in the definitions thereof with
the word: "Obligors."
(g) Section 2.1 of the Original Loan Agreement is
hereby amended by adding the following at the conclusion of the Section:
The Borrowers acknowledge and agree that the Revolving Credit
Commitments terminated in their entirety on July 31, 1995,
which was the Revolving Credit Termination Date, and the
Revolving Credit Commitments shall not be reinstated.
(h) Section 2.2 of the Original Loan Agreement is
hereby amended and restated in its entirety as follows:
2.2. Interest on the Revolving Credit Loans. The
unpaid principal amount of the Revolving Credit Loans shall
bear interest (i) from and after June 28, 1993 through June
30, 1994 at an annual rate equal to the Base Rate plus 1/4%;
(ii) from and after July 1, 1994 through April 30, 1995 at an
annual rate equal to the Base Rate plus 3/4%; (iii) from and
after May 1, 1995 until June 22, 1995 at an annual rate equal
to the Base Rate plus 1%; (iv) from and after June 23, 1995
through December 12, 1995 at an annual rate equal to the Base
Rate plus 2%; (v) from and after December 13, 1995 through
February 28, 1996 at an annual rate equal to the Base Rate
plus 1.5%; (vi) from and after February 29, 1996 through June
14, 1996 at an annual rate equal to the Base Rate plus 1.75%;
(vii) from and after June 15, 1996 through July 14, 1996 at an
annual rate equal to the Base Rate plus 2.5%; (viii) from and
after July 15, 1996 through October 14, 1996, at an annual
rate equal to the Base Rate plus 3%; and (ix) from and after
October 15, 1996 at an annual rate equal to the Base Rate plus
3.5% (all interest rates remain
7
<PAGE> 8
subject to increase upon an "Event of Default"). Such
interest shall be payable: (a) monthly in arrears, on the
fifteenth (15th) day of each month, for the month ending on
the prior day, until the Revolving Credit Loans are repaid in
full, and (b) on the date the Revolving Credit Loans are
repaid in full.
(i) Section 2.3 of the Original Loan Agreement is
hereby amended and restated in its entirety as follows:
2.3. Use of Revolving Credit Loan Proceeds. The
proceeds of the Revolving Credit Loans previously made by the
Banks hereunder shall continue to be used by the Borrowers
only for working capital; and the Banks shall have no
obligation to make any further Revolving Credit Loans.
(j) Section 2.10 of the Original Loan Agreement
was amended and restated previously in its entirety as follows:
2.10. Default Interest. Upon and following an Event
of Default hereunder, whether before or after acceleration of
the indebtedness or entry of judgment, interest on the unpaid
principal balance of the Revolving Credit Loans shall accrue
at an annual rate which is equal to two percent (2%) above the
then applicable rate of interest for the Revolving Credit
Loans ("Revolving Credit Default Interest").
(k) Section 2.11 of the Original Loan Agreement
was amended previously by adding new subsection (D) as follows:
(D) Termination; Non-Renewal. All obligations, if
any, of the Agent and/or the Banks to issue Letters of Credit
terminated effective as of December 13, 1994. The Borrowers
hereby acknowledge that the Agent and the Banks had no
obligation to renew or extend those Letters of Credit expiring
on or after December 13, 1994.
(l) Section 2.12 of the Original Loan Agreement
was amended previously by adding new subsection (D) as follows:
(D) Termination; Non-Renewal. All obligations, if
any, of the Agent and/or the Banks to issue Acceptances
hereunder terminated effective as of December 13, 1994. The
Borrowers hereby acknowledge and agree that the Agent and the
Banks had no obligation to renew those Acceptances maturing
on or after December 13, 1994.
8
<PAGE> 9
(m) The first sentence of Section 2.14(A) of the
Original Loan Agreement is hereby amended and restated in its entirety as
follows:
(A) Rate. During the Base Rate Period, K-Tron
America shall pay interest on the unpaid principal amount of
the Term Loan (i) from and after June 28, 1993 through June
30, 1994 at an annual rate equal to the Base Rate plus 1/2%;
(ii) from and after July 1, 1994 through June 22, 1995 at an
annual rate equal to the Base Rate plus 1%; and (iii) from and
after June 23, 1995 through December 12, 1995 at an annual
rate equal to the Base Rate plus 2%; (iv) from and after
December 13, 1995 through February 28, 1996 at an annual rate
equal to the Base Rate plus 1.5%; (v) from and after February
29, 1996 through June 14, 1996 at an annual rate equal to the
Base Rate plus 1.75%; (vi) from and after June 15, 1996
through July 14, 1996 at an annual rate equal to the Base Rate
plus 2.5%; (vii) from and after July 15, 1996 through October
14, 1996 at an annual rate equal to the Base Rate plus 3%;
(viii) from and after October 15, 1996 at an annual rate equal
to the Base Rate plus 3.5% (all interest rates remain subject
to increase upon an "Event of Default"). Such interest shall
be payable: (a) monthly in arrears on the fifteenth (15th) day
of each month, for the month ending on the prior day, until
the Term Loan is repaid in full and (b) on the date the Term
Loan is repaid in full.
(n) Section 2.17 of the Original Loan Agreement
was amended and restated previously in its entirety as follows:
2.17. Default Interest. Upon and following an Event
of Default hereunder, whether before or after acceleration of
the indebtedness or entry of judgment, interest on the unpaid
principal balance of the Term Loans shall accrue at an annual
rate which is equal to two percent (2%) above the then
applicable rate of interest for the Term Loans (the "Term Loan
Default Rate").
(o) Section 2.18 of the Original Loan Agreement
is hereby deleted in its entirety and replaced with the following:
2.18. Payment Prior to the Forbearance Termination
Date. Prior to the Forbearance Termination Date, the
Borrowers may pay the Loans in whole or in part at any time
without premium or penalty with respect to such payment.
9
<PAGE> 10
(p) Section 3.1 of the Original Loan Agreement
was amended previously by: (i) deleting therefrom the following: "As security
for payment of the Term Loan, K-Tron, N.A. will execute and deliver to the
Agent a first priority mortgage ("Mortgage")"; and adding in place thereof, the
following:
As security for payment of the Term Loan, the Revolving Credit
Loans and all other obligations and liabilities of K-Tron
America due to the Agent and the Banks, K-Tron America will
execute and deliver to Agent (A) a first priority mortgage, as
the same may be amended from time to time (the "Mortgage")
and by (ii) adding after the words "New Jersey" the following: "as more fully
described in the Mortgage".
(q) Section 8.3 of the Original Loan Agreement was
amended previously to read as follows:
SECTION 8.3 Minimum Fixed Charge Coverage Ratio.
K-Tron America will maintain a fixed Charge Coverage Ratio,
measured on a rolling four quarter basis, of not less than the
following amounts as of the last day of each of the following
fiscal quarters:
<TABLE>
<CAPTION>
Through Fourth
Quarter l994 and
Through Second Through Third Each Fiscal Quarter
Quarter l994 Quarter l994 Thereafter
- -------------- -------------- --------------------
<S> <C> <C>
1.30:1.00 1.50:1:00 2.00:1.00
</TABLE>
For purposes of calculating the Fixed Charge Coverage Ratio
for K-Tron America, there shall be added to the numerator of
the ratio royalty payments made during the relevant period by
K-Tron America to K-Tron Technologies.
(r) Section 8.4 of the Original Loan Agreement
was amended previously in its entirety to read as follows:
SECTION 8.4. Maximum Debt to Net Worth. K-Tron
America will not permit its Debt to Net Worth Ratio to exceed
.70:1.00 as of the last day of each fiscal quarter.
10
<PAGE> 11
(s) Section 8.5 of the Original Loan Agreement
was amended and restated previously in its entirety to read as follows:
SECTION 8.5. Minimum Quick Ratio. K-Tron
International will maintain for itself and its Subsidiaries on
a consolidated basis a Quick Ratio of not less than the
following amounts as of the last day of each of the following
fiscal quarters:
<TABLE>
<CAPTION>
Through Second Through Third Quarter l994 and
Quarter l994 Each Fiscal Quarter Thereafter
-------------- -------------------------------
<S> <C>
.50:1.00 .55:1.00
</TABLE>
(t) Section 8.6 of the Original Loan Agreement
was amended and restated previously in its entirety to read as follows:
SECTION 8.6. Minimum Fixed Charge Coverage Ratio.
K-Tron International will maintain for itself and its
Subsidiaries on a consolidated basis a Fixed Charge Coverage
Ratio, measured on a rolling four quarter basis, of not less
than the following amounts as of the last day of each of the
following fiscal quarters:
<TABLE>
<CAPTION>
Through Fourth
Through Second Through Third Quarter l994
Quarter l994 Quarter l994 and Thereafter
-------------- -------------- ---------------
<S> <C> <C>
1.10:1.00 1.30:1.00 1.80:1.00
</TABLE>
(u) Section 8.7 of the Original Loan Agreement
was amended previously in its entirety to read as follows:
SECTION 8.7. Maximum Debt to Net Worth. K-Tron
International will not permit its Debt to Net Worth Ratio,
measured for itself and its Subsidiaries on a consolidated
basis, to exceed the following amounts as of the last day of
each of the following fiscal quarters:
<TABLE>
<CAPTION>
Through Fourth
Through Second Through Third Quarter l994
Quarter l994 Quarter l994 and Thereafter
-------------- -------------- ----------------
<S> <C> <C>
3.75:1.00 3.50:1.00 3.25:1.00
</TABLE>
(v) Section 9.2 of the Original Loan Agreement
was amended previously by adding after the words "If any Event of Default shall
occur and be continuing", the following: "interest on the Term Loans shall
accrue at the Term Loan Default Rate and
11
<PAGE> 12
interest on the Revolving Credit Loans shall accrue at the Revolving Credit
Default Rate, and".
(w) Section 11.2 of the Original Loan Agreement
is hereby amended by changing the respective addresses for notices to the
Agent, the Banks, and counsel for the Agent and Banks as follows:
If to the Agent at:
------------------
First Union National Bank
Broad and Walnut Streets
Philadelphia, PA 19109
Attention: Lynn A. Larney, Assistant Vice President
Telecopier No.: 215-985-7576
With required copies to:
------------------------
PNC Bank, N.A.
Land Title Building
7th Floor
Broad & Chestnut Streets
Philadelphia, PA 19101
Attention: William R. Breisch, Vice President
and Douglas Nickel, Assistant Vice President
Telecopier No.: 215-585-8391
United Jersey Bank
4365 Route 1 South
CN 5284
Princeton, NJ 08543-5284
Attention: Kevin M. Behan, Vice President
and William E. Jacobs, Vice President
Telecopier No.: 609-243-0172
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103-7396
Attention: Margery N. Reed, Esquire
Telecopier No.: 215-979-1020
and
Michael P. Going, Esquire
First Union National Bank
123 South Broad Street
10th Floor
Philadelphia, PA 19109-1199
Telecopier No.: 219-985-8973
(x) Exhibit 2.1 of the Original Loan Agreement
was amended and restated previously in its entirety as set forth below;
provided, however, that the amendment and restatement of this Exhibit is
intended to reflect the percentage of the Revolving Credit Commitments that
were made by each of the Banks as of April 28, 1995 and shall not be construed
as providing for
12
<PAGE> 13
a continued commitment by the Banks to make Revolving Loans as such Commitments
have terminated.
EXHIBIT 2.1
REVOLVING CREDIT COMMITMENTS
<TABLE>
<CAPTION>
Name of Bank Amount Pro Rata Share
- ------------ ------ --------------
<S> <C> <C>
First Union $5,175,000 50%
PNC $2,587,500 25%
UJB $2,587,500 25%
- --------------- ---------- ---
Total Revolving $10,350,000 100%
Credit Commitments
(and all such
Commitments are
terminated)
</TABLE>
(y) Exhibit 2.13 of the Original Loan Agreement
was amended and restated previously in its entirety as follows to reflect the
percentage of the Term Loan Commitments made by each Bank as of April 28, 1995
(the Term Loan is now mature and owing and all commitments by the Banks to make
Term Loans have terminated):
EXHIBIT 2.13
TERM LOAN COMMITMENTS
<TABLE>
<CAPTION>
Name of Bank Amount Pro Rata Share
- ------------ ------ --------------
<S> <C> <C>
First Union $1,988,889.00 50%
PNC $ 994,444.50 25%
UJB $ 994,444.50 25%
- --------------- ------------- ----
Total Term Loan $3,977,778.00 100%
Commitments (and
all such Commitments
are terminated
</TABLE>
2.2 Amendments to Forbearance Agreements.
(a) Section 4.13 of the Forbearance Agreement and
Second Amendment and Section 4.13 of the Forbearance Agreement and Third
Amendment are hereby amended by adding the following language at the conclusion
of each Section:
Notwithstanding any provision in this Section or in the Loan
Documents to the contrary, K-Tron International may transfer
or reverse bill approximately $600,000 of investment banking,
legal and accounting fees already paid to Oppenheimer and
Company, Inc., and other professionals in connection with the
sale of
13
<PAGE> 14
Colortronic GmbH ("Colortronic"), but only on the condition
that such transfer and/or reverse billing does not result in
an intercompany credit against future purchases and/or
payments by K-Tron Europe. Only to the extent required by the
Swiss Forbearance Agreement, K-Tron Europe and the Obligors
may net intercompany balances and claims as of March 1, 1996
provided that such netting will not result in the Obligors
being required to make a cash payment or extend credit to
K-Tron Europe (and such netting is hereby deemed to not result
in any payment being due to the Banks pursuant to this Section
4.13).
(b) Section 4.16 of the Forbearance Agreement and
Second Amendment and Section 4.16 of the Forbearance Agreement and Third
Amendment are hereby amended by striking the second sentence in each and
replacing it with the following:
If and to the extent that the Swiss Forbearance Agreement
requires K-Tron Europe to cease paying its share of monthly
corporate expenses (including management fees) the non-payment
of such management fees and expenses by K-Tron Europe shall
not be a Default or Event of Default.
2.3 Amendments to Loan Documents. All references in the
Loan Documents to "First Fidelity Bank, N.A.", "FFB" or "First Fidelity Bank,
N.A., New Jersey" shall be deemed to refer to "First Union National Bank".
2.4 No Other Amendments. Except as expressly set
forth in Article 2 hereof, the Existing Loan Agreement and all other Loan
Documents shall remain in full force and effect and the Borrowers shall comply
with all of the terms, covenants and provisions set forth in the Existing Loan
Agreement and all other Loan Documents, as amended hereby.
ARTICLE 3 - ACKNOWLEDGEMENTS
3.1 Acknowledgement of Defaults; Existing Loan
Documents; Waiver of Defenses. The Obligors acknowledge and agree that:
(a) the Existing Defaults as enumerated in
Exhibit 3.1 attached hereto currently exist;
(b) An Event of Default occurred under the
Loan Documents as a result of K-Tron Europe's violation of its debt-equity
ratio covenant contained in its loan agreement with the Swiss Banks, which
default the Obligors hereby represent occurred due to the Obligors' sale of an
indirect subsidiary of K-Tron International, Colortronic, and certain patents
and
14
<PAGE> 15
trademarks theretofore licensed to Colortronic, and regarding which default the
Swiss Banks have agreed to forbear;
(c) the Existing Defaults are material in
nature;
(d) as a result of the Existing Defaults, the
Agent, with the consent of the Required Banks, currently has the right to
demand immediate payment by the Obligors of all amounts outstanding under the
Loan Documents;
(e) the Commitments terminated on July 31,
1995; and the Banks have no obligation under the Loan Documents to make any
Loans, issue Letters of Credit or create Acceptances.
(f) the Loans matured on July 31, 1995 and
became due and payable in full on that date. The non-payment of the Loans is
an Event of Default under the Loan Documents;
(g) the Agent and the Banks are presently
entitled to exercise their remedies under the Loan Documents and applicable
law;
(h) the Loan Documents are valid and
enforceable against those Obligors which are parties thereto in every respect,
and all of the terms and conditions thereof are binding upon such Obligors; and
(i) to the extent that any defenses, set-offs
or counterclaims exist as of this date, the Obligors hereby waive any and all
such defenses, set-offs, and counterclaims which they or any of them may have
to the enforcement by the Agent and/or the Banks of the Loan Documents and to
the exercise by the Agent and/or the Banks of their rights and remedies under
the Loan Documents and/or applicable law.
