-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mbe9G3sqlbGTzlz7REuetRLn7vMrKDiSCAojmPFoYfwV4evCNYRtSC/PmdTTotpG gwyX4q8ynPyrayx5b3qrKA== 0000893220-00-000200.txt : 20000217 0000893220-00-000200.hdr.sgml : 20000217 ACCESSION NUMBER: 0000893220-00-000200 CONFORMED SUBMISSION TYPE: SC TO-I/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20000216 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: K TRON INTERNATIONAL INC CENTRAL INDEX KEY: 0000000020 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 221759452 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: SC TO-I/A SEC ACT: SEC FILE NUMBER: 005-33401 FILM NUMBER: 547089 BUSINESS ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 BUSINESS PHONE: 6096616240 MAIL ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: P O BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: K TRON INTERNATIONAL INC CENTRAL INDEX KEY: 0000000020 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 221759452 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: SC TO-I/A BUSINESS ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 BUSINESS PHONE: 6096616240 MAIL ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: P O BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 SC TO-I/A 1 K-TRON INTERNATIONAL, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE TO Tender Offer Statement (under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934) (Amendment No. 1)* K-Tron International, Inc. - -------------------------------------------------------------------------------- (Name of Subject Company (issuer)) K-Tron International, Inc. (issuer) - -------------------------------------------------------------------------------- (Names of Filing Persons (identifying status as offeror, issuer or other person)) Common Stock, par value $.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 482730 10 8 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Edward B. Cloues, II Chairman of the Board and Chief Executive Officer K-Tron International, Inc. Routes 55 and 553 P.O. Box 888 Pitman, New Jersey 08071-0888 (856) 589-0500 (Name, address, and telephone numbers of person authorized to receive notices and communications on behalf of filing persons) Copies to: Alan Singer, Esq. Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103-2921 (215) 963-5000 2 CALCULATION OF FILING FEE Transaction Valuation* Amount of Filing Fee 8,100,000 $1,620 * Filing fee is one-50th of one percent of the aggregate dollar amount of cash being offered by the Company to purchase 450,000 shares of its common stock, based on a price of $18.00 per share. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: _____________ Filing Party: __________________ Form or Registration No.: ___________ Date Filed: ___________________ [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [ ] Third party tender offer subject to Rule 14d-1. [X] Issuer tender offer subject to Rule 13e-4. [ ] Going-private transaction subject to Rule 13e-3. [ ] Amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] 3 INTRODUCTORY STATEMENT This Tender Offer Statement on Schedule TO relates to an offer by K-Tron International, Inc., a New Jersey corporation (the "Issuer"), to purchase up to 450,000 shares of its common stock (the "Shares") at a price of $18.00 per Share, net to the seller, in cash on the terms and subject to the conditions set forth in the Offer to Purchase dated February 16, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of Transmittal"). Copies of the Offer to Purchase, the related Letter of Transmittal and certain other relevant documents (together, the "Offer") are filed as exhibits hereto. The information in the Offer to Purchase and the related Letter of Transmittal, copies of which are filed with this Schedule TO as exhibits (a)(1)(i) and (a)(1)(ii) hereto, is incorporated herein by reference in answer to items in this Schedule TO except those items as to which information is specifically provided herein. Item 5. Past Contacts, Transactions, Negotiations and Agreements. The Issuer is not aware of any arrangements in which its securities, or those of a controlling person or one of its directors or executive officers, are pledged or are otherwise subject to a contingency, the occurrence of which would give another person the power to direct the voting or disposition of such securities. Item 6. Purposes of the Transaction and Plans or Proposals. (c) Except as set forth in the Offer to Purchase, the Issuer does not intend to: (1) engage in any extraordinary transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (2) engage in any purchase, sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (3) make any material change in the Issuer's present dividend rate or policy, or indebtedness or capitalization; (4) change in any way the present Board of Directors or management of the Issuer; (5) make any other material changes in the Issuer's corporate structure or business; (6) cause any class of equity securities of the Issuer to cease to be authorized to be quoted on the Nasdaq National Market; (7) cause a class of equity securities of the Issuer to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (8) suspend the Issuer's obligations to file reports pursuant to Section 15(d) of the Exchange Act; 4 (9) acquire any additional securities of the Issuer or dispose of any securities of the Issuer to any person (other than the issuance of Shares and options for Shares to certain employees under the Issuer's employee benefit plans and the issuance of Shares and options for Shares in connection with the acquisition of businesses); or (10) change the Issuer's charter, bylaws or other governing instruments or take other actions that could impede the acquisition of control of the Issuer. Item 7. Source and Amount of Funds and Other Consideration. (b) There are no conditions to the Issuer's bank financing for the Offer and the financing documents have been executed. The Issuer has not put into place any alternative financing plans in the event its primary financing arrangements fall through. Item 10. Financial Statements. Not applicable. Item 11. Additional Information. (a)(1) There are no material agreements, arrangements, understandings or relationships between the Issuer and any of its executive officers, directors, controlling persons or subsidiaries. (a)(5) The Company is not aware of any legal proceedings, pending or threatened, relating to the Offer. Item 12. Exhibits. (a)(1)(i) Form of Offer to Purchase dated February 16, 2000. (a)(1)(ii) Form of Letter of Transmittal to Accompany Shares of Common Stock. (a)(1)(iii) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(iv) Form of Notice of Guaranteed Delivery. (a)(1)(v) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(vi) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(vii) Form of Letter to Shareholders of the Issuer dated February 16, 2000 from Edward B. Cloues, II, Chairman of the Board and Chief Executive Officer. (b)(1) Note dated February 4, 2000 from K-Tron America, Inc. in favor of The Bank of Gloucester County. 5 (d) Not applicable. (g) Not applicable. (h) Not applicable. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. K-TRON INTERNATIONAL, INC. /s/ EDWARD B. CLOUES, II ------------------------------------------ Name: Edward B. Cloues, II Title: Chairman of the Board and Chief Executive Officer Dated: February 16, 2000 6 EXHIBIT INDEX
Exhibit Description - ------- ----------- (a)(1)(i) Form of Offer to Purchase dated February 16, 2000. (a)(1)(ii) Form of Letter of Transmittal to Accompany Shares of Common Stock. (a)(1)(iii) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(iv) Form of Notice of Guaranteed Delivery. (a)(1)(v) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(vi) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(vii) Form of Letter to Shareholders of Issuer dated February 16, 2000 from Edward B. Cloues, II, Chairman of the Board and Chief Executive Officer. (b)(1) Note dated February 4, 2000 from K-Tron America, Inc. in favor of The Bank of Gloucester County. (d) Not applicable. (g) Not applicable. (h) Not applicable.
EX-99.A.1.I 2 OFFER TO PURCHASE 1 K-TRON INTERNATIONAL, INC. OFFER TO PURCHASE FOR CASH 450,000 SHARES OF COMMON STOCK AT A PURCHASE PRICE OF $18.00 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000, UNLESS THE OFFER IS EXTENDED. K-Tron International, Inc., a New Jersey corporation (the "Company"), invites its shareholders to tender shares of its common stock, par value $.01 per share ("Shares"), to the Company at a price of $18.00 per Share in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase, the related Letter of Transmittal and certain other relevant documents (which together constitute the "Offer"). The Company will pay $18.00 per Share, net to the seller in cash, for 450,000 Shares validly tendered and not withdrawn, upon the terms and subject to the conditions of the Offer, including the proration terms hereof. The Company reserves the right, in its sole discretion and subject to certain restrictions, to purchase more or less than 450,000 Shares pursuant to the Offer. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS SUBJECT, HOWEVER, TO CERTAIN CONDITIONS. As of February 11, 2000, the Company had outstanding 2,927,155 Shares. The 450,000 Shares that the Company is offering to purchase represent 15.37% of the outstanding Shares. The Shares are quoted on the Nasdaq National Market ("Nasdaq") under the symbol "KTII." On February 11, 2000, the last full trading day on Nasdaq prior to the announcement by the Company of its intention to make the Offer, the closing price per Share was $14.125. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 6. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. The Date of this Offer to Purchase is February 16, 2000. 2 TERM SHEET This term sheet is provided for your convenience. Please refer to the full text of this Offer to Purchase for more specific details. WHO IS OFFERING TO BUY MY SECURITIES? - K-Tron International, Inc. See Section 10 for more detailed information about K-Tron. WHAT IS THE CLASS AND AMOUNT OF SECURITIES SOUGHT IN THE OFFER? - We are offering to purchase 450,000 shares of our common stock. See Section 1 for a more detailed discussion of the offer. HOW MUCH IS K-TRON OFFERING TO PAY FOR MY SECURITIES AND WHAT IS THE FORM OF PAYMENT? - We are offering to pay $18.00 per share in cash. See Section 1 for a more detailed discussion of the purchase price. MAY I PLACE CONDITIONS ON THE ACCEPTANCE OF MY SHARES? - Yes. You may specify a minimum number of your shares that we must purchase if we are to purchase any of your shares. This format is intended to assist in your tax planning. See Section 2 for a more detailed discussion of conditional tender of shares. DOES K-TRON HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? - Yes. See Section 9 for a detailed discussion of the source and amount of funds for the transaction. IS K-TRON'S FINANCIAL CONDITION RELEVANT TO MY DECISION WHETHER TO TENDER IN THE OFFER? - We expect to borrow funds to pay for most of the shares we purchase. - We expect that cash flow from current operations will be used to repay the indebtedness incurred and that the increased debt will not be unduly burdensome. See Section 9 for a more detailed discussion of our loan arrangements. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? - You have until 5:00 P.M. on March 17, 2000. See Section 1 for a more detailed discussion of the expiration of the offer. CAN THE OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES? - We can extend the offer at any time in our sole discretion. - If we extend the offer, we may delay the acceptance of any shares that have been tendered. See Section 14 for a more detailed discussion of extension of the offer. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? - We will issue a press release to the Dow Jones News Service. - We may also communicate the extension of the offer through other means. See Section 14 for a more detailed discussion of the notification procedure. ARE THERE ANY CONDITIONS TO THE OFFER? - The offer is not subject to a condition that a minimum number of shares are tendered. i 3 - We may terminate the offer if, following the date of the offer, another person: - makes a tender offer for our shares; - makes a proposal for a merger or acquisition involving K-Tron; - to our knowledge acquires or proposes to acquire more than 5% of our shares; or - files a notification form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to acquire K-Tron or any of our shares. - We may reduce the number of shares offered to be purchased by us if we believe that the number of shares tendered would result in an existing shareholder increasing the percentage of outstanding shares owned by the shareholder by 2% or more (for example, from 6% of the outstanding shares immediately before the offer to 8% or more of the outstanding shares after the offer). - The offer is subject to other conditions. See Section 5 for a more detailed discussion of conditions of the offer. HOW DO I TENDER MY SHARES? - If the share certificates are registered in your name, you should send the share certificates, together with a properly completed Letter of Transmittal, to American Stock Transfer & Trust Company (the "Depositary"). - If your shares are registered in the name of a broker or other nominee, you should instruct your broker or other nominee to tender the shares on your behalf. Your broker or other nominee will execute a Letter of Transmittal on your behalf. - Under some conditions, you may need to obtain a signature guarantee or provide other documentation. See Section 2 for a more detailed discussion of the procedure for tendering your shares, including instructions regarding book-entry transfer. UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES? - You can withdraw shares you previously tendered until 5:00 P.M. on March 17, 2000. - In addition, if we have not yet accepted your shares for payment, you may withdraw shares you previously tendered after 12:00 Midnight on April 13, 2000. See Section 3 for a more detailed discussion of withdrawal rights. HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? - You must send a notice containing your name, the number of shares you tendered, the number of shares you wish to withdraw and the name of the registered holder to the Depositary, and the Depositary must receive that notice before the time to withdraw your shares has expired. - If you delivered or otherwise identified the certificates to the Depositary, you will need to provide the serial numbers on those certificates and your signature on your withdrawal notice must be guaranteed by an eligible institution, which means a bank, broker, dealer or other firm or entity that is a member in good standing of the Security Transfer Agents Medallion Program. - If your shares were to be tendered by book-entry transfer, the notice must identify the relevant account number. See Section 3 for a more detailed discussion of withdrawal procedures. IS THIS THE FIRST STEP IN A GOING-PRIVATE TRANSACTION? - No. ii 4 IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? - You will increase your percentage ownership interest in K-Tron. - You will increase your percentage interest in our future earnings. See Section 7 for a more detailed discussion of the effects of the offer. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? - As of February 11, 2000, the closing price per share of K-Tron common stock, as reported by Nasdaq, was $14.125. See Section 6 for a more detailed discussion of the share price. DO K-TRON INSIDERS OR AFFILIATES HAVE ANY MATERIAL INTEREST IN THE TRANSACTION? - Our executive officers and directors have informed us that they do not intend to tender their shares in connection with the offer. - As a result, the percentage of shares owned by our executive officers and directors will increase after the offer has been completed. - Assuming 450,000 shares are tendered, our executive officers' and directors' aggregate percentage ownership of our outstanding common stock will increase from 11.4% to 13.4%. See Section 8 for a more detailed discussion of the interests of our executive officers and directors. DOES K-TRON RECOMMEND THAT I TENDER IN THE OFFER? - The Board of Directors has approved the offer, but is not making any recommendation whether shareholders should tender. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? - If you have questions about the tender offer, you should contact D. F. King & Co., Inc., our information agent for the offer, toll free at (800) 755-7250 (bankers and brokers call collect (212) 269-5550) or consult your broker. iii 5 TABLE OF CONTENTS
SECTION PAGE - ------- ---- Important Information....................................... 1 Introduction................................................ 2 The Offer................................................... 3 1. Number of Shares; Proration........................... 3 2. Procedure for Tendering Shares........................ 4 3. Withdrawal Rights..................................... 8 4. Purchase of Shares and Payment of Purchase Price...... 9 5. Certain Conditions of the Offer....................... 9 6. Price Range of Shares................................. 11 7. Background and Purpose of the Offer; Certain Effects of the Offer........................................... 11 8. Information Regarding the Company and its Directors and Executive Officers; Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares................................. 12 9. Source and Amount of Funds............................ 13 10. Certain Information about the Company................. 14 11. Effect of the Offer on the Market for Shares; Registration under the Exchange Act.................... 15 12. Certain Legal Matters................................. 15 13. Certain United States Federal Income Tax Consequences........................................... 16 14. Extension of the Offer; Termination; Amendment........ 19 15. Fees and Expenses..................................... 20 16. Miscellaneous......................................... 20
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL OR THE OTHER DOCUMENTS SENT TO YOU IN CONNECTION WITH THE OFFER. DO NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION, IF GIVEN OR MADE, AS HAVING BEEN AUTHORIZED BY THE COMPANY. iv 6 IMPORTANT INFORMATION GENERAL The information agent for the Offer is D. F. King & Co, Inc. (the "Information Agent"), 77 Water Street, New York, New York, 10005 (bankers and brokers call collect (212) 269-5550, all others call toll free (800) 755-7250). Except as discussed below, any shareholders desiring to tender all or any portion of their Shares should either: (i) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, mail or deliver it with any required signature guarantee, or an agent's message (in the case of book-entry transfer), and any other required documents to American Stock Transfer & Trust Company (the "Depositary"), and either mail or deliver the certificates for such Shares to the Depositary (with all such other documents) or follow the procedure for book-entry delivery set forth in Section 2; or (ii) request a broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. A shareholder having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. Shareholders who desire to tender Shares and whose certificates for such Shares are not immediately available or who cannot comply with the procedure for book-entry transfer on a timely basis or whose other required documentation cannot be delivered to the Depositary, in any case, by the expiration of the Offer should tender such Shares by following the procedures for guaranteed delivery set forth in Section 2. TO EFFECT A VALID TENDER OF SHARES, SHAREHOLDERS MUST VALIDLY COMPLETE THE LETTER OF TRANSMITTAL. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent. * * * The Offer is not being made to (nor will any tender of Shares be accepted from or on behalf of) shareholders in any jurisdiction in which the making of the Offer or the acceptance of any tender of Shares therein would not be in compliance with the laws of such jurisdiction. However, the Company may, at its discretion, take such action as it may deem necessary for the Company to make the Offer in any such jurisdiction and extend the Offer to shareholders in such jurisdiction. 1 7 TO THE HOLDERS OF SHARES OF COMMON STOCK OF K-TRON INTERNATIONAL, INC.: INTRODUCTION The Company invites its shareholders to tender 450,000 Shares to the Company at a price of $18.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. The Company will pay for all Shares validly tendered prior to the Expiration Date (as defined in Section 1) and not withdrawn, upon the terms and subject to the conditions of the Offer, including the proration terms described below. The Company reserves the right, in its sole discretion, to purchase more or less than 450,000 Shares. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 5. If, before the Expiration Date, more than 450,000 Shares (or such greater number of Shares as the Company may elect to purchase) are validly tendered and not withdrawn, the Company will, upon the terms and subject to the conditions of the Offer, purchase Shares subject to the proration terms described in this Offer to Purchase. The $18.00 per Share purchase price will be paid net to the tendering shareholders in cash for all Shares purchased by the Company. Tendering shareholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant to the Offer. HOWEVER, ANY TENDERING SHAREHOLDER WHO FAILS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH SHAREHOLDER PURSUANT TO THE OFFER. SEE SECTION 2. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. On February 14, 2000, the Company announced its intention to make the Offer. The Company is making the Offer because it believes: (i) the Shares are significantly undervalued in the public market; (ii) investing in its Shares represents an attractive use of its capital and an efficient way to provide value to its shareholders; and (iii) the Offer will afford those shareholders who desire liquidity an opportunity to sell all or a portion of their Shares at a premium to recent market prices without the usual transaction costs associated with open market sales. After the Offer is completed, the Company expects to have sufficient cash flow and access to sources of capital to continue to fund its operations. As of February 11, 2000, the Company had outstanding 2,927,155 Shares. The 450,000 Shares that the Company is offering to purchase represent 15.37% of the Shares that were outstanding on that date. The Shares are quoted on Nasdaq under the symbol "KTII." On February 11, 2000, the last full trading day on Nasdaq prior to the announcement by the Company of its intention to make the Offer, the closing price per Share was $14.125. THE COMPANY URGES SHAREHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES. SEE SECTION 6. 2 8 THE OFFER 1. NUMBER OF SHARES; PRORATION Upon the terms and subject to the conditions of the Offer, the Company will accept for payment (and thereby purchase) 450,000 Shares, or such lesser number of Shares as are validly tendered before the Expiration Date (and not withdrawn in accordance with Section 3), at a net cash price of $18.00 per Share. The term "Expiration Date" means 5:00 P.M., New York City time, on March 17, 2000, unless and until the Company in its sole discretion shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. See Section 14 for a description of the Company's right to extend the time during which the Offer is open and to delay, terminate or amend the Offer. The Company reserves the right, in its sole discretion, to purchase more than 450,000 Shares pursuant to the Offer. See Section 14. In accordance with applicable regulations of the Securities and Exchange Commission (the "SEC"), the Company may purchase pursuant to the Offer an additional amount of Shares not to exceed 2% of the outstanding Shares without amending or extending the Offer. If (i) the Company increases or decreases the price to be paid for the Shares, the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, or the Company decreases the number of Shares being sought; and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in Section 14, the Offer will be extended until the expiration of such period of ten business days. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday until 12:00 Midnight, New York City time on such day. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS SUBJECT, HOWEVER, TO CERTAIN CONDITIONS. SEE SECTION 5. The Company will pay the $18.00 purchase price per Share for all Shares validly tendered prior to the Expiration Date and not withdrawn upon the terms and subject to the conditions of the Offer. The Company will return, at its own expense, as promptly as practicable after the Expiration Date all of the Shares that it does not purchase, including Shares not purchased because of proration or conditional tenders. If the number of Shares validly tendered and not withdrawn prior to the Expiration Date is less than or equal to 450,000 Shares (or such greater number of Shares as the Company may elect to purchase), the Company will, upon the terms and subject to the conditions of the Offer, purchase at the $18.00 purchase price per Share all of the Shares so tendered, subject to its right to reduce the number of Shares to be purchased under certain circumstances, as described below in this Section 1. Priority. Upon the terms and subject to the conditions of the Offer, in the event that prior to the Expiration Date more than 450,000 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer) are validly tendered and not withdrawn, the Company will purchase such validly tendered Shares in the following order of priority: (i) on a pro rata basis, all of the Shares properly and unconditionally tendered, and all of the Shares properly and conditionally tendered for which the condition can be satisfied; and (ii) if the number of Shares acquired under (i) is less than 450,000, such additional Shares to total 450,000, by lot from shareholders who conditionally tendered their Shares for which the condition could not be met and in the respective amounts that each such shareholder indicated as the minimum number of Shares to be purchased by the Company. Proration. In the event that proration of tendered Shares is required, the Company will determine the proration factor as promptly as practicable after the Expiration Date. Proration for each shareholder tendering Shares shall be based on the ratio of the number of Shares tendered by such shareholder to the 3 9 total number of Shares tendered by all of the shareholders. This ratio will be applied to shareholders tendering Shares to determine the number of Shares that will be purchased from each such shareholder pursuant to the Offer. The Company does not anticipate that, as a result of its purchase of 450,000 Shares in the Offer, any shareholder's ownership of its outstanding common stock will increase by 2% or more of such outstanding common stock. However, if the Company's purchase of 450,000 Shares would cause such an increase, the Company reserves the right to reduce the number of Shares it will purchase to the extent necessary to prevent such an increase. Proration would then apply to such lesser number of Shares. Although the Company does not expect to be able to announce the final results of any proration until approximately seven business days after the Expiration Date, it will announce preliminary results of proration by press release as promptly as practicable after the Expiration Date. Shareholders will be able to obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. As described in Section 13, the number of Shares that the Company will purchase from a shareholder may affect the United States federal income tax consequences to