<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 [NO FEE REQUIRED] for the fiscal year ended January 1, 2000 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
(State or other jurisdiction of 22-1759452
incorporation or organization) (I.R.S. Employer Identification No.)
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: (856)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. /X/
As of March 24, 2000, the aggregate market value of the Common Stock held by
non-affiliates of the Registrant was $34,979,438. Such aggregate market value
was computed by reference to the closing sale price of the Common Stock as
reported on the Nasdaq National Market on such date. For purposes of making this
calculation only, the Registrant has defined affiliates as including all
directors and executive officers, but excluding any institutional shareholders
owning more than ten percent of the Registrant's Common Stock.
As of March 24, 2000, there were 2,420,155 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 document are incorporated herein by reference:
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. The
Company's operations are conducted primarily through subsidiaries, and its
principal business is the design, production, marketing and servicing of
gravimetric and volumetric feeders and related equipment for the processing of
bulk solids in a wide variety of manufacturing processes. K-Tron feeders control
by mass or weight (gravimetric feeding) or by volume (volumetric feeding) the
rate at which ingredients are fed into the manufacturing processes of numerous
products. The major industries served are plastics, food, chemical, detergent,
pharmaceutical and cement, but the Company's feeders are also used in many other
industries.
In addition to feeding equipment, K-Tron designs, produces, markets and
services pneumatic conveying systems and related equipment for the food,
plastics and pharmaceutical industries, which may be used either in conjunction
with certain K-Tron feeders or on a stand-alone basis, as well as electronic
assemblies.
K-Tron has manufacturing facilities in the United States, Switzerland
and Canada, and its equipment is sold throughout the world. The Company provides
service and spare parts for its feeding and pneumatic conveying equipment on a
worldwide basis, and it offers customer and employee training through its K-Tron
Institute in the United States and similar programs in Switzerland and
elsewhere.
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.
BRAND NAMES
The Company markets its feeding and pneumatic conveying equipment under
three brand names: K-Tron Soder (feeders for other than heavy industries),
Hasler (feeders for heavy industries) and Hurricane (pneumatic conveying
equipment). The Company markets these brands on both an equipment and total
systems basis.
FEEDING EQUIPMENT
The Company's feeders control the flow of materials into a
manufacturing process by mass or weight (gravimetric feeding) or by volume
(volumetric feeding). Feeding equipment manufactured by the Company is used in
many different industries.
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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 the flow rate 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 and other containers, 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 (single or twin screw) or
vibratory feeding mechanism, and 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 in industries other than heavy industries.
K-Tron Soder feeders, including loss-in-weight feeders, weigh belt feeders,
volumetric feeders, flow meters and related controls, are assembled at Company
facilities in the United States and Switzerland in a complete range of feeding
equipment types and sizes for these industries. The plastics, food, chemical,
detergent and pharmaceutical industries are among those served by K-Tron Soder
feeders.
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 process, but Hasler feeders serve heavy industry applications
which generally require high rates of material flow in rugged environments.
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Hasler feeders are used in cement mills, mines and quarries and in the
fertilizer, aluminum, coal, glass and steel industries. They are primarily
assembled at Company facilities in Switzerland and also at Company facilities in
the United States.
PNEUMATIC CONVEYING EQUIPMENT
In 1997, K-Tron acquired Hurricane Pneumatic Conveying Inc., a Canadian
company that manufactures pneumatic conveying systems and related equipment
primarily for the food, plastics and pharmaceutical industries. Hurricane's
brand of products, which include both self-contained and central systems for
powder and pellet applications, may be used in conjunction with certain K-Tron
Soder feeders or on a stand-alone basis. Hurricane products are assembled at
Company facilities in Canada.
K-TRON ELECTRONICS
K-Tron Electronics designs, produces and tests electronic assemblies
for outside customers as well as for use by the Company in its products and also
produces controller hardware for the Company. Its 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 sells its equipment throughout the world to a wide variety
of customers in its addressed markets, ranging from large, global companies to
regional and local businesses. No single customer accounted for more than 10% of
the Company's total revenues in fiscal 1999.
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 the producing of electronic assemblies 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. Feeder units are
completed to specific customer orders, and customization is generally limited to
combining existing mechanical and electronic modules to meet a customer's
application requirements.
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
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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 Company's patents have expired and others will expire at various future
dates. 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 ("R&D") to maintain a
technological leadership position in the feeding equipment industry. R&D focuses
on new products as well as on improvements to existing products. Current efforts
are aimed at developing new products, including new controls and a new belt
feeder, shortening the time spent in the development of such products, recycling
existing product designs into lower cost products and analyzing the
price/performance relationship for both new and existing products.
A centralized R&D approach facilitates the development of common or
compatible products for the Company's three brands. The Company utilizes common
weighing and control technologies for both of its feeder brands.
The Company's research and development expenses were $3,353,000,
$2,980,000 and $2,768,000 in fiscal 1999, 1998 and 1997, respectively.
COMPETITION
The Company is a leading worldwide 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 use of
electronic and digital control technology, its use of digital weighing
technology, its development of mechanical design improvements to its products
and its knowledge of material handling. The Company also relies on other
technological advantages and on its reputation and experience in serving the
needs of its large customer base to maintain a competitive advantage.
The Company entered the pneumatic conveying equipment market late in
1997 with its acquisition of the Hurricane brand. This is a very large market,
and the Company's strategy is to target specific niches within the overall
market and to sell its pneumatic conveying equipment in connection with certain
K-Tron Soder feeders as well as on a stand-alone basis.
K-Tron Electronics was established to design and manufacture electronic
assemblies and controller hardware for use by the Company and also to sell such
assemblies to third parties,
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generally focusing on small production runs for customers in New Jersey, eastern
Pennsylvania and Delaware. The market for electronic assemblies is very large,
and K-Tron Electronics is one of many suppliers to this market in the region
identified.
Strong competition exists in every major market that the Company
serves. Competitors range in size from large corporations (or subsidiaries or
divisions thereof) with a broad line of products to regional organizations which
may specialize in a limited range of products.
BACKLOG
At the end of fiscal 1999, the Company's backlog of unfilled orders was
approximately $17,835,000, compared to a backlog of approximately $22,354,000 at
the end of fiscal 1998, a decrease of 20.2%. Using the end of fiscal 1999
exchange rates, the backlog of orders at the end of fiscal 1998 was
approximately $20,585,000, representing a decrease in the 1999 backlog of
approximately 13.4%. The backlog of orders at the end of fiscal 1999, excluding
the effect of foreign currency exchange translations, was lower than the 1998
year-end backlog primarily due to the shipment of a large order in the fourth
quarter of 1999 that was included in the 1998 year-end backlog.
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 in accordance with customer requests, it is expected that most of
the backlog as of the end of fiscal 1999 will be shipped prior to April 30,
2000.
EMPLOYEES
At the end of fiscal 1999, the Company had 475 employees, of which 292
were located in Europe, 163 in the United States, 13 in Singapore, 4 in Canada
and 3 in China.
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 North America, 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 demonstrations and training. A portion
(approximately 10,000 square feet) of the Company's Pitman facility is leased to
a sheet metal business which is a major supplier to the Company. The Company
also has leased facilities in Blackwood, New Jersey where it produces electronic
assemblies and controller hardware, and in Brantford, Ontario where it assembles
pneumatic conveying equipment.
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In Niederlenz, Switzerland, the Company owns a 60,000 square foot
building where it has manufacturing facilities and a tech center for product
demonstrations, and an adjacent five floor, 40,000 square foot office building
which houses administrative offices, training facilities and research and
development offices. In 1999, one floor of the office building was leased to
third parties. The Company also occupies 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. The lease will not be renewed
upon expiration in October 2000. During fiscal 2000, the sales, sales support
and service activities conducted from that building will be moved to a 4,000
square foot leased facility in Neuchatel, Switzerland, near Colombier, while
engineering, assembly and administration will be relocated to the Company's
facility in Niederlenz, Switzerland. In Niederlenz, the manufacturing area will
be expanded by 6,000 square feet and approximately half of the office building
third-party leased space will be used for administration.
Certain sales and service activities are conducted at Company-owned
facilities in England (30% leased to a third party) and Germany and from leased
office space in Germany, France, Singapore and China.
The Company believes that its present facilities will be sufficient to
meet its needs for the foreseeable future.
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.
This item is not applicable because there were no matters submitted to
a vote of security holders during the fourth quarter of 1999.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Edward B. Cloues, II 52 Chairman of the Board of
Directors and Chief Executive
Officer
Kevin C. Bowen 48 President and Chief Executive
Officer of K-Tron America, Inc.
Lukas Guenthardt 41 Senior Vice President -
Strategic Planning, Product
Development and Marketing
Ronald R. Remick 53 Senior Vice President,
Chief Financial Officer and
Treasurer
Beat Steger 43 Managing Director of K-Tron
(Schweiz) AG ("K-Tron
Switzerland")
</TABLE>
Edward B. Cloues, II has been a director since July 1985 and was most
recently reelected at the 1997 annual meeting of shareholders. He became
Chairman of the Board of Directors and Chief Executive Officer of the Company on
January 5, 1998. From May 1985 until May 1998, Mr. Cloues served as Secretary of
the Company. Prior to joining the Company, Mr. Cloues was a senior partner in
the law firm of Morgan, Lewis & Bockius LLP, which is the Company's general
counsel. He is also a director and non-executive Chairman of the Board of AMREP
Corporation and a director of AmeriQuest Technologies, Inc.
Kevin C. Bowen has been President and Chief Executive Officer of K-Tron
America, Inc. since March 1995. From March 1994 to March 1995, Mr. Bowen was
President of K-Tron North America, the North American sales division of K-Tron
America. Mr. Bowen served as President of K-Tron America from May 1990 to March
1994 and has been with the Company in various other capacities since 1979.
Lukas Guenthardt has been Senior Vice President - Strategic Planning,
Product Development and Marketing of the Company since June 1, 1998. Mr.
Guenthardt was Managing Director of K-Tron Switzerland from July 1995 to June 1,
1998, Managing Director of the Soder Division of K-Tron Switzerland from March
1994 to July 1995, and Director of International
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Research and Development of the Company from July 1992, when he joined K-Tron,
until March 1994.
Ronald R. Remick has been Senior Vice President, Chief Financial
Officer and Treasurer of the Company since May 10, 1999. Prior to joining the
Company, Mr. Remick was Vice President of Planning and Treasury of ARCO Chemical
Company from 1995 to 1998 and Vice President of Planning and Control of ARCO
Chemical Company from 1993 to 1995.
Beat Steger has been Managing Director of K-Tron Switzerland since June
1998. From 1995 to June 1998, Mr. Steger was Director of Operations for K-Tron
Switzerland, and he has been with K-Tron Switzerland in various other capacities
since 1988.
The executive officers are elected or appointed by the Board of
Directors of the Company or its appropriate subsidiary 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 Nasdaq National Market under
the symbol "KTII." The following table sets forth the high and low sales prices
for each quarter in fiscal 1998 and 1999 as quoted on the Nasdaq National
Market.
<TABLE>
<CAPTION>
Fiscal Year 1998 High Low
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . $ 17.938 $ 15.50
Second Quarter. . . . . . . . . . . . . . . $ 21.25 $ 17.00
Third Quarter . . . . . . . . . . . . . . . $ 19.813 $ 17.50
Fourth Quarter . . . . . . . . . . . . . . $ 19.75 $ 16.875
Fiscal Year 1999
First Quarter . . . . . . . . . . . . . . $ 18.625 $ 17.4375
Second Quarter . . . . . . . . . . . . . . $ 18.625 $ 16.75
Third Quarter . . . . . . . . . . . . . . $ 18.125 $ 14.00
Fourth Quarter . . . . . . . . . . . . . . $ 16.50 $ 12.625
</TABLE>
On March 24, 2000, the closing price of a share of K-Tron Common Stock
as reported by the Nasdaq National Market was $15.625.
There were 321 record holders of the Company's Common Stock on March
24, 2000.
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DIVIDEND POLICY
The Company has never paid a cash dividend on its Common Stock, and it
currently intends to retain all future 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. In
addition, one of the Company's credit facilities contains certain restrictions
on the transfer of funds that may restrict the Company's ability to declare
dividends.
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 January 1, 2000, January 2, 1999, January 3, 1998, December 28, 1996
and December 30, 1995 have been audited by Arthur Andersen 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
-------------------------------------------------------------------------------
JAN. 1 JAN. 2 JAN. 3 DEC. 28 PRO FORMA DEC. 30
2000 1999 1998 1996 1995(1) 1995
- --------------------------------------------------- ------------- -------------- ---------- ------------ ------------ ------------
FINANCIAL SUMMARY($000):
<S> <C> <C> <C> <C> <C> <C>
Revenues $87,887 $89,142 $87,152 $89,871 $89,640 $110,394
Income before loss on disposition of
businesses and taxes 8,644 8,718 7,309 5,841 2,717 834
Income (loss) on disposition of businesses (2) -- -- -- -- -- (11,278)
Net income (loss) 6,759 6,593 5,444 4,026 1,408 (9,294)
Total assets 54,770 56,617 54,249 55,330 69,296
Working capital 14,057 11,446 9,423 15,362 23,114
Additions to property, plant and equipment 2,605 2,713 3,000 2,081 370
Depreciation and amortization 3,362 3,158 2,977 3,334 4,844
PER SHARE ($):
Basic net earnings (loss) $2.28 $2.10 $1.72 $1.29 $ .45 $(3.00)
Diluted net earnings (loss) 2.23 2.03 1.69 1.28 .45 (3.00)
Book value 8.61 7.34 5.87 4.21 3.03
CAPITALIZATION ($000):
Shareholders' equity $25,210 $22,274 $18,892 $13,194 $9,421
Long-term debt 7,252 9,638 10,619 20,807 35,004
Short-term debt (3) 4,627 1,534 3,148 861 2,133
Total debt 11,879 11,172 13,767 21,668 37,137
RATIOS:
Return on average shareholders' equity (%) 28.4 32.0 33.9 35.6 10.1 N/A
Return on revenues (%) 7.7 7.4 6.2 4.5 1.6 N/A
Long-term debt to shareholders' equity (%) 28.8 43.3 56.2 157.7 371.6
Current assets to current liabilities 1.6 1.5 1.4 1.8 2.1
Average inventory turnover 4.7 4.7 4.1 3.2 2.9
Average accounts receivable turnover 4.4 5.2 5.5 4.8 4.3
OTHER DATA:
Shares outstanding (000) (4) 2,927 3,033 3,218 3,137 3,113
Shareholders of record (5) 287 304 342 350 383
Number of employees 475 496 491 461 466
</TABLE>
(1) Reflects pro forma adjustments for loss on disposition of businesses
described in (2) below and the discontinuance of the Company's other
Colortronic brand business, all as more fully explained in Note 3 of
the Company's fiscal year 1997 consolidated financial statements, as if
such dispositions and discontinuances had been consummated as of the
beginning of the 1995 fiscal year.
(2) 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.
(3) Including current portion of long-term debt.
(4) Net of treasury stock of 1,063 shares for fiscal years 1995 and 1996,
1,053 for fiscal year 1997, 1,295 for fiscal year 1998 and 1,447 for
fiscal year 1999.
(5) Does not include shareholders whose shares are held in street name.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following provides information which management believes is
relevant to an assessment and understanding of the Company's consolidated
results of operations and financial condition. The discussion should be read in
conjunction with the Company's consolidated financial statements and
accompanying notes. All references to 1999, 1998 and 1997 mean the fiscal years
ended January 1, 2000, January 2, 1999 and January 3, 1998, respectively.
In the fourth quarter of 1999, the Company announced that it would
integrate its Soder and Hasler operations worldwide to form a unified business
serving the bulk material handling markets. The Company took a fourth quarter
1999 charge of $710,000 for this restructuring, of which $450,000 remained in
accrued liabilities at the end of 1999. Implementation of the integration plan
started in the fourth quarter of 1999 and will be completed with the closing of
the Company's Hasler manufacturing facility in Colombier, Switzerland before its
lease expires on October 31, 2000. On or about March 31, 2000, the sales, sales
support and service activities conducted from Colombier will be moved to nearby
leased office space in Neuchatel, Switzerland, while engineering, assembly and
administration will be moved to the Company's existing facility in Niederlenz,
Switzerland on or before June 30, 2000.
On March 23, 2000, the Company completed a tender offer begun on
February 16, 2000 and repurchased 508,000 shares of its Common Stock at $18.00
per share for a total of $9,144,000. The purchase represented approximately
17.3% of the shares then outstanding. The purchase was financed by using
$1,194,000 of available cash, all of a $7,000,000 loan facility obtained from a
U.S. bank on February 4, 2000 and $950,000 from an existing $5,000,000 line of
credit with that same bank. The $7,000,000 loan is payable in equal monthly
installments plus accrued interest over a period of four years commencing May 1,
2000.
RESULTS OF OPERATIONS
In 1999, 1998 and 1997, the Company reported net income of $6,759,000,
$6,593,000 and $5,444,000, respectively.
K-Tron is an international company which derived approximately 59%, 58%
and 59% of its 1999, 1998 and 1997 revenues, respectively, from products
manufactured in, and services performed from, its facilities located outside the
United States, primarily in Europe. As such, the financial position and
performance of the Company is sensitive to changes in foreign currency exchange
rates ("foreign exchange rates"), which can affect both the translation of
financial statement items into U.S. dollars and the impact of transactions where
the revenues and related expenses may initially be accounted for in different
currencies, such
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as sales made from the Company's Swiss manufacturing facilities
in currencies other than the Swiss franc.
The following table sets forth the Company's results of operations
expressed as a percentage of total revenues for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0%
Cost of revenues 55.7 54.9 55.2
--------- --------- ---------
Gross profit 44.3 45.1 44.8
Selling, general and
administrative 30.1 31.2 31.9
Research and development 3.8 3.3 3.2
--------- --------- ---------
Operating income 10.4 10.6 9.7
Interest 0.6 0.8 1.3
--------- --------- ---------
Income before income taxes 9.8% 9.8% 8.4%
========= ========= =========
Year-end backlog (at year-end
1999 foreign exchange rates, in
thousands) $ 17,835 $ 20,585 $ 17,340
========= ========= =========
</TABLE>
As noted above, more than half of the Company's revenues are normally
derived from activities in foreign jurisdictions. Consequently, the Company's
results can be significantly affected by changes in foreign exchange rates,
particularly in U.S. dollar exchange rates with respect to the Swiss franc,
German mark and euro and, to a lesser degree, the British pound sterling, French
franc and other currencies. When the U.S. dollar strengthens against these
currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. When
the U.S. dollar weakens against these currencies, the U.S. dollar value of
non-U.S. dollar-based sales increases. Correspondingly, the U.S. dollar value of
non-U.S. dollar-based costs increases when the U.S. dollar weakens and decreases
when the U.S. dollar strengthens. Overall, the Company typically receives a
majority of its revenues in currencies other than the U.S. dollar and, as such,
benefits from a weaker dollar and is adversely affected by a stronger dollar
relative to major currencies worldwide, especially those identified above.
Accordingly, changes in foreign exchange rates, and in particular a
strengthening of the U.S. dollar, may adversely affect the Company's total
revenues, gross profit and operating income as expressed in U.S. dollars.
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In addition, revenues and income of the Company with respect to
particular transactions may be affected by changes in foreign exchange rates
where sales are made in currencies other than the functional currency of the
facility manufacturing the product subject to the sale, including in particular
the U.S. dollar/Swiss franc (for inter-company transactions) and the euro/Swiss
franc and German mark/Swiss franc (for sales from the Company's Swiss
manufacturing facilities which are made in euros or German marks) exchange
rates. For 1999, 1998 and 1997, the changes in these and the U.S. dollar/euro
and U.S. dollar/German mark exchange rates were as follows:
<TABLE>
<CAPTION>
Fiscal Year
------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C>
Average U.S. dollar equivalent of
one Swiss franc 0.664 0.692 0.689
% change vs. prior year -4.0% NIL
Average U.S. dollar equivalent of
one euro 1.064 N/A N/A
Average U.S. dollar equivalent of
one German mark 0.544 0.570 0.577
% change vs. prior year -4.6% -1.2%
Average Swiss franc equivalent
of one German mark 0.819 0.824 0.837
% change vs. prior year -0.6% -1.6%
Average Swiss franc equivalent of
one euro 1.602 N/A N/A
</TABLE>
Total revenues decreased by $1,255,000 or 1.4% in 1999 compared to
1998. Western European revenues increased and North American revenues decreased
in 1999 compared to 1998. If the average foreign exchange translation rates for
1999 were applied to 1998, revenues would have increased by 1.0% in 1999.
Total revenues increased by $1,990,000 or 2.3% in 1998 when compared to
1997. The increase was due to higher U.S. and European shipments offset by lower
shipments to Asia from the Company's Swiss manufacturing facilities. Foreign
exchange translation rates minimally affected 1998 when compared to 1997.
-15-
<PAGE> 16
Gross profit as a percent of total revenues decreased to 44.3% in 1999
as compared to 45.1% in 1998 and 44.8% in 1997. The reduction in gross margin in
1999 as compared to 1998 and 1997 was primarily due to sales mix.
Selling, general and administrative (SG&A) expense decreased by
$1,320,000 or 4.8% in 1999 compared to 1998, after remaining constant in 1998
when compared to 1997. The decrease in 1999 SG&A was due to the lower foreign
exchange translation rates previously described offset in part by restructuring
costs in Europe of $710,000 relating to the Hasler business. As a percent of
total revenues, SG&A was 30.1% in 1999, 31.2% in 1998 and 31.9% in 1997.
Research and development (R&D) expenditures increased by $373,000 or
12.5% in 1999 and by $212,000 or 7.7% in 1998 as compared to 1998 and 1997,
respectively. R&D expenses increased due to greater emphasis on the development
of new products. The 1999 increase as compared to 1998 was offset in part by
lower foreign exchange translation rates. R&D expense as a percent of total
revenues was 3.8% in 1999, 3.3% in 1998 and 3.2% in 1997.
Interest expense decreased by $219,000 or 30.7% in 1999 and by $419,000
or 37.0% in 1998 as compared to 1998 and 1997, respectively. The 1999 and 1998
decreases from 1998 and 1997, respectively, were primarily due to weighted
average lower debt levels and lower interest rates on some loans. Interest
expense as a percent of total revenues was 0.6% in 1999, 0.8% in 1998 and 1.3%
in 1997.
Income before income taxes was $8,644,000 in 1999, $8,718,000 in 1998
and $7,309,000 in 1997. The changes during the periods were the result of the
items discussed above.
The 1999, 1998 and 1997 provisions for income tax of $1,885,000,
$2,125,000 and $1,865,000, respectively, were related primarily to the Company's
results in the United States and Germany. The effective tax rates were 21.8% for
1999, 24.4% for 1998 and 25.5% for 1997. The Company has New Jersey state and
foreign tax loss carryforwards that total $4,300,000 and $2,600,000,
respectively, which, if realized, would have an estimated future benefit of
$212,000 and $735,000, respectively.
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 decreased by 13.4% at the end of 1999 compared to
1998 (at constant foreign exchange rates), primarily due to the shipment of a
large order in the fourth quarter of 1999 that was included in the 1998 year-end
backlog. The bulk of the year-end 1999 backlog consists of orders that will be
ready for delivery in less than 120 days.
-16-
<PAGE> 17
The Company's backlog increased by 19.6% at the end of 1998 compared to
1997 (at constant foreign exchange rates), primarily due to increased order
volume at the United States and Swiss manufacturing facilities. Whereas in prior
years the bulk of the Company's backlog represented orders that would be ready
for delivery in less than 120 days, this was not the case at the end of 1998.
The year-end 1998 backlog consisted of orders most of which would be delivered
in 1999, but only about 40% of such backlog was expected to be shipped in the
first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
All current loan agreements are with the Company's U.S. and Swiss
manufacturing subsidiaries.
At January 1, 2000, the Company's Swiss subsidiary had 7.0 million
Swiss francs ($4.4 million) in short-term lines of credit with Swiss lenders, of
which $2,543,000 was borrowed under these lines of credit and $1,854,000 was
available for future borrowings. The annual interest rate on the amounts
borrowed at January 1, 2000 was 6.25%. In addition to the short-term lines of
credit, the Company's Swiss subsidiary had mortgage borrowings of 10.3 million
Swiss francs ($6.4 million) with maturities through 2002. These mortgages
carried annual interest rates ranging from 3.25% to 4.0%.
In June 1998, the Company's U.S. manufacturing subsidiary refinanced
its 20-year mortgage with a U.S. lender for $2,700,000 at an annual interest
rate of 7.625%. Monthly principal and interest payments are $25,143. Every five
years the bank has the right to review the mortgage and adjust its terms,
including due dates and interest rates, with the first such right occurring in
June 2003. At January 1, 2000, the amount borrowed under the mortgage was
$2,562,000.
Also in June 1998, the Company's U.S. manufacturing subsidiary entered
into a two-year secured revolving credit facility with a U.S. lender that
provides for a maximum borrowing of $5,000,000, subject to certain borrowing
limitations based upon inventory and accounts receivable levels. During 1999,
this credit facility was extended one year through July 2001. The annual
interest rate as of January 1, 2000 was 8.5% (prime rate as published). At
January 1, 2000, there were no outstanding borrowings under the facility, and
$5,000,000 was available for future borrowings.
On March 20, 2000, the Company borrowed $7,000,000 from a loan facility
in the same amount that had been entered into with a U.S. bank on February 4,
2000 and used these funds, together with $1,194,000 of available cash and a
borrowing of $950,000 on the $5,000,000 revolving credit facility referred to
above, to repurchase 508,000 shares of its Common Stock. The $7,000,000 loan is
payable in equal monthly installments of principal plus accrued interest over a
four year period and is secured by liens on the same collateral securing other
loans from the same U.S. bank. One-half of the loan bears interest at the fixed
rate of 8.23% for the first
-17-
<PAGE> 18
two years and the other half is subject to a variable rate of interest equal to
one month LIBOR plus 1.85 percent (7.66% at the date of borrowing).
The Company's capitalization at the end of 1999, 1998 and 1997 is set
forth below:
(Dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Short-term debt, including current
portion of long-term debt $ 4,627 $ 1,534 $ 3,148
Long-term debt 7,252 9,638 10,619
------- ------- -------
Total debt 11,879 11,172 13,767
Shareholders' equity 25,210 22,274 18,892
------- ------- -------
Total debt and shareholders' equity $37,089 $33,446 $32,659
======= ======= =======
(total capitalization)
Percent total debt to total capitalization 32% 33% 42%
Percent long-term debt to equity 29% 43% 56%
Percent total debt to equity 47% 50% 73%
</TABLE>
Total debt increased in 1999 and decreased in 1998 by $707,000 and
$2,595,000, respectively. Total debt without the effect of foreign currency
translation increased in 1999 and decreased in 1998 by $1,961,000 and
$3,031,000, respectively.
At the end of 1999 and 1998, working capital was $14,057,000 and
$11,446,000, respectively, and the ratio of current assets to current
liabilities was 1.65 and 1.49, respectively. Working capital increased in 1999
primarily due to funds provided from operations.
In 1999, 1998 and 1997, the Company utilized internally generated funds
to meet its working capital needs while in 1999 it also used short-term
borrowings to meet its needs.
Net cash provided by operating activities was $2,995,000 in 1999,
$7,615,000 in 1998 and $12,594,000 in 1997. The decrease in operating cash flow
since 1997 was primarily the result of an increase in accounts receivable and
inventory and a reduction in accounts payable and accrued expenses. In 1999 and
1998, net income and depreciation and amortization were the principal components
of cash provided by operating activities.
The average number of days to convert accounts receivable to cash was
82 days in 1999 compared to 70 days in 1998 and 66 days in 1997. The average
number of days to
-18-
<PAGE> 19
convert inventory into accounts receivable was 78 days in 1999 and 1998 compared
to 88 days in 1997.
Net cash used in investing activities was $2,804,000, $2,835,000 and
$3,955,000 in 1999, 1998 and 1997, respectively. Capital expenditures were
$2,605,000, $2,713,000, and $3,000,000 in 1999, 1998 and 1997, respectively.
Funds used in 1997 to acquire a Canadian company were $783,000. The Company has
a year 2000 commitment for capital of approximately $1,000,000 associated with
its Hasler brand restructuring. In addition, the Company expects to make capital
expenditures necessary to maintain its facilities and operations in a normal
fashion and, where required, to further its growth and other business
objectives.
Cash used in financing activities in 1999 and 1998 was primarily used
for the purchase of 166,400 shares in 1999 and 250,000 shares in 1998 of the
Company's Common Stock as well as for debt reduction in 1998 and 1997. In 1999,
cash was obtained from operations as well as from short-term borrowings. In 1998
and 1997, cash was primarily obtained from the cash flow provided by operations.
Cash and short-term investments decreased to $3,093,000 at the end of 1999 from
$3,220,000 a year earlier.
Changes in foreign exchange rates, particularly with respect to the
Swiss franc and German mark, caused a translation decrease in shareholders'
equity of $1,754,000 in 1999 following an increase of $574,000 in 1998 and a
decrease of $560,000 in 1997.
EUROPEAN MONETARY UNION - EURO
On January 1, 1999, the eleven member countries of the European Union,
which does not include Switzerland, established fixed conversion rates between
their existing sovereign currencies, and adopted the euro as their new common
legal currency. As of that date, the euro began trading on currency exchanges,
but the legacy currencies will remain legal tender in the participating
countries for a transition period between January 1, 1999 and January 1, 2002.
During the transition period, non-cash payments can be made in euros,
and parties can elect to pay for goods and services and transact business using
either the euro or a legacy currency. Between January 1, 2002 and July 1, 2002,
the participating countries will introduce euro notes and coins and withdraw all
legacy currencies so that they will no longer be available.
The Company has not encountered significant difficulties with the euro.
Since the Company's sales in Europe have been from two manufacturing plants
located in Switzerland, and since some sales are made in Swiss francs and others
in local currencies, the relationship of the euro to the Swiss franc is
important to the Company, just as the relationship of the Swiss franc and German
mark has been important in the past.
-19-
<PAGE> 20
The euro conversion may affect cross-border competition by creating
cross-border price transparency. The Company regularly assesses its pricing and
marketing strategies in order to ensure that it remains competitive in the
European market. The Company also implemented a new information technology
system in Europe on January 4, 1999 to allow for transactions to take place in
both the legacy currencies and the euro and also for the eventual elimination of
the legacy currencies. The Company's foreign currency exchange risk in
participating countries may be reduced as the legacy currencies are converted to
the euro. The Company will continue to evaluate issues involving the
introduction of the euro, including accounting, tax and legal issues. Based on
current information and the Company's current assessment, the Company does not
believe that the euro conversion has had or will have a material adverse affect
on its business, results of operations, cash flows or financial condition.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a safe harbor for forward-looking statements made by or on behalf of
the Company. The Company and its representatives may from time to time make
written or oral statements that are "forward-looking," including statements
contained in this report and other filings with the Securities and Exchange
Commission, reports to the Company's shareholders and news releases. All
statements that express expectations, estimates, forecasts and projections are
forward-looking statements within the meaning of the Act. In addition, other
written or oral statements which constitute forward-looking statements may be
made by or on behalf of the Company. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts,"
"may," "should," variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in or suggested by such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
A wide range of factors could materially affect future developments and
the performance of the Company, including the following: (i) increasing price
and product/service competition by domestic and foreign competitors, including
new entrants; (ii) the mix of products/services sold by the Company; (iii) rapid
technological changes and developments and the Company's ability to continue to
introduce competitive new products on a timely and cost-effective basis; (iv)
changes in U.S. and global financial and currency markets, including significant
interest rate and foreign currency exchange rate fluctuations; (v) protection
and validity of patent and other intellectual property rights, both of the
Company and its competitors; (vi) the cyclical nature of the Company's business
as a capital goods supplier; (vii) possible future litigation and governmental
proceedings; (viii) the availability of financing and financial resources in the
amounts, at the times and on the terms required to support the Company's future
business, including capacity expansions and possible acquisitions; (ix) the loss
of key customers,
-20-
<PAGE> 21
employees or suppliers; (x) the failure to carry out marketing and sales plans;
(xi) the failure successfully to integrate acquired businesses, if any, into the
Company without substantial costs, delays or other operational or financial
problems; (xii) economic, business and regulatory conditions and changes which
may affect the level of new investments and purchases made by customers,
including general economic and business conditions that are less favorable than
expected; and (xiii) domestic and international political and economic
conditions.