3.2 Acknowledgment of Indebtedness. The Obligors
acknowledge and agree that as of February 28, 1996:
(a) the Borrowers are indebted and liable to the
Agent and the Banks under the Revolving Credit Loans in the principal amount
of: $4,952,501.00 and interest in the amount of $36,301.08 as of February 28,
1996 for a total of $4,988,802.08; and
(b) K-Tron America is indebted and liable to the
Agent and the Banks under the Term Loan in the principal amount of
$2,727,780.00 and interest in the amount of $17,965.41 for a total of
$2,745,745.41 together with the Agent's and the Banks' reasonable fees, costs
and expenses (the amounts set forth in paragraphs 3.2 (a) and (b) are
collectively referred to herein as, the "Current Outstanding Obligations").
3.3 Acknowledgement of Liens, Collateral and
Priority. The Obligors acknowledge and agree that:
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<PAGE> 16
(a) First Union, for itself and as Agent for the
Banks, has a duly recorded, valid, first-priority mortgage lien on certain real
property of K-Tron America, as more fully described in the Mortgage, as amended
by that certain First Amendment of Mortgage and Security Agreement dated April
28, 1995 between K-Tron America and the Agent (the "Mortgage Amendment"), which
is recorded with the Clerk's Office of Gloucester County, New Jersey, at Book
2884, page 209; the Mortgage being recorded on July 30, 1993, with the Clerk's
Office of Gloucester County, New Jersey, at Book 2433, page 292.
(b) Pursuant to the Mortgage, the Agent also has
duly perfected, first-priority security interests in and liens on certain
personal property of K-Tron America, including fixtures.
(c) First Union for itself and as Agent for the
Banks, also has duly perfected, first-priority security interests in and liens
on all of the property and assets of the Obligors, as more fully described in
the Security Agreements.
(d) The Mortgage as amended by the Mortgage
Amendment and the collateral described in the 1994 Security Agreement, as
amended, and all of the collateral described in the Security Agreements and the
other Loan Documents (the "Existing Collateral") shall secure all of the
Obligations (as hereinafter defined) of the Obligors. For purposes of this
Agreement, the word "Obligations" shall mean any and all obligations,
liabilities and indebtedness of each Obligor to the Agent and/or the Banks of
every kind and description, direct and indirect, absolute and contingent, sole,
joint, several, or joint and several, primary or secondary, due or to become
due, now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument and includes obligations to perform acts and refrain
from taking actions as well as obligations to pay money and also includes all
indebtedness, liabilities and obligations of the Obligors or any Obligor to the
Banks evidenced by or arising under the Loan Documents.
3.4 Reaffirmation of Security Interests. The
Obligors hereby reaffirm their prior grant and conveyance to the Agent for the
benefit of the Banks of a continuing security interest in and lien on all
Existing Collateral and reaffirm that the Loan Documents are legal, valid and
binding in every respect against such Obligors that are parties thereto. Each
Obligor hereby confirms, ratifies, reaffirms and acknowledges that the Loan
Documents remain in full force and effect except as the Original Loan Agreement
is expressly amended as described in Article 2 herein. Without limiting the
generality of the foregoing, each Surety hereby confirms, ratifies, reaffirms
and acknowledges that each Suretyship Agreement remains in full force and
effect; and all representations and warranties set forth in each Suretyship
Agreement are true and correct as of the date
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<PAGE> 17
hereof, and there are no defaults thereunder (other than the Existing
Defaults).
ARTICLE 4 - OBLIGORS' COVENANTS
In the event of any inconsistency between this Article 4 and
Article 4 of the Forbearance Agreement and Third Amendment, this Article 4
shall govern. The Obligors covenant and agree as follows from the date hereof
and until the satisfaction of their Obligations, unless the Agent shall
otherwise consent in writing:
4.1 Payments During the Forbearance Period.
(a) The Borrowers shall repay the principal
amount of the Loans to First Union as Agent for the Banks on the dates and in
the amounts set forth below:
<TABLE>
<CAPTION>
Payment Due Date Amount
---------------- ------
<S> <C>
March 15, 1996 $100,000.00
April l5, 1996 $100,000.00
May 15, 1995 $100,000.00
June l5, 1996 $100,000.00
July 15, 1996 $100,000.00
August l5, 1996 $225,000.00
September l5, 1996 $225,000.00
October l5, 1996 $225,000.00
November l5, 1996 $275,000.00
December l5, 1996 $275,000.00
January l5, 1997 $275,000.00
Forbearance Termination Date The entire outstanding
(as hereinafter defined) amount of the Loans
</TABLE>
(b) The first $1.2 million of principal payments
made pursuant to Section 4.1(a) above and Section 4.1(d) below shall be applied
to the Term Loan, and all other payments of principal shall be applied to the
outstanding principal balances of the Revolving Credit Loans and/ or Term Loans
as the Banks may determine in their sole discretion.
(c) The Obligors shall pay to the Banks a
Forbearance Fee (the "Forbearance Fee") in the amount of 1% of the outstanding
principal balance of all Loans as of February 28, 1996 (the "Closing Date").
One-half of the Forbearance Fee shall be due and payable on the Closing Date;
and one-half of the Forbearance Fee shall be due and payable on June 30, 1996.
However, if the Banks have received payment in full of all principal, interest,
fees and any other amount due under the Loan Documents by June 30, 1996,
payment of the second half of the Forbearance Fee shall be waived.
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<PAGE> 18
(d) (i) The amount of the Borrowers' cash flow
which constitutes excess cash flow ("Excess Cash Flow") shall be determined on
a cumulative basis, at the end of each fiscal quarter, after eliminating
inter-Obligor transactions, as follows (without duplication): Net income
computed in accordance with GAAP plus (+) the sum of: (i) non-cash expenses
("non-cash" shall mean not reasonably expected to be settled in cash during the
upcoming 12 months) including but not limited to depreciation and amortization,
increases in general reserves, and other non-cash charges but not including
charges for 401(k) matching payments that the Borrowers' board of directors are
reasonably expected to approve; and (ii) any net decrease in net working
capital assets and liabilities (excluding cash and current portion of Bank
Group debt); and (iii) the cash proceeds of any financing or borrowing; and
(iv) any dividends, tax refunds, proceeds of the sale or issuance of stock, or
capital contributions received; minus (-) the sum of: (a) non-cash income
including but not limited to decreases in general reserves, and other non-cash
credits; and (b) any net increase in net working capital assets and liabilities
(excluding cash and the current portion of the Loans); and (c) principal
repayments of the Loans (including excess cash flow payments previously made)
and existing capital lease financing (including the AS-400 upgrade) and such
other capital lease financing as may from time to time be approved by the
Agent; and (d) capital expenditures paid (but with a limit of not more than
$125,000 in the Borrowers' first fiscal quarter of 1996, $230,000 through the
Borrowers' second fiscal quarter of 1996, $345,000 through the Borrowers' third
fiscal quarter of 1996 and $400,000 through the Borrowers' fourth fiscal
quarter of 1996, excluding the AS400 upgrade) and (e) a holdback reserve for
the actual 401K contributions payable in the Borrowers' second fiscal quarter
of 1996, actual 1995 federal and state taxes payable during the Forbearance
Period by the Obligors, and required estimated tax payment for 1996, all to the
extent not deducted in determining net income during the Forbearance Period and
(f) such other reserves as may be agreed upon by the Banks and Obligors
resulting from revised financial forecasts.
(ii) At the end of each of Borrowers'
fiscal quarters, the Banks, pursuant to the above formula, shall determine the
amount of the Borrowers' Excess Cash Flow for that period. The amount of any
cash flow determined to be Excess Cash Flow, except to the extent allowed to be
retained by the Borrowers as provided herein, shall be due and payable by the
Borrowers to the Banks within 45 days of the end of each of Borrowers' fiscal
quarters (an "Excess Cash Flow Payment").
(iii) The Excess Cash Flow Payments shall
be applied as follows: (a) the first $150,000 of cumulative Excess Cash Flow
for Borrowers' fiscal quarters ending March 31, 1996 and June 30, 1996 shall be
applied pro rata to each remaining Monthly Principal Payment due to the Banks
for the period between and including August 15, 1996 and January 15, 1997,
effectively reducing the required amounts of those Monthly Principal Payments
by the amount of Excess Cash Flow so applied;
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<PAGE> 19
and (b) 75% of all remaining Excess Cash Flow, including Excess Cash Flow for
the quarters ending September 30, 1996 and December 31, 1996, shall be applied
to the outstanding principal balances of the Revolving Credit and/or Term Loans
as the Banks may determine in their sole discretion in the inverse order of
their maturities (receipt by the Banks of these Excess Cash Flow Payments shall
not in any way reduce the amount of the Monthly Principal Payments required
hereunder). The remaining 25% of Excess Cash Flow may be retained by the
Borrowers.
4.2 Payment of the Agent's and Banks' Attorneys'
Fees, Costs and Expenses and Appraisal. The Borrowers shall pay on or before
the date hereof, and thereafter promptly after demand therefor, all reasonable
attorneys' and other professionals' fees, and out-of-pocket costs and expenses
(including all appraisal fees and expenses) incurred by the Agent and the Banks
in connection with the negotiation, preparation, administration and enforcement
of the Loan Documents including, without limitation, this Forbearance Agreement
and Fourth Amendment, and appraisal of the Banks' Collateral.
4.3 Existing Covenants. Unless otherwise provided
herein, the Borrowers shall comply with all of the covenants set forth in the
Loan Documents.
4.4 Repayment of Term Loan and Revolving Credit
Loans. On or before the Forbearance Termination Date (as hereinafter defined),
the Obligors shall pay to the Agent for the benefit of the Banks all
outstanding principal and accrued interest on the Term Loan and the Revolving
Credit Loans.
4.5 No Transfers of Assets without Agent's Written
Consent. The Obligors shall not convey, transfer, consign, pledge or grant
liens on or security interests in any of their respective assets to any entity
other than the Banks or the Agent except: (a) transfers permitted by the
Security Agreements; and (b) purchase money liens on equipment granted for
purchases of such equipment in the ordinary course of the Obligors' respective
businesses (and refinancings of same).
4.6 No Additional Debt. No Obligor shall incur
additional debt other than debt to the Banks, the Agent and/or trade debt or
equipment leases in the ordinary course of such Obligor's business.
4.7 Other Payments. The Obligors shall not make any
payments during the Forbearance Period, as hereinafter defined, to any bank or
financial institution, other than the Agent or the Banks on account of
indebtedness for money borrowed.
4.8 Cash Flow Forecast. On or before February 28,
1996, the Borrowers shall deliver to the Agent and the Banks their detailed,
cash flow forecast for the Forbearance Period, which shall include a detailed
explanation of all assumptions utilized in formulating the forecast (the
"Forecast"). The
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<PAGE> 20
Forecast shall be prepared on a weekly basis for the first three months of the
Forbearance Period and monthly thereafter for each Borrower and Surety
separately and for all the Obligors combined.
4.9 Actual to Projected Cash Flow. On the second
work day of each week during the Forbearance Period, the Borrowers shall
deliver to the Banks a comparison of their actual cash flow compared to the
Forecast (or any prior forecasts delivered to the Banks, as applicable) for the
prior week, together with any necessary revisions or corrections to the
Forecast (or such prior forecast, as applicable).
4.10 Weekly Certification. On the second business day
of each week during the Forbearance Period, the Borrowers shall deliver to the
Banks the information described on Exhibit 4.10 of this Forbearance Agreement
and Fourth Amendment together with a certification by each Borrower's chief
financial officer or by the chief accounting officer of K-Tron International
(or in such officer's absence, any other appropriate officer) for all Borrowers
as to the truth and accuracy thereof.
4.11 Quarterly Cash Flows. As soon as possible
after the conclusion of each fiscal quarter, the Borrowers shall provide the
Banks with statements of their quarterly cash flows for the fiscal quarter just
ended for the Obligors as a whole.
4.12 Financial Information; Tax Returns. Upon the
filing of any document with the Securities Exchange Commission or any income
tax return or quarterly income tax filing with any governmental agency,
authority or body, the Obligors shall simultaneously deliver to the Agent and
the Banks copies of such documents, returns or filings.
4.13 Research and Development Fees. To the extent
that K-Tron Europe does not pay any of K-Tron International's shared management
costs, the Obligors shall not make any payments to K-Tron Europe for research
and development costs.
4.14 Allocated Expense Budget. Before or on February
28, 1996, K-Tron International shall provide the Banks with an allocated
expense budget for 1996, which shall include line items for corporate overhead,
management fees, research and development and marketing and which shall be
subject to the approval of the Banks.
4.15 No Payments to Affiliates Without Fair
Consideration. No Obligor shall make any payments or transfers to any of its
Affiliates unless fair and reasonable consideration is received therefor and
such Affiliate is not liable to such Obligor for any accounts receivable or
other amounts due to such Obligor. No Obligor shall make any payment to any
non-Obligor Affiliate except for goods actually purchased from such non-Obligor
Affiliate.
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<PAGE> 21
4.16 Inventory Purchases. K-Tron America shall not
purchase more inventory than is reasonably required to fill orders that have
been accepted or budgeted in the Forecast (as may be reasonably updated based
upon business conditions and subject to approval of the Banks) or purchase
inventory from any Affiliate for a price that is higher than prices for
comparable products supplied by entities that are not Affiliates.
4.17 Deposit Accounts. The Obligors shall maintain
all of their deposit and other accounts at First Union except for certain
accounts maintained by the Obligors at Wilmington Trust Company solely to
facilitate patent royalty payments.
4.18 Execution of Other Documents. At the Agent's
request, the Obligors shall execute and deliver to the Agent such other
documents and agreements which the Agent, in its sole and reasonable
discretion, deems necessary or convenient to carry out the terms of this
Forbearance Agreement and Fourth Amendment and the other Loan Documents.
4.19 Refinancing. The Borrowers have represented to
the Agent and the Banks that they will seek refinancing of the Loans during the
Forbearance Period. The Borrowers shall use their best efforts to obtain such
refinancing, which efforts shall include without limitation, the following:
(i) on or before March 15, 1996, the Borrowers shall enter into an agreement
with a financial institution or company pursuant to which such entity shall
commence due diligence to determine whether to issue a commitment for a
refinancing of the Borrowers' indebtedness to the Banks; and (ii) either (a) on
or before June 30, 1996, the Borrowers shall have obtained a commitment for
refinancing of the Borrowers' indebtedness to the Banks or (b) on or before
June 1, 1996, the Borrowers shall have engaged at least two financial
institutions or companies, which shall have commenced or completed due
diligence to determine whether to issue a commitment for refinancing the
Borrowers' indebtedness to the Banks. The Borrowers shall cooperate fully with
such financial institutions or companies, providing them with access to their
facilities and records in order to facilitate their due diligence.
4.20 No Bonuses. The Obligors shall not pay any bonus
compensation to their employees (including officers) other than bonus
compensation to their sales employees based on the Obligors' customary practice
for awarding such bonuses and only if the bonuses are paid in the ordinary
course of the Obligors' business.
4.21 Notice of Defaults. The Obligors shall give the
Agent and the Banks notice of any default or event which would become a default
with the giving of notice or the passage of time under any credit facility to
which any Obligor or affiliate is bound, including, without limitation, the
Swiss Forbearance Agreement.