that shareholder and, therefore, may be relevant to a shareholder's decision whether to tender Shares. The Letter of Transmittal affords each tendering shareholder the opportunity to designate a minimum number of Shares that the shareholder wants to tender, if any are purchased. This Offer to Purchase and the related Letter of Transmittal will be furnished to record holders of Shares as of February 11, 2000 and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES Proper Tender of Shares. For Shares to be validly tendered pursuant to the Offer: (i) the certificates for such Shares (or confirmation of receipt of such Shares pursuant to the procedures for book-entry transfer set forth below), together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees, or an agent's message (in the case of any book-entry transfer), and any other documents required by the Letter of Transmittal, must be received prior to 5:00 P.M., New York City time, on the Expiration Date by the Depositary at its address set forth on the back cover of this Offer to Purchase; or (ii) the tendering shareholder must comply with the guaranteed delivery procedure set forth below. It is a violation of Section 14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14e-4 promulgated thereunder, for a person to tender Shares for such person's own account unless the person so tendering: (i) owns such Shares; or (ii) owns other securities convertible into or exchangeable for Shares or owns an option, warrant or right to purchase Shares and intends to acquire such Shares for tender by conversion, exchange or exercise of such option, warrant or right. Section 14(e) and Rule 14e-4 contain a similar restriction applicable to a tender or guarantee of a tender on behalf of another person. The acceptance of Shares by the Company for payment will constitute a binding agreement between the tendering shareholder and the Company upon the terms and subject to the conditions of the Offer, 4 10 including the tendering shareholder's representation that such shareholder owns the Shares being tendered within the meaning of Rule 14e-4 and that the tender of such Shares complies with Rule 14e-4. Conditional Tender of Shares. Under certain circumstances, the Company may reduce on a pro rata basis the number of Shares purchased pursuant to the Offer. As discussed in Section 13, the number of Shares to be purchased from a particular shareholder might affect the tax treatment of such purchase to such shareholder and such shareholder's decision whether to tender. Accordingly, a shareholder may tender Shares subject to the condition that a specified minimum number of such holder's Shares must be purchased if any such Shares so tendered are purchased, and any shareholder desiring to make such a conditional tender must so indicate in the box captioned "Conditional Tender" in the Letter of Transmittal or, if applicable, the Notice of Guaranteed Delivery. Any tendering shareholders wishing to make a conditional tender must calculate and appropriately indicate such minimum number of Shares and each shareholder is urged to consult with his own tax advisor. If the effect of accepting tenders on a pro rata basis would be to reduce the number of Shares to be purchased from any shareholder below the minimum number so specified, such tender will automatically be regarded as withdrawn (except as provided in the next paragraph) and all Shares tendered by such shareholder pursuant to such Letter of Transmittal or Notice of Guaranteed Delivery will be returned as soon as practicable thereafter. If conditional tenders would otherwise be so regarded as withdrawn and would cause the total number of Shares to be purchased to fall below the number of Shares sought by the Company, then, to the extent feasible, the Company may select enough of such conditional tenders that would otherwise have been so withdrawn to permit the Company to purchase the number of Shares sought by the Company. In selecting among such conditional tenders, the Company will select by lot and will limit its purchase in each case to the designated minimum number of Shares to be purchased. Signature Guarantees and Method of Delivery. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this section, includes any participant in The Depository Trust Company (the "Book-Entry Transfer Facility") whose name appears on a security position listing as the holder of the Shares) tendered therewith and payment and delivery are to be made directly to such registered holder; or (ii) Shares are tendered for the account of a bank, broker, dealer or other firm or entity that is a member in good standing of the Security Transfer Agents Medallion Program (each such entity being hereinafter referred to as an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signer of a Letter of Transmittal, or if payment is to be made, or Shares not purchased or tendered are to be issued, to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name of the registered holder appears on the certificate, with the signature on the certificate or stock power guaranteed by an Eligible Institution. In this regard, see Section 4 for information with respect to applicable stock transfer taxes. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility as described above), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) or an agent's message (in the case of any book-entry transfer) and any other documents required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system 5 11 may make book-entry delivery of the Shares by causing such facility to transfer such Shares into the Depositary's account in accordance with such facility's procedure for such transfer. Even though delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), with any required signature guarantees or an agent's message (in the case of any book-entry transfer) and other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for such Shares cannot be delivered to the Depositary prior to the Expiration Date (or the procedures for book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary before the Expiration Date, such Shares may nevertheless be tendered provided that all of the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) the Depositary receives (by hand, mail, overnight courier, telegram or facsimile transmission), on, or prior to, the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form the Company has provided with this Offer to Purchase, including (where required) a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery; and (iii) the certificates for all tendered Shares in proper form for transfer (or confirmation of book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility), together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any required signature guarantees, or an agent's message (in the case of any book-entry transfer), or other documents required by the Letter of Transmittal, are received by the Depositary within three Nasdaq trading days after the date the Depositary receives such Notice of Guaranteed Delivery. Return of Shares. If any tendered Shares are not purchased, or if less than all of the Shares evidenced by a shareholder's certificates are tendered, certificates for Shares that are not purchased will be returned as promptly as practicable after the expiration or termination of the Offer or, in the case of Shares tendered by book-entry transfer at the Book-Entry Transfer Facility, such Shares will be credited to the appropriate account maintained by the tendering shareholder at the Book-Entry Transfer Facility, in each case without expense to such shareholder. Restricted Shares that are returned will bear appropriate legends restricting transfer, as applicable. Backup Federal Income Tax Withholding. Under the United States federal income tax backup withholding rules, unless an exemption applies under the applicable law and regulations, 31% of the gross proceeds payable to a shareholder or other payee pursuant to the Offer must be withheld and remitted to the United States Treasury, unless the shareholder or other payee provides such person's taxpayer identification number (employer identification number or social security number) to the Depositary and certifies under penalties of perjury that such number is correct. Therefore, each tendering shareholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding, unless such shareholder otherwise establishes to the satisfaction of the Depositary that the shareholder is not subject to backup withholding. Certain shareholders, including, among others, all corporations and certain foreign shareholders (in addition to foreign corporations), are not subject to these backup withholding and reporting requirements. In order for a foreign shareholder (other than a foreign corporation) to qualify as an exempt recipient, that shareholder must submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting to that shareholder's exempt status. Such statements can be obtained from the Depositary. See Instruction 11 of the Letter of Transmittal. 6 12 TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING EQUAL TO 31% OF THE GROSS PAYMENTS MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL. For a discussion of certain United States federal income tax consequences to tendering shareholders, see Section 13. Withholding for Foreign Shareholders. Even if a foreign shareholder has provided the required certification to avoid backup withholding, the Depositary will withhold United States federal income taxes equal to 30% of the gross payments payable to a foreign shareholder or his agent unless the Depositary determines that a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business within the United States. For this purpose, a foreign shareholder is any shareholder that is not (i) a citizen or resident of the United States; (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof; (iii) an estate, the income of which is subject to United States federal income taxation regardless of the source of such income; or (iv) a trust, if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States persons have the authority to control all of the substantial decisions of the trust. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver to the Depositary before the payment a properly completed and executed IRS Form 1001. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the Depositary a properly completed and executed IRS Form 4224. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or exemption from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate that such reliance is not warranted. A foreign shareholder may be eligible to obtain a refund of all or a portion of any tax withheld if such shareholder meets the "complete redemption," "substantially disproportionate" or "not essentially equivalent to a dividend" test described in Section 13 or is otherwise able to establish that no tax or a reduced amount of tax is due. Backup withholding generally will not apply to amounts subject to the 30% or a treaty-reduced rate of withholding. Foreign shareholders are urged to consult their own tax advisors regarding the application of United States federal income tax withholding, including eligibility for a withholding tax reduction or exemption, and the refund procedure. See Instruction 11 of the Letter of Transmittal. Tendering Shareholder's Representation and Warranty; Company's Acceptance Constitutes an Agreement. It is a violation of Rule 14e-4, promulgated under the Exchange Act, for a person acting alone or in concert with others, directly or indirectly, to tender Shares for such person's own account unless at the time of tender and at the Expiration Date such person has a "net long position" equal to or greater than the amount tendered in (i) the Shares and will deliver or cause to be delivered such Shares for the purpose of tender to the Company within the period specified in the Offer or (ii) other securities immediately convertible into, exercisable for or exchangeable into Shares ("Equivalent Securities") and, upon the acceptance of such tender, will acquire such Shares by conversion, exchange or exercise of such Equivalent Securities to the extent required by the terms of the Offer and will deliver or cause to be delivered such Shares so acquired for the purpose of tender to the Company within the period specified in the Offer. Rule 14e-4 also provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. A tender of Shares made pursuant to any method of delivery set forth herein will constitute the tendering shareholder's representation and warranty to the Company that (i) such shareholder has a "net long position" in Shares or Equivalent Securities being tendered within the meaning of Rule 14e-4, and (ii) such tender of Shares complies with Rule 14e-4. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement 7 13 between the tendering shareholder and the Company upon the terms and subject to the conditions of the Offer. Determinations of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the number of Shares to be accepted, the price to be paid therefor and the validity, form, eligibility (including the receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all of the tenders it determines not to be in proper form or which the acceptance of or payment for may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares or any particular shareholder. No tender of Shares will be deemed to be properly made until all defects or irregularities have been cured or waived. None of the Company, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders, and none of them will incur any liability for failure to give any such notice. CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT BE DEEMED TO BE VALIDLY TENDERED. 3. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 3, tenders of Shares pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time before the Expiration Date and, unless the Company has accepted the Shares for payment as provided in this Offer to Purchase, may also be withdrawn after 12:00 Midnight, New York City time, on April 13, 2000. For a withdrawal to be effective, the Depositary must receive (at its address set forth on the back cover of this Offer to Purchase) a notice of withdrawal in written, telegraphic or facsimile transmission form on a timely basis. Such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares tendered, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If the certificates have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering shareholder must also submit the serial numbers shown on the particular certificates evidencing the Shares and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 2, the notice of withdrawal must specify the name and the number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. All questions as to the form and validity, including time of receipt, of notices of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. None of the Company, the Depositary, the Information Agent or any other person is or will be obligated to give any notice of any defects or irregularities in any notice of withdrawal, and none will incur any liability for failure to give any such notice. Withdrawals may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not tendered for purposes of the Offer. However, withdrawn Shares may be tendered before the Expiration Date by again following any of the procedures described in Section 2. If the Company extends the Offer or is delayed in its purchase of Shares for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, subject to applicable law, retain on behalf of the Company all tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in this Section 3. 8 14 4. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE Upon the terms and subject to the conditions of the Offer, the Company will purchase and pay the $18.00 per Share purchase price for all of the Shares accepted for payment pursuant to the Offer as soon as practicable after the Expiration Date. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration) but only after timely receipt by the Depositary of certificates for Shares (or of a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents. Payment for Shares purchased pursuant to the Offer will be made by depositing the aggregate purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Company and transmitting payment to the tendering shareholders. In the event of proration, the Company will determine the proration factor and pay for those tendered Shares accepted for payment as soon as practicable after the Expiration Date. However, the Company does not expect to be able to announce the final results of any such proration until approximately seven business days after the Expiration Date. Under no circumstances will the Company pay interest on the purchase price including, without limitation, by reason of any delay in making payment. Certificates for all of the Shares not purchased, including all of the Shares not purchased due to proration, will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to the account maintained with the Book-Entry Transfer Facility by the participant who so delivered such Shares) as promptly as practicable following the Expiration Date or termination of the Offer without expense to the tendering shareholder. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 5. The Company will pay any stock transfer taxes payable on the transfer to it of Shares purchased pursuant to the Offer; provided, however, that if payment of the purchase price is to be made to, or (in the circumstances permitted by the Offer) if unpurchased Shares are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, the amount of all of the stock transfer taxes, if any (whether imposed on the registered holder or such other person), payable on account of the transfer to such person will be deducted from the purchase price unless evidence satisfactory to the Company of the payment of such taxes or exemption therefrom is submitted. See Instruction 6 of the Letter of Transmittal. 5. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, or purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of, or the purchase of and the payment for, Shares tendered, subject to Rule 13e-4(f) promulgated under the Exchange Act, if at any time on or after February 16, 2000 and prior to the time of payment for any such Shares (whether any Shares have theretofore been accepted for payment, purchased or paid for pursuant to the Offer) any of the following events shall have been determined by the Company to have occurred that, in the Company's judgment in any such case and regardless of the circumstances giving rise thereto (including any action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment: (a) there shall have been threatened or instituted or be pending before any court, authority, agency or other tribunal any action, suit or proceeding by any government or governmental, regulatory or administrative authority or agency or by any other person, domestic or foreign, or any judgment, order or injunction entered, enforced or deemed applicable by any such court, authority, agency or tribunal, which (i) challenges or seeks to make illegal, or to delay or otherwise directly or indirectly to restrain, prohibit or otherwise affect the making of the Offer or the acquisition of Shares pursuant to the Offer or is otherwise related in any manner to, or otherwise affects, the Offer; or (ii) could, in 9 15 the sole judgment of the Company, materially affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company and its subsidiaries, taken as a whole, or materially impair the Offer's contemplated benefits to the Company; (b) there shall have been any action threatened or taken, or any approval withheld, or any statute, rule or regulation invoked, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or the Company or any of its subsidiaries, by any government or governmental, regulatory or administrative authority or agency or tribunal, domestic or foreign, which, in the sole judgment of the Company, would or might directly or indirectly result in any of the consequences referred to in clause (i) or (ii) of paragraph (a) above; (c) there shall have occurred (i) the declaration of any banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory); (ii) any general suspension of trading in, or limitation on prices for, securities on any United States national securities exchange or in the over-the-counter market; (iii) the commencement or escalation of a war, armed hostilities or any other national or international crisis directly or indirectly involving the United States; (iv) any limitation (whether or not mandatory) by any governmental, regulatory or administrative agency or authority on, or any event which, in the sole judgment of the Company, might materially affect the extension of credit by banks or other lending institutions in the United States; (v) any significant decrease in the market price of the Shares or in the market prices of equity securities generally in the United States or any change in the general political, market, economic or financial conditions or in the commercial paper markets in the United States or abroad that could have, in the sole judgment of the Company, a material adverse effect on the business, condition (financial or otherwise), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or on the trading in the Shares; (vi) in the case of any of the foregoing existing at the time of the announcement of the Offer, a material acceleration or worsening thereof; or (vii) any decline in either the Dow Jones Industrial Average or the S&P 500 Composite Index by an amount in excess of 10% measured from the close of business on February 15, 2000; (d) any change shall occur or be threatened in the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, which in the sole judgment of the Company is or may be material to the Company and its subsidiaries, taken as a whole; (e) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger or acquisition proposal for the Company, shall have been proposed, announced or made by another person or shall have been publicly disclosed, or the Company shall have learned that (i) any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding Shares, or (ii) any new group shall have been formed that beneficially owns more than 5% of the outstanding Shares; or (f) any person or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to acquire the Company or any of its Shares. The foregoing conditions are for the Company's sole benefit and may be asserted by the Company regardless of the circumstances giving rise to any such condition (including any action or inaction by the Company) or may be waived by the Company in whole or in part. The Company's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by the Company concerning the events described above and any related judgment or decision by the Company regarding the inadvisability of proceeding with the purchase of or payment for any Shares tendered will be final and binding on all parties. 10 16 The Company does not anticipate that, as a result of its purchase of 450,000 Shares in the Offer, an increase in a shareholder's ownership of the Company's outstanding common stock of 2% or more of such outstanding common stock will occur. However, if the Company's purchase of 450,000 Shares would cause such an increase, the Company reserves the right to reduce the number of Shares it will purchase to the extent necessary to prevent such an increase. 6. PRICE RANGE OF SHARES The Shares are quoted on Nasdaq. The high and low sales prices per Share on Nasdaq as compiled from published financial sources for the periods indicated are listed below.
HIGH LOW ------- -------- FISCAL YEAR 1998 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
On February 11, 2000, the last full trading day on Nasdaq prior to the announcement by the Company of its intention to make this Offer to Purchase, the closing price per Share on Nasdaq was $14.125. THE COMPANY URGES SHAREHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES. 7. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER On February 14, 2000, the Company announced its intention to make an offer to purchase up to 450,000 Shares at $18.00 per Share, with the Offer to commence on February 16, 2000. The Company is making the Offer because it believes: (a) the Shares are significantly undervalued in the public market; (b) investing in the Company's Shares represents an attractive use of its capital and an efficient way to provide value to its shareholders; and (c) the Offer will afford those shareholders who desire liquidity an opportunity to sell all or a portion of their Shares at a premium to recent market prices without the usual transaction costs associated with open market sales. After the Offer is completed, the Company expects to have sufficient cash flow and access to other sources of capital to fund its operations. The Offer provides shareholders who are considering a sale of all or a portion of their Shares the opportunity to sell their Shares to the Company at $18.00 per Share. Shareholders who determine not to accept the Offer will increase their proportionate interest in the Company's equity, and thus in its future earnings and assets, subject to the Company's right to issue additional Shares and other equity securities in the future. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. 11 17 Prior to the Offer, the Company purchased 250,000 Shares in July 1998 for $4,531,250 ($18.125 per Share), 100,000 Shares in January 1999 for $1,812,500 ($18.125 per Share), 16,400 Shares in May 1999 for $298,275 ($18.1875 per Share) and 50,000 Shares in November 1999 for $725,000 ($14.50 per Share). The Company may, in the future, repurchase additional Shares in the open market, in private transactions, through tender offers or otherwise, although no such purchases are presently contemplated. Any such purchases may be on the same terms as, or on terms that are more or less favorable to shareholders than, the terms of the Offer. However, Rule 13e-4 of the Exchange Act generally prohibits the Company or its affiliates from purchasing any Shares, other than through the Offer, until at least ten business days after the expiration or termination of the Offer. Any possible future purchases by the Company will depend on many factors, including the market price of the Shares, the results of the Offer, the Company's business and financial position and general economic and market conditions. Shares the Company acquires pursuant to the Offer will be retained as treasury stock by the Company (unless and until the Company determines to retire such Shares) and will be available for the Company to issue without further shareholder action (except as required by applicable law or the rules of Nasdaq or any securities exchange on which Shares are listed) for purposes including, but not limited to, the acquisition of other businesses, the raising of additional capital for use in the Company's business and the satisfaction of obligations under existing or future employee benefit plans. 8. INFORMATION REGARDING THE COMPANY AND ITS DIRECTORS AND EXECUTIVE OFFICERS; INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES The Company, which is located at Routes 55 & 553, P.O. Box 888, Pitman, New Jersey, 08071-0888 (Phone Number: (856) 589-0500), is delivering the Offer and is filing the documents required to execute an issuer tender offer with the SEC. The Company's Board of Directors currently consists of seven directors, whose names, along with those of the chief executive officer and other executive officers of the Company, are set forth in the table below. Information regarding those persons' ownership of Shares is also set forth in that table. Each of the Company's directors and executive officers can be reached in care of the Company, at the Company's address and telephone number.