This list of factors that may affect future performance and the
accuracy of forward-looking statements is illustrative, but it is by no means
exhaustive. Accordingly, all forward-looking statements should be evaluated with
the understanding of their inherent uncertainty.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
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.
ITEM 9. CHANGE 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 and compliance with Section 16(a)
of the Securities Exchange Act of 1934 called for by Item 10 of Form 10-K will
be set forth under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" 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 required information as to executive officers is set forth in Part
I hereof and incorporated herein by reference.
-21-
<PAGE> 22
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by Items 11 and 12 of Form 10-K will be set
forth under the captions "Executive Compensation" and "Security Ownership of
Certain Beneficial Owners and Management," 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. Financial Statements listed in the
accompanying Index to Financial Statements and the Financial Statement Schedule
appearing on page F-1 are filed as part of this annual report on Form 10-K.
2. Financial Statement Schedule. The Financial Statement
Schedule listed in the accompanying Index to Financial Statements and the
Financial Statement Schedule appearing on page F-1 are filed as part of this
annual report on Form 10-K.
3. Exhibits. (see (c) below).
(b) Reports on Form 8-K.
The Company did not file a report on Form 8-K during the
quarter ended January 1, 2000.
(c) Exhibits.
The following is a list of exhibits filed as part of this
annual report on Form 10-K. Where so indicated, 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.
-22-
<PAGE> 23
3.1 Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1
to the Company's annual report on Form 10-K for the year ended January
2, 1999 ("1998 Form 10-K") and incorporated herein by reference)
3.2 By-Laws, as amended (Filed as Exhibit 3.2 to the Company's annual
report on Form 10-K for the year ended January 1, 1994 and incorporated
herein by reference)
4.1 Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to
the 1998 Form 10-K and incorporated herein by reference)
4.2 Rights Agreement dated as of October 3, 1991 with First Interstate Bank
of Arizona, N.A., as Rights Agent (Filed as Exhibit 1 to the Company's
report on Form 8-K dated October 3, 1991 and incorporated herein by
reference)
4.3 Amendment, dated as of March 6, 2000, to Rights Agreement, dated as of
October 3, 1991, with American Stock Transfer & Trust Company, as
successor Rights Agent
10.1 1986 Stock Option Plan, as amended and restated (Filed as Exhibit
10.2.1 to the to the Company's annual report on Form 10-K for the year
ended January 4, 1992 ("1991 Form 10-K") and incorporated herein by
reference)**
10.2 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit
10.2.4 to the Company's annual report on Form 10-K for the year ended
December 31, 1988 and incorporated herein by reference)**
10.3 K-Tron International, Inc. 1996 Equity Compensation Plan, as amended
(Filed as Exhibit 10.3 to the 1998 Form 10-K and incorporated herein by
reference)**
10.4 K-Tron International, Inc. Amended and Restated Employee Stock Purchase
Plan (Filed as Exhibit 10.2 to the Company's report on Form 10-Q for
the quarterly period ended September 28, 1996 and incorporated herein
by reference)**
10.5 Amended and Restated K-Tron International, Inc. Profit-Sharing and
Thrift Plan**
10.6 K-Tron International, Inc. Supplemental Executive Retirement Plan
(Filed as Exhibit 10.2.7 to the 1991 Form 10-K and incorporated herein
by reference)**
10.7 Employment Agreement dated as of October 6, 1997 by and between K-Tron
International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to
the
-23-
<PAGE> 24
Company's report on Form 10-Q for the quarterly period ended September
27, 1997 and incorporated herein by reference)**
10.8 Amendment No. 1 to Employment Agreement dated October 5, 1998 by and
between K-Tron International, Inc. and Edward B. Cloues, II (Filed as
Exhibit 10.1 to the Company's report on Form 10-Q for the quarterly
period ended October 3, 1998 and incorporated herein by reference)**
10.9 Employment Agreement dated as of May 7, 1999 by and between K-Tron
International, Inc. and Ronald R. Remick**
10.10 Form of Employment Agreement with certain employees of the Company,
which are identical in all material respects except for the employee,
amount of salary to be paid and date of execution (Filed as Exhibit
10.12 to the Company's annual report on Form 10-K for the year ended
January 3, 1998 and incorporated herein by reference)**
10.11 Form of Indemnification Agreement with certain directors and officers
of the Company listed on Schedule 10.11, which are identical in all
material respects except for the director or officer who is a party
thereto and the date of execution**
10.12 Leasing Agreement dated October 30, 1990 between CS Immobilien Leasing
AG, Zurich and Hasler Freres SA, with limited guaranty of K-Tron Soder
AG (Filed as Exhibit 10.1(b) to the Company's report on Form 8-K dated
October 30, 1990 and incorporated herein by reference)
10.13 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 (Filed as
Exhibit 10.3.3 to the Company's annual report on Form 10-K for the year
ended December 29, 1990 and incorporated herein by reference)
10.14 Note dated February 4, 2000 from K-Tron America, Inc. in favor of The
Bank of Gloucester County (Filed as Exhibit (b)(1) to Amendment No.1 to
the Company's Tender Offer Statement on Schedule TO dated February 16,
2000 and incorporated herein by reference)
10.15 Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of
The Bank of Gloucester County
10.16 Loan Modification Agreement dated June 24, 1998 between K-Tron
America, Inc and the Bank of Gloucester County
-24-
<PAGE> 25
10.17 Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank
of Gloucester County
10.18 Loan Modification Agreement dated as of July 22, 1999 between K-Tron
America, Inc. and The Bank of Gloucester County
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP
24.1 Power of Attorney (Included on Signature Page)
27.1 Financial Data Schedule
- ----------------
** Management contract or compensatory plan or arrangement required to be
filed or incorporated as an exhibit
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 RONALD R. REMICK, SENIOR 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, 2000 By /s/ Edward B. Cloues, II
-------------------------------
Edward B. Cloues, II
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 Edward
B. Cloues, II, Chairman and Chief Executive Officer of K-Tron International,
Inc., and Ronald R. Remick, Senior 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>
Signature Date Capacity
- --------- ---- --------
<S> <C> <C>
/s/ Edward B. Cloues, II March 28, 2000 Chief Executive Officer
- ---------------------------- (principal executive
Edward B. Cloues, II officer) and Chairman of
the Board of Directors
/s/ Ronald R. Remick March 28, 2000 Senior Vice President,
- ---------------------------- Chief Financial Officer
Ronald R. Remick and Treasurer (principal
financial officer)
/s/ Alan R. Sukoneck March 28, 2000 Vice President, Chief
- ---------------------------- Accounting and Tax
Alan R. Sukoneck Officer (principal
accounting officer)
</TABLE>
-26-
<PAGE> 27
<TABLE>
<CAPTION>
Signature Date Capacity
- --------- ---- --------
<S> <C> <C>
/s/ Leo C. Beebe March 28, 2000 Director
- ------------------------------
Leo C. Beebe
/s/ Norman Cohen March 28, 2000 Director
- ------------------------------
Norman Cohen
/s/ Robert A. Engel March 28, 2000 Director
- ------------------------------
Robert A. Engel
/s/ Richard J. Pinola March 28, 2000 Director
- ------------------------------
Richard J. Pinola
/s/ Hans-Jurg Schurmann March 28, 2000 Director
- ------------------------------
Hans-Jurg Schurmann
/s/ Jean Head Sisco March 28, 2000 Director
- ------------------------------
Jean Head Sisco
</TABLE>
-27-
<PAGE> 28
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JANUARY 1, 2000
TOGETHER WITH AUDITORS' REPORT
<PAGE> 29
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES:
Consolidated Balance Sheets - January 1, 2000 and January 2, 1999 F-3
Consolidated Statements of Operations for the Fiscal Years Ended January 1,
2000, January 2, 1999 and January 3, 1998 F-5
Consolidated Statements of Changes in Shareholders' Equity for the Fiscal
Years Ended January 1, 2000, January 2, 1999 and January 3, 1998 F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended January 1,
2000, January 2, 1999 and January 3, 1998 F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9
SCHEDULE:
Schedule II--Valuation Reserves S-1
</TABLE>
F-1
<PAGE> 30
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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 January 1,
2000 and January 2, 1999, and the related consolidated statements of operations,
changes in shareholders' equity, and cash flows for each of the three fiscal
years in the period ended January 1, 2000. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
this schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 January 1, 2000 and January 2, 1999,
and the results of their operations and their cash flows for each of the three
fiscal years in the period ended January 1, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements as of January 1, 2000 and for each of the three fiscal
years in the period ended January 1, 2000, is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, fairly states 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, Pennsylvania
February 16, 2000
F-2
<PAGE> 31
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(dollars in thousands)
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,093 $ 3,220
Accounts receivable (less allowance for doubtful
accounts of $924 and $1,286) 20,500 19,034
Inventories 10,193 10,743
Deferred income taxes 473 819
Prepaid expenses and other current assets 1,516 1,177
----------- -----------
Total current assets 35,775 34,993
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation of $27,307 and $27,066 14,611 16,215
PATENTS, net of accumulated amortization of $554
and $479 879 751
GOODWILL, net of accumulated amortization
of $4,062 and $4,113 3,486 4,454
OTHER ASSETS 19 204
----------- -----------
Total assets $ 54,770 $ 56,617
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 32
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(dollars in thousands except share data)
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ 2,543 $ 254
Current portion of long-term debt 2,084 1,280
Accounts payable 5,691 6,965
Accrued expenses and other current liabilities 3,200 4,034
Accrued payroll 2,713 4,307
Accrued commissions 1,971 2,609
Customer advances 1,134 1,810
Accrued warranty 1,294 1,055
Income taxes payable 1,088 1,233
--------------- ---------------
Total current liabilities 21,718 23,547
--------------- ---------------
LONG-TERM DEBT, net of current portion 7,252 9,638
--------------- ---------------
DEFERRED INCOME TAXES 303 423
--------------- ---------------
OTHER NONCURRENT LIABILITIES 287 735
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Note 11)
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value, 50,000 shares -- --
authorized; none issued
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 950,000 shares
authorized; none issued -- --
Common stock, $.01 par value; 50,000,000 shares authorized; 4,374,505 and
4,328,555 shares issued 44 43
Paid-in capital 16,103 15,505
Retained earnings 28,598 21,839
Cumulative translation adjustment (1,946) (192)
--------------- ---------------
42,799 37,195
Treasury stock, 1,447,350 and 1,295,450 shares, at cost (17,589) (14,921)
--------------- ---------------
Total shareholders' equity 25,210 22,274
--------------- ---------------
Total liabilities and shareholders' equity $ 54,770 $ 56,617
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 33
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share data)
<TABLE>
<CAPTION>
For the Fiscal Year Ended
January 1, January 2, January 3,
2000 1999 1998
<S> <C> <C> <C>
REVENUES $ 87,887 $ 89,142 $ 87,152
COST OF REVENUES 48,931 48,946 48,121
--------------- --------------- ---------------
Gross profit 38,956 40,196 39,031
--------------- --------------- ---------------
OPERATING EXPENSES:
Selling, general and administrative 26,464 27,784 27,821
Research and development 3,353 2,980 2,768
--------------- --------------- ---------------
29,817 30,764 30,589
--------------- --------------- ---------------
Operating income 9,139 9,432 8,442
INTEREST EXPENSE 495 714 1,133
--------------- --------------- ---------------
Income before income taxes 8,644 8,718 7,309
INCOME TAX PROVISION 1,885 2,125 1,865
--------------- --------------- ---------------
Net income $ 6,759 $ 6,593 $ 5,444
============== ============== ==============
BASIC EARNINGS PER SHARE $ 2.28 $ 2.10 $ 1.72
============= ============= =============
DILUTED EARNINGS PER SHARE $ 2.23 $ 2.03 $ 1.69
============= ============= =============
AVERAGE COMMON SHARES OUTSTANDING 2,962,000 3,133,000 3,162,000
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 3,026,000 3,243,000 3,227,000
</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 CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Cumulative Treasury Stock
Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 29, 1996 4,200,328 $42 $14,120 $ 9,802 $ (206) 1,062,950 $ (10,564) $13,194
Comprehensive income-
Net income -- -- -- 5,444 -- -- -- 5,444
Translation adjustments -- -- -- -- (560) -- -- (560)
-------
Total comprehensive
income 4,884
-------
Issuance of stock 70,972 1 713 -- -- (10,000) 100 814
--------- --- ------- ------- ------- ---------- ---------- -------
BALANCE,
JANUARY 3, 1998 4,271,300 43 14,833 15,246 (766) 1,052,950 (10,464) 18,892
Comprehensive income-
Net income -- -- -- 6,593 -- -- -- 6,593
Translation adjustments -- -- -- -- 574 -- -- 574
-------
Total comprehensive
income 7,167
-------
Issuance of stock 57,255 -- 672 -- -- (7,500) 74 746
Purchase of treasury shares -- -- -- -- -- 250,000 (4,531) (4,531)
--------- --- ------- ------- ------- ---------- ---------- -------
BALANCE,
JANUARY 2, 1999 4,328,555 43 15,505 21,839 (192) 1,295,450 (14,921) 22,274
---------- --- ------- ------- ------- ---------- ---------- -------
Comprehensive income-
Net income -- -- -- 6,759 -- -- -- 6,759
Translation adjustments -- -- -- -- (1,754) -- -- (1,754)
-------
Total comprehensive
income 5,005
-------
Issuance of stock 45,950 1 598 -- -- (14,500) 168 767
Purchase of treasury shares -- -- -- -- -- 166,400 (2,836) (2,836)
---------- --- ------- ------- ------- ---------- ---------- -------
BALANCE,
JANUARY 1, 2000 4,374,505 $44 $16,103 $28,598 $(1,946) 1,447,350 $ (17,589) $25,210
========== === ======= ======= ======= ========== ========== =======
</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 CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
For the Fiscal Year Ended
January 1, January 2, January 3,
2000 1999 1998
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,759 $ 6,593 $ 5,444
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 3,362 3,158 2,977
Amortization of deferred gain on
sale/leaseback transaction (367) (374) (380)
Deferred income taxes 226 81 (321)
Changes in assets and liabilities--
Accounts receivable, net (3,298) (3,113) 250
Inventories (299) (442) 2,991
Prepaid expenses and other
current assets (495) (53) 88
Other assets 170 229 (532)
Accounts payable (786) 1,314 (286)
Accrued expenses and other
current liabilities (2,571) 285 1,928
Accrued warranty 394 99 112
Income taxes payable (100) (162) 323
-------- -------- --------
Net cash provided by
operating activities 2,995 7,615 12,594
-------- -------- --------
INVESTING ACTIVITIES:
Business acquired -- -- (783)
Capital expenditures (2,605) (2,713) (3,000)
Investment in patents (199) (122) (172)
-------- -------- --------
Net cash used in investing activities (2,804) (2,835) (3,955)
-------- -------- --------
</TABLE>
(Continued)
F-7
<PAGE> 36
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Continued)
<TABLE>
<CAPTION>
For the Fiscal Year Ended
January 1, January 2, January 3,
2000 1999 1998
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net borrowings (payments) under notes payable to banks $ 2,511 $ (1,142) $ (6,925)
Proceeds from issuance of long-term debt -- 1,005 689
Principal payments on long-term debt (550) (2,894) (867)
Purchase of treasury stock (2,836) (4,531) --
Proceeds from issuance of common stock 767 746 814
--------------- --------------- ---------------
Net cash used in
financing activities (108) (6,816) (6,289)
--------------- --------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS (210) 102 (275)
--------------- --------------- ---------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (127) (1,934) 2,075
CASH AND CASH EQUIVALENTS:
Beginning of year 3,220 5,154 3,079
--------------- --------------- ---------------
End of year $ 3,093 $ 3,220 $ 5,154
=============== =============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 496 $ 772 $ 1,182
=============== =============== ===============
Income taxes $ 1,663 $ 2,275 $ 1,951
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 37
K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS:
K-Tron International, Inc. and its subsidiaries (the "Company") design, produce,
market, and service gravimetric and volumetric feeders, pneumatic conveying
systems and related equipment for processing bulk solids in a wide variety of
manufacturing processes. The Company has manufacturing facilities in the United
States, Switzerland and Canada, and its equipment is sold throughout the world.
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.
Fiscal Year
The Company's fiscal year is reported on a fifty-two/fifty-three week period.
Fiscal years ended January 1, 2000 (referred to herein as "1999") and January 2,
1999 (referred to herein as "1998") each include fifty-two weeks, while the
fiscal year ended January 3, 1998 (referred to herein as "1997") includes
fifty-three weeks.
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.
Property, Plant and Equipment
Property, plant and equipment is carried at cost and is depreciated 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; and 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.
F-9
<PAGE> 38
Patents
Patents are stated at cost less accumulated amortization. The costs of patents
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.
Goodwill
Excess of cost over net assets acquired is amortized on a straight-line basis
over 15 years. Subsequent to an 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.
Income Taxes
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 enacted tax laws and rates.
Revenue Recognition
Revenue is recognized when goods are shipped.
Research and Development
Expenditures for research, development and engineering of products are expensed
as incurred.
Foreign Currency
Assets and liabilities denominated in foreign currencies are translated to U.S.
dollars at current rates of exchange at year-end. Revenues and expenses are
translated at average rates prevailing during the year. The Company incurred
foreign currency transaction gains of approximately $98,000, $4,000 and $177,000
for 1999, 1998 and 1997, respectively. Translation gains and losses are recorded
as a separate component of shareholders' equity.
Fair Value Disclosures
The carrying value of financial instruments such as cash, accounts receivables
and payables and other current assets and liabilities approximates 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 their 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.
F-10
<PAGE> 39
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.
New Accounting Pronouncements
In fiscal 2001, the Company is required to adopt the provisions of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company does
not anticipate that the adoption will have a material impact on the consolidated
financial statements.
3. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
(in thousands)
<S> <C> <C>
Components $ 8,299 $ 8,504
Work-in-process 1,755 1,820
Finished goods 139 419
--------------- ---------------
$ 10,193 $ 10,743
=============== ===============
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
(in thousands)
<S> <C> <C>
Land $ 1,064 $ 1,215
Buildings and improvements 15,797 17,240
Automotive equipment 686 676
Machinery and equipment 12,441 12,169
Furniture and fixtures 11,930 11,981
--------------- ---------------
41,918 43,281
Less- Accumulated depreciation
and amortization (27,307) (27,066)
--------------- ---------------
$ 14,611 $ 16,215
=============== ===============
</TABLE>
Depreciation of property, plant and equipment for 1999, 1998 and 1997 was
$2,760,000, $2,345,000 and $2,457,000, respectively.
F-11
<PAGE> 40
5. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT:
At January 1, 2000, the Company's Swiss subsidiary had 7.0 million Swiss francs
($4.4 million) in short-term lines of credit with Swiss lenders, of which
$2,543,000 was borrowed under these lines of credit with $1,854,000 available
for future borrowings. The annual interest rate on the amounts borrowed at
January 1, 2000 was 6.25%. In addition to the short-term lines of credit, the
Company's Swiss subsidiary had mortgage borrowings of 10.3 million Swiss francs
($6.4 million) with maturities through 2002 and with annual interest rates
ranging from 3.25% to 4.0% from its Swiss lenders.
In June 1998, the Company's U.S. manufacturing subsidiary refinanced its 20-year
mortgage with a U.S. lender for $2.7 million at an annual interest rate of
7.625%. Monthly principal and interest payments are $25,143. The lender has the
right to review and adjust the terms of the mortgage every five years.
Also in June 1998, the U.S. manufacturing subsidiary entered into a two-year
secured revolving credit facility with a U.S. lender that provides for a maximum
borrowing of $5.0 million, subject to certain maximum borrowing limitations
based upon inventory and receivable levels. During fiscal 1999, this credit
facility was extended one year through July 2001. The annual interest rate as of
January 1, 2000 was 8.5%. As of January 1, 2000, there were no outstanding
borrowings under this credit facility, and $5.0 million was available for future
borrowings.
Under the terms of the U.S. mortgage and revolving credit facilities, fixed
assets with a book value of $2,870,000, and accounts receivable and inventory
with a book value of $13,681,000 are pledged as collateral. In addition, fixed
assets with a book value of $4,175,000 are pledged as collateral under the Swiss
mortgages.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
(in thousands)
<S> <C> <C> <C>
U.S. mortgage, interest at 7.625% per annum $ 2,562 $ 2,644
Non-U.S. mortgages, interest at market rates (3.25% to 4.0% at
January 1, 2000 and 2.95% to 5.0% at January 2, 1999) 6,444 7,542
Other 330 732
--------------- ---------------
9,336 10,918
Less- Current portion (2,084) (1,280)
--------------- ---------------
$ 7,252 $ 9,638
=============== ===============
</TABLE>
F-12
<PAGE> 41
Future annual payments required on long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
2000 $ 2,084
2001 1,772
2002 3,266
2003 2,214
2004 --
Thereafter --
-----------
$ 9,336
===========
</TABLE>
6. EMPLOYEE BENEFIT PLANS:
The Company has a profit-sharing and thrift plan (the "Plan") for all U.S.
employees who have worked for the Company for at least six months 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 five-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 authorized matching
contributions of 100% of the first 6% of participants' compensation for 1999 and
1997, and 110% of the first 6% of participants' compensation for 1998. The Board
of Directors did not authorize any 1999, 1998 or 1997 contribution to the
profit-sharing portion of the Plan.
Substantially all foreign employees participate in defined contribution group
pension plans. Contributions are paid by the employee and employer at
percentages that vary according to age and other factors.
The expense associated with the thrift plan for 1999, 1998 and 1997 was
$405,000, $443,000 and $355,000, respectively. The foreign pension expense for
1999, 1998 and 1997 was $1,008,000, $1,231,000 and $1,066,000, 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, not to exceed $25,000 in stock in any year. Under this plan, the Company
issued 15,706 shares of common stock at an average price of $13.25 in 1999,
14,241 shares of common stock at an average price of $14.92 in 1998 and 17,468
shares of common stock at an average price of $10.72 in 1997.
F-13
<PAGE> 42
7. 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 8).
The Board of Directors has not determined the rights on the remaining 950,000
shares of the authorized preferred stock as of January 1, 2000.
The Company had a stock option plan for nonemployee directors (the "1988 plan")
which expired in November 1998, but under which option grants remain
outstanding. The plan provided that each eligible director was 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 could be issued under the plan was 100,000. These options had a term of
ten years and became exercisable in four equal annual installments beginning on
the date of the grant.
The Company's 1986 Stock Option Plan, as amended (the "1986 plan"), expired in
January 1996, but option grants under the 1986 plan remain outstanding. Key
employees of and consultants to the Company could be granted options to purchase
shares of the Company's common stock. These options could be either incentive
stock options or nonqualified stock options. The Stock Option Committee under
the 1986 plan determined the term of each option, but no option could be
exercisable more than ten years from the date the option was granted. The Stock
Option Committee also determined 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 was
granted.
In 1996, the Company adopted the 1996 Equity Compensation Plan (the "1996
plan"), with features similar to the 1986 plan, except that the maximum number
of shares that may be issued is 450,000. The 1996 plan was amended in 1998,
increasing the maximum number of shares that may be issued to 600,000, and
allowing nonemployee directors to receive grants thereunder at fair market
value. The 1996 plan is administered by a committee selected by the Board of
Directors.
F-14
<PAGE> 43
A summary of the Company's stock option and restricted stock grant activity for
the plans referred to above for the three fiscal years ended January 1, 2000 is
as follows:
<TABLE>
<CAPTION>
Average
Price
Outstanding Per Share Available
----------- --------- ---------
<S> <C> <C> <C>
BALANCE,
DECEMBER 29, 1996 248,684 500,000
Granted 100,000 $ 14.00 (100,000)
Canceled (1,500) 8.00 --
Exercised (56,150) 9.37 --
BALANCE,
JANUARY 3, 1998 291,034 400,000
1996 plan amendment 150,000
Granted 105,000 17.75 (105,000)
Canceled (5,850) 9.33 1,000
Exercised (43,550) 10.07 --
Restricted stock granted 20,000 -- (20,000)
Restricted stock exercised (7,500) -- --
1988 plan expiration -- -- (50,000)
------- -------
BALANCE,
JANUARY 2, 1999 359,134 376,000
Granted 59,500 17.80 (59,500)
Canceled (15,534) 11.47 5,334
Exercised (32,933) 9.15 --
Restricted stock granted 2,000 -- (2,000)
Restricted stock exercised (14,500) -- --
------- -------
BALANCE,
JANUARY 1, 2000 357,667 319,834
======= =======
</TABLE>
As of January 1, 2000, thirty-one employees held options under the 1986 plan for
an aggregate of 72,600 shares at exercise prices from $6.25 to $12.50 with a
weighted average price of $8.22. These options expire in varying amounts through
the year 2005. As of January 1, 2000, thirty-nine employees and six nonemployee
directors held options under the 1996 plan for an aggregate of 256,167 shares at
exercise prices from $14.00 to $19.00 with a weighted average price of $16.33.
These options expire through 2009. As of January 1, 2000, under the 1988 plan,
three directors held options for an aggregate of 28,900 shares at exercise
prices from $9.25 to $11.00 with a weighted average price of $10.18. These
options expire in varying amounts through the year 2004.
In July 1998, the Company repurchased 250,000 shares of its common stock,
representing approximately 7.7% of its then outstanding common stock. The
purchase price was $4,531,250, or $18.125 a share.
During fiscal 1999, the Company repurchased an additional 166,400 shares of its
common stock in three separate transactions, representing approximately 5.5% of
its outstanding common stock as of the beginning of the fiscal year. The total
purchase price was $2,836,000, or an average of $17.04 a share.
F-15
<PAGE> 44
On February 16, 2000, the Company commenced a tender offer to purchase for cash
up to 450,000 shares of its common stock, representing approximately 15.4% of
the Company's then outstanding shares, for $18.00 per share. The tender offer
will expire, unless extended, at 5:00 p.m., New York City time, on Friday, March
17, 2000.
The share repurchase will be financed partly with available cash, but primarily
by using a new $7.0 million credit facility that was obtained from a U.S. bank
on February 4, 2000.
Pro Forma Information
As permitted under SFAS No. 123, the Company has elected to continue to account
for compensation cost using the intrinsic value-based method of accounting as
prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees." SFAS No. 123 does require the Company to disclose
pro forma net income and pro forma earnings per share amounts, as if
compensation expense were recognized for options granted after fiscal year 1994.
Using this approach, net income and earnings per share would have been reduced
to the pro forma amounts indicated in the table:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- -----------
(in thousands, except per share)
<S> <C> <C> <C>
Net income - as reported $ 6,759 $ 6,593 $ 5,444
Net income - pro forma 6,340 6,090 5,256
Basic earnings per share - as reported 2.28 2.10 1.72
Basic earnings per share - pro forma 2.14 1.94 1.66
Diluted earnings per share - as reported 2.23 2.03 1.69
Diluted earnings per share - pro forma 2.10 1.88 1.63
</TABLE>
This pro forma impact may not be representative of the effects for future years,
and could increase if additional options are granted and amortized over the
vesting period.
For disclosure purposes, the fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions: no dividend yield; expected
volatility of 41.45%, 44.13% and 43.60%; risk-free interest rate of 5.17%, 5.85%
and 6.02%; and expected life of 6.00 years, 6.38 years and 6.00 years in 1999,
1998 and 1997, respectively.
The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of subjective
assumptions, including the expected stock price volatility.
F-16
<PAGE> 45
8. 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 ("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 10 days following a public announcement that
a person or group has acquired or obtained the right to acquire beneficial
ownership of 20% or more of the outstanding common stock of the Company, or not
later than 65 days after the commencement of a tender offer or an exchange offer
that would result in a person or group beneficially owning 20% or more of the
outstanding common stock. In either such case, 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 20th
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. 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.
9. INCOME TAXES:
Following are the domestic and foreign components of the income before income
taxes:
<TABLE>
<CAPTION>
Fiscal Year Ended
January 1, January 2, January 3,
2000 1999 1998
------------ ------------- ---------------
(in thousands)
<S> <C> <C> <C>
United States $ 5,196 $ 6,595 $ 2,387
Foreign 3,448 2,123 4,922
-------------- ---------------- ----------------
Income before income taxes $ 8,644 $ 8,718 $ 7,309
============ ============== ==============
</TABLE>
F-17
<PAGE> 46
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------
January 1, January 2, January 3,
2000 1999 1998
---------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Current:
Federal and state $ 1,524 $ 1,938 $ 2,061
Foreign 103 106 125
---------- ----------- -----------
Total current 1,627 2,044 2,186
Deferred:
Federal and state 270 56 (325)
Foreign (12) 25 4
---------- ----------- -----------
Total deferred 258 81 (321)
---------- ----------- -----------
Total income tax provision $ 1,885 $ 2,125 $ 1,865
========== ----------- ===========
</TABLE>
Significant components of the deferred tax accounts at January 1, 2000 and
January 2, 1999, are as follows:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
----------- ------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Depreciation $ 22 $ 126
Accrued liabilities 310 501
Net operating loss carryforwards 1,112 2,445
Inventory basis differences 138 223
Other 478 213
-------- --------
2,060 3,508
Valuation allowance (1,248) (2,580)
-------- --------
Total assets 812 928
-------- --------
Deferred tax liabilities:
Depreciation (566) (230)
Other (76) (302)
-------- --------
Total liabilities (642) (532)
-------- --------
Net deferred asset $ 170 $ 396
======== ========
</TABLE>
F-18
<PAGE> 47
Foreign and U.S. state operating loss carryforwards as of January 1, 2000 were
$2.6 million and $4.3 million, respectively. Of the $2.6 million of foreign
losses, $1.7 million are available to offset future income through 2002. The
balance of $900,000 has an unlimited carryforward period. U.S. state operating
losses are available through 2006.
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 all foreign and state net operating loss
carryforwards and certain other deferred tax assets for which realization is
dependent on future taxable earnings.
At January 1, 2000, retained earnings include $12.9 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
January 1, January 2, January 3,
2000 1999 1998
---------- ------------ --------------
(in thousands)
<S> <C> <C> <C>
Income tax provision on income before income
tax at statutory federal income tax rates $ 2,939 $ 2,964 $ 2,485
Foreign tax rate differential (199) (58) (237)
State tax, net of federal benefit 134 263 133
U.S. and foreign permanent tax differences 21 (440) 708
Change in valuation allowance (870) (532) (1,307)
Other (140) (72) 83
----------- ------------ -----------
Income tax provision $ 1,885 $ 2,125 $ 1,865
=========== =========== ===========
</TABLE>
10. EARNINGS PER SHARE:
The Company adopted SFAS No. 128, "Earnings Per Share," which requires that the
Company report Basic and Diluted Earnings Per Share. Basic Earnings Per Share
represents net income less preferred dividends divided by the weighted average
number of common shares outstanding. Diluted Earnings Per Share is calculated
similarly, except that the denominator includes weighted average number of
common shares outstanding plus the dilutive effect of options, warrants,
convertible securities and other instruments with dilutive effects if exercised.