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<PAGE> 22
4.22 Compliance with Swiss Forbearance Agreement. The
following shall not constitute Events of Default under the Loan Documents:
(a) If and only to the extent required by the
Swiss Forbearance Agreement, K-Tron Europe's cessation of management fee
payments to K-Tron International;
(b) If required by the Swiss Forbearance
Agreement, the transfer by K-Tron Investment of K-Tron Asia Pacific Pte. Ltd.
to K-Tron Switzerland;
(c) If required by the Swiss Forbearance
Agreement, the liquidation and/or transfer of K-Tron Patent AG and K-Tron
Vertech AG to K-Tron Switzerland;
(d) If required by the Swiss Forbearance
Agreement, the netting of intercompany balances between K-Tron Europe and the
Obligors as of March 1, 1996, provided that such netting will not require the
Obligors to make a cash payment or extend credit to K-Tron Europe (and such
netting is hereby deemed to not result in any payment being due to the Banks
pursuant to Section 4.13 of the Forbearance Agreement and Second Amendment and
the Forbearance Agreement and Third Amendment);
(e) If and only to the extent required by the
Swiss Forbearance Agreement, prepayments by the Obligors to K-Tron Europe for
deliveries to the Obligors provided that (a) the Obligors, likewise, shall
require K-Tron Europe to prepay the Obligors for all deliveries from the
Obligors to K-Tron Europe, and (b) the Obligors shall require prepayments by
K-Tron Europe to the Obligors at least to the same extent as K-Tron Europe
requires prepayments by the Obligors. However, to the extent K-Tron Europe
does not require prepayment by the Obligors, the Obligors may make deliveries
to K-Tron Europe without requiring prepayments for such deliveries, provided
that all intercompany balances due to the Obligors from K-Tron Europe shall be
paid within 45 days of the end of the month. The payment and/ or netting of
intercompany balances as a result of deliveries pursuant to the preceding
sentence is hereby deemed to not result in any payment being due to the Banks
pursuant to Section 4.13 of the Forbearance Agreement and Second Amendment and
the Forbearance Agreement and Third Amendment; and
(f) K-Tron Europe's sale of K-Tron France
Sarl and/or Hasler Freres Brazil Ind.e com Ltda.
4.23 Assignment of Income Tax Refunds. The Obligors represent
and warrant to the Banks that they file their federal income tax returns on a
consolidated basis and they are not entitled to a federal income tax refund for
the year ending December 30, 1995. Prior to filing any tax return requesting a
refund, including, without limitation, for the year ending December 30, 1995 or
thereafter, until the Obligations are satisfied, K-Tron International and the
other Obligors shall
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<PAGE> 23
notify the Agent of its or their intent to file a tax return requesting such
refund at least one week before filing such a return so that the assignment of
its income tax refund (and any other necessary or appropriate papers) may be
attached to such tax return prior to the filing thereof. The Obligors shall
deliver to the Agent, immediately upon receipt thereof, any payment received
(with any necessary endorsement) pursuant to any income tax refund to be
applied to permanently reduce such Obligations as the Banks may determine in
their sole discretion; and prior to delivery thereof to the Agent, any such
income tax refund shall be held in trust for the benefit of the Agent and the
Banks.
4.24 Third Party Accounts Payable. Third party
accounts payable of K-Tron America shall not exceed more than $2.5 million at
any time. For purposes of this section, any commissions that are not paid when
due shall be included in K-Tron America's accounts payable.
4.25 Lock Box. The Obligors shall, if they have not
done so previously, enter into lock box agreement(s) with the Agent, in form
and substance satisfactory to the Agent, pursuant to which the Obligors shall
continue to use their best efforts to cause their customers to remit payment
directly to a lock box maintained by the Agent.
4.26 Net Worth. Obligors shall maintain a
consolidated net worth as of the end of each fiscal quarter in an amount that
is not less than $5,000,000. after: (i) eliminating the impact of foreign
exchange rate changes after June 30, 1995 in the equity section of the balance
sheet (as identified by the line item entitled "Cumulative Translation
Adjustment"); and (ii) eliminating the incremental impact of any losses
recognized after June 3, 1995 derived from or attributable to the sale of
K-Tron France Sarl and Hasler Freres Brazil Ind.e com Ltda. Obligors must
deliver the calculation of net worth to the Agent within forty-five (45) days
after the end of each of the first three quarters of each fiscal year of the
Borrowers and within sixty (60) days of the end of the last quarter of each
fiscal year of the Obligors.
ARTICLE 5 - BANK'S COVENANTS
5.1 Forbearance. The Agent and the Banks shall
forbear in the exercise of their rights and remedies (including, without
limitation, the imposition of default rate interest) under the Loan Documents
and applicable law for the period of time (the "Forbearance Period") which
shall be from the date hereof through the date (the "Forbearance Termination
Date") earlier to occur of: (a) January 31, 1997, (b) an Event of Default, as
defined below, other than the Existing Defaults, or (c) June 30, 1996, if
K-Tron International shall not have received an unqualified opinion from Arthur
Andersen LLP on K-Tron International's consolidated financial statements for
its fiscal year ended December 30, 1995.
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<PAGE> 24
ARTICLE 6 - CONDITIONS PRECEDENT AND SUBSEQUENT
The Agent's and Banks' obligations hereunder, are conditioned
upon the fulfillment by the Obligors of the following conditions precedent and
subsequent:
6.1 Conditions Precedent to Closing. The
effectiveness of this Forbearance Agreement and Fourth Amendment is expressly
conditioned upon satisfaction of all of the conditions set forth in Section 6.1
hereof, and the failure of the Obligors to satisfy all such conditions shall
cause this Forbearance Agreement and Fourth Amendment to be null and void. The
Obligors shall deliver or cause to be delivered on or before February 28, 1996
to the Agent and the Banks, in form and substance satisfactory to the Agent and
the Banks, the following:
(a) This Forbearance Agreement and Fourth
Amendment duly executed by the Obligors;
(b) Amendments to the other Loan Documents
and the Financing Statements to change the name of First Fidelity Bank, N.A. to
First Union National Bank, or to account for any change of address of any of
the Obligors; duly executed by the Obligors;
(c) K-Tron International shall provide the
Banks with its allocated expense budget for 1996 (including budgeted
expenditures for corporate overhead, management fees, research and development
and marketing) which shall be satisfactory to the Banks;
(d) The Obligors shall have submitted for the
Banks' approval, and the Banks' shall have approved, the Forecast, as more
fully described in Section 4.8 hereof;
(e) Certificates of Incumbency executed by
the Secretary of each Obligor, dated as of the date of this Agreement,
certifying the incumbency and signature of the Officers of each Obligor
executing this Agreement and any other documents to be delivered pursuant
hereto, together with evidence of the incumbency of such Secretary;
(f) Corporate Resolutions for each Obligor;
and
(g) Opinion of Obligors' counsel.
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<PAGE> 25
ARTICLE 7 - GENERAL RELEASE BY THE OBLIGORS;
RELIEF FROM STAY; WAIVERS
7.1 General Release. Each Obligor for itself and all
persons and entities claiming by, through or under such Obligor (collectively,
the "Releasors") hereby jointly and severally unconditionally remise, release
and forever discharge, and reaffirm their prior release of, the Agent and each
Bank and their past, present and future officers, directors, employees, agents,
attorneys, parent, Affiliates, subsidiaries and the heirs, executors, personal
administrators, successors and assigns, as applicable, of any such persons and
entities (collectively, the "Releasees"), of and from any and all actions,
causes of action, suits, claims, counterclaims, defenses, setoffs, liabilities,
damages and demands whatsoever, whether known or unknown, at law or in equity,
direct or indirect, if any, which any of the Releasors ever had, now has, claim
to have had, now claim to have or hereafter can, shall or may claim to have
against any of the Releasees upon or by reason of any matter, cause or thing,
from the beginning of the world to the date hereof arising from or relating to
the Loan Documents, the Supplemental Loan Documents, this Forbearance Agreement
and Fourth Amendment and the related transactions, obligations, and business
dealings between the Agent, on behalf of the Banks, and the Obligors. The
Obligors warrant and represent that they have not assigned, pledged,
hypothecated and/or otherwise divested themselves and/or encumbered all or any
part of the claims being released hereby and that they hereby agree to
indemnify and hold harmless any and all of the Releasees against whom any such
claim so assigned, pledged, hypothecated, divested and/or encumbered is
asserted.
7.2 Relief from the Automatic Stay. In the event
that any Obligor shall: (i) file with any bankruptcy court or be the subject
of any petition under Title 11 of the U.S. Code, as amended (the "Bankruptcy
Code"), (ii) be the subject of any order for relief issued under the Bankruptcy
Code, (iii) file or be the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future foreign, federal or state act or law
relating to bankruptcy, insolvency or other relief from creditors, (iv) have
sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator or liquidator, or (v) be the subject of any order,
judgment or decree entered by any court of competent jurisdiction approving a
petition filed against such party for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency or other relief from creditors; then, the Agent and the Banks shall
thereupon be entitled to relief from any automatic stay imposed by Section 362
of the Bankruptcy Code or otherwise to exercise any or all of their respective
rights and remedies available under any of the Loan Documents and/or
non-bankruptcy law; and Obligors shall consent to such relief and take all
actions deemed necessary or
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<PAGE> 26
desirable by the Agent and/or the Required Banks to implement this Section.
7.3 Waivers. In the event the Agent and/or the Banks
seek to take possession of any or all of the Collateral by court process, the
Obligors hereby irrevocably waive any bonds and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such
possession, and waive any demand for possession prior to the commencement of
any suit or action to recover such Collateral.
ARTICLE 8 - REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this
Forbearance Agreement and Fourth Amendment, and as partial consideration for
the terms and conditions contained herein, the Obligors represent and warrant
to the Agent and the Banks the following, each and all of which shall survive
the execution and delivery of this Forbearance Agreement and Fourth Amendment
and all of the other documents executed in connection herewith:
8.1 Reaffirmation of Representations and Warranties.
The Obligors hereby reaffirm all of their representations and warranties in
Article 8 of the Forbearance Agreement and Third Amendment as if such
representations and warranties were made as of the date hereof.
8.2 Authorization; Valid and Binding Agreement. All
corporate action required to be taken by each Obligor and its officers,
directors and/or shareholders and all actions required to be taken by their
respective principals for the authorization, execution, delivery and
performance of this Forbearance Agreement and Fourth Amendment and the other
documents contemplated hereby have been taken. Each person executing this
Forbearance Agreement and Fourth Amendment on behalf of an Obligor is an
authorized officer and is authorized to execute same. This Forbearance
Agreement and Fourth Amendment is, and each of the documents executed pursuant
hereto will be, legal, valid, and binding obligations of the party or parties
thereto, enforceable against each such party in accordance with their
respective terms, subject only to bankruptcy, insolvency, reorganization,
moratorium and other laws or equitable principles affecting creditors' rights
generally.
8.3 Corporate Existence. There have been no changes
to the Obligors' Certificates or Articles of Incorporation and By-Laws since
June 22, 1995.
8.4 No Defaults. Subject to Section 4.22 hereof, no
default or Event of Default under the Existing Loan Agreement and the other
Loan Documents, except for those enumerated in Exhibit 3.1 attached hereto
currently exists. In addition, no default, event of default or occurrence that
with the passage of
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<PAGE> 27
time or the giving of notice would constitute such currently exists under the
Swiss Forbearance Agreement.
8.5 Compliance with Laws. The Obligors are in
compliance in all material respects with all laws, regulations and requirements
applicable to their businesses, and have not received, and have no knowledge
of, any order or notice of any governmental investigation or of any violations
or claims of violation of any law, regulation or any governmental requirement.
8.6 Financial Statements; Reporting.
(a) All balance sheets, reports, statements of
income, shareholders' equity and changes in financial position, budgets,
reconciliations, monthly sales reports, monthly accounts receivable reports and
monthly accounts payable reports with respect to the Obligors have been
prepared in form acceptable to the Agent and, if applicable, in conformity with
generally accepted accounting principles and applied on a basis consistent with
that of the preceding fiscal year of the Obligors and present fairly the
financial condition and results of operations for the period covered thereby of
the Obligors. The chief financial officer (or in such officer's absence, any
other appropriate officer) of K-Tron International or each Obligor shall
certify the truth and accuracy of all such financial information. Since
December 31, 1995, there has been no material adverse change in the Obligors'
financial condition or results of operation except as disclosed to the Banks in
writing prior to the date of this Forbearance Agreement and Fourth Amendment.
(b) The Obligors do not know of any facts, other
than those already disclosed in writing to the Agent by the Obligors, that
materially adversely affect or in so far as can be foreseen, will materially
adversely affect the Obligors' ability to perform their Obligations under the
Forbearance Agreement and the Loan Documents.
8.7 Exclusive and First Priority Perfected Lien. The
Agent on behalf of the Banks has, as of the date of this Agreement, and shall
continue to have, until all of the Obligations are paid in full, first
priority, valid perfected (to the extent that the same may be perfected by
filing) liens upon and security interests in all of the collateral, both real
and personal, described in the Security Agreements and the Mortgage, as amended
by the Mortgage Amendment.
ARTICLE 9 - EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default"
under this Forbearance Agreement and Fourth Amendment and all other Loan
Documents:
9.1 Payment. Failure of any Obligor to make any
payment of principal, interest or other amounts due on the date
27
<PAGE> 28
such payment is due under the Loan Agreement, this Forbearance Agreement and
Fourth Amendment and/or under any other Loan Document.
9.2 Covenants. Failure of any Obligor to observe any
non-monetary covenant set forth herein or in any of the Loan Documents which
default is not cured within the time period, if any, specified herein or in the
Loan Documents.
9.3 Agreements Invalid. (a) The validity, binding
nature or enforceability of any material term or provision of this Forbearance
Agreement and Fourth Amendment, any other Supplemental Loan Document or any of
the other Loan Documents is disputed by, on behalf of, or in the right or name
of any Obligor or (b) this Forbearance Agreement and Fourth Amendment, the
Supplemental Loan Documents and the other Loan Documents are found or declared
to be invalid, avoidable, or unenforceable by any court of competent
jurisdiction.
9.4 False Warranties; Breach of Representations. Any
warranty or representation made or reaffirmed by any Obligor in this
Forbearance Agreement and Fourth Amendment or in any other Supplemental Loan
Document or in any certificate or other writing delivered under or pursuant to
this Forbearance Agreement and Fourth Amendment or any other Supplemental Loan
Document, or in connection with any provision of this Forbearance Agreement and
Fourth Amendment or related to the transactions contemplated hereby shall prove
to have been false or incorrect or breached in any material respect as of the
date made.
9.5 Judgments. A final judgment or judgments is
entered, or an order or orders of any judicial authority or governmental entity
is issued against any Obligor (i) for payment of money in the aggregate in
excess of $25,000 or (ii) for injunctive or declaratory relief which would have
a material adverse effect on the ability of any Obligor to conduct its business
as presently conducted; and such judgment or order is not discharged or
execution thereon or enforcement thereof is not stayed pending appeal, within
thirty (30) days after entry or issuance thereof, or, in the event of such a
stay, such judgment or order is not discharged within thirty days after such
stay expires.
9.6 Liens. Any execution, garnishment, attachment,
distraint, or lien is filed, entered, or issued against any Obligor or any of
its property or any order is entered enjoining or restraining any Obligor
and/or restraining or seizing any property of any Obligor which is not stayed,
discharged or bonded within 45 days.
9.7 Bankruptcy or Insolvency of an Obligor.
(a) Any Obligor becomes insolvent, or
generally fails to pay, or is generally unable to pay or admits in writing its
inability to pay its debts as they become due, or
28
<PAGE> 29
applies for, consents to or acquiesces in, the appointment of a trustee,
receiver or other custodian for that Obligor, as the case may be, or a
substantial part of its property, or makes a general assignment for the benefit
of creditors;
(b) Any Obligor commences any bankruptcy,
reorganization, debt adjustment, or other case or proceeding under any state or
federal bankruptcy or insolvency law, or any dissolution or liquidation
proceeding;
(c) Any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any state or federal bankruptcy
or insolvency law or any dissolution or liquidation proceeding is involuntarily
commenced against or in respect of an Obligor and the same shall not be stayed
or dismissed within 45 days;
(d) A trustee, receiver or other custodian is
appointed for any Obligor or a substantial part of such entity's property and
the same shall not be stayed or dismissed within 45 days.
9.8 Cross-Default. A default or an event of default
(other than the Existing Defaults) occurs under any Loan Document that is not
cured within the applicable grace period, if any.