NUMBER OF SHARES PERCENTAGE OF SHARES NAME AND POSITION BENEFICIALLY OWNED BENEFICIALLY OWNED - ----------------- ------------------ -------------------- Edward B. Cloues, II, Director, Chairman and Chief Executive Officer....................................... 171,360 5.7% Kevin C. Bowen, President and Chief Executive Officer of K-Tron America, Inc..................................... 23,240 0.8% Lukas Guenthardt, Senior Vice President -- Strategic Planning, Product Development and Marketing............. 22,297 0.8% Ronald R. Remick, Senior Vice President, Chief Financial Officer and Treasurer................................... 5,900 0.2% Beat Steger, Managing Director of K-Tron (Schweiz) AG..... 10,500 0.4% Leo C. Beebe, Director.................................... 60,385 2.1% Norman Cohen, Director.................................... 7,219 0.2% Robert A. Engel, Director................................. 2,500 0.1% Richard J. Pinola, Director............................... 16,969 0.6% Dr. Hans-Jurg Schurmann, Director......................... 21,000 0.7% Jean Head Sisco, Director................................. 12,801 0.4%
As of February 11, 2000, there were 2,927,155 Shares outstanding, net of treasury stock, and 357,667 Shares issuable upon exercise of outstanding options. As of February 11, 2000, the Company's directors and executive officers as a group (11 persons) beneficially owned 354,171 Shares (including 173,900 Shares issuable to such persons upon exercise of options with exercise prices below $18.00 ("Exercisable 12 18 Securities")), which constituted approximately 11.4% of the outstanding Shares (including Shares issuable if all of the Exercisable Securities held by directors and executive officers were exercised) at such time. If the Company purchases 450,000 Shares in the Offer and no director or executive officer tenders Shares, then after the purchase of such 450,000 Shares, the Company's directors and executive officers as a group will beneficially own approximately 13.4% of the outstanding Shares, including 173,900 Shares issuable on exercise of Exercisable Securities held by directors and executive officers. Based upon the Company's records and upon information provided to the Company by its directors and executive officers, neither the Company nor any of its associates or persons controlling the Company nor, to the best of the Company's knowledge, any of the directors or executive officers of the Company or any of its subsidiaries, nor any associates or subsidiaries of any of the foregoing, has effected any transactions in the Shares during the 60 days prior to February 16, 2000, except for purchases of common stock under the Company's employee stock purchase plan. On December 31, 1999, Messrs. Bowen and Guenthardt purchased 691 and 659 shares of common stock, respectively, under the Company's employee stock purchase plan, at a purchase price of $11.48 per share. Except as set forth in this Offer to Purchase, neither the Company nor any person controlling the Company nor, to the Company's knowledge, any of its directors or executive officers, is a party to any contract, arrangement, understanding or relationship with any other person relating, directly or indirectly, to the Offer with respect to any securities of the Company (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations). 9. SOURCE AND AMOUNT OF FUNDS Assuming that the Company purchases 450,000 Shares pursuant to the Offer at a purchase price of $18.00 per Share, net to the sellers in cash, the Company expects the maximum aggregate cost, including all fees and expenses applicable to the Offer, to be approximately $100,000. The Company estimates that the funds necessary to pay such amounts will come primarily from a loan in an amount not to exceed $7,000,000 (the "Loan") from The Bank of Gloucester County (the "Bank") to K-Tron America, Inc., a wholly-owned subsidiary of the Company ("K-Tron America"). The Loan will be payable in equal monthly installments of principal plus accrued interest over a period of four years commencing May 1, 2000 and ending April 1, 2004. At the election of the Company, the Loan may bear interest at a fixed rate offered by the Bank with respect to up to one half of the principal amount, with all principal not subject to a fixed rate being subject to a variable rate of interest at one month LIBOR plus 1.85 percent. Repayment of the Loan will be secured by a mortgage on certain real estate owned by K-Tron America and located in Gloucester County, New Jersey and by inventory, accounts and equipment (other than equipment subject to purchase money security interests or similar encumbrances) owned by K-Tron America and located in Gloucester County and Camden County, New Jersey. The Company will guarantee payment of the Loan as well as any amounts borrowed under two other unrelated loan facilities (a mortgage note and a line of credit note) in the aggregate principal amount of $7,700,000 that the Bank previously extended to K-Tron America. As a result of this guarantee, the Bank has removed its requirement for financial covenants in K-Tron America's line of credit note that would otherwise have prevented K-Tron America from borrowing funds thereunder after the Loan had been borrowed and the proceeds advanced by K-Tron America to the Company for use in connection with the Offer. The Company intends to repay the Loan through cash flow from operations. It is estimated that the Company will incur approximately $100,000 in financing, legal and other one-time charges associated with the tender offer. 13 19 10. CERTAIN INFORMATION ABOUT THE COMPANY The Company is a leading worldwide producer of feeders and related equipment for the handling of bulk solids in 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 by the Company's feeding equipment are plastics, food, chemical, pharmaceutical and cement, but the Company's feeders are also used in many other industries. In addition to feeding equipment, the Company designs, produces and sells 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. 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 Offer to Purchase and other filings with the SEC, 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 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 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, 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 by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Increased Debt. The Company will borrow up to $7 million to finance the Offer. This may have important consequences. These consequences include the following: - the Company will have used a substantial portion of its cash; - a portion of the Company's cash flow will be used to make principal and interest payments on the debt incurred to finance the Offer, which will reduce the funds that would otherwise be available to the Company for operations, capital expenditures and future business opportunities; 14 20 - a substantial decrease in the Company's cash flow or a substantial increase in its expenses could make it difficult for the Company to meet its debt service requirements and force the Company to modify its operations; - the Company may have more debt than its competitors, which may place it at a competitive disadvantage; and - the Company's level of debt may make it more vulnerable to a downturn in its business or the economy in general. Debt Covenants. The Company has borrowed money through K-Tron America to finance the Offer. The bank financing that K-Tron America and the Company have entered into contains several significant covenants that impose restrictions on the Company and its subsidiaries. These covenants include, without limitation, restrictions on (i) indebtedness; (ii) liens; (iii) mergers and acquisitions; and (iv) certain upstreaming of funds from K-Tron America to the Company or K-Tron Technologies, Inc., a wholly-owned subsidiary of the Company. Additional Information. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their compensation, options granted to them, the principal holders of the Company's Shares and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the SEC. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 2120, Washington DC 20549; and at its regional offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New York, New York 10048. Copies of such material may also be obtained by mail, upon payment of the SEC's customary charges, from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The SEC also maintains a Website on the internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants, such as the Company, that file electronically with the SEC. 11. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT The Company's purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of shareholders. Nonetheless, the Company believes that a sufficient number of Shares will be outstanding and publicly traded following the Offer to ensure a continued trading market in the Shares. Based on the published guidelines of the National Association of Securities Dealers, Inc., the Company does not believe that its purchase of Shares pursuant to the Offer will cause its remaining Shares to no longer be quoted on Nasdaq. The Shares currently are "margin securities" under the rules of the Federal Reserve. This has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. The Company believes that, following the purchase of Shares pursuant to the Offer, the Shares will continue to be "margin securities" for purposes of the Federal Reserve's margin regulations. The Shares are registered under the Exchange Act, which requires, among other things, that the Company furnish certain information to its shareholders and to the SEC and comply with the SEC's proxy rules in connection with meetings of the Company's shareholders. The Company believes that its purchase of Shares pursuant to the Offer will not result in the Shares becoming subject to deregistration under the Exchange Act. 12. CERTAIN LEGAL MATTERS The Company is not aware of any license or regulatory permit that appears to be material to its business that might be adversely affected by its acquisition of Shares as contemplated in the Offer or of any approval or other action by any government or governmental, administrative or regulatory authority or 15 21 agency, domestic or foreign, that would be required for the Company's acquisition or ownership of Shares as contemplated by the Offer. The Company also is not aware of any applicability of antitrust laws to this transaction. Should any such approval or other action be required, the Company currently contemplates that it will seek such approval or take such other action. The Company cannot predict whether it may be required to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to the Company's business. The Company's obligations under the Offer to accept for payment and pay for Shares are subject to certain conditions. See Section 5. 13. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES In General. The following summary describes certain United States federal income tax consequences relevant to the Offer. The discussion contained in this summary is based upon the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), existing and proposed United States Treasury regulations promulgated thereunder, rulings, administrative pronouncements and judicial decisions, changes to which could materially affect the tax consequences described herein and could be made on a retroactive basis. As discussed below, depending upon a shareholder's particular circumstances, the Company's purchase of such shareholder's Shares pursuant to the Offer may be treated either as a sale or a dividend for United States federal income tax purposes. Accordingly, such a purchase generally will be referred to in this section of the Offer to Purchase as an "exchange" of Shares for cash. Scope. This summary does not apply to Shares acquired as compensation. The summary discusses only Shares held as capital assets, within the meaning of Section 1221 of the Code, and does not address all of the tax consequences that may be relevant to particular shareholders in light of their personal circumstances, or to certain types of shareholders (such as certain financial institutions, dealers in securities or commodities, insurance companies, tax-exempt organizations or persons who hold Shares as a position in a "straddle" or as a part of a "hedging" or "conversion" transaction for United States federal income tax purposes). In particular, the discussion of the consequences of an exchange of Shares for cash pursuant to the Offer applies only to a United States Holder. For purposes of this summary, a United States Holder is a holder of Shares that is (i) a citizen or resident of the United States; (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof; (iii) an estate, the income of which is subject to United States federal income taxation regardless of its source; or (iv) a trust, if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. This discussion does not address the tax consequences to foreign shareholders who will be subject to United States federal income tax on a net basis on the proceeds of their exchange of Shares pursuant to the Offer because such income is effectively connected with the conduct of a trade or business within the United States. Such shareholders are generally taxed in a manner similar to a United States Holder (for purposes of this section, "Shareholder"); however, certain special rules apply. Foreign shareholders who are not subject to United States federal income tax on a net basis should see Section 2 for a discussion of the applicable United States withholding rules and the potential for obtaining a refund of all or a portion of the tax withheld. THE SUMMARY DISCUSSION SET FORTH HEREIN IS INCLUDED FOR GENERAL INFORMATION ONLY. THE TAX CONSEQUENCES OF A SALE OF SHARES PURSUANT TO THE OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR SITUATION AND CIRCUMSTANCES OF THE TENDERING SHAREHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE OFFER, INCLUDING THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED HEREIN. Characterization of the Sale. An exchange of Shares by a Shareholder pursuant to the Offer will be a taxable transaction for United States federal income tax purposes. The United States federal income tax 16 22 consequences of such exchange to a Shareholder may vary depending upon the Shareholder's particular facts and circumstances. Under Section 302 of the Code, an exchange of Shares by a Shareholder with the Company pursuant to the Offer will be treated as a "sale or exchange" of such Shares for United States federal income tax purposes (rather than as a deemed distribution by the Company with respect to Shares