F-19
<PAGE> 48
The Company's Basic and Diluted Earnings Per Share are calculated as follows:
<TABLE>
<CAPTION>
Net Income
Available
To Common Earnings
Shareholders Shares Per Share
------------ --------- ---------
For the Fiscal Year Ended January 1, 2000
-----------------------------------------
<S> <C> <C> <C>
Basic $6,759,000 2,962,000 $2.28
Common Share Equivalent of
Options Issued -- 64,000 (.05)
---------- --------- ------
Diluted $6,759,000 3,026,000 $2.23
========== ========== =====
For the Fiscal Year Ended January 2, 1999
-----------------------------------------
Basic $6,593,000 3,133,000 $2.10
Common Share Equivalent of
Options Issued -- 110,000 (.07)
---------- --------- ------
Diluted $6,593,000 3,243,000 $2.03
========== ========== =====
For the Fiscal Year Ended January 3, 1998
-----------------------------------------
Basic $5,444,000 3,162,000 $ 1.72
Common Share Equivalent of
Options Issued -- 65,000 (.03)
---------- --------- ------
Diluted $5,444,000 3,227,000 $1.69
========== ========== =====
</TABLE>
Diluted earnings 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.
F-20
<PAGE> 49
11. COMMITMENTS AND CONTINGENCIES:
The Company leases certain office and plant facilities and equipment under
noncancellable leases. These leases expire in periods ranging from one to five
years and, in certain instances, provide for purchase options.
Immediately prior to the 1990 acquisition of Hasler, the Company's heavy 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 (ten years). Amortization of the deferred gain for 1999, 1998
and 1997 was $367,000, $374,000 and $380,000, respectively.
As of January 1, 2000, future minimum payments under operating leases having
noncancellable terms in excess of one year are summarized below:
<TABLE>
<CAPTION>
Operating
Leases
--------------
(in thousands)
<S> <C>
2000 $ 717
2001 218
2002 67
2003 44
2004 21
---------
$ 1,067
==========
</TABLE>
Rent expense for 1999, 1998 and 1997 was $768,000, $702,000 and $647,000,
respectively.
The Company has employment contracts with eight executives. Except in one case
when two years advance notice is required, these contracts may be terminated by
the Company on one year's advance notice. Under the agreements, each individual
is guaranteed minimum compensation over the contract period. As of January 1,
2000, the estimated future obligation under these contracts is $977,200 (2000)
and $420,000 (2001).
12. MANAGEMENT SEGMENT INFORMATION:
The Company has adopted the provisions of SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131 introduced a
new model for segment reporting called the management approach. The management
approach is based on the way that the chief operating decision-maker organizes
segments within a company for making operating decisions and assessing
performance.
The Company is engaged in one business segment, the development, manufacturing
and marketing of gravimetric and volumetric feeders, pneumatic conveying systems
and related equipment. The Company operates in two primary geographic locations,
North America and Western Europe.
F-21
<PAGE> 50
<TABLE>
<CAPTION>
North Western Elimi- Consoli-
America Europe nations dated
(in thousands)
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 1, 2000
Revenues-
Sales to unaffiliated customers $ 36,226 $ 51,661 $ -- $ 87,887
Sales to affiliates 3,509 2,907 (6,416) --
-------------- ----------- ----------- -------------
Total sales $ 39,735 $ 54,568 $ (6,416) $ 87,887
============== =========== =========== =============
Operating income $ 5,405 $ 3,752 $ (18) $ 9,139
============== =========== =========== =============
Interest expense (495)
-------------
Income before income taxes $ 8,644
=============
Capital expenditures $ 826 $ 1,779 $ 2,605
Depreciation and amortization
expense 1,265 2,097 3,362
Total assets 21,700 33,070 54,770
FISCAL YEAR ENDED
JANUARY 2, 1999:
Revenues-
Sales to unaffiliated customers $ 37,642 $ 51,500 $ -- $ 89,142
Sales to affiliates 3,645 1,881 (5,526) --
-------------- ----------- ----------- -------------
Total sales $ 41,287 $ 53,381 $ (5,526) $ 89,142
============== =========== =========== =============
Operating income $ 6,860 $ 2,425 $ 147 $ 9,432
============== =========== ===========
Interest expense (714)
-------------
Income before income taxes $ 8,718
=============
Capital expenditures $ 1,121 $ 1,592 $ 2,713
Depreciation and amortization
expense 1,376 1,782 3,158
Total assets 20,212 36,405 56,617
FISCAL YEAR ENDED
JANUARY 3, 1998:
Revenues-
Sales to unaffiliated customers $ 35,507 $ 51,645 $ -- $ 87,152
Sales to affiliates 1,976 1,931 (3,907) --
-------------- ----------- ----------- -------------
Total sales $ 37,483 $ 53,576 $ (3,907) $ 87,152
============== =========== =========== =============
Operating income $ 3,040 $ 5,607 $ (205) $ 8,442
============== =========== ===========
Interest expense (1,133)
-------------
Income before income taxes $ 7,309
=============
Capital expenditures $ 1,003 $ 1,997 $ 3,000
Depreciation and amortization
expense 1,005 1,972 2,977
Total assets 21,276 32,973 54,249
</TABLE>
F-22
<PAGE> 51
13. QUARTERLY FINANCIAL INFORMATION (Unaudited):
The following table summarizes quarterly financial data for fiscal 1999 and
1998:
<TABLE>
<CAPTION>
1999 First Second Third Fourth
- --------- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Revenues $19,840 $22,617 $21,688 $23,742
Gross Profit 9,121 10,027 9,925 9,883
Net Income 1,360 1,819 1,670 1,910
Basic Earnings Per Share .46 .62 .56 .65
Diluted Earnings Per Share .44 .60 .55 .63
</TABLE>
<TABLE>
<CAPTION>
1998 First Second Third Fourth
- --------- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Revenues $21,455 $22,366 $21,244 $24,077
Gross Profit 9,640 10,373 9,493 10,690
Net Income 1,307 1,815 1,578 1,893
Basic Earnings Per Share .40 .56 .52 .63
Diluted Earnings Per Share .39 .54 .51 .60
</TABLE>
F-23
<PAGE> 52
SCHEDULE II
K-TRON INTERNATIONAL, INC.
VALUATION RESERVES
<TABLE>
<CAPTION>
Balance at Additions
Beginning Charged Balance at
of Period to Income Deductions(1) End of Period
------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 1, 2000:
Allowance for doubtful accounts $ 1,286,000 $ 39,000 $ 401,000 $ 924,000
FISCAL YEAR ENDED JANUARY 2, 1999:
Allowance for doubtful accounts 1,119,000 208,000 41,000 1,286,000
FISCAL YEAR ENDED JANUARY 3, 1998:
Allowance for doubtful accounts 1,037,000 184,000 102,000 1,119,000
FISCAL YEAR ENDED JANUARY 1, 2000:
Provision for restructuring
reserve -- 710,000 260,000 450,000
FISCAL YEAR ENDED JANUARY 2, 1999:
Provision for restructuring
reserve -- -- -- --
FISCAL YEAR ENDED JANUARY 3, 1998:
Provision for restructuring
reserve -- -- -- --
</TABLE>
(1) Accounts written off less recoveries, net of foreign exchange
translation adjustment.
S-1
<PAGE> 53
EXHIBIT INDEX
Exhibit
Number Description
[S] [C]
3.1 Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1
to the Company's annual report on Form 10-K for the year ended January
2, 1999 ("1998 Form 10-K") and incorporated herein by reference)
3.2 By-Laws, as amended (Filed as Exhibit 3.2 to the Company's annual
report on Form 10-K for the year ended January 1, 1994 and incorporated
herein by reference)
4.1 Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to
the 1998 Form 10-K and incorporated herein by reference)
4.2 Rights Agreement dated as of October 3, 1991 with First Interstate Bank
of Arizona, N.A., as Rights Agent (Filed as Exhibit 1 to the Company's
report on Form 8-K dated October 3, 1991 and incorporated herein by
reference)
4.3 Amendment, dated as of March 6, 2000, to Rights Agreement, dated as of
October 3, 1991, with American Stock Transfer & Trust Company, as
successor Rights Agent
10.1 1986 Stock Option Plan, as amended and restated (Filed as Exhibit
10.2.1 to the to the Company's annual report on Form 10-K for the year
ended January 4, 1992 ("1991 Form 10-K") and incorporated herein by
reference)**
10.2 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit
10.2.4 to the Company's annual report on Form 10-K for the year ended
December 31, 1988 and incorporated herein by reference)**
10.3 K-Tron International, Inc. 1996 Equity Compensation Plan, as amended
(Filed as Exhibit 10.3 to the 1998 Form 10-K and incorporated herein by
reference)**
10.4 K-Tron International, Inc. Amended and Restated Employee Stock Purchase
Plan (Filed as Exhibit 10.2 to the Company's report on Form 10-Q for
the quarterly period ended September 28, 1996 and incorporated herein
by reference)**
10.5 Amended and Restated K-Tron International, Inc. Profit-Sharing and
Thrift Plan**
<PAGE> 54
10.6 K-Tron International, Inc. Supplemental Executive Retirement Plan
(Filed as Exhibit 10.2.7 to the 1991 Form 10-K and incorporated herein
by reference)**
10.7 Employment Agreement dated as of October 6, 1997 by and between K-Tron
International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to
the Company's report on Form 10-Q for the quarterly period ended
September 27, 1997 and incorporated herein by reference)**
10.8 Employment Agreement dated as of May 7, 1999 by and between K-Tron
International, Inc. and Ronald R. Remick**
10.9 Amendment No. 1 to Employment Agreement dated October 5, 1998 by and
between K-Tron International, Inc. and Edward B. Cloues, II (Filed as
Exhibit 10.1 to the Company's report on Form 10-Q for the quarterly
period ended October 3, 1998 and incorporated herein by reference)**
10.10 Form of Employment Agreement with certain employees of the Company,
which are identical in all material respects except for the employee,
amount of salary to be paid and date of execution (Filed as Exhibit
10.12 to the Company's annual report on Form 10-K for the year ended
January 3, 1998 and incorporated herein by reference)**
10.11 Form of Indemnification Agreement with certain directors and officers
of the Company listed on Schedule 10.11, which are identical in all
material respects except for the director or officer who is a party
thereto and the date of execution**
10.12 Leasing Agreement dated October 30, 1990 between CS Immobilien Leasing
AG, Zurich and Hasler Freres SA, with limited guaranty of K-Tron Soder
AG (Filed as Exhibit 10.1(b) to the Company's report on Form 8-K dated
October 30, 1990 and incorporated herein by reference)
10.13 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 (Filed as
Exhibit 10.3.3 to the Company's annual report on Form 10-K for the year
ended December 29, 1990 and incorporated herein by reference)
10.14 Note dated February 4, 2000 from K-Tron America, Inc. in favor of The
Bank of Gloucester County (Filed as Exhibit (b)(1) on Amendment No.1 to
the Company's Tender Offer Statement on Schedule TO dated February 16,
2000 and incorporated herein by reference)
<PAGE> 55
10.15 Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of
The Bank of Gloucester County
10.16 Loan Modification Agreement dated June 24, 1998 between K-Tron America,
Inc. and The Bank of Gloucester County
10.17 Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank
of Gloucester County
10.18 Loan Modification Agreement dated as of July 22, 1999 between K-Tron
America, Inc. and The Bank of Gloucester County
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP
24.1 Power of Attorney (Included on Signature Page)
27.1 Financial Data Schedule
** Management contract or compensatory plan or arrangement required to be
filed or incorporated as an exhibit
<PAGE> 1
Exhibit 4.3
AMENDMENT NO. 1 TO
RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO RIGHTS AGREEMENT (this "Amendment") is made and
entered into as of March 6, 2000 by and between K-Tron International, Inc., a
New Jersey corporation (the "Company") and American Stock Transfer & Trust
Company (the "Rights Agent"). This Amendment amends and otherwise modifies the
Rights Agreement (the "Agreement") dated as of October 3, 1991 by and between
the Company and First Interstate Bank of Arizona, N.A., the predecessor Rights
Agent. Terms used herein that are not defined herein shall have the meanings
ascribed thereto in the Agreement.
WHEREAS, in accordance with Section 26(a) of the Agreement, the Company
and the Rights Agent wish to change certain provisions of the Agreement in a
manner that the Company deems necessary or desirable and that does not adversely
affect the interests of the holders of Rights Certificates.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Section 1(g) shall be amended and restated in its entirety to read
as follows:
(g) Intentionally left blank.
2. Section 11(a)(ii)(B) of the Agreement shall be amended and restated
in its entirety to read as follows:
(B) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant
to the terms of any such plan), alone or together with its
Affiliates and Associates, shall, at any time after the Rights
Dividend Declaration Date, become the Beneficial Owner of 20% or
more of the Common Shares then outstanding, unless the event causing
the 20% threshold to be crossed is a Section 13 Event, or is an
acquisition of Common Shares pursuant to a tender offer or an
exchange offer for all outstanding Common Shares at a price and on
terms that provide fair value to all shareholders, as determined by
at least a majority of the Board of Directors of the Company, after
taking into consideration all factors that such members of the
<PAGE> 2
Board of Directors deem relevant, including, without limitation, the
long-term prospects and value of the Company and the prices and
terms that such members of the Board of Directors believe, in good
faith, could reasonably be achieved if the Company or its assets
were sold on an orderly basis designed to realize maximum value, or
3. Section 11(a)(iii) of the Agreement shall be amended and restated in
its entirety to read as follows:
(iii) In the event that the number of Common Shares
that are authorized by the Company's Restated Certificate of
Incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not sufficient
to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the Company
shall: (A) determine the excess of the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value")
over the Purchase Price (such excess, the "Spread"), and (B) with
respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) Common Shares
of the same or a different class or other equity securities of the
Company (including, without limitation, preferred shares or units of
preferred shares that a majority of the Board of Directors of the
Company has deemed (based, among other things, on the dividend and
liquidation rights of such preferred shares) to have substantially
the same economic value as Common Shares (such preferred shares,
hereinafter referred to as "common share equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination
of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by a majority
of the Board of Directors of the Company after considering the
advice of a nationally recognized investment banking firm selected
by the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and
(y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to
herein as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for exercise of a
Right and
2
<PAGE> 3
without requiring payment of the Purchase Price, Common Shares (to
the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the
Board of Directors of the Company shall determine in good faith that
it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights, the
thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To
the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and
to determine the value thereof. The Company shall make a public
announcement when the exercisability of the Rights has been
temporarily suspended, and again when such suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the
Common Shares shall be the current market price (as determined
pursuant to Section 11(d) hereof) per Common Share on the Section
11(a)(ii) Trigger Date and the value of any "common share
equivalent" shall be deemed to have the same value as the Common
Shares on such date.
4. Section 11(q) of the Agreement shall be amended and restated in its
entirety to read as follows:
(q) In the event that the Rights become exercisable
following a Section 11(a)(ii) Event, the Company, by action of a
majority of the Board of Directors of the Company, may permit the
Rights, subject to Section 7(e) hereof, to be exercised for 50% of
the Common Shares (or cash or other securities or assets to be
substituted for the Adjustment Shares pursuant to subsection
(a)(iii)) that would otherwise be purchasable under subsection (a),
in consideration of the surrender to the Company of the Rights so
exercised and without other payment of the Purchase Price. Rights
exercised under this subsection (q) shall be deemed to have been
exercised in full and shall be canceled.
3
<PAGE> 4
5. Section 13(e) of the Agreement shall be amended and restated in its
entirety to read as follows:
(e) In the event that the Rights become exercisable
under subsection (a) (except as provided in subsection (d)), the
Company, by action of a majority of the Board of Directors of the
Company, may agree with the Principal Party that the Principal Party
shall permit the Rights to be exercised for 50% of the Common Shares
of the Principal Party that would otherwise be purchasable under
subsection (a), in consideration of the surrender to the Principal
Party, as the successor to the Company under subsection (a)(ii), of
the Rights so exercised and without other payment of the Purchase
Price. Rights exercised under this subsection (e) shall be deemed to
have been exercised in full and shall be canceled.
6. Section 21 of the Agreement shall be amended and restated in
its entirety to read as follows:
SECTION 21. Change of Rights Agent. The Rights Agent
or any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon thirty (30) days' prior written
notice mailed to the Company and to each transfer agent of the
Common Shares and Preferred Shares by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights
Agent upon thirty (30) days' prior written notice mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares and Preferred Shares, by
registered or certified mail, and to the holders of Rights
Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the
4
<PAGE> 5
Company or by such a court, shall be (a) a corporation organized,
doing business and in good standing under the laws of the United
States or of any state, having a principal office in the State of
New York or the State of New Jersey, that is authorized by law to
exercise corporate trust and stock transfer powers and is subject to
supervision or examination by federal or state authority and that
has at the time of its appointment as Rights Agent a combined
capital and surplus adequate in the judgment of a majority of the
Board of Directors of the Company to assure the performance of its
duties hereunder and the protection of the interests of the Company
and the holders of Rights or beneficial interests therein, or (b) an
Affiliate of a corporation described in clause (a) of this sentence.
After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for that purpose. Not later than
the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares and Preferred Shares and mail a
notice thereof in writing to the registered holders of the Rights
Certificates or, prior to the Distribution Date, to the registered
holders of the Common Shares. Failure to give any notice provided
for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
7. Section 23(a) of the Agreement shall be amended and restated in its
entirety to read as follows:
(a) The Board of Directors of the Company may, at
its option, at any time prior to the earlier of (i) the close of
business on the tenth day following a Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record
Date, the close of business on the tenth day following the Record
Date), or (ii) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights at a redemption price of $0.01
per Right, as such amount may be appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter
referred to as the
5
<PAGE> 6
"Redemption Price") and the Company may, at its option, pay the
Redemption Price either in Common Shares (based on the "current
market price", as defined in Section 11(d)(i) hereof, of the Common
Shares at the time of redemption) or cash; provided, however, if,
following the occurrence of a Stock Acquisition Date and following
the expiration of the right of redemption hereunder but prior to any
Triggering Event, (i) an Acquiring Person shall have transferred or
otherwise disposed of a number of Common Shares in one transaction
or a series of transactions, not directly or indirectly involving
the Company or any of its Subsidiaries, which did not result in the
occurrence of a Triggering Event or the Company shall have issued
additional equity securities, in either instance such that such
Person is thereafter a Beneficial Owner of 10% or less of the
outstanding Common Shares, and (ii) there is no other Acquiring
Person immediately following the occurrence of the event described
in clause (i), then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired.
8. Section 26(a) of the Agreement shall be amended and restated in its
entirety to read as follows:
(a) Prior to the Distribution Date and subject to
the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend
any provision of this Agreement without the approval of any holders
of certificates representing Common Shares. From and after the
Distribution Date and subject to the penultimate sentence of this
Section 26, the Company and the Rights Agent shall, if the Company
so directs, supplement or amend this Agreement without the approval
of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder
in any manner that the Company may deem necessary or desirable and
that shall not adversely affect the interests of the holders of
Rights Certificates; provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of
this sentence, (A) a time period
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<PAGE> 7
relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the
Rights Agent shall execute such supplement or amendment and shall be
fully protected hereunder by doing so. Nothing herein shall require
the Rights Agent to execute any supplement or amendment adversely
affecting its rights and protections hereunder. Notwithstanding
anything contained in this Agreement to the contrary, no supplement
or amendment shall be made that changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of Preferred
Share Fractions for which a Right is exercisable. Prior to the
Distribution Date, the interests of the beneficial owners of Rights
shall be deemed coincident with the interests of the holders of
Common Shares.
9. Section 28 of the Agreement shall be amended and restated in
its entirety to read as follows:
SECTION 28. Determinations and Actions by the Board
of Directors, etc. For all purposes of this Agreement, any
calculation of the number of Common Shares outstanding at any
particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any
Person is the Beneficial Owner, shall be made in accordance with the
last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the
Company shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the
Rights or to amend or supplement the Agreement). All such actions,
calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or made by the Board in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights
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<PAGE> 8
Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
10. This Amendment shall be effective as of March 6, 2000 and shall be
governed by and interpreted under the laws of the State of New Jersey, without
giving effect to any conflict of laws provisions.
11. As amended and modified hereby, the Agreement is ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the Company and the Rights Agent have executed this
Amendment as of March 6, 2000.
[corporate seal] K-TRON INTERNATIONAL, INC.
Attest:
/s/ Mary E. Vaccara By: /s/ Edward B. Cloues, II
- --------------------- --------------------------
Mary E. Vaccara Edward B. Cloues, II
As its Secretary As its Chairman of the Board
and Chief Executive Officer
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Isaac Kagan
-----------------------
Isaac Kagan
As its Vice President
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<PAGE> 1
Exhibit 10.5
K-TRON INTERNATIONAL, INC.
AND AFFILIATED COMPANIES
PROFIT-SHARING AND THRIFT PLAN
As Amended and Restated Effective As Of January 1, 1999
<PAGE> 2
K-TRON INTERNATIONAL, INC.
AND AFFILIATED COMPANIES
PROFIT-SHARING AND THRIFT PLAN
ARTICLE I.
STATEMENT OF HISTORY AND PURPOSE
1.1. History. K-Tron International, Inc. has had in effect since
December 1, 1984, the K-Tron International, Inc. and Affiliated Companies
Profit-Sharing and Thrift Plan, to which it has made contributions for the
purpose of sharing its profits with its employees in order to provide for the
accumulation of funds for the benefit of eligible employees and their
beneficiaries in the manner and to the extent set forth in such plan.
The K-Tron International, Inc. and Affiliated Companies Profit-Sharing
and Thrift Plan, as amended and restated herein, and its related trust
agreement, constitute an amendment in its entirety to the K-Tron International,
Inc. and Affiliated Companies Profit-Sharing and Thrift Plan which is continued
effective as of January 1, 1999. The purpose of this amendment and restatement
is to reflect changes required by the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996,
the Taxpayer Relief Act of 1997, the IRS Restructuring and Reform Act of 1998
and also to make other desired changes.
1.2. Qualification under the Internal Revenue Code. It is intended that
the Plan be a qualified profit-sharing plan within the meaning of section 401(a)
of the Code, that the requirements of section 401(k) of the Code be satisfied as
to that portion of the Plan represented by contributions made pursuant to
Participant Salary Deferral elections, that the requirements of section 401(m)
of the Code be satisfied as to that portion of the Plan represented by Employer
Matching Contributions and that the trust or other funding vehicle associated
with the Plan be exempt from federal income taxation pursuant to the provisions
of section 501(a) of the Code.
1.3. Documents. The Plan consists of the Plan document as set forth
herein, and any amendments thereto. Certain provisions relating to the Plan and
its operation are contained in the corresponding Trust Agreement (or documents
establishing any other funding vehicle for the Plan), and any amendments,
supplements, appendices and riders to any of the foregoing.
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<PAGE> 3
ARTICLE II.
DEFINITIONS
2.1. "Account" means the entire interest of a Participant in the Plan.
A Participant's Account will consist of one or more separate accounts reflecting
the various types of contributions permitted under the Plan, as hereinafter
provided.
2.2. "Actual Deferral Percentage" means the ratio (expressed as a
percentage to the nearest one-hundredth of one percent) of (a) (1) an Eligible
Employee's Salary Deferrals for the Plan Year (excluding any Salary Deferrals
that are (A) taken into account in determining the Contribution Percentage, (B)
distributed to an Eligible Employee who is not a Highly Compensated Employee
pursuant to a claim for distribution under Section 5.1, or (C) returned to the
Eligible Employee pursuant to Section 5.4), plus (2) at the election of the
Committee, any portion of the Qualified Employer Contributions allocated to the
Participant for the Plan Year permitted to be taken into account under section
401(k) of the Code, plus (3) in the case of any Highly Compensated Employee who
is eligible to participate in more than one cash or deferred arrangement
maintained by the Employer or an Affiliated Company, elective deferrals made on
his behalf under all such arrangements (excluding those that are not permitted
to be aggregated with the Plan under Treas. Reg. Section
1.401(k)-1(b)(3)(ii)(B)) for the Plan Year, to (b) the Eligible Employee's
Compensation for the portion of the Plan Year that the individual was an
Eligible Employee.
2.3. "Affiliated Company" means any entity which (a) with any Employer,
constitutes (1) a "controlled group of corporations" within the meaning of
section 414(b) of the Code, (2) a "group of trades or businesses under common
control" within the meaning of section 414(c) of the Code, or (3) an "affiliated
service group" within the meaning of section 414(m) of the Code or (b) is
required to be aggregated with any Employer pursuant to Treasury regulations
under section 414(o) of the Code. An entity will be considered an Affiliated
Company only with respect to such period as the relationship described in the
preceding sentence exists. For purposes of Section 2.5 or 5.4, "Affiliated
Company" will mean an Affiliated Company, but determined with "more than 50
percent" substituted for the phrase "at least 80 percent" in section 1563(a)(1)
of the Code when applying sections 414(b) and (c) of the Code.
2.4. "Alternate Payee" means the person entitled to receive payment of
benefits under the Plan pursuant to a QDRO.
2.5. "Annual Addition" means, for any Participant for any Plan Year,
the sum of the following amounts allocated to a Participant's accounts under the
Plan and any other qualified defined contribution plan maintained by the
Employer or an Affiliated Company:
(a) Employer contributions (including Matching Contributions, Salary
Deferral amounts except Salary Deferrals distributed pursuant to Section 5.1,
and Qualified Employer Contributions);
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<PAGE> 4
(b) Participant contributions (including mandatory or voluntary
employee contributions made under a qualified defined benefit plan of the
Employer or an Affiliated Company, but excluding Rollover Contributions and
amounts repaid pursuant to Section 7.1(d)(4);
(c) forfeitures; and
(d) amounts described in section 415(l)(1) of the Code (relating to
contributions allocated to individual medical accounts which are part of a
pension or annuity plan) and section 419A(d)(2) of the Code (relating to
contributions allocated to post-retirement medical benefit accounts for key
employees).
2.6. "Applicable Computation Period" means the following:
(a) For purposes of Hours of Employment for eligibility in accordance
with Section 3.1, an Employee's first Applicable Computation Period shall be the
12-month period beginning as of the date he first completed an Hour of
Employment with an Employer. Thereafter, such Employee's Applicable Computation
Period shall be each Plan Year, commencing with the Plan Year which begins after
the date he first completed an Hour of Employment.
(b) For purposes of contributions in accordance with Articles IV and
VIII, Applicable Computation Period means the Plan Year.
(b) For all other purposes, Applicable Computation Period means the
12-month period beginning as of the first day of the month during which a person
first completes an Hour of Employment with an Employer and each anniversary
thereof.
2.7. "Average Actual Deferral Percentage" means the average (expressed
as a percentage to the nearest one-hundredth of one percent) of the Actual
Deferral Percentages of a specified group of Eligible Employees.
2.8. "Average Contribution Percentage" means the average (expressed as
a percentage to the nearest one-hundredth of one percent) of the Contribution
Percentages of a specified group of Eligible Employees.
2.9. "Beneficiary" means the person or entity designated or otherwise
determined to be such in accordance with Section 7.5.
2.10. "Benefit Payment Date" means, for any Participant or Beneficiary
of a deceased Participant, the date as of which the first benefit payment from a
Participant's Account is due; provided, however, that the Benefit Payment Date
applicable to any amount withdrawn pursuant
3
<PAGE> 5
to Section 7.3 will not be taken into account in determining the Participant's
Benefit Payment Date with respect to the remainder of his Account.
2.11. "Board of Directors" means the board of directors of the Company
or a committee of the Board of Directors to which the Board has delegated some
or all of its responsibilities hereunder.
2.12. "Code" means the Internal Revenue Code of 1986, as the same may
be amended from time to time, and any successor statute of similar purpose.
2.13. "Committee" means the committee described in Article IX.
2.14. "Company" means K-Tron International, Inc. and any successor
which shall maintain this Plan.
2.15. "Compensation" means, for any Employee, for any Plan Year:
(a) except as otherwise provided below in this definition, for purposes
of Article IV, the amount described in Subsection (c) below, exclusive of any
(i) amount paid by an Employer for any period during which the Participant was
not an Employee and (ii) amount paid before an Employee was eligible to become a
Participant in accordance with Section 3.1 except for purposes of Regular
Contributions.
(b) for purposes of Section 5.4, the Participant's wages, salaries,
fees for professional services and other amounts received during the Plan Year
for personal services actually rendered in the course of employment with an
Employer. Such other amounts include commissions, bonuses and tips, vacation and
holiday pay, sick/disability pay paid directly by the Employer or by a third
party under the Employer's short-term disability program; severance pay on a
payroll in lieu of notice; earned income as described in section 401(c)(2) of
the Code; and, for Plan Years beginning after December 31, 1997, amounts that
are contributed by the Employer under a salary reduction agreement and excluded
from gross income under sections 125, 402(e)(3), 402(h), 403(b) and 457 of the
Code. Such other amounts exclude amounts paid under an Employer's long-term
disability program; worker's compensation payments; fringe benefits such as
moving expenses, employee discounts, meals, van pooling, reimbursed medical and
educational expenses and life insurance, whether or not includible in gross
income; expenses reimbursed in connection with the performance of duties;
accidental injury payments; contributions made by the Employer to any qualified
deferred compensation, cafeteria or pension plan, including salary reduction
contributions, contributions to a simplified employee pension plan described in
Code section 408(k) and contributions toward the purchase of an annuity contract
described in Code section 403(b); deferrals under any non-qualified deferred
compensation plan until such time as such deferrals are includable in gross
income during a period of employment; amounts realized from the exercise of a
stock option, whether or not qualified, or when restricted stock or property
held by a Participant either becomes freely
4
<PAGE> 6
transferrable or is no longer subject to a substantial risk of forfeiture; and
any other amounts which receive special tax benefits.
(c) for purposes of the definitions of Highly Compensated Employee,
Actual Deferral Percentage, Actual Contribution Percentage and Article VIII, the
amount described in Subsection (b) above increased, for Plan Years beginning
before December 31, 1997, by the amount of any contributions made by the
Employer under any salary reduction or similar arrangement to a qualified
deferred compensation, pension or cafeteria plan, contributions to a simplified
employee pension plan described in Code section 408(k), and contributions toward
the purchase of an annuity contract described in Code section 403(b). For
purposes of the definition of Highly Compensated Employee, the amount described
above shall be for the applicable period for making the determination of Highly
Compensated Employees.
(d) for purposes of Section 4.6, "compensation" means the Compensation,
as defined in subsection (a), that the Participant would have received during a
period of Qualified Military Service (or, if the amount of such Compensation is
not reasonably certain, the Participant's average earnings from the Employer or
an Affiliated Company for the twelve-month period immediately preceding the
Participant's period of Qualified Military Service); provided, however, that the
Participant returns to work within the period during which his right to
reemployment is protected by law.
(e) only the first $160,000, or such other amount as may be applicable
under section 401(a)(17) of the Code, of the amount otherwise described in
subsection (b) and the aggregate amount described in subsections (a) and (d) of
this definition will be counted. In determining Compensation for purposes of
this limitation, the family aggregation rules of section 401(a)(17)(A) of the
Code shall apply for Plan Years beginning before January 1, 1997.