9.9 Change in Ownership. A change in control or
ownership or the sale of any division, except as otherwise permitted herein, of
any of K-Tron International's direct or indirect domestic subsidiaries, K-Tron
Switzerland Ltd. and/or K-Tron Holding AG (other than intercompany mergers and
consolidations of foreign subsidiaries).
9.10 Default by K-Tron Europe. The termination,
default or breach of the Swiss Forbearance Agreement or anything that would
entitle the Swiss Banks, or any of them, to demand repayment of the obligations
due to them by K-Tron International, K-Tron Investment or any of the companies
comprising K-Tron Europe.
9.11 Material Adverse Change or Occurrence. Any Obligor
shall have a material adverse change or occurrence.
ARTICLE 10 - REMEDIES
Upon the earlier of (i) the occurrence of any one or more
Events of Default (other than the Existing Defaults), or (ii) January 31, 1997;
(a) all Obligations shall become due and payable immediately and without notice
to the Obligors, (b) the obligations of the Agent and the Banks hereunder shall
terminate automatically and immediately, without notice to the Obligors, and
(c) the Agent and the Banks shall have all the remedies set forth in any of the
Loan Documents and/or under applicable law.
29
<PAGE> 30
ARTICLE 11 - MISCELLANEOUS
11.1 Costs, Expenses and Attorneys' Fees. The
Obligors agree to pay on demand by the Agent:
(a) All reasonable out-of-pocket costs and
expenses incurred by the Agent and/or the Banks, including without limitation,
all reasonable fees and out-of-pocket expenses of counsel, accountants and
other professionals for the Agent and/or the Banks in connection with:
(i) the negotiation, preparation and
enforcement of this Forbearance Agreement and Fourth Amendment, all other Loan
Documents and the documents relating thereto;
(ii) the assertion by any person,
entity or organization, other than the Banks, of any claim or lien,
encumbrance, security interest, or other interest in any of the assets of the
Obligors (except to the extent such interest is permitted under any Loan
Document), including any attachment, garnishment, levy, notice of debtor's
examination, notice of examination, judgment lien or execution lien, regardless
of when such fees or expenses are incurred;
(iii) the enforcement or exercise by the
Agent and/or the Banks of the Agent's and/or any Bank's rights or remedies with
respect to the collection of the Obligations or to preserve, protect or enforce
the Agent's and/or any Bank's interests in any bankruptcy, insolvency or
reorganization case which may affect any Obligor and any litigation, dispute,
case, arbitration or action with respect to any attachment, garnishment, levy,
notice of debtor's examination, judgment lien or execution which may affect any
Obligor; and
(b) Any stamp or documentary tax or other
similar taxes and any filing, recording, lien, mortgage, release, satisfaction
or search fees which may be payable in connection with the execution, delivery
or performance of this Forbearance Agreement and Fourth Amendment, all other
Loan Documents or the documents comprising or relating hereto and thereto.
All Obligations provided for in this Section shall survive any termination of
the Banks' and the Agent's obligations under this Forbearance Agreement and
Fourth Amendment.
11.2 Cooperation; Other Documents. At all times
following the execution of this Forbearance Agreement and Fourth Amendment, the
Obligors shall execute and deliver to the Agent, or shall cause to be executed
and delivered to the Agent any other document required by the Agent to protect
its rights under this Forbearance Agreement and Fourth Amendment and shall do
or cause to be done, all such other acts and things as the Agent may reasonably
deem to be necessary or desirable to assure the Agent and the Banks of the
benefit of this Forbearance Agreement and Fourth Amendment and the documents
comprising or relating to this
30
<PAGE> 31
Forbearance Agreement and Fourth Amendment. Furthermore, at all times
following the execution of this Forbearance Agreement and Fourth Amendment, the
Agent, the Banks, or their representatives shall have the right to examine each
Obligors' books and records at any time during normal business hours.
11.3 Remedies Cumulative; No Waiver. The
respective rights, powers and remedies of the Agent and Banks in this
Forbearance Agreement and Fourth Amendment and in the documents comprising or
relating to this Forbearance Agreement and Fourth Amendment are cumulative and
not exclusive of any right, power or remedy provided in the Loan Documents, by
law or equity and no failure or delay on the part of the Agent or the Banks in
the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or remedy preclude
any other or further exercise thereof, or the exercise of any other right,
power or remedy.
11.4 Notices. Any notice given pursuant to this
Forbearance Agreement and Fourth Amendment or pursuant to any document
comprising or relating to this Forbearance Agreement and Fourth Amendment shall
be given in conformity with Section 11.2 of the Loan Agreement.
11.5 Survival of Representations and Warranties. All
representations and warranties of the Obligors contained in this Forbearance
Agreement and Fourth Amendment and in the documents comprising or relating to
this Forbearance Agreement and Fourth Amendment shall survive the execution of
this Forbearance Agreement and Fourth Amendment and are material and have been
or will be relied upon by the Agent and the Banks, notwithstanding any
investigation made by any person, entity or organization on either the Agent's
or any Bank's behalf. No implied representations or warranties are created or
arise as a result of this Forbearance Agreement and Fourth Amendment or the
documents comprising or relating to this Forbearance Agreement and Fourth
Amendment. For purposes of the foregoing, all statements in any certificate or
other writing required by this Forbearance Agreement and Fourth Amendment to be
delivered to the Agent on or after the execution of this Forbearance Agreement
and Fourth Amendment by or on behalf of any Obligor pursuant to and in
accordance with this Forbearance Agreement and Fourth Amendment or any document
comprising or relating to this Forbearance Agreement and Fourth Amendment or in
connection with the transactions contemplated thereby shall be deemed to be
representations and warranties contained in this Forbearance Agreement and
Fourth Amendment.
11.6 Integration. This Forbearance Agreement and
Fourth Amendment and all documents referred to, comprising or relating to this
Forbearance Agreement and Fourth Amendment, including, without limitation, the
Loan Documents, constitute the sole agreement of the parties with respect to
the subject matter hereof and thereof and supersede all oral negotiations, term
31
<PAGE> 32
sheets and other prior writings with respect to the subject matter hereof and
thereof.
11.7 Amendment and Waiver. No amendment of this
Forbearance Agreement and Fourth Amendment, and no waiver, discharge or
termination of any one or more of the provisions hereof, shall be effective
unless set forth in writing and signed by all of the parties hereto.
11.8 Consistency of Provisions. This Forbearance
Agreement and Fourth Amendment, the other Supplemental Loan Documents, and the
other Loan Documents, and any other document related hereto and thereto are
intended to be consistent. However, in the event of any inconsistencies among
any of such documents, such inconsistency shall not affect the validity or
enforceability of any such document. The Obligors agree that in the event of
any express inconsistency or ambiguity in any of such documents, the terms of
this Forbearance Agreement and Fourth Amendment shall govern.
11.9 Continuing Effectiveness of Loan Agreement. The
Loan Agreement, as amended hereby, and the other Loan Documents shall remain in
full force and effect.
11.10 Counterparts. This Forbearance Agreement and
Fourth Amendment may be executed in one or more counterparts, all of which
taken together shall constitute one and the same agreement.
11.11 Governing Law. This Forbearance Agreement and
Fourth Amendment shall be governed by, and construed in accordance with, the
laws of the State of New Jersey.
11.12 Severability. Any provision of this Forbearance
Agreement and Fourth Amendment which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Forbearance Agreement and Fourth Amendment or affecting the
validity or enforceability of such provision in any other jurisdiction.
11.13 Headings. Article and Section headings in this
Forbearance Agreement and Fourth Amendment are included for convenience of
reference only and shall not constitute a part of this Forbearance Agreement
and Fourth Amendment for any other purpose.
11.14 Successors and Assigns. The provisions of this
Forbearance Agreement and Fourth Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
32
<PAGE> 33
11.15 Jurisdiction and Venue. IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR
RELATING TO THIS FORBEARANCE AGREEMENT AND FOURTH AMENDMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER, THE OBLIGORS HEREBY IRREVOCABLY SUBMIT THEMSELVES TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY COUNTY OR FEDERAL
JUDICIAL DISTRICT IN THE STATE OF NEW JERSEY WHERE THE AGENT MAINTAINS AN
OFFICE AND AGREE NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE
VENUE OF ANY SUCH COURT. THE OBLIGORS AGREE THAT SERVICE OF PROCESS IN ANY
SUCH PROCEEDING MAY BE DULY EFFECTED UPON THEM BY MAILING A COPY THEREOF,
POSTAGE PREPAID TO THE OBLIGORS AT THE ADDRESS SET FORTH IN THE LOAN AGREEMENT
AND/OR THE SECURITY AGREEMENT.
11.16 Waiver of Jury Trial; Damages. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATING TO THIS
FORBEARANCE AGREEMENT AND FOURTH AMENDMENT OR THE RELATIONSHIP BETWEEN THE
PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANKS AND THE AGENT
TO ENTER INTO THIS FORBEARANCE AGREEMENT AND FOURTH AMENDMENT. IN ADDITION,
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR
RECOVER, IN ANY SUCH JUDICIAL PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE,
CONSEQUENTIAL OR OTHER DAMAGES, EXCEPT FOR ACTUAL DAMAGES.
33
<PAGE> 34
IN WITNESS WHEREOF, the Agent, the Banks and the Obligors have
executed this Forbearance Agreement and Fourth Amendment as of the date and
year first above written.
K-TRON INTERNATIONAL, INC.
By: /s/ ROBERT L. WEINBERG
----------------------------
Name: Robert L. Weinberg
Title: Senior Executive
Vice President, CFO
and Treasurer
K-TRON AMERICA, INC.
By: /s/ ROBERT L. WEINBERG
----------------------------
Name: Robert L. Weinberg
Title: Vice President and
Treasurer
K-TRON TECHNOLOGIES, INC.
By: /s/ ROBERT L. WEINBERG
----------------------------
Name: Robert L. Weinberg
Title: President
K-TRON PATENT, INC.
By: /s/ ROBERT L. WEINBERG
----------------------------
Name: Robert L. Weinberg
Title: Vice President and
Treasurer
K-TRON INVESTMENT CO.
By: /s/ ROBERT L. WEINBERG
----------------------------
Name: Robert L. Weinberg
Title: Vice President and
Treasurer
SIGNATURES CONTINUED ON NEXT PAGE
34
<PAGE> 35
FIRST UNION NATIONAL BANK
FOR ITSELF AND AS AGENT FOR THE BANKS
By: /s/ LYNN A. LARNEY
----------------------------
Name: Lynn A. Larney
Title: Assistant Vice President
PNC BANK, N.A.
By: /s/ DOUGLAS NICKEL
----------------------------
Name: Douglas Nickel
Title: Assistant Vice President
UNITED JERSEY BANK
By: /s/ KEVIN BEHAN
----------------------------
Name: Kevin Behan
Title: Vice President
35
<PAGE> 1
EXHIBIT 10.1.6
- 1 -
FORBEARANCE AGREEMENT
K-TRON
Between
<TABLE>
<S> <C> <C>
Swiss Bank Corp. Aarau (SBC) (Leading bank)
Credit Suisse Aarau (CS)
Swiss Volksbank (SVB) (Subsequently referred to as Banks)
Union Bank of Switzerland (UBS)
Banque Cantonale Neuchateloise (BCN)
as well as
CS Immobilien Leasing Ltd. (Subsequently referred to as CSIL)
and
K-Tron (Switzerland) Ltd.
K-Tron Vertech Ltd. (Subsequently referred to as K-Tron
K-Tron Patent Ltd. Group)
K-Tron Asia Pacific Pte. Ltd.
and
K-Tron International Inc. (Subsequently referred to as K-Tron
K-Tron Investment Co. International)
</TABLE>
Preamble
As per agreement of June 29, 1995, K-Tron (Switzerland) Ltd. merged with K-Tron
Holding Ltd., as a result of which all assets and liabilities of the latter
were transferred to K-Tron (Switzerland) Ltd. retroeffective January 1, 1995.
Through a number of organizational and technical measures and with the aid of
the present forbearance agreement the excessively high debt-to-equity ratio of
K-Tron (Switzerland) Ltd. shall be reduced as quickly as possible to an
acceptable level.
<PAGE> 2
- 2 -
Within the framework of this reorganization also the structure of the entire
K-Tron Group shall be optimized.
1. SUBJECT AND SCOPE OF THE FORBEARANCE AGREEMENT
1.1 This forbearance agreement relates to all credits and credit
limits (incl. contingent commitments) which the banks have
granted to the companies of the K-Tron Group as of March 31,
1995, or which will be granted after this date.
The credits and credit limits granted to K-Tron (Switzerland)
Ltd. as of March 31, 1995, are listed in Appendix 1. With the
ratification of this agreement the banks confirm the correctness
and completeness of the credit limits and credit facilities
listed in Appendix. 1.
Appendix 2 contains the reorganization and restructuring concept
of K-Tron (Switzerland) Ltd.
Appendix 1 and Appendix 2 are a integral parts of this
forbearance agreement.
1.2 All parties to this forbearance agreement concur that of the
currently blocked amounts (resulting from the sale of Colortronic
GmbH, Germany), that is,
<TABLE>
<S> <C>
a) US$ 3.00 million at SBC Aarau
b) US$ 2.15 million at CS Aarau
c) US$ 0.40 million at Dr. H. J. Schurmann, escrow agent, blocked until
Dec. 31, 1995 according to the Colortronic sales
agreement
</TABLE>
<PAGE> 3
- 3 -
the amount a) of SBC Aarau, and the amount b) of CS Aarau shall
be applied to reduce in the corresponding amount the credits
formerly granted to K-Tron Holding Ltd. -- which on account of
the merger have been transferred to K-Tron (Switzerland) Ltd.
The amount c) of US$ 400,000.00 plus accrued interest per Jan. 1,
1996, shall also be transferred to SBC Aarau and CS Aarau in the
ratio of 3:2.15, exchanged into SFr., and be applied to further
reduce immediately the residual balance of the credits originally
granted to K-Tron Holding Ltd.
2. STIPULATIONS OF FORBEARANCE AGREEMENT
2.1 AVAILABILITY OF CREDIT LIMITS
For the duration of this forbearance agreement the banks pledge
to make the credit limits specified in Appendix 1, and after the
application of funds according to Section 1.2, freely and
completely available to the companies of the K-Tron Group for
operational purposes. But the existing agreements between the
banks and the companies of the K-Tron Group still remain in
effect to the extent that they do not contravene this forbearance
agreement.
2.2 DEFERMENT OF CREDIT MATURITIES
The banks agree to defer repayment of the credits and credit
tranches maturing up to March 31, 1997, according to Appendix 1,
as well as to defer the amortization payments on mortgages and
fixed loans that become due up to that time.
<PAGE> 4
- 4 -
Not covered by this deferment agreement are interest payments,
fees and commissions which shall be paid in accordance with the
individual credit agreements negotiated between the banks and
companies of the K-Tron Group.
For the term of this forbearance agreement the banks and CSIL
agree not to call in the outstanding credits (principal) from the
companies of the K-Tron Group and not to enforce their claim
through compulsory execution or court order. This waver becomes
null and void if the companies of the K-Tron Group fail to pay
the interest, fees and commissions according to the individual
credit agreements negotiated with the banks and CSIL; in this
case the banks and CSIL are entitled to demand repayment of the
credits (principal) or to demand the return of the leased object.
This waver is also subject to the stipulations of Sections 2.3
and 6.
2.3 OFFSET ENTITLEMENT
Irrespective of 2.2 above each bank is entitled to reduce the
credits granted to the companies of the K-Tron Group by applying
the following proceeds against the credits (and to reduce the
credit limits accordingly):
Within the scope of the collateral: Net income (gross income less
taxes, duties or other brokerage fees and legal expenses admitted
by the banks) from the sale of assets that have been pledged as
collateral to the corresponding banks and to CSIL.
<PAGE> 5
- 5 -
3. OBLIGATIONS OF THE K-TRON GROUP
3.1 MEASURES FOR LOWERING COSTS, INCREASING THE INCOME, AND IMPROVING
THE LIQUIDITY
The K-Tron Group shall
3.1.1 take all measures deemed to be necessary in accordance with sound
business management principles to lower the costs, increasing the
income and improving the liquidity, and shall report to the
leading bank and CSIL monthly the status of the steps taken.