continued to be held (or deemed to be held) by the tendering Shareholder) if the receipt of cash upon such exchange (i) is "substantially disproportionate" with respect to the Shareholder; (ii) results in a "complete redemption" of the Shareholder's interest in the Company; or (iii) is "not essentially equivalent to a dividend" with respect to the Shareholder. These tests (the "Section 302 tests") are explained more fully below. If any of the Section 302 tests is satisfied, and the sale of the tendered Shares is therefore treated as a "sale or exchange" of such Shares for United States federal income tax purposes, the tendering Shareholder will recognize capital gain or loss equal to the difference between the amount of cash received by the Shareholder pursuant to the Offer and the Shareholder's adjusted tax basis in the Shares sold pursuant to the Offer. Such capital gain or loss will generally be long-term capital gain or loss if the tendering Shareholder held the tendered Shares for more than 12 months. Under current law, any such gain or loss recognized by individuals, trusts or estates will be subject to a maximum 20% tax rate. If none of the Section 302 tests is satisfied, then, to the extent of the Company's current and accumulated earnings and profits, the tendering Shareholder will be treated as having received a dividend taxable as ordinary income in an amount equal to the entire amount of cash received by the Shareholder pursuant to the Offer (without reduction for the adjusted tax basis of the Shares sold pursuant to the Offer), no loss will be recognized, and (subject to reduction as described below for corporate Shareholders eligible for the dividends-received deduction) the tendering Shareholder's adjusted tax basis in the Shares exchanged pursuant to the Offer will be added to such Shareholder's adjusted tax basis in his remaining Shares, if any. No assurance can be given that any of the Section 302 tests will be satisfied as to any particular Shareholder, and thus no assurance can be given that any particular Shareholder will not be treated as having received a dividend taxable as ordinary income. If the exchange of Shares by a Shareholder is not treated as a sale or exchange for federal income tax purposes, any cash received for Shares pursuant to the Offer in excess of the current and accumulated earnings and profits of the Company will be treated, first, as a nontaxable return of capital to the extent of the Shareholder's adjusted tax basis in his Shares, and thereafter, as taxable capital gain, to the extent the cash received exceeds such basis. Constructive Ownership of Stock. In determining whether any of the Section 302 tests is satisfied, a Shareholder must take into account not only the Shares which are actually owned by the Shareholder, but also Shares which are constructively owned by the Shareholder by reason of the attribution rules contained in Section 318 of the Code. Under Section 318 of the Code, a Shareholder may be treated as owning (i) Shares that are actually owned, and in some cases constructively owned, by certain related individuals or entities in which the Shareholder owns an interest, or, in the case of Shareholders that are entities, by certain individuals or entities that own an interest in the Shareholder; and (ii) Shares which the Shareholder has the right to acquire by exercise of an option or a conversion right contained in another instrument held by the Shareholder. EACH SHAREHOLDER SHOULD BE AWARE THAT, BECAUSE PRORATION MAY OCCUR IN THE OFFER, EVEN IF ALL OF THE SHARES ACTUALLY AND CONSTRUCTIVELY OWNED BY A SHAREHOLDER ARE TENDERED PURSUANT TO THE OFFER, FEWER THAN ALL OF SUCH SHARES MAY BE PURCHASED BY THE COMPANY. THUS, PRORATION MAY AFFECT WHETHER A SALE BY A SHAREHOLDER PURSUANT TO THE OFFER WILL MEET ANY OF THE SECTION 302 TESTS. Section 302 Tests. One of the following tests must be satisfied in order for the exchange of Shares pursuant to the Offer to be treated as a sale or exchange for federal income tax purposes. a. Substantially Disproportionate Test. The receipt of cash by a Shareholder will be "substantially disproportionate" if the percentage of the outstanding Shares actually and constructively owned by the Shareholder immediately following the exchange of Shares pursuant to the Offer (treating as not being outstanding all of the Shares purchased pursuant to the Offer) is less than 80% of the percentage of the outstanding Shares actually and constructively owned by such Shareholder immediately before the 17 23 exchange of Shares pursuant to the Offer (treating as outstanding all of the Shares purchased pursuant to the Offer). Shareholders should consult their own tax advisors with respect to the application of the "substantially disproportionate" test to their particular situation and circumstances. b. Complete Redemption Test. The receipt of cash by a Shareholder will be a "complete redemption" if either (i) all of the Shares actually and constructively owned by the Shareholder are exchanged pursuant to the Offer; or (ii) all of the Shares actually owned by the Shareholder are exchanged pursuant to the Offer and, with respect to the Shares constructively owned by the Shareholder which are not exchanged pursuant to the Offer, the Shareholder is eligible to waive (and effectively waives) constructive ownership of all of such Shares under procedures described in Section 302(c) of the Code. Shareholders considering making such a waiver should do so in consultation with their own tax advisors. c. Not Essentially Equivalent to a Dividend Test. Even if the receipt of cash by a Shareholder fails to satisfy the "substantially disproportionate" test and the "complete redemption" test, a Shareholder may nevertheless satisfy the "not essentially equivalent to a dividend" test if the Shareholder's exchange of Shares pursuant to the Offer results in a "meaningful reduction" in the Shareholder's proportionate interest in the Company. Whether the receipt of cash by a Shareholder who exchanges Shares pursuant to the Offer will be "not essentially equivalent to a dividend" will depend upon the Shareholder's particular facts and circumstances. The IRS has indicated in published Revenue Rulings that even a small reduction in the proportionate interest of a small minority Shareholder in a publicly-held corporation who exercises no control over corporate affairs may constitute such a "meaningful reduction." The IRS held, for example, in Rev. Rul. 76-385, 1976-2 C.B. 92, that a reduction in the percentage ownership interest of a Shareholder in a publicly-held corporation who held a minimal interest and who exercised no control over the affairs of the corporation from .0001118% to .0001081% (a reduction of only 3.3% in the Shareholder's prior percentage ownership interest) would constitute a "meaningful reduction." Shareholders expecting to rely on the "not essentially equivalent to a dividend" test should consult their own tax advisors as to its application to their particular situation and circumstances. The Company cannot predict whether or to what extent the Offer will be over-subscribed. If the Offer is over-subscribed, proration of the tenders pursuant to the Offer will cause the Company to accept fewer Shares than are tendered. Therefore, a Shareholder can be given no assurance that a sufficient number of such Shareholder's Shares will be exchanged pursuant to the Offer to ensure that such exchange will be treated as a sale, rather than as a dividend, for United States federal income tax purposes pursuant to the rules discussed above unless the Shareholder makes a conditional tender as described in Section 2. If a Shareholder sells Shares to persons other than the Company at or about the time such holder also exchanges Shares pursuant to the Offer, and the various sales effected by the Shareholder are part of an overall plan to reduce or terminate such Shareholder's proportionate interest in the Company, then the sales to persons other than the Company may, for United States federal income tax purposes, be integrated with the Shareholder's exchange of Shares pursuant to the Offer and, if integrated, should be taken into account in determining whether the Shareholder satisfies any of the Section 302 tests described above. Corporate Shareholder Dividend Treatment. If an exchange of Shares pursuant to the Offer by a corporate Shareholder is treated as a dividend, the corporate Shareholder may be entitled to claim a deduction in an amount equal to 70% of the gross dividend under Section 243 of the Code, subject to applicable limitations. Corporate Shareholders should consider the effect of Section 246(c) of the Code, which disallows the 70% dividends-received deduction with respect to any dividend on any share of stock that is held for 45 days or less during the 90-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend. For this purpose, the length of time a taxpayer is deemed to have held stock may be reduced by periods during which the taxpayer's risk of loss with respect to the stock is diminished by reason of the existence of certain options or other hedging transactions. Moreover, under Section 246A of the Code, if a corporate Shareholder has incurred indebtedness directly attributable to an investment in Shares, the 70% dividends received deduction may 18 24 be reduced by a percentage generally computed based on the amount of such indebtedness and the Shareholder's total adjusted tax basis in the Shares. In addition, any amount received by a corporate Shareholder pursuant to the Offer that is treated as a dividend may constitute an "extraordinary dividend" under Section 1059 of the Code. In such case, a corporate Shareholder would be required under Section 1059(a) of the Code to reduce its adjusted tax basis (but not below zero) in its Shares by the non-taxed portion of the extraordinary dividend (i.e., the portion of the dividend for which a deduction is allowed), and, if such portion exceeds the Shareholder's adjusted tax basis in its Shares, to treat the excess as gain from the sale of such Shares in the year in which the dividend is received. These basis reduction and gain recognition rules would be applied by taking account only of the Shareholder's adjusted tax basis in the Shares that were sold, without regard to other Shares that the Shareholder may continue to own. Corporate Shareholders should consult their own tax advisors as to the application of Section 1059 of the Code to the Offer and to any dividends which may be treated as paid with respect to Shares sold pursuant to the Offer. Foreign Shareholders. See Section 2 with respect to the withholding of taxes for foreign shareholders. Backup Withholding. See Section 2 with respect to the application of United States federal income tax backup withholding. 14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT The Company expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 5 shall have occurred or shall be deemed by the Company to have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, any Shares by giving oral or written notice of such extension to the Depositary and making a public announcement thereof. The Company also expressly reserves the right, in its sole discretion, to terminate the Offer and not accept for payment or pay for any Shares not theretofore accepted for payment or paid for or, subject to applicable law, to postpone payment for Shares upon the occurrence of any of the conditions specified in Section 5 hereof by giving oral or written notice of such termination or postponement to the Depositary and making a public announcement thereof. The Company's reservation of the right to delay payment for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires that the Company must pay the consideration offered or return the Shares tendered promptly after termination or withdrawal of a tender offer. Subject to compliance with applicable law, the Company further reserves the right, in its sole discretion, and regardless of whether any of the events set forth in Section 5 shall have occurred or shall be deemed by the Company to have occurred, to amend the Offer in any respect (including, without limitation, by decreasing or increasing the consideration offered in the Offer to holders of Shares or by decreasing or increasing the number of Shares being sought in the Offer). Amendments to the Offer may be made at any time and from time to time by public announcement thereof, such announcement, in the case of an extension, to be issued no later than 12:00 noon, New York City time, on the next business day after the last previously scheduled or announced Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to shareholders in a manner reasonably designated to inform shareholders of such change. Without limiting the manner in which the Company may choose to make any public announcement, except as provided by applicable law (including Rule 13e-4(e)(3) promulgated under the Exchange Act), the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Company makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Company will extend the Offer to the extent required by Rule 13e-4 promulgated under the Exchange Act, which requires that the minimum period 19 25 during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer (other than a change in price or a change in percentage of securities sought) will depend upon the facts and circumstances, including the relative materiality of such terms or information. Pursuant to Rule 13e-4(f)(1)(ii), if (i) the Company increases or decreases the price to be paid for Shares, the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, or the Company decreases the number of Shares being sought; and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given, the Offer will be extended until the expiration of such period of ten business days. 15. FEES AND EXPENSES D. F. King & Co., Inc. and American Stock Transfer & Trust Company are providing services as Information Agent and Depositary, respectively, in connection with the Offer, and the Company will pay reasonable and customary compensation for their services in such capacities. The Company will also reimburse the Information Agent and the Depositary for out-of-pocket expenses and has agreed to indemnify the Information Agent and the Depositary against certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. The Information Agent may contact shareholders by mail, telephone, fax, email, telex, telegraph and personal interviews, and may request brokers, dealers and other shareholders to forward materials relating to the Offer to beneficial owners. Neither the Information Agent nor the Depositary has been retained to make solicitations or recommendations in connection with the Offer. The Company will not pay fees or commissions to any broker, dealer, commercial bank, trust company or other person for soliciting any Shares pursuant to the Offer. The Company will, however, on request, reimburse such persons for customary handling and mailing expenses incurred in forwarding materials in respect of the Offer to the beneficial owners for which they act as nominees. No such broker, dealer, commercial bank, trust company or other person has been authorized to act as the Company's agent for purposes of the Offer. The Company will pay (or cause to be paid) any stock transfer taxes on its purchase of Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal. 16. MISCELLANEOUS The Company is not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If the Company becomes aware of any jurisdiction where the making of the Offer is not in compliance with any applicable law, the Company will make a good faith effort to comply with such law. Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has filed with the SEC a Tender Offer Statement on Schedule TO (the "Schedule TO") which contains additional information with respect to the Offer. The Schedule TO, including the exhibits and any amendments thereto, may be examined, and copies may be obtained, at the same places and in the same manner as is set forth in Section 10 with respect to information concerning the Company. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. February 16, 2000 K-TRON INTERNATIONAL, INC. 20 26 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for the Shares and any other required documents should be sent or delivered by each shareholder or such shareholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at the applicable address set forth below: The Depositary for the Offer is: AMERICAN STOCK TRANSFER & TRUST COMPANY 40 Wall Street 46th Floor New York, New York 10005 If by facsimile transmission: (For Eligible Institutions only) (718) 234-5001 Any questions or requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at its telephone number and address set forth below. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005 BANKERS AND BROKERS CALL COLLECT (212) 269-5550 ALL OTHERS CALL TOLL FREE (800) 755-7250 EX-99.A.1.II 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF COMMON STOCK OF K-TRON INTERNATIONAL, INC. TENDERED PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 16, 2000 THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000, UNLESS THE OFFER IS EXTENDED Depositary: AMERICAN STOCK TRANSFER & TRUST COMPANY 40 Wall Street 46th Floor New York, New York, 10005 By Facsimile Transmission: For Information: (for Eligible Institutions (800) 937-5449 Only) (718) 234-5001
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. The instructions accompanying this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. This Letter of Transmittal is to be used (a) if you desire to effect the tender transaction yourself; (b) if you intend to request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you and the Shares (as hereinafter defined) are not registered in the name of such broker, dealer, commercial bank, trust company or other nominee; and (c) by a broker, dealer, commercial bank, trust company or other nominee effecting the transaction as a registered owner or on behalf of a registered owner. To accept the Offer in accordance with its terms, a properly completed and duly executed Letter of Transmittal (or photocopy thereof bearing original signature(s) and any required signature guarantees), any certificates representing Shares tendered, and any other documents required by this Letter of Transmittal should be mailed or delivered to the Depositary at the appropriate address set forth herein and must be received by the Depositary prior to 5:00 P.M., New York City time, on March 17, 2000, or such later time and date to which the Offer is extended, unless the tendering party has satisfied the conditions for guaranteed delivery described in Section 2 of the Offer to Purchase. Shareholders are not required to pay a service charge to K-Tron International, Inc. or the Depositary in connection with their tender of Shares, but may be charged a fee by a broker, dealer or other institution for processing the tender requested. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. DESCRIPTION OF SHARES TENDERED NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, EXACTLY AS NAME(S) APPEAR(S) ON TENDERED CERTIFICATE(S))
- --------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4) - --------------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) ENCLOSED (PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY) ----------------------------------------------------------- CERTIFICATE NO. OF NO. OF SHARES NO.* SHARES TENDERED** - --------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total No. of Shares Tendered - ---------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders who tender Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. - -------------------------------------------------------------------------------- 2 THE BOXES BELOW ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY [ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE DEPOSITARY TRUST COMPANY ("DTC") AND COMPLETE THE FOLLOWING: [ ] Name of Tendering Institution [ ] DTC Participant Number [ ] Transaction Code Number [ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) Window Ticket Number (if any) Date of Execution of Notice of Guaranteed Delivery DTC Participant Number (if delivered by book-entry transfer) NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW 2 3 Ladies and Gentlemen: The person(s) signing this Letter of Transmittal (the "Signer") hereby tender(s) to K-Tron International, Inc. (the "Company"), a New Jersey corporation, the above-described shares of common stock, par value $.01 per share (the "Shares"), of the Company, at a price (the "Purchase Price") equal to $18.00 per Share net in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 16, 2000, receipt of which is hereby acknowledged, and in this Letter of Transmittal (which Offer to Purchase and Letter of Transmittal together constitute the "Offer"). Subject to, and effective upon, acceptance for payment of, or payment for, Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Signer hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to all of the Shares that are being tendered hereby that are purchased pursuant to the Offer and hereby irrevocably constitutes and appoints American Stock Transfer & Trust Company (the "Depositary") as attorney-in-fact of the Signer with respect to such Shares, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) present certificate(s) for such Shares, if any, for cancellation and transfer on the Company's books; and (b) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, all in accordance with the terms and subject to the conditions set forth in the Offer. The Signer hereby represents and warrants that (a) the Signer, if a broker, dealer, commercial bank, trust company or other nominee, has obtained the tendering shareholder's instructions to tender pursuant to the terms and conditions of this Offer in accordance with the letter from the Company to brokers, dealers, commercial banks, trust companies and other nominees; (b) when and to the extent the Company accepts the Shares for purchase, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the Signer will execute and deliver any additional documents that the Depositary or the Company deems necessary or desirable to complete the assignment, transfer and purchase of the Shares tendered hereby; and (d) the Signer has read and agrees to all of the terms and conditions of the Offer. The name(s) and address(es) of the registered owner(s) should be printed as on the registration of the Shares. If the Shares tendered hereby are in certificated form, the certificate(s) representing such Shares must be delivered together with this Letter of Transmittal. The Signer recognizes that, under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may not be required to purchase any of the Shares tendered hereby. In any such event, the Signer understands that certificate(s) for the Shares not purchased, if any, will be returned to the Signer at its registered address unless otherwise indicated under the Special Delivery Instructions below. The Signer understands that acceptance of Shares by the Company for payment will constitute a binding agreement between the Signer and the Company upon the terms and subject to the conditions of the Offer. The check for the Purchase Price of the tendered Shares purchased will be issued to the order of the Signer and mailed to the address indicated, unless otherwise indicated in the box titled Special Payment Instructions or the box titled Special Delivery Instructions. The Company will not pay interest on the Purchase Price under any circumstances. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the Signer and all obligations of the Signer hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the Signer. Except as stated in the Offer, this tender is irrevocable. Unless otherwise indicated herein under "Special Payment Instructions," the Signer acknowledges that the Company will issue the check for the Purchase Price and/or return any certificate for Shares not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," the Signer acknowledges that the Company will mail the check for the Purchase Price for any Shares purchased and/or return any certificates for Shares not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Payment Instructions and/or the Special 3 4 Delivery Instructions are completed, the Signer expects that the Company will issue the check for the Purchase Price and/or return any certificates for Shares not accepted for payment in the name of, and/or deliver such check and/or return any such certificates for Shares to, the person(s) so indicated. The Signer recognizes that the Company has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder thereof if the Company does not accept for payment any of the Shares tendered hereby. 4 5 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 5, 6, 7, AND 10) To be completed ONLY if certificates for Shares that are not purchased and/or any check are to be issued in the name of and sent to someone other than the Signer. Mail [ ] check [ ] certificates to: Name(s) - ------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------- (INCLUDE ZIP CODE) - ------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 4 AND 7) To be completed ONLY if certificates for Shares that are not purchased and/or any check, issued in the name of the Signer, are to be sent to someone other than the Signer or to the Signer at an address other than that shown above. Mail [ ] check [ ] certificates to: Name(s) - ------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------- - ------------------------------------------------------ (INCLUDE ZIP CODE) SIGNATURE (IF SPECIAL PAYMENT INSTRUCTIONS ARE GIVEN) (SEE INSTRUCTION 7) - ------------------------------------------------------ SIGNATURE(S) OF PAYEE(S) Dated - --------------------- , 2000 By signing and completing the form above, under the penalties of perjury, I/we certify that the above tax identification or social security number(s) is/are correct. Note: Failure to complete and sign may result in backup withholding of 31% of the payments due to you. See Instruction 11. CONDITIONAL TENDER Unless this box has been completed and a minimum specified, the tender will be deemed unconditional (see Section 2 of the Offer to Purchase). Minimum number of Shares that must be purchased, if they are purchased: --------------- Shares (fill in) 5 6 IMPORTANT: SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 (BELOW) OR FORM W-8 AS APPLICABLE (SEE INSTRUCTIONS 1, 5, 6 AND 11) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF SHAREHOLDER(S)) Dated: - ------------------------, 2000 (Must be signed by registered holder(s) exactly as name(s) appear(s) on the Share certificates or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, agents, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Capacity (Full Title): - -------------------------------------------------------------------------------- (SEE INSTRUCTION 5) Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- Home: - ---------------------------------------------------- Business: ----------------- Taxpayer Identification or Social Security No. (if applicable): ----------------- (COMPLETE SUBSTITUTE FORM W-9 BELOW OR FORM W-8, AS APPLICABLE) (SEE INSTRUCTION 11) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDING ZIP CODE) Area Code and Tel. No.: - -------------------------------------------------------------------------------- 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) of Shares tendered herewith (including, for purposes of this document, any participant in the book-entry transfer facility of The Depository Trust Company ("DTC") whose name appears on DTC's security position listing as the owner of Shares), unless such holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" above; or (b) if such Shares are tendered for the account of a firm or other entity that is a member in good standing of the Security Transfer Agent's Medallion Program (an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal is to be used (a) if Shares are to be forwarded herewith; or (b) if tenders are to be made by book-entry transfer to the account maintained by the Depositary pursuant to the procedure set forth in Section 2 of the Offer to Purchase. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING SHAREHOLDER. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Delivery will be deemed made only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. Shareholders have the responsibility to cause their Shares (in proper certificated or uncertificated form), this Letter of Transmittal (or a photocopy hereof) bearing original signature(s) and any required signature guarantee(s), and any other documents required by this Letter of Transmittal to be timely delivered in accordance with the Offer. All tendering shareholders, brokers, dealers, commercial banks, trust companies and other nominees, by execution of this Letter of Transmittal (or photocopy hereof), waive any right to receive any notice of the acceptance of their tender. 3. Inadequate Space. If the space provided in any of the above boxes is inadequate, the necessary information should be listed on a separate schedule signed by all of the required signatories and attached hereto. 