(f) if the Compensation of a Participant is determined for a Plan Year
that contains fewer than 12 calendar months, then the annual compensation
limitation described in subsection (e) above will be adjusted with respect to
that Participant by multiplying the annual compensation limitation in effect for
the Plan Year by a fraction the numerator of which is the number of full months
in the Plan Year and the denominator of which is 12; provided, however, that no
proration is required for a Participant who is covered under the Plan for less
than one full Plan Year if the formula for allocations is based on Compensation
for a period of at least 12 months.
2.16. "Contribution Percentage" means the ratio (expressed as a
percentage to the nearest one-hundredth of one percent) of (a) (1) the Matching
Contributions allocated to an Eligible Employee's Account for the Plan Year
(excluding any Matching Contributions forfeited pursuant to Section 5.1(b) or
5.3(a)), plus (2) at the election of the Committee, any portion of the Qualified
Employer Contributions allocated to the Eligible Employee for the Plan Year
required or permitted to be taken into account under section 401(m) of the Code,
plus (3) in the case of any Highly Compensated Employee who is eligible to
participate in more than one plan
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<PAGE> 7
maintained by the Employer or an Affiliated Company to which employee or
matching contributions are made, after-tax employee contributions and employer
matching contributions made on his behalf under all such plans (excluding those
that are not permitted to be aggregated with the Plan under Treas. Reg.
Section 1.401(m)-1(b)(3)(ii)) for the Plan Year), to (b) the Eligible Employee's
Compensation for the portion of the Plan Year that the individual was an
Eligible Employee. For purposes of determining Contribution Percentages, the
Employer or the Committee may take Salary Deferrals into account, in accordance
with Treasury regulations, so long as the requirements of Section 5.2(a) are met
both when the Salary Deferrals used in determining Contribution Percentages are
and are not included in determining Actual Deferral Percentages.
2.17. "Deferred Retirement Date" means the first day of any month
subsequent to a Participant's Normal Retirement Date.
2.18. "Disability" means any physical or mental condition for which a
Participant shall be eligible to receive benefits under the disability insurance
provisions of the Social Security Act.
2.19. "Effective Date" means December 1, 1984, except as otherwise
provided herein.
2.20. "Eligible Employee" means each Employee of an Employer for whom
the Employer is required to contribute Federal Insurance Contributions Act
taxes, other than (a) any person who is transferred from a foreign subsidiary on
temporary assignment in the United States, (b) any person whose terms and
conditions of employment are determined through collective bargaining, unless
the collective bargaining agreement provides for the eligibility of such person
to participate in this Plan, (c) any person who is an Employee solely by reason
of being a "leased employee" as defined under section 414(n) or 414(o) of the
Code, or (d) an independent contractor or any other person who is not treated by
the Employer as an employee for purposes of withholding federal employment
taxes, regardless of any contrary governmental or judicial determination
relating to such employment status or tax withholding. If a person described in
clause (d) of the preceding sentence is subsequently reclassified as, or
determined to be, an employee by the Internal Revenue Service, any other
governmental agency or authority, or a court, or if an Employer or Affiliated
Company is required to reclassify such an individual as an employee as a result
of such reclassification or determination (including any reclassification by an
Employer or Affiliated Company in settlement of any claim or action relating to
such individual's employment status), such individual will not become eligible
to become a Participant in this Plan by reason of such reclassification or
determination.
2.21. "Employee" means a person who is employed by an Employer or an
Affiliated Company. A person who is not otherwise employed by an Employer will
be deemed to be employed by any such company if he is a leased employee with
respect to whose services such Employer or Affiliated Company is the recipient,
within the meaning of section 414(n) or 414(o) of the Code, but to whom section
414(n)(5) of the Code does not apply.
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<PAGE> 8
2.22. "Employer" means the Company and each Affiliated Company which
adopts this Plan and joins in the corresponding Trust Agreement.
2.23. "ERISA" means the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time, and any successor statute of
similar purpose.
2.24. "Highly Compensated Employee" means, for Plan Years beginning on
or after January 1, 1997, any Employee who performed services for an Employer or
an Affiliated Company during the Plan Year for which a determination is being
made (the "Determination Year") and who:
(a) was at any time in the Determination Year or the immediately
preceding Determination Year a five-percent (5%) owner, as defined in section
416(i) of the Code; or
(b) for the immediately preceding Determination Year, received
Compensation from the Employer or an Affiliated Company in excess of $80,000, as
adjusted by the Secretary of the Treasury in accordance with section 414(q) of
the Code.
2.25. "Investment Fund" means any of the funds established pursuant to
Section 6.2 for the investment of the assets of the Trust Fund.
2.26. "Investment Manager" means any fiduciary (other than the Trustee
or other Named Fiduciary) who has the power to manage, acquire, or dispose of
any asset of the Plan and who is qualified as an "investment manager" within the
meaning of section 3(38) of ERISA.
2.27. "Matching Contribution" means an Employer contribution made
pursuant to Section 4.2.
2.28. "Matching Contribution Account" means so much of a Participant's
Account as consists of amounts attributable to Matching Contributions allocated
to such Participant's Account, including all earnings and gains attributable
thereto and reduced by all losses attributable thereto, all expenses chargeable
thereagainst and by all withdrawals and distributions therefrom.
2.29. "Named Fiduciary" means the Board of Directors, the Trustee, and
the Committee. Each Named Fiduciary will have only those particular powers,
duties, responsibilities and obligations as are specifically delegated to him
under the Plan or the Trust Agreement. Any fiduciary, if so appointed, may serve
in more than one fiduciary capacity and may also serve in a non-fiduciary
capacity.
2.30. "Normal Retirement Date" means as to Participants who attained
age 65 prior to January 1, 1992, the date on which on which a Participant
attained age 65 and as to all other
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<PAGE> 9
Participants, the later to occur of (a) the date on which the Participant
attains age 62, or (b) January 1, 1992.
2.31. "Participant" means an Eligible Employee who has elected to
participate in the Plan and has filed the required authorizations operative
under the Plan as provided in Article III hereof, or a person who has an
undistributed interest in the Trust Fund.
2.32. "Plan" means the K-Tron International, Inc. and Affiliated
Companies Profit-Sharing and Thrift Plan as set forth herein, and as the same
may from time to time hereafter be amended.
2.33. "Plan Year" means each consecutive 12-month period beginning on
each January 1 and ending on each December 31.
2.34. "QDRO" means a "qualified domestic relations order" within the
meaning of section 206(d)(3)(B) of ERISA and section 414(p) of the Code.
2.35. "Qualified Employer Contribution" means a contribution made by an
Employer pursuant to Section 4.4.
2.36. "Qualified Employer Contribution Account" means so much of a
Participant's Account as consists of amounts attributable to Qualified Employer
Contributions allocated to such Participant's Account, including all earnings
and gains attributable thereto and reduced by all losses attributable thereto,
all expenses chargeable thereagainst and by all withdrawals and distributions
therefrom.
2.37. "Qualified Military Service" means any service in the uniformed
services (as defined in chapter 43 of title 38, United States Code) where the
Participant's right to reemployment is protected by law.
2.38. "Regular Contribution" means an Employer contribution made
pursuant to Section 4.3.
2.39. "Regular Contribution Account" means so much of a Participant's
Account as consists of amounts attributable to Regular Contributions and
top-heavy contributions pursuant to Article VIII that are allocated to such
Participant's Account, including all earnings and gains attributable thereto and
reduced by all losses attributable thereto, all expenses chargeable thereagainst
and by all withdrawals and distributions therefrom.
2.40. "Retirement" means the termination of a Participant's employment
on his Normal or Deferred Retirement Date.
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2.41. "Rollover Account" means so much of a Participant's Account as
consists of his Rollover Contributions, including all earnings and gains
attributable thereto, and reduced by all losses attributable thereto, all
expenses chargeable thereto and all withdrawals and distributions therefrom.
2.42. "Rollover Contributions" means amounts contributed by an Eligible
Employee pursuant to Section 4.7.
2.43. "Salary Deferral Account" means so much of a Participant's
Account as consists of his Salary Deferrals, including all earnings and gains
attributable thereto, and reduced by all losses attributable thereto, all
expenses chargeable thereto and all withdrawals and distributions therefrom.
2.44. "Salary Deferrals" means the portion of a Participant's
Compensation which is reduced in accordance with Section 4.1(a) and with respect
to which a corresponding contribution is made to the Plan by the Employer
pursuant to Section 4.1(c).
2.45. "Service" means the following:
(a) All periods of employment with an Employer.
A period of employment begins as of the date the Employee
first completes an Hour of Employment for the Employer and
ends on the earlier of the date the Employee resigns, is
discharged, retires or dies or, if the Employee is absent for
any other reason, on the first anniversary of the first day of
such absence (with or without pay) from the Employer. If an
Employee is absent for any reason and returns to the employ of
the Employer before incurring a Break-in-Service, as provided
in Subsection (b), he shall receive credit for his period of
absence up to a maximum of 12 months. Service subsequent to a
Break-in-Service will be credited as a separate period of
employment.
(b) "Break-in-Service" means a period of 12-consecutive months
during which an Employee fails to accrue an Hour of Employment
with the Employer. Such period begins on the earlier of the
date the Employee resigns, is discharged, retires or dies or,
if the Employee is absent for any other reason, on the first
anniversary of the first day of such absence (with or without
pay) from the Employer. If an Employee is absent by reason of
(i) the pregnancy of the Employee, (ii) the birth of a child
of the Employee, (iii) the placement of a child with the
Employee in connection with an adoption of such child by such
Employee, or (iv) caring for such child immediately following
such birth or placement, such Employee will not be treated as
having retired, resigned or been discharged and the period
between the first and second anniversary of the first day of
such absence shall not be deemed a Break-in-Service.
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(c) "Month of Service" means a calendar month any part of which is
in a period of employment or credited absence.
(d) "Year of Service" means, unless otherwise indicated, twelve
(12) Months of Service.
(e) "Hour of Employment" means the following:
(1) For an Employee paid on an hourly basis or for whom
hourly records of employment are required to be
maintained, each hour for which the person is
directly or indirectly paid or entitled to payment
for the performance of duties or for the period of
time when no duties are performed, irrespective of
whether the employment relationship has terminated,
such as vacation, holiday or illness.
(2) For an Employee paid on a non-hourly basis or for
whom hourly records of employment are not required to
be maintained, each week for which the person
directly or indirectly paid or entitled to payment
shall be equal to 45 Hours of Employment.
(3) A person shall receive an Hour of Employment for each
hour for which back pay has been awarded or agreed to
irrespective of mitigation of damages, provided that
each such hour shall be credited to the Applicable
Computation Period to which it pertains, rather than
the Applicable Computation Period in which the award
or agreement is made, and further provided that no
such award or agreement shall have the effect of
crediting an Hour of Employment for any hour for
which the person previously received credit under (1)
or (2) above.
(4) Notwithstanding the foregoing, Hours of Employment
shall be computed and credited in accordance with
Department of Labor Regulations 2530.200(b)-2,
subparagraphs (b) and (c).
(f) An Employee shall receive credit for the period of his
employment with another business entity to which he had been
transferred by the Company solely for purposes of determining
his vested interest in accordance with Section 7.1.
2.46. "Social Security Taxable Wage Base" means the amount of wages
from which Social Security taxes are required to be withheld in accordance with
the Federal Insurance Contributions Act, or any successor act, regulation, or
ruling pertaining thereto, which is in effect at the beginning of each Plan
Year.
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2.47. "Trust Agreement" means the trust instrument executed by the
Company and the Trustee for purposes of providing a vehicle for investment of
the assets of the Plan.
2.48. "Trustee" means the party or parties so designated pursuant to
the Trust Agreement and each of their respective successors.
2.49. "Trust Fund" means all of the assets of the Plan held by the
Trustee under the Trust Agreement.
2.50. "Valuation Date" means the last day of each calendar month or
such other dates as the Committee may determine from time to time. The date or
dates designated by the Committee and communicated in writing to the Trustee for
the purpose of valuing each Investment Fund and adjusting Accounts hereunder
need not be uniform with respect to each Investment Fund or Participant
Accounts; provided, however, that each Investment Fund will be valued and each
Participant Account will be adjusted no less often than once annually.
2.51. Other Defined Terms. Other terms may be defined within the text
of subsequent Sections of this Plan. Unless specifically indicated otherwise,
such terms will have those defined meanings for all purposes under this Plan,
with the same force and effect as if set out in this Article II.
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ARTICLE III.
PARTICIPATION ELIGIBILITY
3.1. Eligibility for Participation.
(a) Each Employee who was a Participant on December 31, 1998 shall
continue to be a Participant as of January 1, 1999. Each Employee who was an
Eligible Employee on December 31, 1998 shall continue to be an Eligible Employee
as of January 1, 1999.
(b) Prior to October 1, 1999, each other Eligible Employee may:
(1) for purposes of Section 4.1, become a Participant as of
the first day of the calendar quarter next following the date he completes one
(1) Year of Service.
(2) for all other purposes of the Plan, become a Participant
as of the last day of the calendar quarter in which he completes one (1) Year of
Service.
For purposes of this Section 3.1, "Year of Service" shall mean
an Applicable Computation Period in which the Eligible Employee completes 1,000
Hours of Employment with an Employer.
(c) Effective October 1, 1999, each other Eligible Employee may:
(1) for purposes of Section 4.1, become a Participant as of
the first day of the calendar quarter next following the date he completes six
(6) Months of Service.
(2) for all other purposes of the Plan, become a Participant
as of the last day of the calendar quarter in which he completes six (6) Months
of Service.
For purposes of this Section 3.1, "six (6) Months of Service"
shall mean an Applicable Computation Period in which the Eligible Employee
completes 500 Hours of Employment with an Employer.
3.2. Procedure for and Effect of Participation. Each Participant will
complete such forms and provide such data as are reasonably required by the
Committee as a precondition of such participation. By becoming a Participant, an
Eligible Employee will for all purposes be deemed conclusively to have assented
to the terms and provisions of the Plan, the corresponding Trust Agreement, and
to all amendments to such instruments.
3.3. Reemployment.
(a) If an Eligible Employee satisfies the requirements of Section 3.1,
terminates employment with the Employers and Affiliated Companies and is later
reemployed, he will again
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be eligible to participate in the Plan on the date he is reemployed or on the
first day of any subsequent calendar quarter.
(b) If an Employee satisfies the requirements of Section 3.1 and
subsequently becomes an Eligible Employee, he will be eligible to participate in
the Plan on the date he becomes an Eligible Employee or on the first day of any
subsequent calendar quarter.
3.4. Effect of Collective Bargaining. In the event a collective
bargaining agreement is entered into between an Employer and a representative
for any class of Employees in the employ of the Employer subsequent to January
1, 1999, eligibility for participation in the Plan by such Employees who are not
Participants shall not be extended beyond the effective date of the collective
bargaining agreement unless the agreement extends membership in the Plan to such
Employees. If, under the collective bargaining agreement, participation in the
Plan is not extended, such Employees who are Participants in the Plan shall
remain Participants but shall not be permitted to contribute in accordance with
Article IV or share in any Employer contributions or forfeitures allocated in
accordance with Articles IV and VIII for the period beyond the effective date of
the collective bargaining agreement.
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ARTICLE IV.
CONTRIBUTIONS
4.1. Salary Deferral Contributions.
(a) Elections. Subject to the limitations set forth in Article V, each
Participant may elect, in the manner prescribed by the Committee, to reduce his
Compensation received on and after the effective date of the election through
payroll reductions by an amount equal to from one percent (1%) to fifteen
percent (15%), in whole percentages, of his Compensation payable with respect to
any payroll period.
The Salary Deferrals elected by a Participant will be tentative and
will become final only after the Committee has made such adjustments thereto as
it deems necessary to maintain the qualified status of the Plan and to satisfy
all requirements of section 401(k) of the Code.
(b) Increase in or Reduction of Salary Deferrals. A Participant may, in
the manner prescribed by the Committee, elect to increase or reduce the rate of
his Salary Deferrals (including cessation or recommencement of such Salary
Deferrals), or change the type of contribution being made, within the limits
described in Section 4.1. Any new election made pursuant to this subsection (b)
at least 30 days (or such other period as the Committee may designate from time
to time) prior to the first day of the next following calendar month (for
periods prior to August 1, 1999, the next following calendar quarter) (or as of
such other dates as the Committee may designate from time to time), will be
effective as of such date.
(c) Contribution and Allocation of Salary Deferrals. The Employer will
contribute to the Plan with respect to each Plan Year an amount equal to the
Salary Deferrals of its Participants for such Plan Year, as determined pursuant
to Salary Deferral elections in force pursuant to this Section. There will be
allocated to the Salary Deferral Account of each Participant the Salary Deferral
amounts contributed by the Employer to the Plan with respect to that
Participant.
4.2. Matching Contributions.
(a) Matching Contributions. Subject to the limitations described in
Article V, an Employer will contribute to the Plan, on behalf of each
Participant who is eligible to receive an allocation of Matching Contributions
and who has made Salary Deferrals during a Plan Year, an amount equal to the
designated percentage rate of each Participant's Salary Deferrals for the Plan
Year. Such designated percentage rate shall be determined by the Company and
announced to Employees at the end of the Plan Year of reference. Notwithstanding
the foregoing and subject to the limitations described in Article V, an Employer
may contribute to the Plan, on behalf of each Participant who is eligible to
receive an allocation of additional Matching Contributions and who has made
Salary Deferrals during a Plan Year, an additional amount of Matching
Contributions.
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<PAGE> 16
(b) Allocation of Matching Contributions. Matching Contributions made
pursuant to this Section 4.2 will be allocated, as of the last day of the Plan
Year for which such contributions are made, to the Matching Contribution
Accounts of Participants who are employed by an Employer on the last business
day of the Plan Year. Additional Matching Contributions will be allocated, as of
the last day of the Plan Year for which such contributions are made, to the
Matching Contribution Accounts of Participants who are employed by the Employer
on the last business day of the Plan Year, in the same proportion that the
Salary Deferrals of each such Participant for such Plan Year bears to the
aggregate Salary Deferrals of all Participants for such Plan Year.
4.3. Regular Contributions. Subject to the limitations described in
Article V, the Employers may contribute for each Plan Year an amount which,
along with forfeitures, shall be allocated to Participants in the employ of the
Employers on the last business day of such Plan Year, which amount shall be
credited at the end of such Plan Year.
Such amount shall be allocated to a Participant in the same proportion
as (i) the sum of such Participant's Compensation and Compensation in excess of
the Social Security Taxable Wage Base, bears to (ii) the sum of Compensation and
Compensation in excess of the Social Security Taxable Wage Base for all such
Participants. Notwithstanding the foregoing, the maximum percentage allocated to
a Participant pursuant to the preceding sentence shall be the greater of (i)
5.7% or (ii) the portion of the rate of tax payable by an Employer under Section
3111(a) of the Code which is attributable to old-age insurance at the beginning
of each Plan Year; provided, however, that if the total amount to be allocated
to a Participant exceeds this limitation, the excess allocation to which the
Participant is entitled shall be in the same proportion as the Participant's
Compensation bears to the sum of all Participants' Compensation.
4.4. Qualified Employer Contributions. Subject to the limitations
described in Article V, the Employer may, in its discretion, make Qualified
Employer Contributions for a Plan Year, which will be allocated as of the last
day of the Plan Year for which such contributions are made to the Qualified
Employer Contribution Accounts of some or all of those Participants who are not
Highly Compensated Employees for the Plan Year, as determined by the Employer at
the time such contributions are made, in an amount necessary to satisfy at least
one of the tests in Section 5.2. The allocable share of each such Participant
will be in the ratio which his Salary Deferrals for the Plan Year bears to the
aggregate Salary Deferrals for all such Participants.
4.5. Contributions for Additional Participants. Notwithstanding the
foregoing provisions of this Article IV, a Participant shall be entitled to
share in the Matching Contributions, additional Matching Contributions,
Qualified Employer Contributions and Regular Contributions and forfeitures, if
any, for the Plan Year of (i) his Retirement, Disability or death, (ii) the
commencement or end of a "leave of absence" authorized by the Employer, or (iii)
his transfer to another business entity to which such Participant had been
transferred by the Employer, even if the Participant is not in the employ of the
Employer on the last business day of such Plan Year.
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<PAGE> 17
As used herein, "leave of absence" shall mean a leave granted for
pregnancy, sickness, death or any other family obligation or status; personal or
family hardship or special business circumstances; educational purposes; and/or
civic, charitable or governmental services, provided that all Participants under
similar circumstances are treated in a similar manner.
A Participant shall not share in the allocation of an Employer's
Regular Contributions or forfeitures for any Plan Year during which he
terminated his employment for reasons other than those specified above.
4.6. Contributions With Respect to Military Service.
(a) Salary Deferrals. A Participant who returns to employment with an
Employer or an Affiliated Company following a period of Qualified Military
Service will be permitted to make additional Salary Deferrals, within the limits
described in Section 4.1, up to an amount equal to the Salary Deferrals that the
Participant would have been permitted to contribute to the Plan if he had
continued to be employed and received Compensation during the period of
Qualified Military Service. Salary Deferrals under this Section may be made
during the period which begins on the date such Participant returns to
employment and which has the same length as the lesser of (a) 3 multiplied by
the period of Qualified Military Service and (b) 5 years.
(b) Matching Contributions. The Employer will contribute to the Plan,
on behalf of each Participant who is eligible for Matching Contributions and who
has made Salary Deferrals under paragraph (a) above, an amount equal to the
Matching Contributions that would have been required under Section 4.2 had such
Salary Deferrals been made during the period of Qualified Military Service.
(c) Other Employer Contributions. The Employer will contribute to the
Plan, on behalf of each Participant who returns from Qualified Military Service
as described in subsection (a), an amount equal to any other Employer
contributions that would have been required under Sections 4.3, 4.4 or 4.5 had
such Participant continued to be employed and received Compensation during the
period of Qualified Military Service.
(d) Limitations on Contributions. The Salary Deferrals, Matching
Contributions, additional Matching Contributions, Qualified Employer
Contributions and Regular Contributions made under this Section will be subject
to the limitations described in Article V for the Plan Year
to which such contributions relate.
4.7. Rollover Contributions. Effective September 1, 1999, the Plan will
accept, as "Rollover Contributions" made on behalf of any Eligible Employee,
cash equal to (a) all or a portion of the amount received by the Eligible
Employee as a distribution from (either directly or through a conduit individual
retirement account), or (b) an amount transferred directly to the Plan (pursuant
to section 401(a)(31) of the Code) on the Eligible Employee's behalf, by the
trustee of another qualified trust forming a part of a plan described in section
401(a) or 403(a)
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<PAGE> 18
of the Code, but only if the deposit qualifies as a tax-free rollover as defined
in section 402 of the Code as determined in accordance with procedures
established by the Committee. If the amount received does not qualify as a
tax-free rollover, the amount will be refunded to the Eligible Employee.
Rollover amounts will be allocated to the Eligible Employee's Rollover Account
and invested in accordance with the provisions of Article VI.
4.8. Timing of Contributions. Matching Contributions, additional
Matching Contributions, Qualified Employer Contributions and Regular
Contributions for any Plan Year under this Article IV will be made no later than
the last date on which amounts so paid may be deducted for federal income tax
purposes for the taxable year of the Employer in which the Plan Year ends.
Amounts contributed as Salary Deferrals will be remitted to the Trustee as soon
as such practicable, but no later than the fifteenth (15th) business day of the
month following the month in which such contributions were withheld from the
Participant's Compensation. The requirements of this Section do not apply to
contributions made pursuant to Section 4.6.
4.9. Contingent Nature of Contributions. Each contribution made by the
Employer pursuant to the provisions of Sections 4.1, 4.2, 4.3, 4.4, 4.5 or 4.6
is made expressly contingent on its deductibility for federal income tax
purposes for the fiscal year with respect to which such contribution is made,
and no such contribution will be made for any year to the extent it would exceed
the deductible limit for such year as set forth in section 404 of the Code.
4.10. Exclusive Benefit; Refund of Contributions. All contributions
made to the Plan are made for the exclusive benefit of the Participants and
their Beneficiaries, and such contributions will not be used for, nor diverted
to, purposes other than for the exclusive benefit of the Participants and their
Beneficiaries (including the costs of maintaining and administering the Plan and
corresponding trust). Notwithstanding the foregoing, to the extent that such
refunds do not, in themselves, deprive the Plan of its qualified status, refunds
of contributions will be made to the Employer under the following circumstances
and subject to the following limitations:
(a) Disallowance of Deduction. To the extent that a federal income tax
deduction is disallowed, in whole or in part, for any contribution made by an
Employer, or such contribution is otherwise nondeductible and recovery thereof
is permitted, the Trustee will refund to the Employer the amount so disallowed
within one (1) year of the date of such disallowance or as otherwise permitted
by applicable administrative rules.
(b) Mistake of Fact. In the case of a contribution which is made in
whole or in part by reason of a mistake of fact, so much of the Employer
contribution as is attributable to the mistake of fact will be returnable to the
Employer upon demand, upon presentation of evidence of the mistake of fact to
the Trustee and of calculations as to the impact of such mistake. Demand and
repayment must be effectuated within one (1) year after the payment of the
contribution to which the mistake applies.
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In the event that any refund is paid to the Employer hereunder, such
refund will be made without regard to net investment gains attributable to the
contribution, but will be reduced to reflect net investment losses attributable
thereto.
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ARTICLE V.
LIMITATIONS ON CONTRIBUTIONS
5.1. Calendar Year Limitation on Salary Deferrals.
(a) Notwithstanding anything contained herein to the contrary, Salary
Deferrals made on behalf of an active Participant under this Plan together with
elective deferrals (as defined in section 402(g) of the Code) under any other
plan or arrangement maintained by the Employer or an Affiliated Company will not
exceed $10,000 (as adjusted in accordance with section 402(g) of the Code and
Treasury regulations thereunder) for any calendar year. Furthermore, should a
Participant claim that his Salary Deferrals under this Plan when added to his
other elective deferrals under any other plan or arrangement (whether or not
maintained by an Employer or an Affiliated Company) exceed the limit imposed by
section 402(g) of the Code for the calendar year in which the deferrals
occurred, the Committee will distribute, by April 15 of the following calendar
year, the amount of Salary Deferrals specified in the Participant's claim, plus
income thereon determined in the manner described in Section 5.3(c). The
Participant's claim will be in writing and will be submitted to the Committee
prior to April 1 following the calendar year in which such deferrals occurred. A
Participant will be deemed to have made a claim for distribution of excess
deferrals from the Plan to the extent that his Salary Deferrals together with
his elective deferrals under any other plan or arrangement maintained by the
Employer or an Affiliated Company exceed the limit imposed by section 402(g) of
the Code for the calendar year. For purposes of determining the necessary
reduction, (1) Salary Deferrals previously distributed pursuant to Section
5.3(a) or returned to the Participant pursuant to Section 5.4 will be treated as
distributed under this Section 5.1 and (2) Salary Deferrals not taken into
account in determining Matching Contributions under Section 4.2 will be reduced
first.
(b) In the event a Participant receives a distribution of excess Salary
Deferrals pursuant to paragraph (a), the Participant will forfeit any Matching
Contributions (plus income thereon determined as described in Section 5.3(c))
allocated to the Participant by reason of the distributed Salary Deferrals.
Amounts forfeited will be used to reduce future Matching Contributions made
pursuant to Section 4.2.
5.2. Nondiscrimination Limitations on Salary Deferrals and Matching
Contributions.
(a) Salary Deferral Limitations. With respect to Salary Deferrals for
any Plan Year beginning on or after January 1, 1997, one of the following tests
must be satisfied:
(1) The Average Actual Deferral Percentage for active
Participants who are Highly Compensated Employees for the Plan Year will not
exceed the Average Actual Deferral Percentage for all other active Participants
for the preceding Plan Year multiplied by 1.25; or
(2) The Average Actual Deferral Percentage for active
Participants who are Highly Compensated Employees for the Plan Year will not
exceed the Average Actual Deferral
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Percentage for all other active Participants for the preceding Plan Year
multiplied by two (2), provided that the Average Actual Deferral Percentage for
such Highly Compensated Employees does not exceed the applicable Average Actual
Deferral Percentage for all other active Participants by more than two (2)
percentage points.
(b) Matching Contribution Limitations. With respect to Matching
Contributions for any Plan Year beginning on or after January 1, 1997, one of
the following tests must be satisfied:
(1) The Average Contribution Percentage for active
Participants who are Highly Compensated Employees for the Plan Year will not
exceed the Average Contribution Percentage for all other active Participants for
the preceding Plan Year multiplied by 1.25; or
(2) The Average Contribution Percentage for active
Participants who are Highly Compensated Employees for the Plan Year will not
exceed the Average Contribution Percentage for all other active Participants for
the preceding Plan Year multiplied by two (2), provided that the Average
Contribution Percentage for such Highly Compensated Employees does not exceed
the applicable Average Contribution Percentage for all other active Participants
by more than two (2) percentage points.
(c) Aggregate Limitation. For any Plan Year in which both the
limitations in Sections 5.2(a)(1) and (b)(1) are exceeded, the sum of the
Average Actual Deferral Percentage and the Average Contribution Percentage for
active Participants who are Highly Compensated Employees (determined after
adjustments are made under Sections 5.3(a) and (b) for purposes of satisfying
the limitations described in Sections 5.2(a) and (b)) will not exceed the
greater of:
(1) the sum of (A) the greater of the applicable Average
Actual Deferral Percentage or the Average Contribution Percentage for all other
active Participants multiplied by 1.25, plus (B) the lesser of (i) two (2)
multiplied by the lesser of the applicable Average Actual Deferral Percentage or
the Average Contribution Percentage for all other Participants, or (ii) two
percent (2%) plus the lesser of the applicable Average Actual Deferral
Percentage or the Average Contribution Percentage for all other active
Participants; or
(2) the sum of (A) the lesser of the applicable Average Actual
Deferral Percentage or the Average Contribution Percentage for all other active
Participants multiplied by 1.25, plus (B) the lesser of (i) two (2) multiplied
by the greater of the applicable Average Actual Deferral Percentage or the
Average Contribution Percentage for all other active Participants, or (ii) two
percent (2%) plus the greater of the applicable Average Actual Deferral
Percentage or the Average Contribution Percentage for all other active
Participants.
(d) For purposes of subsections (a) through (c), this Plan will be
aggregated and treated as a single plan with other plans maintained by the
Employer or an Affiliated Company
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<PAGE> 22
to the extent that this Plan is aggregated with any such other plan for purposes
of satisfying section 410(b) (other than section 410(b)(2)(A)(ii)) of the Code.
(e) The determination and treatment of the Salary Deferrals, Matching
Contributions, Qualified Employer Contributions, Actual Deferral Percentage and
Contribution Percentage of any Participant will satisfy such other requirements
as may be prescribed by the
Secretary of the Treasury.
5.3. Correction of Discriminatory Contributions.
(a) If the nondiscrimination tests of Section 5.2(a) are not satisfied
with respect to Salary Deferrals for any Plan Year beginning on or after January
1, 1997, the Committee will (1) determine the amount by which the Actual
Deferral Percentage for the Highly Compensated Employee or Employees with the
highest Actual Deferral Percentage for the Plan Year would need to be reduced to
comply with the limit in Section 5.2(a), (2) convert the excess percentage
amount determined under clause (1) into a dollar amount, and (3) reduce the
Salary Deferrals of the Highly Compensated Employee or Employees with the
greatest dollar amount of Salary Deferrals by the lesser of (A) the amount by
which the Highly Compensated Employee's Salary Deferrals exceeds the Salary
Deferrals of the Highly Compensated Employee with the next highest dollar amount
of Salary Deferrals, or (B) the amount of the excess dollar amount determined
under clause (2). This process will be repeated until the Salary Deferrals of
Highly Compensated Employees have been reduced by an amount equal to the excess
dollar amount determined under clause (2). The Salary Deferrals of any Highly
Compensated Employee which must be reduced pursuant to this subsection (a) will
be reduced (i) first, by distributing Salary Deferrals not taken into account in
determining Matching Contributions under Section 4.2, and (ii) then, by
distributing Salary Deferrals not described in (i), within twelve (12) months of
the close of the Plan Year with respect to which the reduction applies, and the
provisions of Section 5.1(b) regarding the forfeiture of related Matching
Contributions will apply. For purposes of determining the necessary reduction,
Salary Deferrals previously distributed pursuant to Section 5.1 will be treated
as distributed under this Section 5.3(a).