3.1.2 use all moneys received from the sale of non-operational assets
to proportionately reduce the credit limits of the banks.
3.1.3 ensure that the participations/companies that form part of the
K-Tron Group do not take any actions that contravene the
stipulations of this agreement, that violate or jeopardize this
agreement, or that could impair the economic situation of the
K-Tron Group.
3.1.4 implement the reorganization measures listed in Appendix 2.
3.2 FUND TRANSFERS
The K-Tron Group
3.2.1 shall use, as far as possible, all credit limits proportionately
to the established limits and in addition authorize the banks to
compensate the balances at their own discretion.
<PAGE> 6
- 6 -
3.2.2 shall handle all fund transfers exclusively through payment
orders (no checks) and only via the banks.
3.2.3 agrees not to use open credit limits of the undersigned banks to
repay other banks.
3.3 TRANSACTIONS REQUIRING APPROVAL
The K-Tron Group
3.3.1 may not without prior written approval of the banks grant any
credits or loans to third parties or affiliated companies, may
not repay any such credits or loans, may not incur any contingent
liabilities, and may not pledge additional collateral for other
credits or claims.
3.3.2 may not distribute any dividends without the approval of the
banks.
3.3.3 shall obtain the approval of the banks before the sale of any
assets valued at over SFr. 100,000.00.
3.3.4 may not without the prior written consent of the banks make any
(partial) investments or disinvestments in/of shares, including
any participations except those in the annually submitted
investment budget. The banks are aware of the planned sale of
K-Tron (France) S.a.r.l. and Hasler Freres Brazil Ind. e. com.
Ltda.
3.3.5 may not, without the written consent of the banks, borrow any
funds from banks that are not part of this agreement.
<PAGE> 7
- 7 -
3.3.6 may not, without the written consent of the banks, deviate from
the reorganization concept or the action plan according to
Appendix 2.
3.3.7 may not, without the written consent of the banks, conclude any
new license agreements and may not modify the existing license
agreements.
3.4 MANDATORY RECORD KEEPING AND RIGHT OF INSPECTION
The K-Tron Group
3.4.1 shall provide the banks and CSIL at all times with the desired
information and release them from the banking secrecy among each
other.
3.4.2 authorizes the statutory auditors and external consultants to
supply information to the banks and CSIL.
3.4.3 authorizes the banks and CSIL to inspect all account books and
all supplementary records and documents.
3.4.4 shall submit to the leading bank per March 31 of each year, at
the latest, the annual report per December 31 (with
consolidation) audited by Arthur Anderson, including the report
of the statutory auditors and any explanatory reports, as well as
the original of other documents prepared by the statutory
auditors that have been signed by the K-Tron Group and the
statutory auditors.
3.4.5 shall submit to the leading bank and for the use by the other
banks and CSIL, the following reports -- broken down by Soder
Division and Hasler Division as well as consolidated:
<PAGE> 8
- 8 -
<TABLE>
<CAPTION>
Documents Interval First time on
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
(Audited) interim report (balance sheet and P&L quarterly Dec. 31, 1995
statement) within 45 days from the scheduled reporting
dates
Budget (with comparison of desired/ actual) signed by semiannually Dec. 31, 1995
the statutory auditors, within 30 days from the
scheduled reporting dates
12-Months revolving liquidity forecast, within 30 days quarterly Dec. 31, 1995
of the scheduled reporting dates
Order book, within 30 days of the scheduled reporting quarterly Dec. 31, 1995
dates
Bank limits and draw-downs, within 30 days of the quarterly Dec. 31, 1995
scheduled reporting dates
Report on the progress of business with brief comment, quarterly Dec. 31, 1995
within 30 days of the scheduled reporting date
Aged list of accounts payable, within 30 days of the quarterly Dec. 31, 1995
scheduled reporting date
Aged list accounts receivable, within 30 days of the quarterly Dec. 31, 1995
scheduled reporting date
</TABLE>
3.4.6 shall inform the leading bank immediately on any legal actions on
the part of creditors that are either received or expected, or
any other compulsory execution measures.
3.4.7 agrees to the consulting services of the experts proposed by the
leading bank and to provide them with access to all account
books.
<PAGE> 9
- 9 -
4. LEADING BANK
The leading bank assumes the leadership not only with respect to
the relationship among the banks and CSIL, but also the
relationship of the banks and CSIL with the companies of the
K-Tron Group as well as other third parties that may possibly
participate in this forbearance agreement.
Except for gross negligence, any liability of the leading bank
for damage resulting from its leadership is explicitly waived,
not only with respect to the other banks and CSIL, but also the
companies of the K-Tron group.
5. BANK SECRECY
The companies of the K-Tron Group release the banks from the bank
secrecy among each other. This means that the banks are
authorized to supply each other at any time with any information
on their business relationships with companies of the K-Tron
Group with respect to the credit limits and facilities listed in
Appendix 2. The companies of the K-Tron Group also release the
banks from the bank secrecy in relevant contacts with external
consultants, lawyers and auditors, and release the latter from
their business or professional secrecy in contacts with the
banks.
6. DURATION OF THE AGREEMENT
This agreement remains in force until
MARCH 31, 1997
Appendix 2 is an integral part of this forbearance agreement and
remains in
<PAGE> 10
- 10 -
force until the reorganization/restructuring of K-Tron
(Switzerland) Ltd. has been completed according to Section 4 of
Appendix 2.
Early termination of this forbearance agreement on part of the
banks and CSIL is only possible for valid cause, namely, if this
agreement is violated by a company of the K-Tron Group or by one
of the banks or CSIL, if bankruptcy is declared or if a
composition agreement is made by K-Tron Switzerland (Ltd.) or if
a comparable composition or liquidation procedure under foreign
law is opened against a subsidiary of K-Tron (Switzerland).
In addition, early termination is possible if due to the periodic
reporting or other available information such a negative
development of the business situation of the K-Tron Group is
revealed that the continuation of the credits on part of the
banks can no longer be justified.
Early termination cancels the forbearance agreement immediately.
Notice shall be given in writing by the corresponding bank to the
debtor companies of the K-Tron Group and a copy shall be
forwarded to all other banks and to CSIL.
7. CLAIM FOR DAMAGES
Claims may be raised for damages against any party who violates
this agreement, particularly also against a bank who terminates
this agreement without valid cause.
<PAGE> 11
- 11 -
8. MAILING ADDRESSES
Communications related to the forbearance agreement are
considered to have been duly delivered by the banks and the
companies of the K-Tron Group if they are received at the
following addresses:
Swiss Bank Corporation
Attn. Dr. U. A. Weidmann/F2
Beim Bahnhof
CH-5001 Aarau/Switzerland
Credit Suisse
Attn. Mrs. C. Dill
Bahnhofstrasse 20
CH-5001 Aarau/Switzerland
Swiss Volksbank
Attn. Mr. T. Hilpertshauser
Weltpoststrasse 5
CH-3015 Bern/Switzerland
Union Bank of Switzerland
Attn. Mr. M. Baster
Bahnhofstrasse 61
CH-5001 Aarau/Switzerland
Banque Cantonale Neuchateloise
Attn. Mr. M. Paolini
Place Pury 4
CH-2001 Neuchatel/Switzerland
CS Immobilien Leasing Ltd.
Attn. Mrs. V. Zollinger
Thurgauerstrasse 56
CH-8070 Zurich/Switzerland
<PAGE> 12
- 12 -
For the K-Tron Group and K-Tron International:
K-Tron (Switzerland) Ltd.
Executive Management
Industrie Lenzhard
5702 Niederlenz
9. EFFECTIVE DATE
This agreement enters into force when it has been duly signed by
all parties involved.
10. APPLICABLE LAW/PLACE OF JURISDICTION
This forbearance agreement is subject to Swiss law.
THE PLACE OF JURISDICTION FOR ALL LEGAL DISPUTES ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT IS AARAU. The banks and CSIL
have the right, however, to initiate legal action against
companies of the K-Tron Group also at their domicile or in any
other competent court.
<TABLE>
<S> <C>
Aarau . . . . . . . . . . . . . . 22.12.95 . . . . . . . . . . . . . . . . . .
(Swiss Bank Corporation
Aarau; leading bank)
Aarau . . . . . . . . . . . . . . 3.1.96 . . . . . . . . . . . . . . . . . .
(Credit Suisse)
Bern . . . . . . . . . . . . . . . 5.1.96 . . . . . . . . . . . . . . . . . .
(Swiss Volksbank)
</TABLE>
<PAGE> 13
- 13 -
<TABLE>
<S> <C>
Aarau . . . . . . . . . . . . . . 17.1.96 . . . . . . . . . . . . . . . . . .
(Union Bank of Switzerland)
Nauchatel . . . . . . . . . . . . 27.1.96 . . . . . . . . . . . . . . . . . .
(Bank Cantonale
Neuchateloise)
. . . . . . . . . . . . . . . . . 26.1.96 . . . . . . . . . . . . . . . . . .
(CS Immobilien Leasing Ltd.)
. . . . . . . . . . . . . . . . . 25./28. Nov. 95 . . . . . . . . . . . . . . .
K-Tron (Switzerland) Ltd.
. . . . . . . . . . . . . . . . . 25./28.Nov. 95 . . . . . . . . . . . . . . .
(K-Tron Vertech Ltd.)
. . . . . . . . . . . . . . . . . 25./28. Nov 95 . . . . . . . . . . . . . . .
(K-Tron Patent Ltd.)
. . . . . . . . . . . . . . . . . 25. Nov. 95 . . . . . . . . . . . . . . .
(K-Tron Asia Pacific Pte. Ltd.)
(Signature authenticated)
. . . . . . . . . . . . . . . . . 25. Nov. 95 . . . . . . . . . . . . . . .
(K-Tron International, Inc.)
(Signature authenticated)
. . . . . . . . . . . . . . . . . 25. Nov. 95 . . . . . . . . . . . . . . .
(K-Tron Investment Co.)
(Signature authenticated)
</TABLE>
APPENDICES:
Appendix 1: Credit limits and drawdowns per March 31, 1995
Appendix 2: Reorganization and restructuring concept K-Tron
<PAGE> 14
- 1 -
APPENDIX 1
Large bank schedule
Group name : K-Tron K-Tron (Swizterland) Ltd.; Niederlenz
Credit limits and draw-downs as of March 31, 1995 in 000 Swiss Francs
Creditor
Total committment
Collateral allocation
Collateral
Unsecured portion
Quota*
Information on collateral / comments
Pro Memoria
Commitments of leasing companies and banks not participating in the forbearance
agreement (foreign banks, pension fund)
* Quota according to calculation method "Large bank schedule"
<PAGE> 15
- 1 -
APPENDIX 2: REORGANIZATION AND RESTRUCTURING CONCEPT
K-TRON
1. BOARD OF DIRECTORS
The present board of directors of K-Tron (Switzerland) Ltd.
consisting of Dr. Hans Jurg Schurmann, will be supplemented by
Mr. Lukas Gunthardt and Dr. Urs Schenker. The board of directors
shall be limited to three members. This arrangement remains in
effect until the reorganization according to Section 4 has been
completed.
K-Tron International Ltd., K-Tron Investment Co. as well as the
companies of the K-Tron Group agree not to interfere with the
directives of the new board of K-Tron (Switzerland) Ltd.
2. RESTRUCTURING K-TRON (SWITZERLAND) LTD.
Through the following organizational, operational and technical
measures the K-Tron Group shall be restructured as quickly as
possible:
a) Streamlining of the organization structure within 6 months:
- The shares of K-Tron Asia Pacific Pte. Ltd. Singapore shall,
after the restructuring of the latter (i.e. when the share
capital is again fully covered), be transferred at the
nominal value, excluding goodwill, to K-Tron (Switzerland)
Ltd.
- K-Tron Patent Ltd. shall either be merged with K-Tron
(Switzerland) Ltd. or liquidated;
- K-Tron Vertech Ltd. shall be merged or liquidated
<PAGE> 16
- 2 -
b) Set-up of a management information system MIS within the new
organization according to a).
c) Optimization of the development and production process.
d) Product development according to Section 3.
e) Optimization and streamlining of the existing product range.
3. DEVELOPMENT OF NEW PRODUCTS
The development of new products at K-Tron (Switzerland) Ltd.
shall be intensified. Patents issued or acquired in this
connection shall remain with K-Tron (Switzerland) Ltd., and
remain so even after the termination of this forbearance
agreement or Appendix 2 thereof. As long as any of the banks has
an open credit against any company of the K-Tron Group, and/or if
it does not agree with the transfer of patents by K-Tron
(Switzerland) Ltd., these may not be transferred to K-Tron
Investment Co. or K-Tron International, Inc., or any other
physical person or legal entity.
4. FINANCIAL AND BANKING RELATED MEASURES
4.1 The reorganization of K-Tron (Switzerland) Ltd. is considered to
be complete when a debt-to-equity ration of 60:40 has been
attained. Acceptable proof that the reorganization has been
completed is the submission to the leading bank of an audited
semi-annual financial report of K-Tron (Switzerland) Ltd. that
shows the aforementioned ratio.
a) Beginning March 1, 1996, and until the completion of the
reorganization of K-Tron (Switzerland) Ltd., neither K-Tron
(Switzerland) Ltd. nor any of its subsidiaries will no longer
pay any management fees to the American K-Tron companies.
<PAGE> 17
- 3 -
Any claims of K-Tron (Switzerland) Ltd. against the American
K-Tron companies that have arisen before the signing of this
forbearance agreement shall be settled by the latter by
March 1, 1996.
In addition, deliveries of K-Tron (Switzerland) Ltd. to
the American K-Tron companies will be made only against
prepayment (or against letter or credit).
b) Until the reorganization of K-Tron (Switzerland) has been
completed, K-Tron Investment Co. -- as the owner of all shares
of K-Tron (Switzerland) Ltd. -- agrees
- Not to change in any way the capital structure of K-Tron
(Switzerland) Ltd. without the prior written consent of the
banks and CSIL;
- To vote into or out of office the board of directors
(according to Section 1) and to appoint the statutory
auditors of K-Tron Switzerland (Ltd.) only in consultation
with the banks;
- Not to transfer the owned shares of K-Tron (Switzerland) Ltd.
c) With the execution of this forbearance agreement K-Tron
(Switzerland) Ltd. globally assigns to the leading bank as
security for the amounts owed to the banks and to CSIL all
future receivables that will be generated in the course of its
operations. The terms will be covered by a separate agreement
concluded between K-Tron (Switzerland) Ltd. and the banks.
<PAGE> 18
- 4 -
4.2 Until the desired debt-to-equity ratio stipulated in Section 4.1
has been achieved , the assistance of the banks is absolutely
essential. As compensation for their assistance they are entitled
to increase the interest margins then in effect at the leading bank
by 2.5% p.a. (pro rata) after the expiration of the forbearance
agreement until the reorganization has been completed. If K-Tron
(Switzerland) Ltd. does not borrow any additional funds from the
banks during the term of this forbearance agreement, the banks will
increase this interest margin by no more than 2% p.a. (pro rata).
However, these interest payments which are due in addition to the
other interest, commissions, fees and amortizations, must not cause
K-Tron (Switzerland) Ltd. to become illiquid or insolvent. For this
reason the additional interest payments will be claimed by the
banks only if K-Tron (Switzerland) Ltd. does not experience
financial difficulty on account of this.
5. PENSION FUND
An expert's opinion on the status of the pension fund will be
prepared. If necessary, corrective steps will be initiated, in
parallel with those in Sections 1 to 4.
6. TERM OF VALIDITY
The reorganization and restructuring concept defined in Appendix 2
has a term of validity that is independent of the forbearance
agreement, and shall remain valid also after the latter has been
terminated, until the reorganization of K-Tron (Switzerland) Ltd.
has been completed according to Section 4.1
<PAGE> 19
- 5 -
(debt-to-equity ratio of 60:40). Section 3 of this Appendix 2
remains in force until the conditions stipulated therein are
fulfilled.