(b) If the nondiscrimination tests of Section 5.2(b) are not satisfied
with respect to Matching Contributions for any Plan Year beginning on or after
January 1, 1997, the Committee will (1) determine the amount by which the Actual
Contribution Percentage for the Highly Compensated Employee or Employees with
the highest Actual Contribution Percentage for the Plan Year would need to be
reduced to comply with the limit in Section 5.2(b), (2) convert the excess
percentage amount determined under clause (1) into a dollar amount, and (3)
reduce the excess contributions of the Highly Compensated Employee or Employees
with the greatest dollar amount of Matching Contributions by the lesser of (A)
the amount by which the dollar amount of the affected Highly Compensated
Employees's Matching Contributions exceeds the dollar amount of the Matching
Contributions of the Highly Compensated Employee with the next highest dollar
amount of Matching Contributions, or (B) the amount of the excess dollar amount
determined under clause (2). This process will be repeated until the
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<PAGE> 23
Matching Contributions of the Highly Compensated Employees has been reduced by
an amount equal to the excess dollar amount determined under clause (2). The
Matching Contributions of any Highly Compensated Employee which must be reduced
pursuant to this subsection (b) will be reduced by distributing any Matching
Contributions, within twelve (12) months of the close of the Plan Year with
respect to which the reduction applies. Amounts forfeited under this subsection
(b) will be applied to reduce future Matching Contributions made pursuant to
Section 4.2.
(c) Any distribution, recharacterization or forfeiture of Salary
Deferrals or Matching Contributions necessary pursuant to subsections (a) or (b)
will include a distribution or forfeiture of the income, if any, allocable to
such contributions. Such income will be equal to the sum of (1) the allocable
gain or loss for the Plan Year (determined by multiplying the income allocable
to the Participant's Salary Deferrals or Matching Contributions, as applicable,
for the Plan Year by a fraction, the numerator of which is the Participant's
excess Salary Deferrals or Matching Contributions, as applicable, for the Plan
Year and the denominator is the Participant's Salary Deferral Account or
Matching Contribution Account, as applicable, as of the beginning of the Plan
Year), plus (2) ten percent (10%) of the amount determined under clause (1)
multiplied by the number of whole calendar months between the end of the Plan
Year and the date of distribution, counting the month of distribution if
distribution occurs after the fifteenth day of the month.
(d) For purposes of satisfying the nondiscrimination test described in
Section 5.2(c), the Salary Deferrals of all Highly Compensated Employees will be
reduced as described in subsections (a) and (b), (i) first, by distributing
Salary Deferrals not taken into account in determining Matching Contributions
under Section 4.2, and (ii) then, by distributing Salary Deferrals not described
in clause (i) and forfeiting Matching Contributions corresponding to such
distributed Salary Deferrals.
(e) Notwithstanding anything in this Section to the contrary, for any
Highly Compensated Employee who is an active Participant in the Plan while
eligible to participate in any other qualified retirement plan maintained by the
Employer or an Affiliated Company (excluding any such plan which is not
permitted to be aggregated with the Plan pursuant to Treas. Reg.
Section 1.401(k)-1(g)(11) or Section 1.401(m)-1(f)(14)) under which the Employee
has made employee contributions or elective deferrals, or is credited with
employer matching contributions for the year, the Committee will coordinate
corrective actions under this Plan and such other plan for the year.
(f) In lieu of or in addition to the actions described in subsections
(a) through (e) of this Section, to satisfy the tests in Section 5.2, the
Employer may make Qualified Employer Contributions as described in Section 4.4.
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5.4. Annual Additions Limitations.
(a) In no event will the Annual Additions on behalf of any Participant
for any Plan Year exceed the lesser of:
(1) $30,000, or
(2) twenty-five percent (25%) of such Participant's
Compensation for the Plan Year.
The limitation referred to in Section 5.4(a)(2) will not apply to any
contribution for medical benefits within the meaning of section 401(h) or
section 419A(f)(2) of the Code which is otherwise treated as an Annual Addition
under section 415(l)(1) or 419A(d)(2) of the Code.
If the amount otherwise allocable to the Account of a Participant would
exceed the amount described above as a result of the reallocation of
forfeitures, a reasonable error in estimating the Participant's Compensation, a
reasonable error in determining the amount of elective deferrals (within the
meaning of section 402(g) of the Code) that may be made under the limitations of
section 415 of the Code, or such other circumstances as permitted by law, the
Committee will determine which portion, if any, of such excess amount is
attributable to the Participant's Salary Deferrals and/or Matching Contributions
and/or Qualified Employer Contributions, if any, until such excess amount has
been exhausted. To the extent any portion of a Participant's Salary Deferrals
are determined to be excess under this Section, such Salary Deferrals, with
income thereon, will be returned to the Participant as soon as administratively
practicable. To the extent any portion of the Matching Contributions and/or
Qualified Employer Contributions allocable to a Participant are determined to be
excess under this Section, while the Participant remains an Eligible Employee,
his excess Matching Contributions and/or Qualified Employer Contributions will
be held in a suspense account (which will share in investment gains and losses
of the Fund) by the Trustee until the following Plan Year (or any succeeding
Plan Years), at which time such amounts will be allocated to the Participant's
Account before any Matching Contributions and/or Qualified Employer
Contributions are made on his behalf for the Plan Year. When the Participant
ceases to be an Eligible Employee, his excess Matching Contributions and/or
Qualified Employer Contributions held in the suspense account will be allocated
in the following Plan Year (or any succeeding Plan Years) to the Accounts of
other Participants in the Plan. Furthermore, the Committee will perform any
other actions as may be necessary to preserve the Plan's status as a qualified
plan.
(b) Effective for Plan Years beginning before January 1, 2000, the
amount allocated to the Account of any Participant for any Plan Year will not
cause the sum of the "defined contribution fraction" and the "defined benefit
fraction," as such terms are defined in section 415(e) of the Code, to exceed
1.0, or such other limitation as may be applicable under section 415 of the Code
with respect to any combination of qualified plans without disqualification of
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any such plan. In the event that the amount tentatively available for allocation
to the Account of any Participant in any Plan Year beginning before January 1,
2000 exceeds the maximum amount permissible hereunder, benefits under the
defined benefit plan or plans in which the Participant is participating will be
adjusted to the extent necessary to satisfy the requirements of section 415(e)
of the Code.
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ARTICLE VI.
INVESTMENT AND VALUATION OF TRUST FUND;
MAINTENANCE OF ACCOUNTS
6.1. Investment of Assets. All existing assets of the Trust Fund and
all future contributions will be invested by the Trustee in accordance with the
terms of the Trust Agreement and Section 6.2.
6.2. Investment in Investment Funds. The Committee will designate the
available Investment Funds to which a Participant may direct the investment of
amounts credited to his Account. The Committee, in its sole discretion, may from
time to time designate additional Investment Funds of the same or different
types or modify, cease to offer or eliminate any existing Investment Funds.
Anything contained in this Section 6.2 to the contrary notwithstanding,
all or any part of the Trust Fund may be invested by one or more Investment
Managers appointed by the Committee, under one or more pooled or commingled
funds maintained by a bank or insurance company, together with commingled assets
of other plans of deferred compensation qualified under section 401(a) of the
Code. A portion of the Trust Fund, as determined by the Committee, may be held
in the form of uninvested cash or in a liquid asset account for temporary
periods pending reinvestment or distribution.
6.3. Investment Elections. Each Participant, upon commencing or
recommencing active participation under Section 4.1, will direct in the form and
at the time prescribed by the Committee the investment of contributions made by
him or on his behalf in any one or more of the available Investment Funds, in
whole percentage increments, subject to such limitations as the Committee may
prescribe. In the event a Participant fails to direct the investment of all or a
portion of his Account, the Committee will designate a default Investment Fund
in which such amount will be invested.
6.4. Change of Election. Each Participant may change his investment
direction with respect to the investment of his future contributions by written
notice to the Committee (or its delegate) at least 30 days (or such shorter
period as is acceptable to the Committee) prior to the first day of the first
calendar month as of which such election is to be effective. Until changed in
accordance with this Section 6.4, an Investment Fund election shall remain in
effect for all subsequent Plan Years.
6.5. Transfers Between Investment Funds. Each Participant or
Beneficiary of a deceased Participant may elect to transfer all or a portion of
his interest in any Investment Fund to any other available Investment Fund by
written notice to the Committee (or its delegate) at least 30 days (or such
shorter period as is acceptable to the Committee) prior to the first day of the
first calendar month as of which such election is to be effective (or at such
other time as determined in accordance with Section), provided such change (i)
results in multiples of 5% in
25
<PAGE> 27
any one Investment Fund; (ii) is applied to the ending balance determined as of
the applicable Valuation Date; and (iii) is applicable equally to each of the
Participant's Accounts. Such change shall become effective within such period of
time as may be administratively required for the orderly liquidation of
investments following the applicable Valuation Date.
6.6. Individual Accounts. There will be maintained on the books of the
Plan with respect to each Participant, as applicable, a Salary Deferral Account,
a Matching Contribution Account, a Regular Contribution Account, a Qualified
Employer Contribution Account and a Rollover Account. Each such Account will
separately reflect the Participant's interest in each Investment Fund relating
to such Account. Each Participant will receive, at least annually or at more
frequent intervals determined by the Committee, a statement of his Account
showing the balances in each Investment Fund. A Participant's interest in any
Investment Fund will be determined and accounted for based on his beneficial
interest in any such fund, and no Participant will have any interest in or
rights to any specific asset of any Investment Fund.
6.7. Valuation. The Trust Fund shall be valued by the Trustee as of
each Valuation Date on the basis of its fair market value. The Trust Fund may
also be valued by the Trustee as of any other date as the Committee may
authorize for any reason the Committee deems appropriate.
6.8. Allocation of Investment Earnings and Expenses. On the basis of
the valuation as of a Valuation Date, subject to the provisions of Article VII,
the Accounts of all Participants shall be (a) proportionately adjusted to
reflect expenses and investment earnings such as interest, dividends, realized
and unrealized investment profits and losses, and (b) directly adjusted to
reflect all other applicable transactions during the Plan Year attributable to
such Accounts including, but not limited to, any distributions or annuity
purchases.
6.9. Fiduciary Responsibility. This Plan is intended to constitute a
plan described in section 404(c) of the Employee Retirement Security Act of
1974, as amended, and Title 29 of the Code of Federal Regulations Section
2550.404c-1. None of the Company, an Employer, the Committee, the Trustee nor
any other Plan fiduciary will be liable for any losses which are the direct and
necessary result of investment instructions provided by any Participant,
Beneficiary or Alternate Payee.
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<PAGE> 28
ARTICLE VII.
VESTING AND BENEFIT DISTRIBUTIONS
7.1. Vesting.
(a) Upon Retirement. A Participant shall be 100% vested in his Account
at all times after first becoming eligible for Retirement. A Participant shall
be eligible to retire on his Normal or Deferred Retirement Date. In the event a
Participant does not retire on his Normal Retirement Date, he shall continue to
be credited with contributions in accordance with Articles IV and VIII until his
actual retirement.
(b) Upon Disability. A Participant who incurs a Disability prior to his
termination of employment shall be 100% vested in his Account. The Committee
shall require evidence that the application for such benefits has been approved
by the Social Security Administrator. The final determination shall be made by
the Committee on the basis of such evidence.
If such Participant returns to the employ of an Employer, he
shall resume his participation as of the date of his return. The Participant's
vested interest in that portion of his Account attributable to Service from the
date of his last reemployment shall be determined in accordance with the
provisions of this Article VII, without regard to his prior Disability.
(c) Upon Death. A Participant who dies prior to his termination of
employment shall be 100% vested in his Account. Upon the death of a Participant,
his Beneficiary shall be entitled to 100% of such Participant's vested Account.
(d) Upon Termination of Employment. Upon a Participant's termination of
employment for reasons other than his Retirement, Disability or death, the
following provisions shall apply:
(1) A Participant shall at all times be 100% vested in his
Account, except for the portion of his Account that is his Regular Contribution
Account.
(2) (a) Subject to Section 7.1(d)(4), for periods prior to
December 31, 1999, a Participant shall be vested in his Regular Contribution
Account in accordance with the following schedule on the basis of the
Participant's full Years of Service:
<TABLE>
<CAPTION>
Number of Years Percentage of Account
--------------- ---------------------
<S> <C>
Less than 3 full Years of Service 0
3 full Years of Service 20%
4 full Years of Service 40%
5 full Years of Service 60%
6 full Years of Service 80%
7 or more full Years of Service 100%
</TABLE>
27
<PAGE> 29
(b) Subject to Section 7.1(d)(4), for periods on and
after December 31, 1999, a Participant shall be vested in his Regular
Contribution Account in accordance with the following schedule on the basis of
the Participant's full Years of Service:
<TABLE>
<CAPTION>
Number of Years Percentage of Account
--------------- ---------------------
<S> <C>
Less than 1 full Year of Service 0
1 full Year of Service 20%
2 full Years of Service 40%
3 full Years of Service 60%
4 full Years of Service 80%
5 or more full Years of Service 100%
</TABLE>
(3) The portion of a Participant's Account which is not vested
shall be forfeited on the earlier of the date on which the Participant receives
a distribution of his vested benefits or the date on which such Participant
incurs five consecutive Breaks-in-Service, but in no event shall such forfeiture
occur earlier than the first day after the Valuation Date next following the
date on which the Participant terminated employment. If a Participant does not
have a vested interest in his Account, he shall be deemed to have received an
immediate distribution as of the first day after the Valuation Date next
following the date on which such Participant terminated employment. That portion
of a Participant's Regular Contribution Account which is forfeited shall be
reallocated in accordance with Section 4.3 and Article VIII.
(4) If a Participant is reemployed by the Employer prior to
incurring five consecutive Breaks-in-Service, the dollar amount which was
subject to forfeiture in accordance with Section 7.1(d)(3) will be restored to
the Participant's Account if the Participant repays the amount distributed from
his Account. Such amounts must be repaid to the Trust Fund in a lump sum within
five years from the date such Participant resumes his employment with the
Employer. The funds required for the restoration of such Account may, as
determined by the Committee, be paid from forfeitures, Regular Contributions, or
investment gains of the Trust Fund attributable to the Regular Contribution
Accounts of all Participants.
Such repaid amounts shall be credited to the Participant's
Accounts as determined by the Committee, taking into account the applicable
vesting schedules, amounts subject to special tax treatment and withdrawal
rules. Additional Accounts will be established, if required, to accommodate
these objectives. Amounts repaid and restored in accordance with this Subsection
will not be treated as Annual Additions.
Notwithstanding the foregoing, no restoration shall be made to
a Participant's Account and no repayment shall be permitted with respect to
funds accumulated prior to reemployment in the case of
(i) any Participant who was fully vested;
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<PAGE> 30
(ii) any Participant who is reemployed after incurring five
consecutive Breaks-in-Service, or
(iii) any Participant who incurred a one year Break-in-Service
prior to January 1, 1985 and reemployment.
7.2. Commencement of Benefits.
(a) Death Benefits.
(1) Form and Timing of Benefit. Unless otherwise elected by
the Beneficiary and subject to Section 7.2(a)(2), death benefits will be paid in
a single lump sum to the Participant's Beneficiary as soon as practicable after
the Participant's death.
(2) Required Distribution Dates. Notwithstanding any provision
in the Plan to the contrary, the Benefit Payment Date:
(a) for a non-spouse Beneficiary will be no later
than December 31 of the year containing (i) the fifth anniversary of the
Participant's death or (ii) with respect to death benefits payable from the
Participant's Account in the form of installments, the first anniversary of the
Participant's death.
(b) for a spouse Beneficiary will be no later than
December 31 of the later of (i) the calendar year following the year of the
Participant's death or (ii) the calendar year in which the Participant would
have attained age 70-1/2.
Distributions under this Section 7.2(a) will otherwise comply
with the requirements of section 401(a)(9) of the Code and the regulations
thereunder, including the incidental death benefit requirements of proposed
Treas. Reg. Section 1.401(a)(9)-2.
(b) Upon Other Events.
(1) Amount of Benefit. The Plan benefit payable to a
Participant upon such Participant's termination of employment for reasons other
than his death, will be equal to the balance of his vested Account, determined
as of the Valuation Date related to the Benefit Payment Date for the
Participant.
(2) Time of Distribution.
(a) General Rule. Distribution of benefits under this
Section 7.2(b) to the Participant will be made no later than the 60th day
following the Valuation Date next subsequent to the Participant's termination of
employment; provided, however, that in the case of a Participant who has not
reached his Normal Retirement Date and whose Account balance
29
<PAGE> 31
exceeds $5,000 ($3,500 for Benefit Payment Dates before January 1, 1999), no
distribution will be made at such time without the written consent of the
Participant. If the Participant does not so consent, then distribution will be
deferred until any subsequent date elected by the Participant in a manner
prescribed by the Committee, but not later than the 60th day following the last
day of the Plan Year during which the anniversary of the Participant's Normal
Retirement Date occurs.
(b) Required Distribution Dates. Except as otherwise
provided in this Section, the Benefit Payment Date for any Participant will not
be later than the 60th day following the close of the Plan Year in which (A) the
Participant attains age 65, (B) occurs the tenth anniversary of the year in
which the Participant commenced participation in the Plan, or (C) the
Participant terminates from employment, whichever occurs last. Notwithstanding
any provision in the Plan to the contrary, a Participant's Benefit Payment Date
shall not be later than April 1 of the calendar year following the later of (i)
the calendar year in which the Participant attains age 70-1/2, or (ii) for
distributions after December 31, 1996, in the case of a Participant who is not a
5% owner (within the meaning of section 416(i) of the Code) with respect to the
Plan Year ending in the calendar year in which the Participant attains age
70-1/2, the calendar year in which the Participant's termination of employment
occurs. Notwithstanding the foregoing, a Participant who attains age 70-1/2
prior to January 1, 2000 shall be entitled to elect the April 1 of the calendar
year following the calendar year in which he attains age 70-1/2 as his Benefit
Payment Date. Distributions under this Section 7.2 will otherwise comply with
the requirements of section 401(a)(9) of the Code and the regulations
thereunder, including the incidental death benefit requirements of proposed
Treas. Reg. Section 1.401(a)(9)-2.
(3) Election Period. A Participant's election to commence
payment prior to his Normal Retirement Date must be made within the ninety (90)
day period ending on the Benefit Payment Date elected by the Participant and in
no event earlier than the date the Committee provides the Participant with
written information relating to his right to defer payment until his Normal
Retirement Date and his right to make a direct rollover as set forth in Section
7.8. Such information must be supplied not less than thirty (30) days nor more
than ninety (90) days prior to the Benefit Payment Date. Notwithstanding the
preceding sentence, a Participant's Benefit Payment Date may occur less than
thirty (30) days after such information has been supplied to the Participant
provided that, after the Participant has received such information and has been
advised of his right to a thirty (30) day period to make a decision regarding
the distribution, the Participant affirmatively elects a distribution.
7.3. Withdrawals. A Participant may, in a manner prescribed by the
Committee thirty (30) days prior to the requested date of withdrawal, request a
withdrawal from his Account in accordance with the following rules:
(a) 59-1/2 Withdrawals. A Participant, while still employed, may
request a withdrawal of (i) all or a portion of his Salary Deferral Account at
any time after he attains age 59-1/2, provided, however, that at least three
Plan Years must elapse before such Participant is
30
<PAGE> 32
eligible for another withdrawal from his Salary Deferral Account pursuant to
this clause; or (ii) all or a portion of his Salary Deferral Account at any time
before he attains age 59-1/2, provided such withdrawal meets the financial
hardship provisions set forth in paragraph (b) below; or (iii) all or a portion
of his Qualified Employer Contribution Account at any time after he attains age
59-1/2.
(b) Hardship Withdrawals. Each Participant will have the right to make
a withdrawal from his Account on account of hardship. If the Committee or its
delegate determines that a requested withdrawal is on account of an immediate
and heavy financial need of the Participant, and the withdrawal is necessary to
satisfy such financial need, the Participant will be permitted to withdraw all
or a portion of his Account; provided, however, the aggregate amount of a
Participant's withdrawals from his Salary Deferral Account (including any such
withdrawals under any predecessor plan from elective deferrals and earnings
attributable thereto under such predecessor plan) will not exceed the balance of
his Account to the extent attributable to elective deferrals under any
predecessor plan as of December 31, 1988, plus the sum of his Salary Deferrals
and any elective deferrals made to any predecessor plan after December 31, 1988.
Withdrawals pursuant to this Section will be subject to the following additional
rules:
(1) A distribution will be deemed to be on account of an
immediate and heavy financial need of a Participant when the distribution is on
account of:
(A) expenses for medical care described in section
213(d) of the Code incurred by the Participant, the Participant's spouse, or any
dependents of the Participant as defined in section 152 of the Code (or the
distribution is necessary for such persons to obtain such medical care);
(B) costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the Participant;
(C) payment of tuition, related educational fees,
room and board for the next twelve (12) months of post-secondary education for
the Participant, his spouse, children or dependents;
(D) the need to prevent the eviction of the
Participant from his principal residence or foreclosure on the mortgage of his
principal residence; or
(E) any other financial need as may be promulgated by
the Internal Revenue Service.
(2) A withdrawal will be deemed necessary to satisfy the
financial need of a Participant if:
(A) the amount of the withdrawal does not exceed the
amount of the Participant's immediate and heavy financial need, including, at
the election of the Participant,
31
<PAGE> 33
any amounts necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the distribution;
(B) the Participant provides the Committee with a
signed, written statement certifying that the financial hardship cannot be
relieved:
(i) through reimbursement of compensation by
insurance or otherwise;
(ii) by reasonable liquidation of such
Participant's assets, including those of his spouse and minor children if they
are reasonably available to him;
(iii) by discontinuance of Salary Deferrals;
or
(iv) by other distributions or loans from
the Plan or any other qualified plan or loans from commercial sources on
reasonably commercial terms.
(C) in the absence of the certification described in
(B), the following requirements will apply:
(i) The Participant must have obtained all
other distributions and loans available under all plans maintained by the
Employer.
(ii) Salary Deferrals and any other Employee
contributions under all plans maintained by the Employer will be suspended for
12 months following the receipt of the financial hardship withdrawal. The
Participant's Salary Deferrals will automatically be resumed following the
required period of suspension, unless the Participant elects otherwise.
(iii) The limitation of Section 5.1 which is
imposed on a Participant's Salary Deferrals for the calendar year immediately
following the calendar year of the financial hardship withdrawal will be reduced
by the amount of such contributions and/or deferrals for the calendar year of
such withdrawal.
(3) The amount of such financial hardship withdrawal may not
exceed the amount required to meet the specified need. In addition, the amount
of such withdrawal from a Participant's Salary Deferral Account shall be limited
to the sum of the Participant's Salary Deferrals made, plus the income credited
to the Salary Deferral Account as of the last Valuation Date in 1988.
(4) A financial hardship withdrawal from a Participant's
Salary Deferral Account will be available only after the total amount available
from all other Accounts has been withdrawn.
32
<PAGE> 34
(5) A hardship withdrawal will be made in a single sum
payment.
(c) General Withdrawal Rules. Any withdrawal pursuant to this Section
7.3 shall be subject to the following requirements:
(1) Only one withdrawal will be permitted during any Plan
Year.
(2) A written request for a withdrawal must be submitted to
the Committee at least 30 days prior to the withdrawal date and must specify the
Investment Fund from which the withdrawal is to be taken.
(3) A withdrawal may be requested as of any January 1, or at
such other dates as the Committee may fix from time to time with respect to a
hardship withdrawal. If requested as of any date other than the day after a
Valuation Date, no investment earnings will be credited on the amount withdrawn
from the period from the last Valuation Date to the date specified for the
withdrawal.
(4) The minimum amount that may be withdrawn is $1,000, or the
balance in the Participant's Account from which a current withdrawal is
permitted, if less. The minimum amount limitation shall not apply in the case of
a hardship withdrawal.
7.4. Form of Benefit Payment.
(a) General Rule. Except as otherwise provided in this Section 7.4, all
distributions of benefits payable to a Participant under Section 7.2 or 7.3 of
the Plan will be made in the form of a single lump sum. Any benefits payable
under this Article VII may be paid in cash, securities or such other assets of
the Trust Fund as the Committee may direct. The distribution of a lump sum to a
Participant or his Beneficiary shall constitute the complete discharge of all
obligations of the Plan.
(b) Small Benefits. Notwithstanding any provisions of the Plan to the
contrary, the Committee will direct that a Participant's Account will be paid in
a single sum without the Participant's consent (or, in the event of the
Participant's death, his Beneficiary's) if, as of a Benefit Payment Date which
occurs on or after January 1, 1999, the total value of the Participant's Account
is $5,000 or less ($3,500 for Benefit Payment Dates before January 1, 1999). Any
such distribution shall occur not later than the earlier to occur of (1) the
90th day following the Valuation Date next subsequent to such termination, or
(2) the 60th day following the Valuation Date occurring at the end of the Plan
Year in which such termination occurs if, by the end of such Plan Year, the
Participant has attained his Normal Retirement Date and there has occurred the
10th anniversary of the date on which the Participant's Plan participation
commenced.
33
<PAGE> 35
7.5. Beneficiary Designation Right.
(a) Spouse as Beneficiary. The Beneficiary of a death benefit payable
pursuant to Section 7.1 will be the Participant's spouse as of the Participant's
date of death; provided, however, that the Participant may designate a
Beneficiary other than his spouse pursuant to Section 7.5(b) if:
(1) the requirements of Section 7.5(c) are satisfied, or
(2) the Participant has no spouse, or
(3) the Committee determines that the spouse cannot be located
or such other circumstances exist under which spousal consent is not required,
as prescribed by Treasury regulations.
(b) Beneficiary Designation Right. Each Participant who is permitted to
designate a Beneficiary other than his spouse pursuant to Section 7.5(a) will
have the right to designate one or more primary and one or more secondary
Beneficiaries to receive any benefit becoming payable upon the Participant's
death. All Beneficiary designations will be in writing in a form satisfactory to
the Committee. Each Participant will be entitled to change his Beneficiaries at
any time and from time to time by filing a written notice of such change with
the Committee. However, the Participant's spouse must again consent in writing
to such change, unless (1) the prior consent of the spouse expressly permits
designations by the Participant without any requirement of further consent by
the spouse or (2) one of the exceptions described in Sections 7.5(a)(2) and
7.5(a)(3) applies.
If no designation is made, or if all of the Beneficiaries named in such
designation predecease the Participant or cannot be located by the Committee,
then the Participant will be deemed to have designated the following as his
Beneficiaries and contingent Beneficiaries, with priority in the order named:
(1) his spouse;
(2) his estate.
(c) Form and Content of Spouse's Consent. A spouse may consent to the
designation of one or more Beneficiaries other than such spouse provided that
such consent will be in writing, must consent to the specific alternate
beneficiary or beneficiaries designated (or permit beneficiary designations by
the Participant without the spouse's further consent), must acknowledge the
effect of such consent, and must be witnessed by a Plan representative or notary
public. Such spouse's consent will be irrevocable, unless expressly made
revocable. The consent of a spouse in accordance with this Section 7.5(c) will
not be effective with respect to any subsequent spouse of the Participant.
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<PAGE> 36
7.6. Domestic Relations Orders.
(a) General. Except as otherwise provided in this Section 7.6, an
Alternate Payee will have no rights to a Participant's benefit and will have no
rights under this Plan other than those rights specifically granted to the
Alternate Payee pursuant to a QDRO. Notwithstanding the foregoing, an Alternate
Payee will have the right to make a claim for any benefits awarded to the
Alternate Payee pursuant to a QDRO, as provided in Article XI. Any interest of
an Alternate Payee in the Account of a Participant, other than an interest
payable solely upon the Participant's death pursuant to a QDRO which provides
that the Alternate Payee will be treated as the Participant's surviving spouse,
will be separately accounted for by the Trustee in the name and for the benefit
of the Alternate Payee.
(b) Distribution.
(1) Notwithstanding anything in this Plan to the contrary, a
QDRO may provide that any benefits of a Participant payable to an Alternate
Payee that are separately accounted for will be distributed immediately or at
any other time specified in the order but not later than the latest date
benefits would be payable to the Participant pursuant to this Article. If the
order does not specify the time at which benefits will be payable to the
Alternate Payee, the Alternate Payee may elect, in writing on a form prescribed
by the Committee, to have benefits commence (A) in accordance with Section 7.2,
as of the earlier of (i) the Participant's 50th birthday or (ii) the
Participant's termination of employment, or as of any date thereafter that is
not later than the latest date on which benefits would be payable to the
Participant pursuant to that Section or (B) in accordance with Section 7.1, but
as of the Alternate Payee's death; provided, however, that in the event the
amount payable to the Alternate Payee under the QDRO does not exceed $5,000
($3,500 for Benefit Payment Dates occurring before January 1, 1999), such amount
will be paid to the Alternate Payee in a single sum as soon as practicable
following the Committee's receipt of the order and verification of its status as
a QDRO.
(2) If the QDRO does not specify the Participant's Accounts,
or Investment Funds in which the Participant's Accounts are invested, from which
amounts that are separately accounted for will be paid to an Alternate Payee,
such amounts will be distributed, or segregated, from the Participant's
Accounts, and the Investment Funds in which such Accounts are invested, on a pro
rata basis.
(3) The benefit payable to an Alternate Payee will be paid in
the form of a single sum.
(c) Withdrawals. An Alternate Payee will not be permitted to make any
withdrawals under Article VII.
(d) Death Benefits. Unless a QDRO establishing a separate account for
an Alternate Payee provides to the contrary, an Alternate Payee for whom a
separate account is established
35
<PAGE> 37
will have the right to designate a Beneficiary, in the same manner as provided
in Section 7.5 with respect to a Participant (except that no spousal consent
will be required), who will receive benefits payable to an Alternate Payee which
have not been distributed at the time of an Alternate Payee's death. If the
Alternate Payee for whom a separate account is established does not designate a
Beneficiary, or if the Beneficiary predeceases the Alternate Payee, benefits
payable to the Alternate Payee which have not been distributed will be paid to
the Alternate Payee's estate. Any death benefit payable to the Beneficiary of an
Alternate Payee will be paid in a single sum in cash as soon as administratively
practicable after the Alternate Payee's death.
(e) Investment Direction. Unless a QDRO establishing a separate account
for an Alternate Payee provides to the contrary, an Alternate Payee for whom a
separate account is established will have the right to direct the investment of
any portion of a Participant's Accounts payable to the Alternate Payee under
such order in the same manner as provided in Article VI with respect to a
Participant, which amounts will be separately accounted for by the Trustee in
the Alternate Payee's name; provided, however, that the Alternate Payee shall
not be permitted to elect to invest any such amounts in "employer securities"
within the meaning of section 409(l) of the Code.