<PAGE> 1
EXHIBIT 10.2.3
K-TRON INTERNATIONAL, INC.
1996 EQUITY COMPENSATION PLAN
The purpose of the K-Tron International, Inc. 1996 Equity Compensation
Plan (the "Plan") is to provide designated officers (including officers who
are also directors) and other employees of K-Tron International, Inc. (the
"Company") and its subsidiaries with the opportunity to receive grants of
incentive stock options, nonqualified stock options, stock appreciation rights
and restricted stock. The Company believes that the Plan will provide an
incentive to the participants to contribute materially to the long-term growth
of the Company, will align the economic interests of the participants with
those of the Company's shareholders and will aid the Company and its
subsidiaries in attracting and retaining officers and employees of outstanding
ability.
1. Administration
The Plan shall be administered and interpreted by a committee (the
"Committee"), which shall consist of two or more persons appointed by the
Company's Board of Directors (the "Board"), all of whom shall be
"disinterested persons" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act") and "outside directors" as defined in Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
related Treasury regulations.
The Committee shall have the sole authority to (i) determine the
individuals to whom grants shall be made under the Plan, (ii) determine the
type, size and terms of the grants to be made to each such individual, (iii)
determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting and (iv) deal with any other matters arising
under the Plan.
The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and
for the conduct of its business as it deems necessary or advisable, in its
sole discretion. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interests
in the Plan or in any awards granted hereunder. All powers of the Committee
shall be executed in its sole discretion, in the best interest of the Company
and in keeping with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
2. Grants
Incentives under the Plan shall consist of incentive stock options,
nonqualified stock options, stock appreciation rights and restricted stock
(hereinafter collectively referred to as "Grants"). All Grants shall be
subject to the terms and conditions set forth herein and to those other terms
and conditions consistent with this Plan as the Committee deems appropriate
<PAGE> 2
and as are specified in writing by the Committee to the individual (the "Grant
Letter"). The Committee shall approve the form and provisions of each Grant
Letter to an individual. Grants under a particular Section of the Plan need
not be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Subject to the adjustments specified in Section 3(b), the aggregate
number of shares of common stock of the Company (the "Company Stock") that may
be issued or transferred under the Plan is 450,000 shares, in the aggregate.
Notwithstanding anything in the Plan to the contrary, the maximum aggregate
number of shares of Company Stock that shall be subject to Grants made under
the Plan to any single employee during any one year period shall be 100,000
shares. The shares may be authorized but unissued shares of Company Stock or
reacquired shares of Company Stock, including shares purchased by the Company
on the open market for purposes of the Plan. If and to the extent options
granted under the Plan terminate, expire, or are cancelled, forfeited,
exchanged or surrendered without having been exercised or if any shares of
restricted stock are forfeited, the shares subject to such Grants shall again
be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock outstanding by reason of (i) a stock dividend, (ii) recapitalization,
(iii) stock split, combination or exchange of shares, (iv) merger,
reorganization or consolidation in which the Company is the surviving
corporation, (v) reclassification or change in par value or (vi) any other
extraordinary or unusual event affecting the outstanding Company Stock as a
class without in any of such cases the Company's receipt of consideration, or
if the value of outstanding shares of Company Stock is substantially reduced
due to the Company's payment of an extraordinary dividend or distribution, the
maximum number of shares of Company Stock available for Grants, the maximum
number of shares of Company Stock which any one individual participating in
the Plan may be granted during the term of the Plan, the number of shares
covered by outstanding Grants and the price per share or the applicable market
value of such Grants shall be proportionately adjusted by the Committee to
reflect any increase or decrease in the number or kind of issued shares of
Company Stock to preclude the enlargement or dilution of rights and benefits
under such Grants; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated. The adjustments determined by the
Committee shall be final, binding and conclusive. Notwithstanding the
foregoing, no adjustment shall be authorized or made pursuant to this Section
to the extent that such authority or adjustment would cause any Incentive
Stock Option to fail to comply with Section 422 of the Code.
4. Eligibility for Participation
All employees employed by the Company and its subsidiaries ("Employees")
(including Employees who are officers or members of the Board) shall be
eligible to participate in the Plan. The Committee shall select the Employees
to receive Grants and determine the number of shares of Company Stock subject
to a particular Grant in such
-2-
<PAGE> 3
manner as the Committee determines. (Employees who receive Grants under this
Plan shall hereinafter be referred to as "Grantees".) The term "Company" as
used hereafter when referring to Employees shall include the Company's
subsidiaries.
Nothing contained in this Plan shall be construed to limit the right of
the Company to make Grants in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business or assets of any
corporation, firm or association, including options granted to employees
thereof who become Employees of the Company, or for other proper corporate
purpose.
5. Granting of Options
(a) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Company Stock that will be subject to each
Grant of stock options.
(b) Type of Option and Price. The Committee may grant options intended
to qualify as incentive stock options ("Incentive Stock Options") within the
meaning of Section 422 of the Code or options which are not intended so to
qualify ("Nonqualified Stock Options") (hereinafter collectively the "Stock
Options") or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
The purchase price of Company Stock subject to a Stock Option shall be
determined by the Committee and may be equal to, greater than, or less than
the Fair Market Value (as defined in the next paragraph) of a share of such
Stock on the date such Stock Option is granted; provided, however, that the
purchase price of Company Stock subject to an Incentive Stock Option shall be
equal to, or greater than, the Fair Market Value of a share of such Stock on
the date such Stock Option is granted.
If the Company Stock is traded in a public market, then the Fair Market
Value per share shall be, if the principal trading market for the Company
Stock is a national securities exchange or the National Market segment of The
Nasdaq Stock Market, the last reported sale price thereof on the relevant date
or (if there were no trades on that date) the latest preceding date upon which
a sale was reported, or, if the Company Stock is not principally traded on
such exchange or market, the mean between the last reported "bid" and "asked"
prices thereof on the relevant date, as reported on Nasdaq or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not traded in a public market
or subject to reported transactions or "bid" or "asked" quotations as set
forth above, the Fair Market Value per share shall be as determined by the
Committee.
(c) Exercise Period. The Committee shall determine the option exercise
period of each Stock Option. The exercise period shall not exceed ten (10)
years from the date of grant.
-3-
<PAGE> 4
(d) Vesting and Exercisability of Options. Stock Options shall become
vested and exercisable in accordance with the terms and conditions determined
by the Committee, in its sole discretion and as specified in the Grant Letter.
The Committee, in its sole discretion, may accelerate the exercisability of
any or all outstanding Stock Options at any time for any reason. In addition,
all outstanding Stock Options shall vest upon a Change of Control (as defined
in Section 9) in accordance with the provisions of Section 10, unless, in
cases not covered by Section 10(f), the Committee in its sole discretion
determines not to accelerate such Stock Options upon a Change of Control. The
Committee may make such determination prior to the Change of Control or, if
the Committee making such determination following a Change of Control is
comprised of the same members as served on the Committee immediately prior to
such Change of Control, within five (5) days following such Change of Control.
(e) Manner of Exercise. A Grantee may exercise a Stock Option which has
become exercisable, in whole or in part, by delivering a written notice of
exercise to the Committee with accompanying payment of the option price in
accordance with Subsection (g) below. Such notice may instruct the Company to
deliver shares of Company Stock due upon the exercise of the Stock Option to
any registered broker or dealer designated by the Committee ("Designated
Broker") in lieu of delivery to the Grantee. Such instructions must designate
the account into which the shares are to be deposited.
(f) Termination of Employment, Disability or Death.
(1) In the event that a Grantee ceases to be an employee of the
Company for any reason other than "disability", death, or "termination for
cause", any Stock Option which is otherwise vested and exercisable by the
Grantee shall terminate unless exercised within thirty (30) days of the date
on which the Grantee ceases to be an employee of the Company (or within such
other period of time as may be specified in the Grant Letter), but in any
event no later than the date of expiration of the option exercise period. Any
of the Grantee's Stock Options which are not otherwise vested and exercisable
as of the date on which the Grantee ceases to be an employee of the Company
shall terminate as of such date.
(2) In the event that a Grantee ceases to be an employee of the
Company on account of a "termination for cause" by the Company, any Stock
Option held by the Grantee shall terminate as of the date the Grantee ceases
to be an employee of the Company.
(3) In the event that a Grantee ceases to be an employee of the
Company because the Grantee is "disabled", any Stock Option which is otherwise
vested and exercisable by the Grantee shall terminate unless exercised within
one year of the date on which the Grantee ceases to be an employee of the
Company (or within such other period of time as may be specified in the Grant
Letter), but in any event no later than the date of expiration of the option
exercise period. Any of the Grantee's Stock Options which are not otherwise
vested and exercisable as of the date on which the Grantee ceases to be an
employee shall terminate as of such date.
-4-
<PAGE> 5
(4) In the event of the death of a Grantee while the Grantee is an
employee of the Company or within not more than 30 days of the date on which
the Grantee ceases to be an employee of the Company on account of a
termination of employment specified in Section 5(f)(1) of the Plan (or within
such other period of time as may be specified in the Grant Letter), any Stock
Option which is otherwise vested and exercisable by the Grantee shall
terminate unless exercised within one year of the date on which the Grantee
ceases to be an employee of the Company (or within such other period of time
as may be specified in the Grant Letter), but in any event no later than the
date of expiration of the option exercise period. Any of the Grantee's Stock
Options which are not otherwise vested and exercisable as of the date on which
the Grantee ceases to be an employee shall terminate as of such date.
(5) For purposes of this Section 5(f), the following terms shall be
defined as follows: (A) "disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code and (B) "termination for
cause" shall mean, except to the extent otherwise provided in a Grantee's
Grant Letter, a finding by the Committee, after full consideration of the
facts presented on behalf of both the Company and the Grantee, that the
Grantee has breached his or her employment or service contract with the
Company, or has been engaged in disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, or has disclosed
trade secrets or confidential information of the Company to persons not
entitled to receive the same. In such event, in addition to the immediate
termination of the Stock Option, the Grantee shall automatically forfeit all
option shares for any exercised portion of a Stock Option for which the
Company has not yet delivered the share certificates upon refund by the
Company of the option price paid by the Grantee for such option shares.
(g) Satisfaction of Option Price. The Grantee shall pay the option
price specified in the Grant Letter in (i) cash, (ii) with the approval of the
Committee, by delivering shares of Company Stock owned by the Grantee
(including Company Stock acquired in connection with the exercise of a Stock
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the option price
or (iii) through any combination of (i) and (ii). The Grantee shall pay the
option price and the amount of withholding tax due, if any, at the time of
exercise. Shares of Company Stock shall not be issued or transferred upon
exercise of a Stock Option until the option price is fully paid and any
required withholding is made.
(h) Rule 16b-3 Restrictions. Unless a Grantee who is an "insider," as
defined under Section 16 of the Exchange Act, could otherwise transfer Company
Stock issued pursuant to a Stock Option without incurring liability under
Section 16(b) of the Exchange Act, at least six months must elapse from the
date of acquisition of a Stock Option by such a Grantee to the date of
disposition of the Company Stock issued upon exercise of such option.
(i) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, to the extent that the aggregate Fair Market Value of the
Company Stock on the date of
-5-
<PAGE> 6
the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year under the Plan or any
other stock option plan of the Company exceeds $100,000, then such option as
to the excess shall be treated as a Nonqualified Stock Option. An Incentive
Stock Option shall not be granted to any Employee who, at the time of grant,
owns stock possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or any parent of the Company, unless
the option price per share is not less than 110% of the Fair Market Value of
the Company Stock on the date of grant and the option exercise period is not
more than five years from the date of grant.
6. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to an
Employee under a Grant (a "Restricted Stock Grant"), upon such terms as the
Committee deems appropriate. The following provisions are applicable to
Restricted Stock Grants:
(a) General Requirements. Shares of Company Stock issued pursuant to
Restricted Stock Grants may be issued for consideration or for no
consideration, at the sole discretion of the Committee. The Committee shall
establish conditions under which restrictions on the transfer of shares of
Company Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate. The period of years during which
the Restricted Stock Grant will remain subject to restrictions will be
designated in the Grant Letter as the "Restriction Period."
(b) Number of Shares. The Committee shall grant to each Grantee a
number of shares of Company Stock pursuant to a Restricted Stock Grant in such
manner as the Committee determines.
(c) Requirement of Employment. If a Grantee's employment terminates
during a period designated in the Grant Letter as the Restriction Period, or
if other specified conditions are not met, the Restricted Stock Grant shall
terminate as to all shares covered by the Grant as to which restrictions on
transfer have not lapsed and those shares of Company Stock must be immediately
returned to the Company. The Committee may, however, provide for complete or
partial exceptions to this requirement as it deems equitable.
(d) Restrictions on Transfer and Legend on Share Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except to a Successor Grantee under Section 8. Each
certificate for a share issued or transferred under a Restricted Stock Grant
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the
share certificate or certificates covering any of the shares subject to
restrictions when all restrictions on such shares have lapsed.
-6-
<PAGE> 7
(e) Right to Vote and to Receive Cash Dividends. During the Restriction
Period, unless the Committee determines otherwise, the Grantee shall have the
right to vote shares subject to the Restricted Stock Grant and to receive any
regular cash dividends paid on such shares.
(f) Lapse of Restrictions. All restrictions imposed under the
Restricted Stock Grant shall lapse upon the expiration of the applicable
Restriction Period and the satisfaction of any conditions imposed by the
Committee. The Committee may determine, as to any or all Restricted Stock
Grants, that all the restrictions shall lapse without regard to any
Restriction Period. All outstanding Restricted Stock Grants shall vest upon a
Change of Control, unless the Committee determines otherwise.
7. Stock Appreciation Rights
(a) The Committee may grant stock appreciation rights ("SARs") to any
Grantee in tandem with any Stock Option, for all or a portion of the
applicable Stock Option, either at the time the Stock Option is granted or at
any time thereafter while the Stock Option remains outstanding; provided,
however, that in the case of an Incentive Stock Option, such rights may be
granted only at the time of the Grant of such Stock Option. Unless the
Committee determines otherwise, the base price of each SAR shall be equal to
the greater of (i) the exercise price of the related Stock Option or (ii) the
Fair Market Value of a share of Company Stock as of the date of Grant of such
SAR.
(b) The number of SARs granted to a Grantee which shall be exercisable
during any given period of time shall not exceed the number of shares of
Company Stock which the Grantee may purchase upon the exercise of the related
Stock Option during such period of time. Upon the exercise of a Stock Option,
the SARs relating to the Company Stock covered by such Stock Option shall
terminate. Upon the exercise of SARs, the related Stock Option shall
terminate to the extent of an equal number of shares of Company Stock.
(c) Upon a Grantee's exercise of some or all of the Grantee's SARs, the
Grantee shall receive in settlement of such SARs an amount equal to the value
of the stock appreciation for the number of SARs exercised, payable in cash,
Company Stock or a combination thereof. The stock appreciation for an SAR is
the difference between the base price of the SAR as described in Subsection
(a) and the Fair Market Value of the underlying Company Stock on the date of
exercise of such SAR.
(d) At the time of such exercise, the Grantee shall have the right to
elect the portion of the amount to be received that shall consist of cash and
the portion that shall consist of Common Stock, which for purposes of
calculating the number of shares of Company Stock to be received, shall be
valued at their Fair Market Value on the date of exercise of such SARs. The
Committee shall have the right to disapprove a Grantee's election to receive
cash in full or partial settlement of the SARs exercised and to require that
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<PAGE> 8
shares of Company Stock be delivered in lieu of cash. If shares of Company
Stock are to be received upon exercise of an SAR, cash shall be delivered in
lieu of any fractional share.
(e) An SAR is exercisable only during the period when the Stock Option
to which it is related is also exercisable. No SAR may be exercised for cash
by an officer or director of the Company subject to Section 16 of the Exchange
Act, in whole or in part, except in accordance with Rule 16b-3 under the
Exchange Act.