7.7. Post Distribution Credits. In the event that, after the payment of
a single-sum distribution under this Plan (other than an in-service benefit
distribution described in Section 7.3), any funds will be subsequently credited
to the Participant's Account, such additional funds will be paid to the
Participant or applied for the Participant's Account as promptly as practicable
thereafter; provided, that the Participant is not then an Employee or, if he is
an Employee, he has reached the required distribution date described in Section
7.2(b)(2).
7.8. Direct Rollovers. In the event any payment or payments to be made
under the Plan to a Participant, a Beneficiary who is the surviving spouse of a
Participant, or an Alternate Payee who is the spouse or former spouse of a
Participant, would constitute an "eligible rollover distribution," such
individual may request that such payment or payments be transferred directly
from the Trust to the trustee of (i) an individual retirement account described
in section 408(a) of the Code, (ii) an individual retirement annuity described
in section 408(b) of the Code (other than an endowment contract), (iii) an
annuity plan described in section 403(a) of the Code, or (iv) a qualified
defined contribution plan the terms of which permit the acceptance of rollover
distributions; provided, however, that (iii) and (iv) will not apply to a
Beneficiary who is the surviving spouse of a Participant. Any such request will
be made in writing, on the form prescribed by the Committee for such purpose, at
such time in advance as the Committee may specify.
For purposes of this Section 7.8, "eligible rollover distribution" will
mean a distribution from the Plan, excluding (1) any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) over the life (or life expectancy) of the individual, the joint lives
(or joint life expectancies) of the individual and the individual's designated
Beneficiary, or a specified period of ten (10) or more years, (2) any
distribution to
36
<PAGE> 38
the extent such distribution is required under section 401(a)(9) of the Code,
(3) any distribution to the extent such distribution is not included in gross
income, and (4) for distributions after December 31, 1998 (in accordance with
guidance issued by the Internal Revenue Service), any hardship distribution
described in section 401(k)(2)(B)(i)(IV) of the Code.
7.9. Delay of Payment.
(a) If the amount of any payment under this Article VII would adversely
affect the Trust Fund by forcing the premature liquidation of assets, such
payment may be delayed until the timely and orderly liquidation of investments
can be accomplished, but in no event later than the 60th day following the last
day of the Plan Year during which the Participant's Normal Retirement Date
occurs.
If the amount of any payment under this Section would
adversely affect the Trust Fund by permitting former Participants to enter into
direct competition with the Company, such payment will be delayed until the 60th
day after the end of the Plan Year during which the Participant's Normal
Retirement Date occurs.
If the amount of any payment under this Section cannot be
ascertained by the applicable commencement date, payment shall be made no later
than 60 days after the earliest day on which the amount of such payment can be
ascertained.
If a Participant is in receipt of benefits from the Company's
insured long-term disability program, payment of the Participants Account shall
be deferred to the first day of the month in which such Participant is no longer
eligible to receive such benefits or, if earlier, the 60th day following the
last day of the Plan Year during which the Participant's Normal Retirement Date
occurs, provided the benefits payable under the long-term disability program
would otherwise be reduced by the benefits payable under the Plan.
(b) When distribution of benefits from the Trust Fund is to be deferred
in accordance with Section 7.2(b)(2), after the applicable Valuation Date, the
provisions of Section 6.8 shall apply to a Participant's Account until
distribution is made.
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ARTICLE VIII.
PROVISIONS RELATING TO TOP-HEAVY PLANS
8.1. Definitions. For purposes of this Article VIII, the following
terms will have the following meanings:
(a) "Aggregation Group" will mean the group of qualified plans
sponsored by the Employer or by an Affiliated Company formed by including in
such group (1) all such plans in which a Key Employee participates in the Plan
Year containing the Determination Date, or any of the four (4) preceding Plan
Years, including any frozen or terminated plan that was maintained within the
five-year-period ending on the Determination Date, (2) all such plans which
enable any plan described in clause (1) to meet the requirements of either
section 401(a)(4) of the Code or section 410 of the Code, and (3) such other
qualified plans sponsored by the Employer or an Affiliated Company as the
Employer elects to include in such group, as long as the group, including those
plans electively included, continues to meet the requirements of sections
401(a)(4) and 410 of the Code.
(b) "Determination Date" will mean the last day of the preceding Plan
Year or, in the case of the first Plan Year, the last day of such Plan Year.
(c) "Key Employee" will mean a person employed or formerly employed by
the Employer or an Affiliated Company who, during the Plan Year or during any of
the preceding four (4) Plan Years, was any of the following:
(1) An officer of the Employer having an annual Compensation
of more than fifty percent (50%) of the amount in effect under section
415(b)(1)(A) of the Code for the Plan Year. The number of persons to be
considered officers in any Plan Year and the identity of the persons to be so
considered will be determined pursuant to the provisions of section 416(i) of
the Code and the regulations published thereunder.
(2) One (1) of the ten (10) Employees who owns (or is
considered as owning under the attribution rules set forth at section 318 of the
Code and the regulations thereunder) the largest interest in the Employer or
such Affiliated Company, provided that no person will be considered a Key
Employee under this paragraph (2) if his annual Compensation is not greater than
the limitation in effect for such Plan Year under section 415(c)(1)(A) of the
Code, nor will any person be considered a Key Employee under this paragraph (2)
if his ownership interest in the Plan Year being tested and the preceding four
Plan Years was at all times less than one-half of one percent (1/2%) in value of
any of the entities forming the Employer and the Affiliated Companies.
(3) A five-percent (5%) owner of the Employer.
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(4) A person who is both an Employee whose annual Compensation
exceeds $150,000 and who is a one-percent (1%) owner of the Employer.
The beneficiary of any deceased Participant who was a Key Employee will
be considered a Key Employee for the same period as the deceased Participant
would have been so considered.
(d) "Key Employee Ratio" will mean the ratio (expressed as a
percentage) for any Plan Year, calculated as of the Determination Date with
respect to such Plan Year, determined by dividing the amount described in
paragraph (1) hereof by the amount described in paragraph (2) hereof, after
deduction from both such amounts of the amount described in paragraph (3)
hereof.
(1) The amount described in this paragraph (1) is the sum of
(A) the aggregate of the present value of all accrued benefits of Key Employees
under all qualified defined benefit plans included in the Aggregation Group, (B)
the aggregate of the balances in all of the accounts standing to the credit of
Key Employees under all qualified defined contribution plans included in the
Aggregation Group, and (C) the aggregate amount distributed from all plans in
such Aggregation Group to or on behalf of any Key Employee during the period of
five (5) Plan Years ending on the Determination Date.
(2) The amount described in this paragraph (2) is the sum of
(A) the aggregate of the present value of all accrued benefits of all
Participants under all qualified defined benefit plans included in the
Aggregation Group, (B) the aggregate of the balances in all of the accounts
standing to the credit of all Participants under all qualified defined
contribution plans included in the Aggregation Group, and (C) the aggregate
amount distributed from all plans in such Aggregation Group to or on behalf of
any Participant during the period of five (5) Plan Years ending on the
Determination Date.
(3) The amount described in this paragraph (3) is the sum of
(A) all rollover contributions (or similar transfers) to plans included in the
Aggregation Group initiated by an Employee from a plan sponsored by an employer
which is not the Employer or an Affiliated Company, (B) any amount that would
have been included under paragraph (1) or (2) hereof with respect to any person
who has not rendered service to any Employer at any time during the
five-year-period ending on the Determination Date, and (C) any amount that is
included in paragraph (2) hereof for, on behalf of, or on account of, a person
who is a Non-Key Employee as to the Plan Year of reference but who was a Key
Employee as to any earlier Plan Year.
The present value of accrued benefits under any defined
benefit plan will be determined under the method used for accrual purposes for
all plans maintained by the Employer and all Affiliated Companies if a single
method is used by all such plans, or otherwise, the slowest accrual method
permitted under section 411(b)(1)(C) of the Code.
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(e) "Non-Key Employee" will mean any Employee or former Employee who is
not a Key Employee as to that Plan Year, or a beneficiary of a deceased
Participant who was a Non-Key Employee.
8.2. Determination of Top-Heavy Status. The Plan will be deemed
"top-heavy" as to any Plan Year if, as of the Determination Date with respect to
such Plan Year, either of the following conditions is met:
(a) The Plan is not part of an Aggregation Group and the Key Employee
Ratio, determined by substituting the "Plan" for the "Aggregation Group" each
place it appears in Section 8.1(d), exceeds sixty percent (60%), or
(b) The Plan is part of an Aggregation Group, and the Key Employee
Ratio of such Aggregation Group exceeds sixty percent (60%).
The Plan will be deemed "super top-heavy" as to any Plan Year if, as of
the Determination Date with respect to such Plan Year, the conditions of
subsections (a) or (b) hereof are met with "ninety percent (90%)" substituted
for "sixty percent (60%)" therein.
8.3. Top-Heavy Plan Minimum Allocation. The aggregate allocation made
under the Plan to the Account of each active Participant who is a Non-Key
Employee for any Plan Year in which the Plan is a Top-Heavy Plan and who
remained in the employ of the Employer or an Affiliated Company through the end
of such Plan Year (whether or not in the status of Eligible Employee) will be
not less than the lesser of:
(a) Three percent (3%) of the Compensation of each such Participant for
such Plan Year; or
(b) The percentage of such Compensation so allocated under the Plan to
the Account of the Key Employee for whom such percentage is the highest for such
Plan Year.
If any person who is an active Participant in the Plan is a Participant
under any defined benefit pension plan qualified under section 401(a) of the
Code sponsored by the Employer or an Affiliated Company, there will be
substituted "Four percent (4%)" for "Three percent (3%)" in subsection (a)
above. For the purposes of determining whether or not the provisions of this
Section have been satisfied, (i) contributions or benefits under chapter 2 of
the Code (relating to tax on self-employment income), chapter 21 of the Code
(relating to Federal Insurance Contributions Act), title II of the Social
Security Act, or any other Federal or state law are disregarded; (ii) all
defined contribution plans in the Aggregation Group will be treated as a single
plan; and (iii) employer matching contributions and elective deferrals under all
plans in the Aggregation Group will be disregarded. For the purposes of
determining whether or not the requirements of this Section have been satisfied,
contributions allocable to the account of the Participant under any other
qualified defined contribution plan that is part of the Aggregation
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Group will be deemed to be contributions made under the Plan, and, to the extent
thereof, no duplication of such contributions will be required hereunder solely
by reason of this Section. Subsection (b) above will not apply in any Plan Year
in which the Plan is part of an Aggregation Group containing a defined benefit
pension plan (or a combination of such defined benefit pension plans) if the
Plan enables a defined benefit pension plan required to be included in such
Aggregation Group to satisfy the requirements of either section 401(a)(4) or
section 410 of the Code.
8.4. Top-Heavy Plan Maximum Allocations. Effective for Plan Years
beginning before January 1, 2000, if the Plan is a Super Top-Heavy Plan, or if
the Plan is a Top-Heavy Plan which fails to satisfy the additional minimum
allocation requirements under Section 8.3 hereof, the definitions of "defined
contribution fraction" and "defined benefit fraction" as incorporated by
reference in Section 5.4 will be modified as required under section 416 of the
Code.
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ARTICLE IX.
COMMITTEE
9.1. Committee. The Committee will be appointed by and serve at the
discretion of the Board of Directors. The Committee will act by a majority of
its members with minutes being recorded for each meeting. Such minutes will be
made available to any member upon written request.
9.2. Authority and Responsibility of the Committee. The Committee will
be the Plan "administrator" as such term is defined in section 3(16) of ERISA,
and as such will have the following duties and responsibilities:
(a) to adopt and enforce such rules and regulations and prescribe the
use of such forms as may be deemed necessary to carry out the provisions of the
Plan;
(b) to maintain and preserve records relating to Participants, former
Participants, and their Beneficiaries and Alternate Payees;
(c) to prepare and furnish to Participants, Beneficiaries and Alternate
Payees all information and notices required under federal law or the provisions
of this Plan;
(d) to prepare and file or publish with the Secretary of Labor, the
Secretary of the Treasury, their delegates and all other appropriate government
officials all reports and other information required under law to be so filed or
published;
(e) to provide directions to the Trustee with respect to methods of
benefit payment, valuations at dates other than regular Valuation Dates and on
all other matters where called for in the Plan or requested by the Trustee;
(f) to determine all questions of the eligibility of Employees and of
the status of rights of Participants, Beneficiaries and Alternate Payees, to
make factual determinations, to construe the provisions of the Plan, to correct
defects therein and to supply omissions thereto;
(g) to engage assistants and professional advisers;
(h) to arrange for bonding, if required by law;
(i) to provide procedures for determination of claims for benefits and
to establish rules, not inconsistent with the provisions or purposes of the
Plan, as it may deem necessary or desirable for the proper administration of the
Plan or transaction of its business;
(j) to determine whether any domestic relations order constitutes a
QDRO and to take such action as the Committee deems appropriate in light of such
domestic relations order;
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(k) to make such determinations as are required pursuant to the
provisions of Sections 7.3 hereof;
(l) to retain records on elections and waivers by Participants, their
spouses and their Beneficiaries and Alternate Payees;
(m) to perform such other functions and duties as are set forth in the
Plan that are not specifically given to another Named Fiduciary;
(n) to monitor the performance of various Investment Funds;
(o) to appoint the Trustee and, at least once during each Plan Year, to
review the Trustee's performance;
(p) to approve and amend the Trust Agreement;
(q) to terminate the Trust Agreement and settle the account of the
Trustee and to remove the Trustee and, upon such removal or upon the resignation
of the Trustee, to appoint a successor;
(r) to appoint an Investment Manager(s) (or to refrain from such
appointment), to monitor the performance of the Investment Manager(s) so
appointed, to terminate such appointment and, upon such termination or upon
resignation of the Investment Manager(s), to appoint a successor, to amend the
separate agreement(s) which will be entered into with the Investment Manager(s)
and either increase or decrease the portion of the Trust Fund which will be
managed by the Investment Manager(s);
(s) to establish, revise from time to time, and communicate to the
Trustee and/or Investment Manager(s), a funding policy and method for the Plan;
and
(t) to ensure that an independent qualified public accountant examines
the Trustee's accounts and records as of the close of each Plan Year and renders
an opinion.
9.3. Reporting and Disclosure. The Committee will keep all individual
and group records relating to Plan Participants, Beneficiaries and Alternate
Payees, and all other records necessary for the proper operation of the Plan.
Such records will be made available to the Employer and to each Participant,
Beneficiary and Alternate Payee for examination during normal business hours
except that a Participant, Beneficiary or Alternate Payee will examine only such
records as pertain exclusively to the examining Participant, Beneficiary or
Alternate Payee and those records and documents relating to all Participants
generally. The Committee will prepare and will file as required by law or
regulation all reports, forms, documents and other items required by ERISA, the
Code, and every other relevant statute, each as amended, and all regulations
thereunder. This provision will not be construed as imposing upon the
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Committee the responsibility or authority for the preparation, preservation,
publication or filing of any document required to be prepared, preserved or
filed by the Trustee or by any other Named Fiduciary to whom such
responsibilities are delegated by law or by this Plan.
9.4. Construction of the Plan. The Committee will take such steps as
are considered necessary and appropriate to remedy any inequity that results
from incorrect information received or communicated in good faith or as the
consequence of an administrative error. The Committee will have full
discretionary power and authority to make factual determinations, to interpret
the Plan, to make benefit eligibility determinations, and to determine all
questions arising in the administration, interpretation and application of the
Plan. The Committee will correct any defect, reconcile any inconsistency,
resolve any ambiguity or supply any omission with respect to the Plan. All such
corrections, reconciliations, interpretations and completions of Plan provisions
will be final, binding and conclusive upon the parties, including the Employer,
the Employees, their families, dependents, Beneficiaries and any Alternate
Payees.
9.5. Compensation of the Committee. The Committee will serve without
compensation for its services as such.
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ARTICLE X.
ALLOCATION AND DELEGATION OF AUTHORITY
10.1. Authority and Responsibilities of the Committee. The Committee
will have the authority and responsibilities imposed by Article X hereof. With
respect to the said authority and responsibility, the Committee will be a "Named
Fiduciary," and as such, will have no authority and responsibility other than as
granted in the Plan, or as imposed by law.
10.2. Authority and Responsibilities of the Trustee. The Trustee will
be the "Named Fiduciary" with respect to those powers and duties set forth in
the Trust Agreement. The Trustee will keep complete and accurate accounts of all
of the assets of, and the transactions involving, the Trust Fund. All such
accounts will be open to inspection by the Committee during normal business
hours.
10.3. Limitations on Obligations of Named Fiduciaries. No Named
Fiduciary will have authority or responsibility to deal with matters other than
as delegated to it under this Plan, under the Trust Agreement, or by operation
of law. Except as provided by section 405 of ERISA, a Named Fiduciary will not
in any event be liable for breach of fiduciary responsibility or obligation by
another fiduciary (including Named Fiduciaries) if the responsibility or
authority for the act or omission deemed to be a breach was not within the scope
of the said Named Fiduciary's authority or delegated responsibility. The
determination of any Named Fiduciary as to any matter involving its
responsibilities hereunder will be conclusive and binding on all persons.
10.4. Designation and Delegation. Each Named Fiduciary may designate
other persons to carry out such of its responsibilities hereunder for the
operation and administration of the Plan as it deems advisable and delegate to
the persons so designated such of its powers as it deems necessary to carry out
such responsibilities. Such designation and delegation will be subject to such
terms and conditions as the Named Fiduciary deems necessary or proper. Any
action or determination made or taken in carrying out responsibilities hereunder
by the persons so designated by the Named Fiduciary will have the same force and
effect for all purposes as if such action or determination had been made or
taken by such Named Fiduciary.
10.5. Reports to Board of Directors. As deemed necessary or proper, the
Named Fiduciaries, or an appropriate committee thereof, will report to the Board
of Directors on the operation and administration of the Plan.
10.6. Engagement of Assistants and Advisers. Any Named Fiduciary will
have the right to hire, at the expense of the Trust Fund, such professional
assistants and consultants as it, in its sole discretion, deems necessary or
advisable.
10.7. Payment of Expenses. The expenses incurred by the Named
Fiduciaries in connection with the operation of the Plan, including but not
limited to, the expenses incurred by
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reason of the engagement of professional assistants and consultants, will be
expenses of the Plan and will be payable from the Trust Fund at the direction of
the Committee. The Company will have the option, but not the obligation, to pay
any such expenses, in whole or in part, and by so doing, to relieve the Trust
Fund from the obligation of bearing such expenses. Payment of any such expenses
by the Company on any occasion will not bind the Company to thereafter pay any
similar expenses.
10.8. Indemnification. Each person who is a Named Fiduciary or a member
of any committee or board comprising a Named Fiduciary (other than the Trustee)
will be indemnified by the Company against costs, expenses and liabilities
(other than amounts paid in settlement to which the Company does not consent)
reasonably incurred by him in connection with any action to which he may be a
party by reason of his service as a Named Fiduciary except in relation to
matters as to which he will be adjudged in such action to be personally guilty
of gross negligence or willful misconduct in the performance of his duties. The
foregoing right to indemnification will be in addition to such other rights as
the person may enjoy as a matter of law or by reason of insurance coverage of
any kind, but will not extend to costs, expenses and/or liabilities otherwise
covered by insurance or that would be so covered by any insurance then in force
if such insurance contained a waiver of subrogation. Rights granted hereunder
will be in addition to and not in lieu of any rights to indemnification to which
the person may be entitled pursuant to the bylaws of the Company. Service as a
Named Fiduciary will be deemed in partial fulfillment of the person's function
as an employee, officer and/or director of the Company, if he serves in that
capacity as well as in the role of Named Fiduciary.
10.9. Bonding. The Committee will arrange for such bonding as is
required by law for persons who are Employees and/or members of the Board of
Directors, but no bonding in excess of the amount required by law will be
considered required by the Plan. The Company will obtain, and pay the expense
of, any bond required by law.
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ARTICLE XI.
CLAIMS PROCEDURES
11.1. Application for Benefits. Each Participant, Beneficiary or
Alternate Payee believing himself or herself eligible for benefits under the
Plan will apply for such benefits by completing and filing with the Committee an
application for benefits on a form supplied by the Committee. Before the date on
which benefit payments commence, each such application must be supported by such
information and data as the Committee deems relevant and appropriate. Evidence
of age, marital status (and, in the appropriate instances, health, death or
Disability), and location of residence will be required of all applicants for
benefits. In the event a Participant, Beneficiary or Alternate Payee fails to
apply to the Committee at least sixty (60) days prior to the applicable required
distribution date described in Section 7.2, the Committee will make diligent
efforts to locate such Participant, Beneficiary or Alternate Payee and obtain
such application. In the event the Participant, Beneficiary or Alternate Payee
fails to make application by the applicable date described in Section 7.2, the
Committee will commence distribution as of such date without such application;
provided, however, that in the event the Committee fails to locate the
Participant, Beneficiary or Alternate Payee so that distribution as of the
applicable date described in Section 7.2 is not possible, payment will be made
no later than sixty (60) days after the date on which the Participant,
Beneficiary or Alternate Payee is located.
11.2. Appeals of Denied Claims for Benefits. In the event that any
claim for benefits is denied in whole or in part, the Participant, Beneficiary
or Alternate Payee whose claim has been so denied will be notified of such
denial in writing by the Committee. The notice advising of the denial will be
furnished to the Participant, Beneficiary or Alternate Payee within ninety (90)
days of receipt of the benefit claim by the Committee, unless special
circumstances require an extension of time to process the claim. If an extension
is required, the Committee will provide notice of the extension prior to the
termination of the ninety (90) day period. In no event may the extension exceed
a total of one hundred eighty (180) days from the date of the original receipt
of the claim. The notice advising of the denial will specify the reason or
reasons for denial, make specific reference to pertinent Plan provisions,
describe any additional material or information necessary for the claimant to
perfect the claim (explaining why such material or information is needed), and
will advise the Participant, Beneficiary or Alternate Payee, as the case may be,
of the procedure for the appeal of such denial. All appeals will be made by the
following procedure:
(a) The Participant, Beneficiary or Alternate Payee whose claim has
been denied will file with the Committee a notice of desire to appeal the
denial. Such notice will be filed within sixty (60) days of notification by the
Committee of claim denial, will be made in writing, and will set forth all of
the facts upon which the appeal is based. Appeals not timely filed will be
barred.
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(b) The Committee will consider the merits of the claimant's written
presentations, the merits of any facts or evidence in support of the denial of
benefits, and such other facts and circumstances as the Committee will deem
relevant.
(c) The Committee will ordinarily render a determination upon the
appealed claim within sixty (60) days after its receipt which determination will
be accompanied by a written statement as to the reasons therefor. However, in
special circumstances the Committee may extend the response period for up to an
additional sixty (60) days, in which event it will notify the claimant in
writing prior to commencement of the extension. Notwithstanding the foregoing,
if the Committee holds regularly scheduled meetings at least quarterly to review
such appeals, a individual's request for review will be acted upon at the
meeting immediately following the receipt of the individual's request unless
such request is filed within thirty (30) days preceding such meeting. In such
instance, the decision will be made no later than the date of the second meeting
following the Committee's receipt of such request. If special circumstances
(such as a need to hold a hearing) require a further extension of time for
processing a request, a decision will be rendered not later than the third
meeting of the Committee following the receipt of such request for review and
written notice of the extension will be furnished to the individual prior to the
commencement of the extension. Any determination rendered by the Committee will
be final and binding upon all parties.
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ARTICLE XII.
AMENDMENT AND TERMINATION
12.1. Amendment.
(a) The Plan may be amended or otherwise modified by the Board of
Directors, or the Committee to the extent authorized in accordance with
Subsection (c). Copies of any such amendment or modification shall be sent to
the governing body of each Employer. It shall be deemed each Employer consented
to such amendment or modification unless its governing body delivers written
notice to the contrary to the Board of Directors, the Committee and the Trustee
within 30 days of its receipt of such amendment or modification.
(b) No amendment or modification shall:
(1) permit any part of the Trust Fund, other than such part as
is required to pay taxes, administrative expenses and expenses incurred in
effectuating such changes, to be used for or diverted to purposes other than the
exclusive benefit of the Participants or Beneficiaries and/or persons entitled
to benefits under the Plan or permit any portion of the Trust Fund to revert to
or become the property of the Company;
(2) have the effect of reducing the Account of any Participant
as of the date of such amendment or deprive any Participant or Beneficiary of a
benefit accrued and payable; or
(3) eliminate any option which constitutes a valuable right
available to a Participant with respect to benefits previously accrued to the
extent the Participant satisfied, either before or after the amendment, the
conditions for the form of payment except as otherwise permitted by applicable
law and regulations.
(c) The Committee may amend or modify the Plan in order to bring the
Plan into compliance with applicable law or regulations, provided said amendment
or modification does not have a material effect on the estimated cost of
maintaining the Plan and does not create a new class of benefits or
entitlements.
12.2. Plan Termination.
(a) The Company expects to continue this Plan and the corresponding
Trust indefinitely, but reserves the right to terminate in whole or in part
either or both at any time by resolution of the Board of Directors, without the
consent of any Participant, Alternate Payee, Surviving Spouse or Beneficiary.
(b) Any termination of the Plan will become effective as of the date
designated by the Board of Directors. Except as expressly provided elsewhere in
the Plan, prior to the satisfaction
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of all liabilities with respect to the benefits provided under this Plan, no
termination will cause any part of the funds or assets held to provide benefits
under the Plan to be used other than for the benefit of Participants and their
Beneficiaries or Alternate Payees or to meet the administrative expenses of the
Plan. Upon termination or partial termination of the Plan, or upon complete
discontinuance of contributions, the rights of all affected persons to benefits
accrued to the date of such termination will be nonforfeitable. Upon termination
of the Plan, Accounts will be distributed in accordance with applicable law.
12.3. Mergers and Consolidations of Plans. Pursuant to action by the
Board of Directors, the Plan may be merged or consolidated with, or a portion of
its assets and liabilities may be transferred to, another qualified plan. In the
event of any merger or consolidation with, or transfer of assets or liabilities
to, any other plan, each Participant will have a benefit in the surviving or
transferee plan if such plan were then terminated immediately after such merger,
consolidation or transfer that is equal to or greater than the benefit he would
have had immediately before such merger, consolidation or transfer in the plan
in which he was then a participant had such plan been terminated at that time.
For the purposes hereof, former Participants, Beneficiaries and Alternate Payees
will be considered Participants.
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ARTICLE XIII.
PARTICIPATING COMPANIES
13.1. Adoption by Other Entities. Any corporation or other business
entity may, by resolution of its own governing body, and with the approval of
the Board of Directors, adopt the Plan and thereby become an Employer.
Notwithstanding the adoption of the Plan by other entities, the Plan will be
administered as a single plan and all Plan assets will be available to pay
benefits to all Participants under the Plan
13.2. Alternative Provisions. No Employer may adopt alternative
provisions as to itself or its Employees. Upon request of the governing body of
an Employer, the Board of Directors may amend the Plan with respect to the
Employees of such Employer provided that any change will only apply if any
inequity resulting from such changed Plan provisions is not found to be
discriminatory on behalf of Highly Compensated Employees.
13.3. Right to Withdraw (Plan Spinoff). Each Employer having adopted the
Plan shall have the right as of the last day of any month to withdraw from the
Plan and/or Trust Agreement by delivering to the Board of Directors, the
Committee and the Trustee written notification from its own governing body of
such action and setting forth the date as of which the withdrawal shall be
effective. The date specified in such written notice shall be deemed a Valuation
Date.
13.4. Procedure Upon Withdrawal.
(a) If an Employer withdraws from the Plan and Trust Agreement as of the
result of its adoption of a different plan, the Trustee shall segregate the
portion of the Trust Fund attributable to the Accounts of Participants employed
solely by such Employer.
As soon as administratively feasible following receipt of a
favorable letter of determination from the Internal Revenue Service with regard
to the adoption of such successor plan, the Trustee shall transfer the
segregated assets to the insurance carrier or fiduciary designated by the
Employer as the agency through which the benefits of such successor plan are to
be disbursed.
(b) If an Employer withdraws from the Plan and Trust Agreement as the
result of its adoption of a resolution to terminate its participation in the
Plan and to distribute assets to its Employees who are Participants, the Trustee
shall segregate the portion of the Trust Fund attributable to the Accounts of
the Participants who are employed solely by such Employer, and the termination
provisions of Article XII shall apply with respect to such segregated assets.
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ARTICLE XIV.
MISCELLANEOUS PROVISIONS
14.1. Nonalienation of Benefits.
(a) Except as provided in Section 14.1(b), none of the payments,
benefits or rights of any Participant, Alternate Payee or Beneficiary will be
subject to any claim of any creditor, and, in particular, to the fullest extent
permitted by law, all such payments, benefits and rights will be free from
attachment, garnishment, trustee's process, or any other legal or equitable
process available to any creditor of such Participant, Alternate Payee or
Beneficiary. Except as provided in Section 14.1(b), no Participant, Alternate
Payee or Beneficiary will have the right to alienate, anticipate, commute,
pledge, encumber or assign any of the benefits or payments which he may expect
to receive, contingently or otherwise, under the Plan, except the right to
designate a Beneficiary or Beneficiaries as hereinabove provided.
(b) Compliance with the provisions and conditions of (1) any QDRO, (2)
any federal tax levy made pursuant to section 6331 of the Code, or (3) subject
to the provisions of section 401(a)(13) of the Code, a judgment, order, decree
or settlement agreement between the Participant and the Secretary of Labor or
the Pension Benefit Guaranty Corporation relating to a violation (or an alleged
violation) of part 4 of subtitle B of title I of ERISA, will not be considered a
violation of this provision.
14.2. No Contract of Employment. Neither the establishment of the Plan,
nor any modification thereof, nor the creation of any fund, trust or account,
nor the payment of any benefits will be construed as giving any Participant or
Employee, or any person whomsoever, the right to be retained in the service of
the Employer, and all Participants and other Employees will remain subject to
discharge to the same extent as if the Plan had never been adopted.
14.3. Severability of Provisions. If any provision of the Plan will be
held invalid or unenforceable, such invalidity or unenforceability will not
affect any other provisions hereof, and the Plan will be construed and enforced
as if such provisions had not been included.
14.4. Heirs, Assigns and Personal Representatives. This Plan will be
binding upon the heirs, executors, administrators, successors and assigns of the
parties, including each Participant, Beneficiary and Alternate Payee, present
and future (except that no successor to the Employer will be considered a Plan
sponsor unless that successor adopts the Plan).
14.5. Headings and Captions. The headings and captions herein are
provided for reference and convenience only, will not be considered part of the
Plan, and will not be employed in the construction of the Plan.
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14.6. Gender and Number. Except where otherwise clearly indicated by
context, the masculine and the neuter will include the feminine and the neuter,
the singular will include the plural, and vice-versa.
14.7. Controlling Law. This Plan will be construed and enforced
according to the laws of the State of New Jersey to the extent not preempted by
Federal law, which will otherwise control.
14.8. Funding Policy. The Committee will establish, and communicate to
the Trustee, a funding policy and method consistent with the objectives of the
Plan and of the Trust Fund.
14.9. Title to Assets; Source of Benefits. No person will have any right
to, or interest in, any assets of the Trust Fund, except as provided from time
to time under the Plan, and then only to the extent of the benefits payable
under the Plan to such person or out of the assets of the Trust Fund. All
payments of benefits as provided for in the Plan will be made from the assets of
the Trust Fund, and neither the Employer nor any other person will be liable
therefor in any manner.