8. Transferability of Grants
Only the Grantee or his or her authorized representative may exercise
rights under a Grant. Such persons may not transfer those rights except by
will or by the laws of descent and distribution or, with respect to Grants
other than Incentive Stock Options, if permitted under Rule 16b-3 of the
Exchange Act and if permitted in any specific case by the Committee in its
sole discretion, pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended or the regulations thereunder . When a Grantee dies, the
representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee
must furnish proof satisfactory to the Company of his or her right to receive
the Grant under the Grantee's will or under the applicable laws of descent and
distribution. Notwithstanding the foregoing, the Committee may provide, in a
Grant Letter, that a Grantee may transfer Nonqualified Stock Options to his or
her children, grandchildren or spouse or to one or more trusts for the benefit
of such family members or to partnerships in which such family members are the
only partners (a "Family Transfer"), provided that the Grantee receives no
consideration for a Family Transfer and the Grant Letters relating to
Nonqualified Stock Options transferred in a Family Transfer continue to be
subject to the same terms and conditions that were applicable to such
Nonqualified Stock Options immediately prior to the Family Transfer.
9. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) A liquidation or dissolution of the Company or the sale
(excluding transfers to subsidiaries) of all or substantially all of the
Company's assets occurs;
(b) As a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split or sale or
transfer of assets, any person or group (as such terms are used in and under
Section 13(d) of the Exchange Act) becomes the beneficial owner (as defined in
Rule 13-d under the Exchange Act), directly or indirectly, of securities of
the Company representing more than 20% of the common stock of the Company or
the combined voting power of the Company's then outstanding securities; or
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<PAGE> 9
(c) During any period of two consecutive years, individuals who, at
the beginning of such period, constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Company's shareholders, of at least two-thirds of the
directors who were not directors at the beginning of such period was approved
by a vote of at least two-thirds of the directors then still in office who
were either directors at the beginning of the period or who, in connection
with their election or nomination, received the foregoing two-thirds approval.
10. Consequences of a Change of Control
(a) Notice. Unless the Committee determines otherwise:
(i) If a Change of Control described in Section 9(a) or (b) will
occur, then, not later than ten (10) days after the approval by the
shareholders of the Company (or approval by the Board, if shareholder action
is not required) of such Change of Control, the Company shall give each
Optionee with any outstanding Stock Options written notice of such proposed
Change of Control.
(ii) If a Change of Control described in Section 9(b) may occur
without approval by the shareholders (or approval by the Board) and does so
occur, or if a Change of Control described in Section 9(c) occurs, then, not
later than ten (10) days after such Change of Control becomes known to the
Company, the Company shall give each Optionee with any outstanding Stock
Options written notice of the Change of Control.
(b) Election Period. In connection with the Change of Control and
effective only upon such Change of Control, unless the Committee determines to
have an earlier effective date, each Grantee shall thereupon have the right,
within twenty (20) days after such written notice is sent by the Company (the
"Election Period"), to make an election as described in Subsection (c) with
respect to all of his or her outstanding Stock Options (whether the right to
exercise such Stock Options has then accrued or the right to exercise such
Stock Options will occur or has occurred upon the Change of Control).
(c) Election Right. During the Election Period, unless the Committee
determines otherwise, each Grantee shall have the right to elect:
(i) To exercise in full any installments of such Stock Options not
previously exercised, or
(ii) To surrender all or part of such outstanding Stock Options, in
exchange for a payment by the Company, in cash or Company Stock as determined
by the Committee, in an amount equal to the excess over the purchase price of
the then Fair Market Value of the shares of Company Stock subject to the
Grantee's outstanding Stock Options; provided, however, that in the case of a
Stock Option held by a Grantee who is subject to Section 16(b)
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of the Exchange Act, any such surrender or payment shall be made on such date
as the Committee shall determine consistent with Rule 16b-3 under the Exchange
Act.
(d) Termination of Stock Options. If a Grantee does not make a timely
election in accordance with Subsection (c) in connection with a Change of
Control where the Company is not the surviving corporation (or survives only
as a subsidiary of another corporation), the Grantee's Stock Options shall
terminate as of the Change of Control. Notwithstanding the foregoing, a Stock
Option will not terminate if assumed by the surviving or acquiring
corporation, or its parent, upon a merger or consolidation and, with respect
to an Incentive Stock Option, the assumption of the Option occurs under
circumstances which are not deemed a modification of the Option within the
meaning of Sections 424(a) and 424(h)(3)(A) of the Code.
(e) Accounting and Tax Limitations.
(i) Notwithstanding the foregoing, if the right described in
Subsection (c)(ii) would make the applicable Change of Control ineligible for
pooling of interest accounting treatment under APB No. 16 or make such Change
of Control ineligible for desired tax treatment with respect to such Change of
Control and, but for those provisions, the Change of Control would otherwise
qualify for such treatment, the Grantee shall receive shares of Company Stock
with a Fair Market Value equal to the cash that would otherwise be payable
pursuant to Subsection (c)(ii) in substitution for the cash.
(ii) Notwithstanding the foregoing, if the termination of the Stock
Options described in Subsection (d) would make the applicable Change of
Control ineligible for pooling of interest accounting treatment under APB No.
16 and, but for such provision, the Change of Control would otherwise qualify
for such treatment, each affected Grantee shall receive a replacement or
substitute stock option issued by the surviving or acquiring corporation.
(f) Other Limitations. Notwithstanding any other provision of this
Section 10, if a Change of Control described in Section 9(a) will occur, or if
a Change of Control described in Section 9(b) will occur and the Company will
not be the surviving corporation, then the Committee notice required by
Subsection (a) shall be mandatory and the Grantee shall have the right to make
the election called for in Subsection (c), subject to the provisions of
Subsections (d) and (e) and further subject to the Committee's right to permit
only the election under Subsection (c)(i).
11. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that any amendment that increases the aggregate number (or
individual limit for any single Grantee) of shares of Company Stock that may
be issued or transferred under the Plan (other than by operation of Section
3(b)), or modifies the requirements as to
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<PAGE> 11
eligibility for participation in the Plan, shall be subject to approval by the
shareholders of the Company and provided, further, that the Board shall not
amend the Plan without shareholder approval if such approval is required by
Rule 16b-3 under the Exchange Act or Section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 19(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 19(b) or may be amended by agreement of
the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
12. Funding of the Plan
The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under the Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
13. Rights of Participants
Nothing in the Plan shall entitle any Employee or other person to any
claim or right to be granted a Grant under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any individual any rights
to be retained by or in the employ of the Company or any other employment
rights.
14. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether
cash, other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
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<PAGE> 12
15. Withholding of Taxes
The Company shall have the right to deduct from all Grants paid in cash,
or from other wages paid to an officer or other employee of the Company, any
federal, state or local taxes required by law to be withheld with respect to
such cash awards and, in the case of Grants paid in Company Stock, the Grantee
or other person receiving such shares shall be required to pay to the Company
the amount of any such taxes which the Company is required to withhold with
respect to such Grants or the Company shall have the right to deduct from
other wages paid to the employee by the Company the amount of any withholding
due with respect to such Grants.
16. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to
condition any Grant made to any Grantee hereunder on such Grantee's
undertaking in writing to comply with such restrictions on his or her
subsequent disposition of such shares of Company Stock as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof and certificates representing such shares may
be legended to reflect any such restrictions. Certificates representing
shares of Company Stock issued under the Plan will be subject to such
stop-transfer orders and other restrictions as may be applicable under such
laws, regulations and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
17. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control. References herein to a Section or a Subsection are references to
Sections or Subsections of the Plan unless otherwise noted.
18. Effective Date of the Plan
Subject to the approval of the Company's shareholders, this Plan shall be
effective on May 10, 1996.
19. Miscellaneous
(a) Substitute Grants. The Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant
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made by such corporation ("Substituted Stock Incentives"). The terms and
conditions of the substitute grant may vary from the terms and conditions
required by the Plan and from those of the Substituted Stock Incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Stock Options and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company
that the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The
Committee may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation.
The Committee may also adopt rules regarding the withholding of taxes on
payments to Grantees. The Committee may, in its sole discretion, agree to
limit its authority under this Subsection.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Company Stock covered by
a Grant until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Letters issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the State of New
Jersey.
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EXHIBIT 10.2.4
Amended February 24, 1986
Amended March 8, 1996
K-TRON INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I.
INTRODUCTION
Sec. 1.01 Statement of Purpose. The purpose of the K-Tron
International, Inc. Amended and Restated Employee Stock Purchase Plan is to
provide eligible employees of K-Tron International, Inc. (the Company) who
wish to become shareholders an opportunity to purchase common stock of the
Company. The Board of Directors of the Company believes that employee
participation in ownership will be to the mutual benefit of both the employees
and the Company.
Sec. 1.02 Internal Revenue Code Considerations. This Plan is
intended to quality as an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1954, as amended.
ARTICLE II.
DEFINITIONS
Sec. 2.01 "Administrative Committee" shall mean the committee
appointed by the Board of Directors to administer this Plan, as provided in
Section 6.03 hereof.
Sec. 2.02 "Board of Directors" shall mean the Board of Directors of
the Company.
Sec. 2.03 "Company" shall mean K-Tron International, Inc., a New
Jersey corporation.
Sec. 2.04 "Compensation" shall mean the total remuneration paid,
during the period of reference, to an Employee by Employer, including regular
salary or wages, overtime payments, bonuses and commissions, but excluding
expense reimbursements of all types, payments in lieu of expenses, Employer
contributions to any qualified retirement plan or other program of deferred
compensation, Employer contributions to Social Security, the costs paid by
Employer in connection with fringe benefits (whether or not the Employee could
have elected to receive cash in lieu of such benefits), and any amounts
accrued for the benefit of Employee but not paid during the period of
reference.
<PAGE> 2
Sec. 2.05 "Continuous Service" shall mean the period of time,
immediately preceding the Offering Date of reference, during which the
Employee has been employed by Employer and during which there has been no
interruption of Employee's employment by Employer. For this purpose, periods
of Excused Absence shall not be considered to be interruptions of Continuous
Service.
Sec. 2.06 "Effective Date" shall mean July 1, 1981.
Sec. 2.07 "Eligible Employee" shall mean each person who, on an
Offering Date, meets all of the following requirements:
(a) He/she is an Employee of Employer;
(b) He/she has completed at least twelve (12) months of
Continuous Service; and
(c) He/she is not deemed for purposes of Section 423(b)(3) of
the Internal Revenue Code to own stock possessing five
percent (5%) or more of the total combined voting power or
value of all classes of Stock of the Company or his/her
Employer.
Sec. 2.08 "Employee" shall mean each person employed by Employer
whose customary employment is for more than twenty (20) hours per week and for
more than five (5) months per year.
Sec. 2.09 "Employer" shall mean the Company and each subsidiary of
Company designated by the Board of Directors as an Employer under the Plan. A
"subsidiary" of the Company shall be any corporation in which the Company
holds, directly or indirectly, fifty percent (50%) or more of the total
combined voting power of all classes of stock of such subsidiary, as described
in Section 425(f) of the Internal Revenue Code.
Sec. 2.10 "Excused Absence" shall mean absence pursuant to a leave
of absence granted by the Company or any other entity constituting Employer,
absence due to disability or illness, or absence by reason of a layoff. An
Excused Absence shall not exceed the greater of (a) ninety (90) days, or (b)
the period during which, an Employee on such Excused Absence has a contractual
or statutory right to reemployment (the greater of (a) or (b) being the
"Excused Period"). Any absence shall cease to be an Excused Absence upon the
earlier of (a) the last day of the Excused Period, or (1)) the last day of the
calendar month in which the leave expires by its terms, the layoff ends by
recall or permanent separation from service, or recovery from illness or
disability occurs.
Sec. 2.11 "Exercise Date" shall mean the last day of each Purchase
Period.
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Sec. 2.12 "Internal Revenue Code" shall mean the United States
Internal Revenue Code of 1954, as the same is presently constituted and as it
may hereafter be amended, and successor statutes of similar purpose.
Sec. 2.13 "Market Value" shall mean the closing price (or the
average of the closing bid and asked prices) of the Stock as reported on the
principal market, trading system or exchange on which the Stock is traded (as
determined by the Administrative Committee) as of the date of reference. If
there is no such price reported for the date of reference, "Market Value"
shall mean the "Market Value," computed as aforesaid, as of the date next
preceding the date of reference on which such price is reported. If the Stock
is not publicly-traded, the "Market Value" shall mean the fair market value of
the Stock determined by the Administrative Committee, whose determination
shall be final and binding, subject to the approval of the Board of Directors.
Sec. 2.14 "Offering" shall mean the offering of shares of Stock
under this Plan,.
Sec. 2.15 "Offering Date" shall mean the first business day of
January and the first business day of July of each Plan Year, commencing with
July 1981.
Sec. 2.16 "Participant" shall mean each Employee who elects to
participate in this Plan.
Sec. 2.17 "Plan" shall mean the K-Tron International, Inc. Amended
and Restated Employee Stock Purchase Plan, as the same is set forth herein and
as the same may hereafter be amended.
Sec. 2.18 "Plan Year" shall mean the calendar year.
Sec. 2.19 "Purchase Agreement" shall mean the document prescribed
by the Administrative Committee pursuant to which an Eligible Employee has
enrolled to be a Participant in this Plan.
Sec. 2.20 "Purchase Period" shall mean the period beginning on an
Offering Date and ending on the last business day of the fifth calendar month
following the calendar month in which such Offering Date occurred.
Sec. 2.21 "Stock" shall mean the common stock of the Company. Such
Stock may be authorized but previously unissued shares or shares reacquired
and held by the Company as treasury shares.
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Sec. 2.22 "Stock Purchase Account" shall mean with respect to any
Employee a non-interest bearing account consisting of all amounts withheld
from such Employee's Compensation (or otherwise paid into the Plan) for the
purpose of purchasing shares of Stock under this Plan, reduced by all amounts
applied to the purchase of Stock under this Plan.
ARTICLE III.
ADMISSION TO PARTICIPATION
Sec. 3.01 Initial Participation. Any Eligible Employee may elect
to be a Participant and may become a Participant by executing and filing with
the Administrative Committee a Purchase Agreement on forms provided by the
Administrative Committee. The effective date of an Eligible Employee's
participation shall be the Offering Date coincident with or next following the
date on which the Administrative Committee receives from the Eligible Employee
a properly executed Purchase Agreement.
Sec. 3.02 Discontinuance of Participation. Any Participant may
voluntarily withdraw from the Plan by filing a notice of withdrawal with the
Administrative Committee prior to an Exercise Date. Upon such withdrawal,
there shall be paid to the Participant the amount, if any, standing to his/her
credit in his/her Stock Purchase Account. Amounts paid to a Participant or
former Participant pursuant to this Section 3.02 shall not be eligible for
redeposit in the Participant's Stock Purchase Account in the event of the
person's readmission to participation.
Sec. 3.03 Involuntary Withdrawal; Termination of Eligible Employee
Status. If a Participant's Continuous Service terminates for any reason, or
if a Participant ceases to be an Eligible Employee, no further amounts shall
be deducted from such Participant's compensation and deposited into his/her
Stock Purchase Account and the entire amount standing to the Participant's
credit in his/her Stock Purchase Account on the effective date of such
occurrence shall be used to purchase whole shares of Stock under this Plan as
of the next succeeding Exercise Date, and any balance thereafter remaining to
his/her credit in his/her Stock Purchase Account shall be refunded to him/her.
Notwithstanding the foregoing, if a Participant's Continuous Service is
terminated for any reason three (3) months or more prior to the next
succeeding Exercise Date, the entire amount, if any, standing to his/her
credit in that Stock Purchase Account shall be refunded to him/her.
Sec. 3.04 Readmission to Participation. Any Eligible Employee who
has previously been a Participant, who has discontinued participation (whether
by interruption of Continuous Service or otherwise), and who wishes to be
reinstated as a Participant may again become a Participant by executing and
filing with the Administrative Committee a new
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Purchase Agreement on forms provided by the Administrative Committee.
Reinstatement to Participant status shall be effective as of the Offering Date
coincident with or next following the date on which the Administrative
Committee receives from the Eligible Employee the Properly executed Purchase
Agreement.
ARTICLE IV.
STOCK PURCHASE
Sec. 4.01 Reservation of Shares. There shall be 500,000 shares of
Stock reserved for the Plan, subject to adjustment in accordance with the
anti-dilution provisions hereinafter set forth. Except as provided in Section
5.02 hereof, the aggregate number of shares that may be purchased under the
Plan shall not exceed the number of shares reserved for the Plan.
Sec. 4.02 Limitation on Shares Available. Subject to the
limitations described in Sections 4.04 (a) and (b), the maximum number of
shares of Stock that may be purchased for each Participant on an Exercise Date
is the lowest of (a) the number of whole shares of Stock that can be purchased
by applying the full balance of his/her Stock Purchase Account to such
purchase of shares at the Purchase Price (as hereinafter determined), (b) the
Participant's proportionate part of the maximum number of shares of Stock
available within the limitation established by the maximum aggregate number of
such shares reserved for this Plan, as stated in Section 4.01 hereof, or (c)
5,000 shares. Notwithstanding the foregoing, if any person entitled to
purchase shares pursuant to any offering hereunder would, upon such purchase,
be deemed for the purposes of Section 423(b)(3) of the Internal Revenue Code
to own stock (including any number of shares that such person would be
entitled to purchase hereunder) possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company,
the maximum number of shares that such person shall be entitled to purchase
pursuant to this Plan shall be reduced to that number which, when added to the
number of shares of Stock that such person is so deemed to own (excluding any
number of shares that such person would be entitled to purchase hereunder), is
one less than such five percent (5%). Any portion of a Participant's Stock
Purchase Account that cannot be applied by reason of the foregoing limitation,
or by reason of the fact that no fractional shares are purchased or issued
under this Plan, shall remain in the Participant's Stock Purchase Account for
application to purchase of Stock on the next Offering Date (unless withdrawn
before that Offering Date).
Sec. 4.03 Purchase Price of Shares. The Purchase Price per share
of the Stock sold to Participants pursuant to any Offering shall be
eighty-five percent (85%) of the Market Value of such share on the Offering
Date on which such Offering commences or on the
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Exercise Date on which such Offering expires, whichever is the lower. If the
Exercise Date with respect. to the purchase of Stock is a day on which the
Stock is selling exdividend but is on or before the record date for such
dividend, then for Plan purposes the Purchase Price per share will be
increased by an amount equal to the dividend per share. In no event shall the
Purchase Price be less than this par value of the Stock.
Sec. 4.04 Exercise of Purchase Privilege.
(a) Subject to the provisions of Section 4.02 above and of
paragraph (b) of this Section 4.04, if on the tenth
business day prior to any Exercise Date there is standing,
to the credit of a Participant in his/her Stock Purchase
Account an amount equal to, or greater than, the Purchase
Price of one share of Stock for the Offering that expires
on such Exercise Date, there shall be purchased for the
Participant at such Purchase Price the largest number of
whole shares of Stock as can be purchased with the amount
then standing to the Participant's credit in his/her Stock
Purchase Account. Each such purchase shall be deemed to
have occurred on the Exercise Date occurring at the close
of the offering from which the purchase was made.
(b) A Participant may not purchase shares of Stock having an
aggregated Market Value of more than twenty-five thousand
dollars ($25,000), determined at the time off the
Offering(s), for each calendar year in which one or more
such Offering(s) is/are outstanding at any time, and a
Participant may not purchase a share of Stock under any
Offering after the expiration of the Purchase Period for
such Offering.
Sec. 4.05 Establishment of Stock Purchase Account. Each
Participant shall authorize payroll deductions from Compensation for the
purposes of funding his/her Stock Purchase Account. In the Purchase
Agreement, each Participant shall authorize a deduction from each payment of
his/her Compensation during a Purchase Period, which deduction shall be not
less than two percent (2%) nor more than ten percent (10%) of the gross amount
of such payment, rounded to the nearest whole dollar amount. Any Participant
who has elected payroll deductions which exceed two percent (2%) of his/her
payments of Compensation may reduce his/her payroll deduction rate during any
Purchase Period, provided no such reduction shall reduce the payroll deduction
rate below two percent (2%). The payroll deduction rate may not be increased
during any Purchase Period. However, a Participant may change the deduction
to any permissible level for any subsequent Offering by filing notice thereof
prior to the Offering Date on which such subsequent Offering commences.
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Sec. 4.06 Payment for Stock. The Purchase Price for all shares of
Stock purchased by any Participant under this Plan shall be paid out of the
Participant's Stock Purchase Account. As of each Exercise Date, the amount
standing to the credit of each Participant on the tenth (10th) business day
prior to the Exercise Date in his/her Stock Purchase Account in the Offering
that expires on such Exercise Date shall be charged with the aggregate
Purchase Price of the shares of Stock purchased by such Participant on the
Exercise Date. The remaining balance standing to the Participant's credit in
his/her Stock Purchase Account shall remain credited to such Stock Purchase
Account for the next succeeding Offering under this Plan. No interest shall
be paid or payable with respect to any amount held in the Participant's Stock
Purchase Account.
4.07 Share Ownership; Issuance of Certificates.
(a) The shares purchased by a Participant on an Exercise Date
shall, for all purposes, be deemed to have been issued and/or sold at the
close of business on such Exercise Date. Prior to that time, none of the
rights or privileges of a shareholder of the Company shall inure to the
Participant with respect to such shares. All the shares of Stock purchased
under this Plan shall be delivered by the Company in a manner as determined by
the Administrative Committee, provided, however, that all shares acquired by
Participants during any Plan Year shall be delivered not later than one
hundred twenty (120) days following the last day of such Plan Year.
(b) The Administrative Committee, in its sole discretion, may
determine that the shares of Stock shall be delivered by the Company to the
Participant by issuing and delivering to the Participant a certificate for the
number of shares of Stock purchased by a Participant on an Exercise Date or
during a Plan Year, or that the shares of Stock purchased by all Participants
shall be delivered to a member firm of the New York Stock Exchange which is
also a member of the National Association of Securities Dealers, as selected
by the Administrative Committee from time to time, which shares shall be
maintained by such member firm in separate brokerage accounts of each
Participant. Each certificate or brokerage account, as the case may be, may
be in the name of the Participant or, if he/she designates on his/her Stock
Purchase Agreement, in his/her name jointly with his/her spouse, with right of
survivorship. A Participant who is a resident of a jurisdiction that does not
recognize such joint tenancy may have a certificate or brokerage account in
his/her name as tenant in common with his/her spouse, without right of
survivorship. Such designation may be changed by filing notice thereof.
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ARTICLE V.
SPECIAL ADJUSTMENTS
Sec. 5.01 Shares Unavailable. If, on any Exercise Date, the
aggregate funds available for the purchase of Stock would purchase a number of
shares in excess of the number of shares then available for purchase under the
Plan, the following events shall occur:
(a) The number of shares that would otherwise be purchased by
each Participant shall be proportionately reduced on the
Exercise Date in order to eliminate such excess;
(b) The Plan shall automatically terminate immediately after
the Exercise Date as of which the supply of available
shares is exhausted; and
(c) Any amount remaining in the Stock Purchase Account of any
Participant shall be repaid to such Participant.
Sec. 5.02 Anti-Dilution Provisions. The aggregate number of shares
of Stock reserved for purchase under the Plan, as hereinabove provided, and
the calculation of the Purchase Price per share may be appropriately adjusted
to reflect any increase or decrease in the number of issued shares of Stock
resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend, or other increase or decrease
in such shares, if effected without receipt of consideration by the Company.
Any such adjustment shall be made by the Administrative Committee acting with
the consent of, and subject to the approval, of the Board of Directors.
Sec. 5.03 Effect of Certain Transactions. Subject to any required
action by the shareholders, it the Company shall be the surviving or resulting
corporation in any merger or consolidation, any Offering hereunder shall
pertain to and apply to the shares of stock of the Company. However, in the
event of a dissolution or liquidation of the Company, or of a merger or
consolidation in which the Company is not the surviving or resulting
corporation, this Plan and any offering hereunder shall terminate upon the
effective date of such dissolution, liquidation, merger, or consolidation, and
the balance then standing to the credit of each Participant in his/her Stock
Purchase Account shall be returned to him/her.
-8-
<PAGE> 9
ARTICLE VI.
MISCELLANEOUS
Sec. 6.01 Non-Alienation. The right to purchase shares of Stock
under this Plan is personal to the Participant, is exercisable only by the
Participant during his/her lifetime except as hereinafter set forth, and may
not be assigned or otherwise transferred by the Participant. Notwithstanding
the foregoing, there shall be delivered to the executor, administrator or
other personal representative of a deceased Participant such shares of Stock
and such residual balance as may remain in the Participant's Stock Purchase
Account as of the Exercise Date occurring at the close of the Purchase Period
in which the Participant's death occurs, including shares of Stock purchased
as of that date or prior thereto with moneys deposited by the Participant
and/or withheld from the Participant's compensation.
Sec. 6.02 Administrative Costs. The Company shall pay all
administrative expenses associated with the operation of this Plan. No
administrative charges shall be levied against the Stock Purchase Accounts of
the Participants.
Sec. 6.03 Administrative Committee. The Board of Directors shall
designate a committee to be the Administrative Committee of the Plan. The
Administrative Committee shall have the authority and power to administer the
Plan and to make, adopt, construe, and enforce rules and regulations not
inconsistent with the provisions of the Plan. The Administrative Committee
shall adopt and prescribe the contents of all forms required in connection
with the administration of this Plan, including, but not limited to, the
Purchase Agreement, payroll withholding authorizations, withdrawal documents,
and all other notices required hereunder. The Administrative Committee's
interpretations and decisions in respect of this Plan, the rules and
regulations pursuant to which it is operated, and the rights of Participants
hereunder shall be final and conclusive.
Sec. 6.04 Amendment of this Plan. The Board of Directors may, at
any time and from time to time, amend this Plan in any respect, except that no
amendment may
(a) increase the number of shares reserved for purposes of
this Plan;
(b) reduce the Purchase Price per share; or
(c) allow any person who is not an Eligible Employee to become
a Participant
without the approval of the shareholders.
-9-
<PAGE> 10
Sec. 6.05 Expiration and Termination of this Plan. Unless
terminated prior thereto pursuant to Section 5.01 to this Plan, this Plan
shall continue in effect until 11:59 p.m., Pitman, New Jersey time on June 30,
2001, provided, however, that the Board of Directors shall have the right to
terminate this Plan at any time prior thereto without notice to any
Participant. Upon the expiration or termination of this Plan, the balance, if
any, then standing to the credit of each Participant in his/her Stock Purchase
Account shall be refunded to him/her.
Sec. 6.06 Repurchase of Stock. The Company shall not be required
to purchase or repurchase from any Participant any of the shares of Stock that
the Participant acquired under this Plan.
Sec. 6.07 Notice. A Purchase Agreement and any notice that a
Participant files pursuant to the Plan shall be on the form prescribed by the
Administrative Committee and shall be effective only when received by the
Administrative Committee. Delivery of such forms may be made by hand or by
certified mail, sent postage prepaid, to K-Tron International, Inc., Routes 55
and 553, Pitman, New Jersey 08071, Attention: Stock Purchase Plan Committee.
Sec. 6.08 Government Regulation. The Company's obligation to sell
and to deliver the Stock under the Plan is.at all times subject to all
approvals of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Stock.
Sec. 6.09 Headings, Captions, Gender. The headings and captions
herein are for convenience of reference only and shall not be considered as a
part of the text. The masculine shall include the feminine, and vice versa.
Sec. 6.10 Severability of Provisions; Prevailing Law. The
provisions of this Plan shall be deemed severable. In the event any such
provision is determined to be unlawful or unenforceable by a court of
competent jurisdiction or by reason of a change in an applicable statute, this
Plan shall continue to exist as though such provision had never been included
therein. This Plan shall be governed by the laws of the State of New Jersey,
to the extent such laws are not in conflict with or superseded by federal law.
-10-
<PAGE> 1
Exhibit 11-1
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF (LOSS) EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
(dollars in thousands except share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------
December 30, December 31, January 1,
1995 1994 1994
---------------- ---------------- -------------
<S> <C> <C> <C>
Common shares issued at the end of the period 4,175,585 4,150,887 4,119,228
Effect of weighting shares issued during the period (16,585) (23,887) (15,228)
---------------- ---------------- -------------
Weighted average common shares outstanding 4,159,000 4,127,000 4,104,000
Effect of including weighted average of treasury
shares (1,063,000) (1,063,000) (1,063,000)
Effect of including average number of options
outstanding after applying treasury stock method
(includes only those options having a dilutive
effect) -- 15,000 34,000
---------------- ---------------- -------------
Common and common stock equivalent shares used in
computing earnings per share 3,096,000 3,079,000 3,075,000
================ ================ =============
Loss before cumulative effect of accounting changes
$ (9,294) $ (6,826) $ (1,919)
Cumulative effect of accounting changes -- -- 854
---------------- ---------------- -------------
Net loss $ (9,294) $ (6,826) $ (1,065)
================ ================ =============
Loss per share before cumulative effect of
accounting changes $ (3.00) $ (2.22) $ (0.62)
Cumulative effect of accounting changes -- -- 0.27
---------------- ---------------- -------------
Loss per share $ (3.00) $ (2.22) $ (0.35)
================ =============== =============
</TABLE>
<PAGE> 1
Exhibit 21.1
K-Tron International, Inc.
List of Subsidiaries*
<TABLE>
<CAPTION>
State or Jurisdiction
Name of Subsidiary of Incorporation
------------------ ----------------
<S> <C>
K-Tron Investment Co. . . . . . . . . . . . . . . . . . . Delaware
K-Tron America, Inc. . . . . . . . . . . . . . Delaware
K-Tron Asia Pacific Pte Ltd . . . . . . . . . Singapore
K-Tron (Switzerland) Ltd. . . . . . . . . . . Switzerland
K-Tron Deutschland GmbH . . . . . . . . . Germany
K-Tron France S.a.r.l. . . . . . . . . . France
K-Tron Great Britain Ltd. . . . . . . . . England
K-Tron Technologies, Inc. . . . . . . . . . . . . . . . . Delaware
</TABLE>
- --------------
* Pursuant to applicable Securities and Exchange Commission
regulations, the Registrant has omitted those subsidiaries which, when
considered in the aggregate as a single subsidiary, would not have been
considered a significant subsidiary as of the end of fiscal year 1995.
<PAGE> 1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To K-Tron International, Inc.:
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 File Nos. 33-7921, 33-8043, 33-39039,
33-39040, and 2-72898.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa
March 28, 1996
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the registration statements
listed below, of our reports dated March 11, 1994, appearing in the Annual
Report on Form 10-K of K-Tron International, Inc. and subsidiaries for the
fiscal year ended December 30, 1995 and to the reference to us under the
heading "Selected Financial Data".
Registration Statement No. 33-7921 on Form S-8
Registration Statement No. 33-8043 on Form S-8
Registration Statement No. 33-39039 on Form S-8
Registration Statement No. 33-39040 on Form S-8
Registration Statement No. 2-72898 on Form S-8
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 3,239
<SECURITIES> 0
<RECEIVABLES> 21,926
<ALLOWANCES> 1,077
<INVENTORY> 18,534
<CURRENT-ASSETS> 45,222
<PP&E> 44,351
<DEPRECIATION> 26,756
<TOTAL-ASSETS> 69,296
<CURRENT-LIABILITIES> 22,108
<BONDS> 35,004
0
0
<COMMON> 42
<OTHER-SE> 9,379
<TOTAL-LIABILITY-AND-EQUITY> 69,296
<SALES> 110,394
<TOTAL-REVENUES> 110,394
<CGS> 67,658
<TOTAL-COSTS> 67,658
<OTHER-EXPENSES> 49,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,142
<INCOME-PRETAX> (10,444)
<INCOME-TAX> (1,150)
<INCOME-CONTINUING> (9,294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,294)
<EPS-PRIMARY> (3.00)
<EPS-DILUTED> (3.00)
</TABLE>