14.10. Payments to Minors, Etc. Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of
receipting therefor will be deemed paid when paid to such person's guardian or
to the party providing or reasonably appearing to provide for the care of such
person, and such payment will fully discharge the Trustee, the Committee, the
Employers and all other parties with respect thereto.
14.11. Reliance on Data and Consents. The Employers, the Trustee, the
Committee, all fiduciaries with respect to the Plan, and all other persons or
entities associated with the operation of the Plan, the management of its
assets, and the provision of benefits thereunder, may reasonably rely on the
truth, accuracy and completeness of all data provided by any Participant,
Beneficiary or Alternate Payee, including, without limitation, data with respect
to age, health and marital status. Furthermore, the Employers, the Trustee, the
Committee and all fiduciaries with respect to the Plan may reasonably rely on
all consents, elections and designations filed with the Plan or those associated
with the operation of the Plan and its corresponding trust by any Participant,
the spouse of any Participant, any Beneficiary of any Participant, any Alternate
Payee of any Participant or the representatives of such persons without duty to
inquire into the genuineness of any such consent, election or designation. None
of the aforementioned persons or entities associated with the operation of the
Plan, its assets and the benefits provided under the Plan will have any duty to
inquire into any such data, and all may rely on such data being current to the
date of reference, it being the duty of the Participants, spouses of
Participants, Beneficiaries and Alternate Payees to advise the appropriate
parties of any change in such data.
14.12. Lost Payees. A benefit will be deemed forfeited, and used to
reduce future Matching Contributions made pursuant to Section 4.2 by the
Employer that last employed the Participant, if the Committee is unable to
locate a Participant, a Beneficiary or an Alternate Payee
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to whom payment is due; provided, however, that such benefit will be reinstated
if a claim is made by the party to whom properly payable.
14.13. No Warranties. Neither the Board of Directors nor its members nor
the Committee nor the Company nor any Affiliated Company nor the Trustee nor any
Employer warrants or represents in any way that the value of each Participant's
Accounts will increase or will not decrease. The Participant assumes all risk in
connection with any change in values.
14.14. Notices. Each Participant, Beneficiary and Alternate Payee will
be responsible for furnishing the Committee with the current and proper address
for the mailing of notices, reports and benefit payments. Any notice required or
permitted to be given will be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any check mailed to such address is returned as undeliverable to
the addressee, mailing of checks will be suspended until the Participant,
Beneficiary or Alternate Payee furnishes the proper address. This provision will
not be construed as requiring the mailing of any notice or notification if the
regulations issued under ERISA deem sufficient notice to be given by the posting
of notice in appropriate places, or by any other publication device.
Executed this 20th day of July, 1999.
K-Tron International, Inc.
By: /s/ Edward B. Cloues, II
-----------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
Attest: /s/ Mary Vaccara
----------------
Secretary
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<PAGE> 1
Exhibit 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of May 7, 1999
by and between K-TRON INTERNATIONAL, INC., a New Jersey corporation ("K-Tron"),
and RONALD R. REMICK, a resident of Pennsylvania (the "Employee").
WHEREAS, K-Tron and the Employee desire to enter into an
agreement to provide for the Employee's employment by K-Tron or another member
of the K-Tron Group (K-Tron and its subsidiaries as they may exist from time to
time are collectively referred to herein as the "K-Tron Group" and each is
sometimes individually referred to herein as a "member" of the K-Tron Group),
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. K-Tron agrees that either K-Tron or another
member of the K-Tron Group will employ the Employee, and the Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
1.1 Employment Term. The employment term of this Agreement
(the "Employment Term") shall commence on May 10, 1999 (the "Commencement Date")
and shall continue until terminated in accordance with Section 8 hereof or
otherwise.
1.2 Duties and Responsibilities. During the Employment Term,
the Employee shall be employed by K-Tron or another member of the K-Tron Group,
as determined by K-Tron, and he shall perform all duties and accept all
responsibilities incidental to any position in which he shall be so employed or
as may be assigned to him by the Board of Directors of K-Tron (the
<PAGE> 2
"K-Tron Board") or its chief executive officer and shall cooperate fully with
the K-Tron Board and K-Tron's chief executive officer. If the Employee is
employed by another member of the K-Tron Group, the foregoing reference to the
K-Tron Board and to K-Tron's chief executive officer shall also be deemed to
include the board of directors and chief executive officer of such other member.
The Employee's initial employment with K-Tron shall be as its Senior Vice
President, Chief Financial Officer and Treasurer.
1.3 Extent of Service. During the Employment Term, the
Employee shall use his best efforts in the business of the member of the K-Tron
Group by which he is employed, and he shall devote substantially his full time,
attention and energy to the business of the member of the K-Tron Group by which
he is employed and to the performance of his services and the discharge of his
duties and responsibilities hereunder. Except as provided in Section 5 hereof,
the foregoing shall not be construed as preventing the Employee from making
investments in other businesses or enterprises or from being engaged in civic or
charitable affairs provided that the Employee agrees not to become engaged in
any other activity which may interfere with his ability to discharge his duties
and responsibilities hereunder to K-Tron or another member of the K-Tron Group.
The Employee further agrees not to work on either a part time or independent
contractual basis for any other business or enterprise during the Employment
Term without the prior written approval of the K-Tron Board.
1.4 Compensation. For all the services rendered during the
Employment Term by the Employee hereunder as an employee of a member of the
K-Tron Group, such member of the K-Tron Group by which he is employed shall pay
the Employee an annual base salary of One Hundred Seventy Thousand U.S. dollars
($170,000), less such withholding and other deductions
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as may be required by law or any employee benefit plan in which the Employee
participates or agreed to by the Employee, payable in installments at such times
as such member of the K-Tron Group customarily pays its other officers (but in
no event less often than monthly). Such salary may be increased from time to
time during the Employment Term in the sole discretion of K-Tron, and any such
increased salary shall thereafter be the Employee's new base salary for purposes
of this Agreement. Notwithstanding the foregoing, either the K-Tron Board or
K-Tron's chief executive officer, or the board of directors or chief executive
officer of any other member of the K-Tron Group employing the Employee, shall
have the right at any time or times to reduce the Employee's base salary if such
reduction is generally being made for other officers of K-Tron or of other
members of the K-Tron Group holding comparable positions. The Employee shall
also be entitled to receive bonus payments in the sole discretion of the K-Tron
Board or its Compensation and Human Resources Committee. In addition to said
annual salary and bonus payments (if any), and except as may otherwise be agreed
with the Employee in writing, the Employee shall be entitled to receive an
automobile allowance of $10,000 per year (or a car in accordance with K-Tron
policy as it may exist from time to time, as the Employee may elect) and annual
paid vacation of four weeks and to participate in such employee benefit plans of
the member of the K-Tron Group employing the Employee as may exist from time to
time on the same basis as other persons holding comparable positions with such
member of the K-Tron Group, except that the Employee shall have no right solely
by virtue of this Agreement to participate in any such plans that are not
generally available to all employees of K-Tron or of the other member of the
K-Tron Group by which he is employed.
1.5 Stock Grant. On the Commencement Date and subject to the
Employee
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having purchased prior to such date and owning on such date 2,000 shares of
K-Tron Common Stock, K-Tron shall issue to the Employee 2,000 shares of its
Common Stock as a restricted stock grant under Section 6 of the K-Tron
International, Inc. 1996 Equity Compensation Plan, as amended (the "1996 Equity
Compensation Plan"). K-Tron and the Employee agree that the sole restriction
applicable to such restricted shares shall be that the Employee be employed by
K-Tron on the first anniversary of the Commencement Date, in which case the
restriction shall lapse at that time; provided, however, that the foregoing
restriction shall lapse immediately if the Employment Term is earlier terminated
by K-Tron for any reason other than "cause" as defined in Section 8.4 hereof. In
all other respects, the restricted stock grant shall be governed by Section 6
and other applicable provisions of the 1996 Equity Compensation Plan.
1.6 Stock Option Grant. On the Commencement Date, the Employee
will be granted a ten-year nonqualified stock option under the 1996 Equity
Compensation Plan to purchase a total of 7,500 shares of K-Tron Common Stock at
the last reported sale price on the Nasdaq Stock Market on that date (or, if
there are no trades on that date, the latest preceding date upon which a sale
was reported) and on the other terms and conditions to be set forth in a stock
option grant agreement to be entered into on that date between K-Tron and the
Employee, the form of which is attached hereto as Exhibit A. Provided that the
Employee is still employed by K-Tron or another member of the K-Tron Group on
the first and second anniversaries of the Commencement Date, respectively, he
will be granted similar stock options on those dates for 7,500 shares (first
anniversary) and 5,000 shares (second anniversary) of K-Tron Common Stock, using
the same form of stock option grant agreement or such other standard form of
grant agreement as may then be used by K-Tron.
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2. Reimbursement of Expenses. The member of the K-Tron Group
employing the Employee shall reimburse the Employee for all ordinary and
necessary out-of-pocket business expenses incurred by him in connection with the
discharge of his duties and responsibilities hereunder during the Employment
Term in accordance with such company's expense approval procedures then in
effect and upon presentation to such company of an itemized account and written
proof of such expenses.
3. Developments. The Employee shall disclose fully, promptly
and in writing to K-Tron or to any other member of the K-Tron Group by which he
is employed any and all inventions, discoveries, improvements, modifications and
the like, whether patentable or not, which he conceives, makes or develops,
solely or jointly with others, while employed by K-Tron or another member of the
K-Tron Group and which (i) relate to the business, work or activities of any
member of the K-Tron Group or (ii) result from or are suggested by the carrying
out of his duties hereunder, or from or by any information which he may receive
while employed by K-Tron or another member of the K-Tron Group. The Employee
hereby assigns, transfers and conveys to K-Tron or its designee all of his
right, title and interest in and to any and all such inventions, discoveries,
improvements, modifications and the like and agrees to take all such actions as
may be requested by K-Tron at any time and with respect to any such invention,
discovery, improvement, modification or the like to confirm or evidence such
assignment, transfer and conveyance. Furthermore, at any time and from time to
time, upon the request of K-Tron, the Employee shall execute and deliver to
K-Tron, or to another member of the K-Tron Group designated by K-Tron, any and
all instruments, documents and papers, give evidence and do any and all other
acts which, in the opinion of counsel for K-Tron, are or may be necessary or
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<PAGE> 6
desirable to document such assignment, transfer and conveyance or to enable
K-Tron or such other member of the K-Tron Group to file and prosecute
applications for and to acquire, maintain and enforce any and all patents,
trademark registrations or copyrights under United States or foreign law with
respect to any such inventions, discoveries, improvements, modifications or the
like or to obtain any extension, validation, reissue, continuance or renewal of
any such patent, trademark or copyright. K-Tron or such other member of the
K-Tron Group shall be responsible for the preparation of any such instruments,
documents and papers and for the prosecution of any such proceedings and shall
reimburse the Employee for all reasonable expenses incurred by him in compliance
with the provisions of this Section 3.
4. Confidential Information. The Employee acknowledges that,
by reason of his employment by K-Tron or another member of the K-Tron Group, he
will have access to confidential information of the K-Tron Group, including,
without limitation, information and knowledge pertaining to products,
inventions, discoveries, improvements, innovations, designs, ideas, trade
secrets, proprietary information, manufacturing, packaging, advertising,
distribution and sales methods, sales and profit figures, customer and client
lists and relationships between members of the K-Tron Group and dealers,
distributors, sales representatives, wholesalers, customers, clients, suppliers
and others who have business dealings with them ("Confidential Information").
The Employee acknowledges that such Confidential Information is a valuable and
unique asset of K-Tron and the other members of the K-Tron Group and covenants
that, both during and after the Employment Term, he will not disclose any
Confidential Information to any person (except as his duties as an employee of
K-Tron or another member of the K-Tron Group may require) without the prior
written authorization of the K-Tron Board. The obligation of
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confidentiality imposed by this Section 4 shall not apply to information which
appears in issued patents or printed publications, which otherwise becomes
generally known in the industry through no act of the Employee in breach of this
Agreement or which is required to be disclosed by court order or applicable law.
5. Non-Competition. During (i) the term of the Employment Term
and (ii) for one year thereafter only in the event that (A) such Employment Term
is terminated under Section 8.2 or 8.4 (but only if it is terminated by a member
of the K-Tron Group) hereof or (B) the Employee terminates employment with the
member of the K-Tron Group employing him without giving the notice required by
Section 8.1 hereof, the Employee shall not, unless acting as an employee
pursuant hereto or with the prior written consent of the K-Tron Board, directly
or indirectly, own, manage, operate, finance, join, control or participate in
the ownership, management, operation, financing or control of, or be connected
as an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise with, or use or permit his name to be used in connection
with, any business or enterprise engaged in the business of designing,
engineering, manufacturing, marketing or distributing feeding or blending
equipment, or in any other business then engaged in by K-Tron or any other
member of the K-Tron Group, within (i) any state of the United States or the
District of Columbia or (ii) any other country in which K-Tron or any member of
the K-Tron Group has engaged in any such business within the prior year or is
about to engage in any such business; provided, however, that notwithstanding
the foregoing, this provision shall not be construed to prohibit the passive
ownership by the Employee of not more than 1% of the capital stock of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to the Securities
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Exchange Act of 1934. In the event that the provisions of this Section 5 should
ever be adjudicated to exceed the time, geographic, product or other limitations
permitted by applicable law in any jurisdiction, then such provisions shall be
deemed reformed in such jurisdiction to the maximum time, geographic, product or
other limitations permitted by applicable law.
6. No Solicitation. During (i) the term of the Employment Term
and (ii) for one year thereafter only in the event that (A) such Employment Term
is terminated under Section 8.2 or 8.4 (but only if it is terminated by a member
of the K-Tron Group) hereof or (B) the Employee terminates employment with the
member of the K-Tron Group employing him without giving the notice required by
Section 8.1 hereof, the Employee shall not, unless acting as an employee
pursuant hereto or with the prior written consent of the K-Tron Board, call on
or solicit, either directly or indirectly, any person, firm, corporation or
other entity who or which is, or within two years prior thereto had been, a
customer of any member of the K-Tron Group, with respect to any matters
involving the designing, engineering, manufacturing, marketing or distributing
of feeding or blending equipment or involving any other businesses then engaged
in by any member of the K-Tron Group.
7. Equitable Relief.
(a) The Employee acknowledges that the restrictions
contained in Sections 3, 4, 5 and 6 hereof are, in view of the nature of the
business of K-Tron and the other members of the K-Tron Group, reasonable and
necessary to protect the legitimate interests of the K-Tron Group, that K-Tron
would not have entered into this Agreement in the absence of such restrictions,
that the business of the K-Tron Group is international in scope and that any
violation of any provision of those Sections will result in irreparable injury
to K-Tron and the other
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<PAGE> 9
members of the K-Tron Group.
(b) The Employee agrees that in the event of any violation
of the restrictions referred to in Section 7(a) above, K-Tron and any other
member of the K-Tron Group shall be entitled to preliminary and permanent
injunctive relief, without the necessity of posting a bond or proving actual
damages, and to an equitable accounting of all earnings, profits and other
benefits arising from any such violation, which rights shall be cumulative and
in addition to any other rights or remedies to which K-Tron or any other member
of the K-Tron Group may be entitled.
(c) The Employee irrevocably and unconditionally agrees
that in the event of any violation of the restrictions referred to in Section
7(a) above, an action may be commenced for preliminary and permanent injunctive
relief and other equitable relief in any federal or state court of competent
jurisdiction sitting in Gloucester or Camden County, New Jersey or in any other
court of competent jurisdiction. The Employee hereby waives, to the fullest
extent permitted by law, any objection that he may now or hereafter have to such
jurisdiction or to the laying of the venue of any such suit, action or
proceeding brought in such a court and any claim that such suit, action or
proceeding has been brought in an inconvenient forum. The Employee agrees that
effective service of process may be made upon him by mail under the notice
provisions contained in Section 10 hereof and that all pleadings, notices and
other papers may be served upon him in the same manner.
(d) The Employee agrees that he will provide, and that any
member of the K-Tron Group may similarly provide, a copy of Sections 3, 4, 5 and
6 of this Agreement to any business or enterprise (i) which he may directly or
indirectly own, manage, operate, finance, join,
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<PAGE> 10
control or participate in the ownership, management, operation, financing or
control of, or (ii) with which he may be connected with as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise, or
in connection with which he may use or permit his name to be used; provided,
however, that this provision shall not apply in respect of Sections 5 and 6 of
this Agreement after expiration of the time periods set forth therein.
(e) The Employee represents and acknowledges that (i) he
has been advised by K-Tron to consult his own legal counsel in respect of this
Agreement and (ii) he has had full opportunity to do so.
8. Termination.
8.1 Generally. Either party may terminate the Employment Term
upon not less than one year's prior notice to the other party. Should either
party elect to terminate the Employment Term on this basis, neither K-Tron nor
any member of the K-Tron Group shall have any liability or obligation to the
Employee after the date on which the Employment Term ends except for unpaid
salary and benefits accrued to such date and any additional benefits or payments
(excluding any other severance benefits or payments) payable to the Employee
under any applicable formal policy or plan of any member of the K-Tron Group
which covers the Employee at the time of his termination.
8.2 Partial or Total Disability. If in the judgment of the
K-Tron Board, the Employee is unable to perform his duties and responsibilities
hereunder by reason of illness, injury or incapacity for six consecutive months,
or for more than six months in the aggregate during any period of 12 calendar
months, during which time K-Tron or the member of the K-
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Tron Group actually employing the Employee at the time of his disability shall
continue to compensate the Employee hereunder (with such compensation to be
reduced by the amount of any payments due the Employee for this time period
under any applicable disability benefit programs, including Social Security
disability, worker's compensation and disability retirement benefits), the
Employment Term may be terminated by K-Tron in which event neither K-Tron nor
any other member of the K-Tron Group shall have any further liability or
obligation to the Employee except for unpaid salary and benefits accrued to the
date of his termination and for any additional disability or other benefits or
payments (excluding any other severance benefits or payments) payable to the
Employee under any applicable formal policy or plan of any member of the K-Tron
Group which covers the Employee at the time of his termination. The Employee
agrees, in the event of any dispute under this Section 8.2 and if requested by
K-Tron, to submit to a physical examination by a licensed physician selected by
K-Tron, the cost of such examination to be paid by K-Tron.
8.3 Death. In the event that the Employee dies during the
Employment Term, the member of the K-Tron Group actually employing the Employee
at the time of his death shall pay to his executors, administrators or personal
representatives, as appropriate, an amount equal to the installment of his
salary payable for the month in which he dies. Thereafter, neither K-Tron nor
any other member of the K-Tron Group shall have any further liability or
obligation hereunder to the Employee's executors, administrators, personal
representatives, heirs, assigns or any other person claiming under or through
him, except for any benefits or other payments (excluding any severance benefits
or payments) payable to the Employee under any applicable formal policy or plan
of any member of the K-Tron Group which covered the Employee at the
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time of his death.
8.4 For Cause. Nothing in this Agreement shall be construed to
prevent the termination of the Employment Term at any time either (i) by the
Employee for the failure of K-Tron or any other member of the K-Tron Group
actually employing the Employee at the time to observe or perform any of the
material terms or provisions hereof provided that the Employee has given written
notice of such failure to K-Tron and any other member of the K-Tron Group
employing the Employee and such failure has continued for 30 days thereafter, or
(ii) by K-Tron, by action of the K-Tron Board, for "cause." For purposes of this
Agreement, "cause" shall mean the failure of the Employee to observe or perform
(other than by reason of illness, injury or incapacity) any of the material
terms or provisions of this Agreement provided that the Employee has been given
written notice of such failure and such failure has continued for 30 days
thereafter, dishonesty, disloyalty, willful misconduct, conviction of a felony
or other crime involving moral turpitude, misappropriation of funds, habitual
insobriety, substance abuse, similar like cause, any action on the part of the
Employee involving willful and deliberate malfeasance or gross negligence in the
performance of his duties and responsibilities hereunder, any other action on
the part of the Employee that is damaging or detrimental in a significant way to
any member of the K-Tron Group or any willful violation by the Employee of a
written directive from the K-Tron Board or K-Tron's chief executive officer.
8.5 Without Cause. K-Tron, by action of the K-Tron Board, may
terminate the Employment Term at any time without cause upon notice to the
Employee accompanied by payment to the Employee of a lump sum amount equal to
100% of the Employee's then-annual base salary hereunder, in which event neither
K-Tron nor any other member of the K-Tron Group
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shall have any further liability or obligation to the Employee after the date of
termination of the Employment Term except for any unpaid salary and benefits
accrued to such date and for any additional or other benefits or payments
(excluding any other severance benefits or payments) payable to the Employee
under any applicable formal policy or plan of any member of the K-Tron Group
which covers the Employee at the time of his termination. Notwithstanding the
foregoing, if notice of termination shall have previously been given to the
Employee under Section 8.1 hereof and be in effect, the amount to be paid to the
Employee shall be reduced to 100% of the base salary hereunder to which the
Employee would otherwise have been entitled for the remaining balance of his
Employment Term.
9. Survival. Notwithstanding the termination of the Employment
Term for any reason whatsoever, the obligations of the Employee under Sections
3, 4, 5 and 6 hereof shall survive and remain in full force and effect for the
periods therein provided, and the provisions for equitable relief found in
Section 7 hereof shall continue in force.
10. Notices. All notices and other communications hereunder
shall be in writing and deemed to have been given when hand delivered, in person
or by a recognized courier or delivery service, when telefaxed to the
recipient's correct telefax number (with receipt confirmed) or when mailed by
registered or certified mail, return receipt requested, or by air mail to any
addressee located outside the United States, as follows (provided that notice of
change of address shall be deemed given only when received):
If to K-Tron, to:
K-Tron International, Inc.
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Routes 55 and 553
Pitman, NJ 08071
Attention: Chief Executive Officer
With a required copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: Timothy Maxwell, Esquire
If to the Employee, to:
Ronald R. Remick
521 Avonwood Road
Haverford, PA 19041
or to such other name or address as any designated recipient shall specify by
notice to the other designated recipients in the manner specified in this
Section 10. Any communication delivered in another manner shall be deemed given
when actually received.
11. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of New Jersey, United States of America
without giving effect to any conflict of laws provisions.
12. Contents of Agreement, Amendment and Assignment.
(a) This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes any prior
employment agreement between the parties and shall not be changed, modified or
terminated except upon written amendment executed by a duly authorized officer
of K-Tron and the Employee. Furthermore and without
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limitation, nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of any member of the K-Tron Group beyond
the expiration of the Employment Term, and if employed thereafter the Employee
specifically acknowledges that he shall be an employee-at-will and thus subject
to discharge with or without cause and without further compensation of any
nature.
(b) Employee acknowledges that from time to time, K-Tron
and other members of the K-Tron Group may establish, maintain and distribute
employee manuals or handbooks or personnel policy manuals, and officers or other
representatives of K-Tron or other members of the K-Tron Group may make written
or oral statements relating to personnel policies and procedures. Such manuals,
handbooks and statements are intended only for general guidance. No policies,
procedures or statements of any nature by or on behalf of any member of the
K-Tron Group (whether written or oral, and whether or not contained in any
employee manual or handbook or personnel policy manual), and no acts or
practices of any nature, shall be construed to modify this Agreement or to
create express or implied obligations of employment or continued employment by
K-Tron or any other member of the K-Tron Group.
(c) All of the provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, personal representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
the Employee hereunder are of a personal nature and shall not be assignable or
delegable in whole or in part by the Employee.
(d) In the event that the Employee is employed by a member
("such other member") of the K-Tron Group other than K-Tron, and in the further
event that either (i) K-Tron
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or another member of the K-Tron Group shall sell 50% or more of the voting stock
of such other member to a third party after such other member shall have assumed
all of K-Tron's obligations hereunder or (ii) such other member shall sell
substantially all of its operating assets to a third party which agrees in
writing to assume all of K-Tron's obligations hereunder, then K-Tron shall, upon
the closing of any such transaction, have no further duties or obligations
hereunder.
(e) All references in this Agreement to the "K-Tron Board"
shall also be deemed to include the Executive Committee of the K-Tron Board.
13. Severability. If any provision of this Agreement or the
application thereof to anyone or any circumstance is held invalid or
unenforceable in any jurisdiction, the remainder of this Agreement, and the
application of such provision to such person or entity or such circumstance in
any other jurisdiction or to other persons, entities or circumstances in any
jurisdiction, shall not be affected thereby, and to this end the provisions of
this Agreement are severable.
14. Remedies Cumulative; No Waiver. No remedy conferred upon
any party by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity. No
delay or omission by any party in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by such party from
time to time and as often as may be deemed expedient or necessary by such party
in its or his sole discretion.
15. Miscellaneous. The masculine pronoun whenever used shall
include the feminine and the singular shall be construed as the plural, where
applicable. All section headings
-16-
<PAGE> 17
are for convenience only. This Agreement may be executed in several
counterparts, each of which shall be an original. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
IN WITNESS WHEREOF, K-Tron and the Employee have executed this
Agreement as of the date first above written.
[Corporate Seal] K-TRON INTERNATIONAL, INC.
Attest:
By:
- ----------------------------- ------------------------------
Secretary As its Chairman and
Chief Executive Officer
EMPLOYEE
- ------------------------------ ------------------------------
Witness Ronald R. Remick
-17-
<PAGE> 1
EXHIBIT 10.11
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of the __ day of ______, _____,
by and between K-TRON INTERNATIONAL, INC., a New Jersey corporation (the
"Corporation"), and the individual whose name appears on the signature page
hereof (such individual being referred to herein as the "Indemnified
Representative" and collectively with other individuals who may execute
substantially similar agreements as the "Indemnified Representatives"), with
reference to the following background:
A. The Indemnified Representative currently is serving in one or more
capacities as a director or officer of the Corporation or has been specifically
designated as a person whom the Corporation shall indemnify as hereinafter
provided (which may include any person serving at the request of the
Corporation as a director, officer, employee, agent, fiduciary or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise) and as such is performing a valuable service to
or on behalf of the Corporation.
B. The Corporation has been unable to obtain at reasonable cost
directors' and officers' liability insurance to protect directors and officers
of the Corporation and its subsidiaries from certain liabilities or has in the
past experienced difficulty in obtaining such insurance. At the same time,
directors and officers of corporations in general are being increasingly
subjected to expensive and time consuming litigation, including matters that
traditionally would be brought only against the corporation. The Indemnified
Representative has indicated that the Indemnified Representative may not be
willing to remain in office or otherwise continue to serve the Corporation
absent the protections afforded by this Agreement.
C. To induce the Indemnified Representative to continue to serve the
Corporation and in consideration for such continued service, and to assist in
the recruitment of qualified personnel in the future, the Corporation agrees to
indemnify the Indemnified Representative upon the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, the
Corporation and the Indemnified Representative agree as follows:
<PAGE> 2
1. Agreement to Serve. The Indemnified Representative agrees to serve or
continue to serve in each Indemnified Capacity (as hereinafter defined in
Section 2(c) (i)) held now or in the future for so long as the Indemnified
Representative is duly elected or appointed or until such time as the
Indemnified Representative tenders a resignation in writing. This Agreement
shall not be deemed an employment contract between the Corporation or any of its
affiliates and any Indemnified Representative who is an employee of the
Corporation or any of its affiliates, and the Indemnified Representative
specifically acknowledges that the Indemnified Representative's employment with
the Corporation or any of its affiliates is at will and that the Indemnified
Representative may be discharged at any time for any reason, with or without
cause, and with or without severance compensation, except as may be otherwise
provided in a written employment contract between the Indemnified Representative
and the Corporation or any of its affiliates or other applicable formal
severance policies duly adopted by the board of directors of the Indemnified
Representative's employer.
2. Indemnification.
(a) Except as provided in Sections 2(b) and 3, the Corporation shall
indemnify the Indemnified Representative against any Liability (as hereinafter
defined in Section 2(c) (ii)) incurred by the Indemnified Representative in
connection with any Proceeding (as hereinafter defined in section 2(c) (iii)) in
which the Indemnified Representative may be involved as a party or otherwise, by
reason of the fact that the Indemnified Representative is or was serving in an
Indemnified Capacity, including, without limitation, any Liability resulting
from actual or alleged breach or neglect of duty, error, misstatement or
misleading statement, gross negligence, negligence or act giving rise to strict
or products liability, whether occurring prior to or after the date of this
Agreement. If the Indemnified Representative is entitled to indemnification in
respect of a portion, but not all, of any Liability, the Corporation shall
indemnify the Indemnified Representative to the maximum extent for such portion
of any Liability.
(b) Notwithstanding the provisions of subsection (a), the
Corporation shall not indemnify the Indemnified Representative under this
Agreement for any Liability incurred in a Proceeding initiated (which shall not
be deemed to include counter-claims or affirmative defenses) or participated in
as an
2
<PAGE> 3
intervenor or amicus curiae by the Indemnified Representative unless such
initiation of or participation in the Proceeding is authorized, either before or
after commencement of the Proceeding, by the affirmative vote of a majority of
the directors then in office. This subsection does not apply to reimbursement of
expenses incurred in successfully prosecuting or defending an arbitration under
Section 5(d) or otherwise successfully prosecuting or defending the rights
granted to the Indemnified Representative by or pursuant to this Agreement.
(c) As used in this Agreement:
(i) "Indemnified Capacity" means any and all past, present or future
service by an Indemnified Representative in one or more capacities (A) as a
director, officer, employee or agent of the Corporation, or of any
constituent corporation absorbed by the Corporation in a consolidation or
merger and designated by the Board of Directors of the Corporation, or, (B)
at the request of the Corporation, as a director, officer, employee, agent,
fiduciary or trustee of another corporation or of any partnership, joint
venture, employee benefit plan or other entity or enterprise.
(ii) "Liability" means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to any
employee benefit plan, or cost or expense of any nature (including, without
limitation, attorneys fees and disbursements); and
(iii) "Proceeding" means any threatened, pending or completed action,
suit, appeal, or other proceeding of any nature, whether civil, criminal,
arbitrative, administrative or investigative, whether formal or informal,
and whether brought by or in the right of the Corporation, a class of its
security holders or otherwise.
3. Exclusions.
(a) The Corporation shall not be liable under this Agreement to make
any payment in connection with any Liability incurred by the Indemnified
Representative:
3
<PAGE> 4
(i) to the extent payment for such Liability is made to the
Indemnified Representative under an insurance policy provided by the
Corporation;
(ii) to the extent the Indemnified Representative is indemnified for
such Liability by the Corporation under its certificate of incorporation or
by-laws or under the New Jersey Business Corporation Act or otherwise than
pursuant to this Agreement;
(iii) for any claim for an accounting of profits made either from the
purchase or sale by such Indemnified Representative of securities of the
Corporation pursuant to Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any corresponding superseding
provision, or from any use of material, non-public information, if such use
is illegal under applicable provisions of the Exchange Act or the
regulations thereunder;
(iv) for which the conduct of the Indemnified Representative has been
determined in a final adjudication pursuant to Section 5(d) or otherwise to
constitute breach of such person's duty of loyalty to the Corporation or
its shareholders, bad faith or knowing violation of law, or receipt by
such person of an improper personal benefit, and which conduct was
material to the cause of action or claim giving rise to the Liability; or
(v) to the extent such indemnification has been determined in a final
adjudication pursuant to Section 5(d) or otherwise to be unlawful.
(b) Any fact, act or omission pertaining to the Indemnified Representative
shall not be imputed to any other Indemnified Representative for the purposes
of determining the applicability of any exclusion set forth herein.
(c) The termination of a proceeding by judgement, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that
4
<PAGE> 5
the Indemnified Representative is not entitled to indemnification under this
Agreement.
4. ADVANCEMENT OF EXPENSES. The Corporation shall pay any Liability
incurred in good faith by the Indemnified Representative in advance of the final
disposition of a Proceeding upon receipt of an undertaking by or on behalf of
the Indemnified Representative to repay such amount if it shall ultimately
be determined pursuant to Section 5 (d) or otherwise that the Indemnified
Representative is not entitled to be indemnified by the Corporation pursuant to
this Agreement. The financial ability of the Indemnified Representative to
repay an advance shall not be a prerequisite to the making of such advance.
5. INDEMNIFICATION PROCEDURE.
(a) The Indemnified Representative shall use such Indemnified
Representative's best efforts to notify promptly the Secretary of the
Corporation of the commencement of any Proceeding or the occurrence of any
event which might give rise to a Liability under this Agreement, but the failure
so to notify the Corporation shall not relieve the Corporation of any liability
which it may have to the Indemnified Representative under this Agreement or
otherwise.
(b) The Corporation shall be entitled, upon notice to the Indemnified
Representative, to assume the defense of any Proceeding with counsel reasonably
satisfactory to the Indemnified Representative involved in such Proceeding or a
majority of the Indemnified Representatives involved in such Proceeding if
there be more than one. If the Corporation notifies the Indemnified
Representative, of its election to defend the Proceeding, the Corporation shall
have no liability for the expenses (including attorney's fees and
disbursements) of the Indemnified Representative incurred in connection with
the defense of such Proceeding subsequent to such notice, unless (i) such
expenses (including attorney's fees and disbursements) have been authorized by
the Corporation, (ii) the Corporation shall not in fact employed counsel
reasonably satisfactory to such Indemnified Representative or Indemnified
Representatives to assume the defense of such Proceeding, or (iii) it shall have
been determined pursuant to Section 5(d) that the Indemnified Representative
was entitled to indemnification for such expenses under this Agreement or
otherwise. Notwithstanding the
5
<PAGE> 6
foregoing, the Indemnified Representative may elect to retain counsel at the
Indemnified Representative's own cost and expense to participate in the defense
of such Proceeding.
(c) The Corporation shall not be required to obtain the consent of
the Indemnified Representative to the settlement of any Proceeding which the
Corporation has undertaken to defend if the Corporation assumes full and sole
responsibility for such settlement and the settlement grants the Indemnified
Representative an unqualified release in respect of all Liabilities at issue
in the Proceeding. The Corporation shall not be liable for any amount paid by
an Indemnified Representative in settlement of any Proceeding that is not
defended by the Corporation, unless the Corporation has consented to such
settlement (which consent shall not be unreasonably withheld).
(d) Any dispute related to the right to indemnification or
advancement of expenses hereunder, except with respect to indemnification for
liabilities arising under the Securities Act of 1933, as amended, which the
Corporation has undertaken to submit to a court for adjudication, shall be
decided only by arbitration in the City of Philadelphia, Pennsylvania (or such
other metropolitan area to which the Corporation's principal executive offices
may be relocated), in accordance with the commercial arbitration rules then in
effect of the American Arbitration Association, before a panel of three
arbitrators, one of whom shall be selected by the Corporation, the second of
whom shall be selected by the Indemnified Representative and the third of whom
shall be selected by the other two arbitrators. In the absence of the American
Arbitration Association, or if for any reason arbitration under the arbitration
rules of the American Arbitration Association cannot be initiated, or if one of
the parties fails or refuses to select an arbitrator, or if the arbitrators
selected by the Corporation and the Indemnified Representative cannot agree on
the selection of the third arbitrator within seven days after such time as the
Corporation and the Indemnified Representative have each been notified of the
selection of the other's arbitrator, the necessary arbitrator or arbitrators
shall be selected by the presiding judge of the court of general jurisdiction of
the State of New Jersey (or, if the Corporation's principal executive offices
have been relocated to another metropolitan area, then by the presiding judge of
the court of general jurisdiction for the county in which such offices have
6
<PAGE> 7
been relocated). Each arbitrator selected as provided herein is required to be
or have been a director or an executive officer of a corporation whose shares
of common stock were listed during at least one year of such service on the New
York Stock Exchange or the American Stock Exchange or quoted on the National
Association of Securities Dealers Automated Quotations System. The party or
parties challenging the right of an Indemnified Representative to the benefits
of this Agreement shall have the burden of proof. The Corporation shall
reimburse the Indemnified Representative for the expenses (including attorneys'
fees and disbursements) incurred in successfully prosecuting or defending such
arbitration. Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable.
(e) Upon a payment to the Indemnified Representative
under this Agreement, the Corporation shall be subrogated to the extent of such
payment to all of the rights of the Indemnified Representative to recover
against any person for such Liability, and the Indemnified Representative shall
execute all documents and instruments required by the Corporation and shall
take such other actions requested by the Corporation and at its expense as may
be necessary to secure such rights, including the execution of such documents
as may be necessary for the Corporation to bring suit to enforce such rights.
6. Non-Exclusively. The indemnification rights granted to the
Indemnified Representative pursuant to this Agreement (i) shall not be deemed
exclusive of any other rights to which the Indemnified Representative may be
entitled under any statute, by-law, certificate or articles of incorporation,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in an Indemnified Capacity and in any other capacity, and (ii)
shall continue as to a person who has ceased to be an Indemnified
Representative in respect of matters arising prior to such time or involving
such person at a time when he or she was an Indemnified Representative. Without
limiting the generality of the foregoing, the Corporation and the Indemnified
Representative acknowledge the provisions of Article X of the Corporation's
By-laws and confirm that the Indemnified Representative is acting in reliance
thereon. Section 9 of Article X also provides that the indemnifications rights
granted
7
<PAGE> 8
by Article X shall not be deemed exclusive of any other rights to which the
Indemnified Representative may be otherwise entitled.
7. Discharge of Duty. The Indemnified Representative shall be deemed to
have discharged such person's duty to the Corporation if he or she has relied
in good faith on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by any of the following;
(a) one or more officers or employees of the Corporation whom the
Indemnified Representative reasonably believes to be reliable and competent with
respect to the matter presented;
(b) legal counsel, public accountants or other persons as to matters
that the Indemnified Representative reasonably believes are within the person's
professional or expert competence; or
(c) a committee of the Board of Directors of the Corporation on which
he or she does not serve as to matters within its area of designated authority,
which committee he or she reasonably believes to merit confidence.
8. Reliance on Provisions. The Indemnified Representative shall be deemed
to be acting in such person's Indemnified Capacity in reliance upon the rights
of indemnification provided by this Agreement.
9. Severability and Reformation. Any provision of this Agreement which is
adjudicated to be invalid or unenforceable in any jurisdiction or under any
circumstance shall be ineffective to the extent of such invalidity or
unenforceability only and shall be deemed reformed so as to continue to apply
to the maximum extent and to provide the maximum indemnification permissible
under the applicable law of such jurisdiction. Any such adjudication shall not
invalidate or render unenforceable the remaining provisions hereof and shall not
invalidate or render unenforceable such provision in any other jurisdiction or
under any other circumstances.
10. Notices. Any notice, claim, request or demand required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally
or sent by telegram or by
8
<PAGE> 9
registered or certified mail, postage prepaid: (i) if to the Corporation, to
Routes 55 & 553, PO Box 888, Pitman, NJ 08071-0888, or to such other address to
which the principal executive offices of the Corporation may be moved,
Attention: Secretary, or (ii) if to the Indemnified Representative, to the
address listed on the signature page hereof; or to such other address as any
party hereto shall have specified in a notice given in accordance with this
Section.
11. Amendments; Binding Effect. No amendment, modification, termination or
cancellation of this Agreement shall be effective as to the Indemnified
Representative unless signed in writing by the Corporation and the Indemnified
Representative. This Agreement shall be binding upon the Corporation and its
successors and assigns and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of the Indemnified Representative.
12. Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the substantive laws of the State of New Jersey,
without reference to the principles governing the conflict of laws applicable in
that or any other jurisdiction.
13. Gender and Number. Words used herein, regardless of the gender or
number specifically used, shall be deemed to include any other gender,
masculine, feminine or neuter, and any other number, singular or plural, as the
context may require.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first set forth above.
K-TRON INTERNATIONAL, INC. INDEMNIFIED REPRESENTATIVE
By:_________________________ _____________________________(SEAL)
Title: Chairman and Chief Name:
Executive Officer
Address:
9
<PAGE> 10
Schedule 10.11
Indemnification Agreements
The following persons are parties to indemnification agreements with K-Tron
International, Inc.:
Richard E. Andeen
Leo C. Beebe
Kenneth W. Bullivant
Edward B. Cloues, II
Norman Cohen
Robert L. Edwards
Robert A. Engel
Dr. Mario Gallo
Lukas Guenthardt
Edward Kane
Ronald G. Larson
Richard J. Pinola
Ronald R. Remick
Marcel O. Rohr
Martin W. Schuler
Dr. Hans-Jurg Schurmann
Jean Head Sisco
Alan R. Sukoneck
John C. Tucker
Robert L. Weinberg
Johannes Wirth
<PAGE> 1
Exhibit 10.15
Prepared by:
/s/ Jeffrey G. Albertson
JEFFREY G. ALBERTSON, ESQ
Albertson, Ward & McCaffrey
36 Euclid Street
P.O. Box 685
Woodbury, New Jersey 08096
(609) 853-7770
MORTGAGE NOTE
$2,700,000.00 Woodbury, New Jersey
June 11, 1996
BETWEEN the Borrower(s) K-TRON AMERICA, INC., whose address is Route 55
and 553, P.O. Box 888, Pitman, New Jersey 08071-0888, referred to as "Borrower".
AND the Lender, THE BANK of Gloocester County, whose address is 1100
Old Broadway, Woodbury, New Jersey 08096, referred to as "THE BANK".
If more than one Borrower signs this Note, the word "Borrower" shall
mean each Borrower named above. The word "THE BANK" means the original Lender
and anyone else who takes this Note by transfer.
BORROWER'S PROMISE TO PAY PRINCIPAL AND INTEREST. In return for a loan
that Borrower received, Borrower promises to pay $2,700,000.00 (called
"principal"), plus interest to the order of THE BANK. Interest, at a yearly rate
of 9.0% will be charged on that part of the principal which has not been paid
from the date of this Note until all principal has been paid. Interest shall be
calculated hereunder for the actual number of days that principal is outstanding
based on a year of 360 days.
<PAGE> 2
PAYMENTS. Borrower will pay principal and interest based on a TWENTY
(20) YEAR schedule with monthly payments of $24,292.60 on the fIRST DAY OF EACH
MONTH BEGINNING ON AUGUST 1996. Borrower will pay all amounts owed under this
Note no later than JULY 1, 2016. All payments will be made to THE BANK at the
address shown above or to a different place if required by THE BANK.
OPTION TO DECLARE LOAN DUE: Although the repayment of the loan
evidenced by this instrument has been designed as if it were to extend for a
term of TWENTY (20) YEARS, BORROWERS understand that THE BANK expressly reserves
the right and option, exercisable at its discretion, to declare the entire
unpaid principal balance under this Note together with all interest which shall
have accrued thereon to be due and payable on the FIFTH (5TH) ANNIVERSARY of the
date of the first payment due under this Note and on each succeeding FIVE (5)
YEAR anniversary of that date during the term hereof (Loan Call Date). In the
event THE BANK desires to exercise its option to declare the loan due, it shall
deliver written notice thereof by regular first class mail to BORROWERS' last
known address within the 180-day period commencing on the 90th day prior to and
ending on the 90th day after a Loan Call Date. BORROWERS shall, within 90 days
after BORROWER'S receipt of written notice from THE BANK of its exercise of the
option, repay the entire principal balance due under this Note together with all
unpaid interest which shall have accrued-thereon as well as any other sums which
may then be due under this Note, the mortgage security, or any other document
constituting a part of the within loan transaction.
SECURITY. The Borrower hereunder has delivered as security for this
instrument a mortgage bearing even date herewith covering premises designated on
the official tax map as Lot
<PAGE> 3
3.01, Block 249, Township of Mantua, Gloucester County, New Jersey, which
Mortgage is about to be recorded in the office of the Clerk of Gloucester
County.
PREPAYMENT: Borrower shall have the right to prepay this Note in whole
or in part at any time without penalty. Prepayments shall first be applied to
interest due and then to the remaining principal.
LATE CHARGE: The effective date of the receipt by the holder of any
installment of this Note shall be the day on which the holder receives cash or
collected funds at the place of payment as specified herein in payment of any
such installment. BORROWERS shall be entitled to a FIFTEEN (15) DAY grace period
after which period a "late charge" of $0.05 FOR EACH $1.00 SO OVERDUE OR $25.00
WHICHEVER IS GREATER, NOT TO EXCEED $1,000.00 may be charged by the holder for
the purpose of defraying the expense incident to handling such delinquent
payment.
DEFAULT: If any installment of this Note or interest payment is not
paid within 15 days of the date and at the place herein specified, THE BANK may
at its option, and without further notice declare this Note to be in default and
the entire principal balance then remaining unpaid together with all interest
which shall have accrued on the unpaid principal balance from and after the date
of such default shall be due and payable in full without notice.
If a default shall occur in this loan and not be cured as provided in
the loan documents or otherwise agreed to by THE BANK, THE BANK shall, after
declaring the loan to be in default, have the right to increase the interest
rate TWO (2%) PERCENT PER YEAR in excess of the note rate. This provision is in
addition to any late charges that may be due.
<PAGE> 4
ATTORNEY'S FEE: If this Note is placed in the hands of an attorney for
collection because of a default in the terms hereof or in the terms of the
mortgage given as security for the within obligation, the undersigned jointly
and severally agree to pay the reasonable fees and costs of such attorney,
whether or not legal action is instituted and further consent that if a judgment
is entered in any action the amount of such fees shall form a part of such
judgment in addition to any fees allowed by Statute or Rule of the Court.
COMMITMENT LETTER COMPLIANCE: This Note is contingent upon BORROWERS'
compliance with all of the terms and conditions contained in the commitment
letter issued by THE BANK to BORROWERS on or about June 5, 1996. Upon breach of
any term or condition contained therein THE BANK shall have the right to declare
this loan in default and demand payment in full of the principal balance
remaining unpaid, together with all interest which shall have accrued thereon.
Further, providing the said commitment letter so provides, THE BANK reserves the
right to increase the interest rate in accordance with the provisions of the
loan commitment for failure of the BORROWER or any guarantor to submit required
financial information within thirty days of the date of request by THE BANK.
PAYMENT AT MATURITY: THIS LOAN IS PAYABLE IN FULL:
A. AT MATURITY; OR
B. UPON DEMAND IN THE EVENT OF A DEFAULT HEREUNDER OR DEFAULT UNDER THE
MORTGAGE SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER LOAN
INSTRUMENT. IN SUCH EVENT, YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE
LOAN AND UNPAID INTEREST THEN DUE. THE BANK IS UNDER NO
<PAGE> 5
OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO
MAKE PAYMENT 0UT 0F 0THER ASSETS YOU MAY 0WN OR YOU WILL HAVE TO FIND A LENDER
WILLING TO LEND YOU THE MONEY. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY
HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN
EVEN IF YOU OBTAIN REFINANCING FROM THE BANK.
WAIVER OF PRESENTMENT: EACH AND ALL PARTIES hereto whether maker,
endorsers, sureties, guarantor or otherwise do hereby jointly and severally
waive presentment and demand for payment, notice of dishonor, protest and notice
of protest.
IN WITNESS WHEREOF, the BORROWERS hereunder have hereunto set their
hands and seals the day and year first above written.
ATTEST: K-TRON AMERICA, INC.
BY:
/s/ Patricia M. Moore /s/ Kevin C. Bowen
PATRICIA M. MOORE, KEVIN C. BOWEN, PRESIDENT
VICE PRESIDENT - FINANCE
<PAGE> 1
Exhibit 10.16
THE BANK OF GLOUCESTER COUNTY
LOAN MODIFICATION AGREEMENT
K-TRON AMERICA, INC.
Date: June 24, 1998 Loan # 6039359-6500
Original Amount: $2,700,000.00
Present Balance: $2,091,600.32
WHEREAS, the undersigned borrower executed the mortgage and note
referred to above on June 11, 1996 and
WHEREAS, the mortgage and note executed by the borrower allow a
modification of interest rate, due date or other terms without affecting the
priority of The Bank of Gloucester County's lien.
NOW, therefore, in consideration of a modification fee of $500.00, the
above referenced note and mortgage are modified as follows:
INTEREST RATE AND REPAYMENT TERMS:
FROM THE DATE HEREOF THIS LOAN SHALL ACCRUE INTEREST AT A RATE OF
7.625% AND SHALL BE REPAYABLE IN FIFTY NINE (59) MONTHLY PAYMENTS OF
$19,538.26 PRINCIPAL AND INTEREST (CALCULATED BASED ON A 15 YEAR
AMORTIZATION SCHEDULE) BEGINNING AUGUST 1, 1998, AND ONE (1) FINAL
PAYMENT OF ALL UNPAID PRINCIPAL AND ACCRUED INTEREST DUE AND OWING ON
JULY 1, 2003.
THE PARAGRAPH OF THE MORTGAGE NOTE DATED JUNE 1996 THAT BEGINS WITH THE
PHRASE "OPTION TO DECLARE LOAN DUE" IS HEREBY DELETED IN ITS ENTIRETY.
ADDITIONALLY, THE BORROWER SHALL HAVE THE OPTION TO RE-ADVANCE MONEY ON
THIS MORTGAGE LOAN. MONEY MAY BE RE-ADVANCED ONLY TO THE EXTENT THAT
THE TOTAL AMOUNT OUTSTANDING UNDER THIS MORTGAGE LOAN IS LESS THAN OR
EQUAL TO $2,700,000. A RE-ADVANCE OF MONEY WITHIN THE FIRST SIX (6)
MONTHS FOLLOWING THE DATE HEREOF SHALL BEAR INTEREST AT A RATE OF
7.625%. A RE-ADVANCE OF MONEY AFTER SIX (6) MONTHS BUT WITHIN TWELVE
(12) MONTHS OF THE DATE HEREOF SHALL BEAR INTEREST AT A FIXED RATE
EQUAL TO THE FIVE YEAR T-BILL RATE PLUS 275 BASIS POINTS. A RE-ADVANCE
OF MONEY AFTER 12 MONTHS BUT WITHIN 60 MONTHS OF THE DATE OF THE
MODIFICATION SHALL BEAR INTEREST AT A RATE TO BE DECIDED IN THE SOLE
DETERMINATION OF THE BANK. REGARDLESS OF WHEN THE RE-ADVANCE OCCURS, IN
ORDER TO BE ENTITLED TO REQUEST A RE-ADVANCE, THE BORROWER MUST EXHIBIT
A DEBT COVERAGE RATIO OF NO LESS THAN 1.20 FOR ALL ITS DEBT INCLUDING
THE NEW MORTGAGE PAYMENT. THE BORROWER MUST DISCLOSE THE PURPOSE OF THE
RE-ADVANCE AND THERE MUST BE NO EVENT OF DEFAULT ON THE LOAN.
<PAGE> 2
OTHER CONDITIONS
THE BORROWER SHALL HAVE THE RIGHT TO PREPAY THE WHOLE OR ANY PART OF
THE PRINCIPAL AND INTEREST HEREUNDER PROVIDED THAT: (a) AT THE TIME OF
PREPAYMENT NO EVENT OF DEFAULT HEREUNDER SHALL HAVE OCCURRED; (b) ANY
PREPAYMENT DURING THE FIRST LOAN YEAR FROM THE DATE OF THE MODIFICATION
SHALL BE ACCOMPANIED BY A PREPAYMENT PENALTY EQUAL TO THREE PERCENT
(3%) OF THE AMOUNT, DURING THE SECOND LOAN YEAR FROM THE DATE OF THE
MODIFICATION SHALL BE ACCOMPANIED BY A PREPAYMENT PENALTY EQUAL TO TWO
PERCENT (2%) OF THE AMOUNT, AND DURING THE THIRD LOAN YEAR FROM THE
DATE OF THE MODIFICATION SHALL BE ACCOMPANIED BY A PREPAYMENT PENALTY
EQUAL TO ONE (1%) OF THE AMOUNT; ANY PREPAYMENT MADE AFTER THE THIRD
LOAN YEAR FROM THE DATE OF THE MODIFICATION SHALL NOT BE SUBJECT TO ANY
PREPAYMENT PENALTY; (c) ANY PARTIAL PREPAYMENT SHALL BE APPLIED TO THE
UNPAID PRINCIPAL BALANCE, AND NO PREPAYMENT SHALL REDUCE THE AMOUNT OF
THE SCHEDULED INSTALLMENTS NOR RELIEVE THE UNDERSIGNED FROM PAYING THE
SCHEDULED INSTALLMENTS ON EACH DUE DATE, UNTIL THE ENTIRE INDEBTEDNESS
IS PAID. (NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH ABOVE, THE
PREPAYMENT PENALTY WILL NOT BE CHARGED IF IN THE SOLE DETERMINATION OF
THE BANK ANY PREPAYMENT COMES FROM THE BORROWER'S INTERNALLY GENERATED
FUNDS. THE TERM "LOAN YEAR" AS USED HEREIN IS DEFINED AS ANY PERIOD OF
ONE YEAR COMMENCING ON THE DATE OF THE MODIFICATION OR ON ANY
ANNIVERSARY OF SUCH DATE.)
All terms and conditions of the note, mortgage or other security
executed by the borrower, to the extent not modified by this agreement, shall
remain in force and effect.
THE BANK OF GLOUCESTER COUNTY K-TRON AMERICA, INC.
By: /s/ David J. Hanrahan /s/ Kevin C. Bowen
David J. Hanrahan, Sr., VP Kevin C. Bowen, President/CEO, Date
/s/ Patricia M. Moore
Patricia M. Moore, Vice President, Date
<PAGE> 1
Exhibit 10.17
Prepared by:
/s/ Jeffrey G. Albertson
JEFFREY G. ALBERTSON, ESQ.
Albertson Ward
36 Euclid Street
P.O. Box 685
Woodbury, NJ 08096
(609) 853-7770
NOTE
$5,000,000.00 WOODBURY, NEW JERSEY
JUNE 24, 1998
PAYMENT OBLIGATION: FOR VALUE RECEIVED, BORROWER K-TRON AMERICA, INC., A
DELAWARE CORPORATION does hereby bind and oblige itself to pay to the order of
THE BANK OF GLOUCESTER COUNTY (hereinafter referred to as "THE BANK"), at its
offices, 100 Park Avenue, Woodbury, New Jersey 08096 the maximum principal sum
of FIVE MILLION DOLLARS ($5,000,000.00) or such lesser amount as may from time
to time be advanced by THE BANK and remain outstanding under this Note with
interest thereon at the rate of 0.00% above THE WALL STREET JOURNAL'S Prime
Rate. Interest shall be calculated hereunder for the actual number of days that
principal is outstanding based on a year of 360 days. This loan shall be repaid
over a term of two (2) YEAR(S) AND NINE DAYS during which the BORROWER shall
make monthly payments of interest only on the FIRST DAY of each month. All
principal and accumulated interest shall be due on JULY 3, 2000; provided
however, this note shall be for the purpose of creating a line of credit in the
maximum amount of FIVE
<PAGE> 2
MILLION DOLLARS ($5,000,000.00) during which period of time principal may be
increased or reduced at the option of the BORROWER subject to the said maximum
amount. Further, the principal amount outstanding on this Line of Credit shall
never exceed the sum of EIGHTY (80%) PERCENT of accounts receivable aged ninety
(90) days or less plus a sum representing FIFTY (50%) PERCENT of the current
inventory valuation. The BORROWER shall submit to THE BANK on a monthly basis
its accounts receivable certification (via its "DSO" Report) and on a quarterly
basis its accounts receivable aging along with the inventory certification.
PRIME RATE: PRIME RATE as used herein is defined as that rate of interest
established from time to time by THE WALL STREET JOURNAL and announced as its
PRIME RATE. For the purposes hereof, PRIME RATE is influenced by varying factors
including money market conditions which cannot be predicted with any degree of
certainty and which may cause the PRIME RATE to fluctuate at variable intervals
at the discretion of THE WALL STREET JOURNAL. The rate announced by THE WALL
STREET JOURNAL as its PRIME RATE may or may not be the rate charged by THE BANK
to its most creditworthy borrowers.
SECURITY: The BORROWER hereunder has delivered as security for this
instrument a first perfected security interest on all inventory and accounts
receivable now owned and/or hereafter acquired by BORROWER, including insurance
proceeds therefrom.
PREPAYMENT: BORROWER shall have the right to prepay this Note in whole or
in part at any time without penalty. Prepayments shall first be applied to
interest due and then to the remaining principal.
LATE CHARGE: The effective date of the receipt by the holder of any
installment of this Note shall be the day on which the holder receives cash or
collected funds at the place of
<PAGE> 3
payment as specified herein in payment of any such installment. BORROWER shall
be entitled to a FIFTEEN (15) DAY grace period after which period a "late
charge" of $0.05 FOR EACH $1.00 SO OVERDUE OR $25.00 WHICHEVER IS GREATER, may
be charged by the holder for the purpose of defraying the expense incident to
handling such delinquent payment.
DEFAULT: If any installment of this Note or interest payment is not paid
within FIFTEEN (15) DAYS of the date and at the place herein specified, THE BANK
may at its option, and without further notice declare this Note to be in default
and the entire principal balance then remaining unpaid together with all
interest which shall have accrued on the unpaid principal balance from and after
the date of such default shall be due and payable in full without notice.
If a default shall occur in this loan and not be cured as provided in the
loan documents or otherwise agreed to by THE BANK, THE BANK shall, after
declaring the loan to be in default, have the right to increase the interest
rate TWO (2%) percent in excess of the note rate. This provision is in addition
to any late charges that may be due.
ATTORNEY'S FEE: If this Note is placed in the hands of an attorney for
collection because of a default in the terms hereof or in the terms of the
security agreement as security for the within obligation, the undersigned
jointly and severally agree to pay the reasonable fees and costs of such
attorney, whether or not legal action is instituted and further consent that if
a judgment is entered in any action the amount of such fees shall form a part of
such judgment in addition to any fees allowed by Statute or Rule of the Court.
COMMITMENT LETTER COMPLIANCE: This Note is contingent upon BORROWER'S
compliance with all of the terms and conditions contained in the commitment
letter issued by THE BANK to BORROWER on June 23, 1998. Upon breach of any term
or
<PAGE> 4
condition contained therein THE BANK shall have the right to declare this loan
in default and demand payment in full of the principal balance remaining unpaid,
together with all interest which shall have accrued thereon.
PAYMENT AT MATURITY: THIS LOAN IS PAYABLE IN FULL AT MATURITY OR UPON
DEMAND IN THE EVENT OF A DEFAULT HEREUNDER OR DEFAULT UNDER THE FINANCING
AGREEMENT SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER LOAN
INSTRUMENT. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID
INTEREST THEN DUE. THE BANK IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT
TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY
OWN OR YOU WILL HAVE TO FIND A LENDER WILLING TO LEND YOU THE MONEY. IF YOU
REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING
COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM
THE BANK.
WAIVER OF PRESENTMENT: EACH AND ALL PARTIES hereto whether maker,
endorsers, sureties, guarantor or otherwise do hereby jointly and severally
waive presentment and demand for payment, notice of dishonor, protest and notice
of protest.
<PAGE> 5
IN WITNESS WHEREOF. the BORROWER hereunder has hereunto set their hands and
seals the day and year first above written.
ATTEST: K-TRON AMERICA, INC.
BY:
/s/ Patricia M. Moore /s/ Kevin C. Bowen
PATRICIA M. MOORE KEVIN C. BOWEN, PRESIDENT
VICE PRESIDENT/FINANCE
<PAGE> 1
Exhibit 10.18
THE BANK OF GLOUCESTER COUNTY
LOAN MODIFICATION AGREEMENT
K-TRON AMERICA, INC.
Date: July 22, 1999
ACCOUNT #6039359-6600 Maturity Date: July 3, 2001
Original Amount: $ 5,000,000.00 Annual Fee: $12,500.00
Present Balance: $ 0.00
WHEREAS, the undersigned borrower executed the note referred to above on
June 27, 1998, And,
WHEREAS, the note, security agreement and commitment letter executed by the
borrower allow a modification of interest rate, due date or other terms or
conditions without affecting the priority of The Bank of Gloucester County's
lien.
NOW, therefore, in consideration of an annual fee of $12,500.00, the above
referenced note is extended and modified as follows:
IT IS HEREBY AGREED THAT THE ABOVE NUMBERED NOTE SHALL BECOME DUE JULY 3,
2001. DURING THE TERMS OF THE RENEWAL, PAYMENTS OF INTEREST ONLY SHALL BE
DUE EACH MONTH BEGINNING AUGUST 1, 1999 AND SHALL BE APPLIED TO INTEREST
AND THEN TO PRINCIPAL.
BORROWER AGREES THAT UNTIL ALL OBLIGATIONS HEREUNDER ARE FULLY PAID AND
DISCHARGED, BORROWER WILL NOT WITHOUT PRIOR WRITTEN CONSENT OF THE BANK:
PERMIT THE CONSOLIDATED NET WORTH OF BORROWER, DETERMINED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY
APPLIED, TO BE LESS THAN $7,000,000 AT DECEMBER 31,1999, OR PERMIT THE
RATIO OF CONSOLIDATED TOTAL LIABILITIES TO CONSOLIDATED NET WORTH TO
BE MORE THAN 2.50:1 AT DECEMBER 31, 1999.
<PAGE> 2
All terms and conditions of the original note, commitment letter and any
security thereto attached is fully incorporated herein and fully ratified except
as specifically modified by this modification agreement.
K-TRON AMERICA, INC.
THE BANK OF GLOUCESTER COUNTY /s/ Kevin C. Bowen 7/30/99
KEVIN C. BOWEN, PRESIDENT/DATE
By: /s/ David J. Hanrahan /s/ Patricia M. Moore 7/26/99
David J. Hanrahan, Sr., VP PATRICIA M. MOORE/VP/FINANCE/DATE
<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
Hurricane Pneumatic Conveying Inc................................ Canada
K-Tron America, Inc.............................................. Delaware
K-Tron (Schweiz) AG.............................................. Switzerland
K-Tron Asia Pacific Holding Pte Ltd..................... Singapore
K-Tron Asia Pacific Pte....................... Singapore
K-Tron China Ltd...... ................................. China
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 1999.
<PAGE> 1
EXHIBIT 23.1
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. 333-52523, 333-26531, 33-7921,
33-8043, 33-39039, 33-39040 and 2-72898.
/s/Arthur Andersen LLP
Philadelphia, Pa
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 3,093
<SECURITIES> 0
<RECEIVABLES> 21,424
<ALLOWANCES> 924
<INVENTORY> 10,193
<CURRENT-ASSETS> 35,775
<PP&E> 41,918
<DEPRECIATION> 27,307
<TOTAL-ASSETS> 54,770
<CURRENT-LIABILITIES> 21,718
<BONDS> 7,252
0
0
<COMMON> 44
<OTHER-SE> 25,166
<TOTAL-LIABILITY-AND-EQUITY> 54,770
<SALES> 87,887
<TOTAL-REVENUES> 87,887
<CGS> 48,931
<TOTAL-COSTS> 48,931
<OTHER-EXPENSES> 29,817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> 8,644
<INCOME-TAX> 1,885
<INCOME-CONTINUING> 6,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,759
<EPS-BASIC> 2.28
<EPS-DILUTED> 2.23
</TABLE>