4. Partial Tenders (not applicable to shareholders who tender by book-entry transfer). If fewer than all of the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Description of Shares Tendered." In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal (unless otherwise provided in the box titled "Special Payment Instructions" or "Special Delivery Instructions") as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Authorizations and Endorsements. a. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. b. If any of the Shares tendered hereby are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal. c. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. d. If this Letter of Transmittal or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Company of their authority so to act must be submitted. 7 8 e. If this Letter of Transmittal is signed by the registered holder(s) of the Shares transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not purchased are to be issued in the name of, a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. f. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate(s) for such Shares. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. Transfer Taxes. The Company will pay any transfer taxes payable upon the transfer to it of Shares purchased pursuant to the Offer. If, however, (a) payment of the Purchase Price is to be made to, or (in the circumstances permitted by the Offer) unpurchased Shares are to be registered in the name(s) of, any person(s) other than the registered owner(s); or (b) if any tendered certificate(s) are registered, or the Shares tendered are otherwise held, in the name(s) of any person(s) other than the person signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered owner(s) or such other person(s)) payable on account of the transfer to such person(s) will be deducted from the Purchase Price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. 7. Special Payment and Delivery Instructions. If certificate(s) for unpurchased Shares and/or check(s) are to be issued in the name of a person other than the registered owner(s) or if such certificate(s) and/or check(s) are to be sent to someone other than the registered owner(s), or to the registered owner(s) at a different address, the captioned boxes "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal must be completed. 8. Irregularities. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of tenders will be determined by the Company, in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any or all tenders determined not to be in appropriate form or to refuse to accept for payment, purchase or pay for any Shares if, in the opinion of the Company's counsel, accepting, purchasing or paying for such Shares would be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defect in any tender, whether generally or with respect to any particular Share(s) or shareholder(s). The Company's interpretations of the terms and conditions of the Offer (including these instructions) shall be final and binding. NONE OF THE COMPANY, THE DEPOSITARY, THE INFORMATION AGENT OR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY NOTICE OF DEFECTS IN TENDERS, AND NONE OF THEM SHALL INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE. 9. Questions and Requests for Assistance and Additional Copies. Questions and requests for assistance may be directed to D. F. King & Co., Inc., the Information Agent (bankers and brokers call collect (212) 269-5550, all others call toll free (800) 755-7250). Requests for additional copies of the Offer to Purchase and this Letter of Transmittal may also be directed to the Information Agent. Shareholders who do not own Shares directly may also obtain such information and copies from their broker, dealer, commercial bank, trust company or other nominee. Shareholders who do not own Shares directly are required to tender their Shares through their broker, dealer, commercial bank, trust company or other nominee and should NOT submit this Letter of Transmittal to the Depositary. 10. Restriction on Short Sales. Section 14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14e-4 promulgated thereunder make it unlawful for any person, acting alone or in concert with others, to tender Shares in a partial tender offer for such person's own account unless at the time of tender, and at the time the Shares are accepted for payment, the person tendering has a net long position equal to or greater than the amount tendered in (i) Shares, and will deliver or cause to be delivered such Shares for the purpose of tender to the person making the Offer within the period specified in the Offer; or (ii) an equivalent security and, upon acceptance of his or her tender, will acquire Shares by conversion, exchange or exercise of such equivalent security to the extent required by the terms of the Offer, and will deliver or cause to be delivered the Shares so acquired for the purpose of tender to the Company within the period specified in the Offer. Section 14(e) and Rule 14e-4 provide a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. 8 9 The acceptance of Shares by the Company for payment will constitute a binding agreement between the tendering shareholder and the Company, upon the terms and subject to the conditions of the Offer, including such shareholder's representation that (i) such shareholder has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act; and (ii) the tender of such Shares complies with Rule 14e-4. 11. Backup Withholding Tax. Subject to the availability of an exemption, each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify under penalties of perjury that such number is correct and that such shareholder is not subject to backup withholding. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must not check the box in Part 2 of the Substitute Form W-9, set forth below, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding with respect to any payments received pursuant to the Offer. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, check the box in Part 3 of the Substitute Form W-9 and sign and date the Substitute Form W-9. Such a shareholder must also complete the Certificate of Awaiting Taxpayer Identification Number, which is provided below. Notwithstanding that "Applied For" is written in Part I and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. However, such withheld amount will be refunded to such shareholder if a certified TIN is provided to the Depositary within 60 days. Each tendering non-U.S. shareholder should complete a Form W-8 and provide it to the Depositary. Contact the Information Agent for a copy of the Form W-8. IMPORTANT TAX INFORMATION THE FEDERAL INCOME TAX DISCUSSION SET FORTH HEREIN IS INCLUDED FOR GENERAL INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO NON-U.S. SHAREHOLDERS. ALL SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER. SUBSTITUTE FORM W-9 OR FORM W-8 Under the United States federal income tax laws, the Depositary may be required to withhold 31% of the amount of any payment made to certain holders pursuant to the Offer. In order to avoid such backup withholding, each tendering United States shareholder must provide the Depositary with such shareholder's correct TIN by completing the Substitute Form W-9 set forth on the following page. In general, if a shareholder is an individual, the TIN is the Social Security number of such individual. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a penalty imposed by the Internal Revenue Service. Certain shareholders (including, among others, all corporations) are not subject to these backup withholding and reporting requirements, but should nonetheless complete a Substitute Form W-9 to avoid possible erroneous backup withholding. For further information regarding backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a TIN if you do not have one and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number. In order for a non-United States shareholder to avoid 31% backup withholding, such shareholder must submit a statement to the Depositary signed under penalties of perjury attesting as to its non-United States status. Form W-8 and instructions for such statement may be obtained by contacting the Information Agent. IMPORTANT: THIS LETTER OF TRANSMITTAL, OR FACSIMILE HEREOF BEARING ORIGINAL SIGNATURE(S), PROPERLY COMPLETED AND DULY EXECUTED, TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, SHARES (IN PROPER CERTIFICATED OR UNCERTIFICATED FORM), AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. 9 10 CONSEQUENCES OF FAILURE TO FILE SUBSTITUTE FORM W-9 OR FORM W-8 Failure to complete Substitute Form W-9 or Form W-8 will not, by itself, cause the Shares to be deemed invalidly tendered but may require the Depositary to withhold 31% of the amount of any payments made pursuant to the Offer. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, the shareholder may claim a refund from the Internal Revenue Service. - --------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE Part 1: PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Social Security Number FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW OR DEPARTMENT OF THE TREASURY Employer Identification Number INTERNAL REVENUE SERVICE ------------------------------- ------------------------------------------------------------------------------------------ PAYER'S REQUEST FOR TAXPAYER Part 2: Check the box if you are NOT subject to backup withholding under the provisions of IDENTIFICATION NUMBER (TIN) section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. [] ------------------------------------------------------------------------------------------ CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND COMPLETE. SIGNATURE ---------------------------------------------------- DATE-------------- ------------------------------------------------------------------------------------------ Part 3: Awaiting TIN [ ] - ---------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER" FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me, and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number to the payer, 31% of all reportable payments due to me pursuant to the Offer will be withheld until I provide a Taxpayer Identification Number to the payer and that, if I do not provide my Taxpayer Identification Number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding. Signature: - ------------------------------------------------------------------ Date: -------- 10 EX-99.A.1.III 4 GUIDELINES TO CERTIFICATION OF TAXPAYER ID. 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(3) 7. a. A revocable savings trust The grantor- account (in which grantor is trustee(1) also trustee) b. Any "trust" account that is not The actual owner(1) a legal or valid trust under State law 8. Sole proprietorship account The owner(4) - ------------------------------------------------------------ - ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - ------------------------------------------------------------ 9. A valid trust, estate, or pension The legal entity (do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. If the owner does not have an employer identification number, furnish the owner's social security number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card (for resident individuals), Form SS-4, Application for Employer Identification Number (for businesses and all other entities), or Form W-7 for International Taxpayer Identification Number (for alien individuals required to file U.S. tax returns), at an office of the Social Security Administration or the Internal Revenue Service. To complete Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part 1, sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING Unless otherwise noted herein, all references below to section numbers or to regulations are references to the Internal Revenue Code and the regulations promulgated thereunder. Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7). - The United States or any agency or instrumentality thereof. - A state, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. - A foreign government or a political subdivision, agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the United States or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup with-holding if (i) this interest is $600 or more, and (ii) the interest is paid in the course of the payer's trade or business and (iii) you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under section 6041, 6041A(a), 6045 and 6050A. PRIVACY ACT NOTICES.--Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income and such failure is due to negligence, a penalty of 20% is imposed on any portion of an underpayment attributable to the failure. (3) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certification or affirmations, you are subject to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A.1.IV 5 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY REGARDING THE OFFER BY K-TRON INTERNATIONAL, INC. TO PURCHASE FOR CASH 450,000 SHARES AT $18.00 PER SHARE This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to tender shares pursuant to the Offer if (i) certificates for shares of common stock ("Shares") of K-Tron International, Inc., a New Jersey corporation (the "Company"), are not immediately available; (ii) time will not permit all required documents to reach American Stock Transfer & Trust Company, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in the Offer to Purchase, dated February 16, 2000 (the "Offer to Purchase")); or (iii) the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See Section 2 of the Offer to Purchase. Tenders using this form may be made only by or through a firm or other entity that is a member in good standing of the Security Transfer Agent's Medallion Program. Depositary: AMERICAN STOCK TRANSFER & TRUST COMPANY 40 Wall Street 46th Floor New York, New York, 10005 By Facsimile Transmission: (for Eligible Institutions only) (718) 234-5001 For Information: (800) 937-5449 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY. 2 Ladies and Gentlemen: The undersigned hereby tenders to K-Tron International, Inc. (the "Company"), upon the terms and subject to the conditions set forth in its Offer to Purchase, dated February 16, 2000, and the related Letter of Transmittal, receipt of which are hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. - -------------------------------------------------------------------------------- Number of Shares Tendered: ---------------------- Certificate Nos. (if available): ------------------------------------------------------ ------------------------------------------------------ If Shares will be tendered by book-entry transfer to The Depository Trust Company, please check box: DTC Participant Number: ------------------------- - -------------------------------------------------------------------------------- Name(s) of Record Holder(s): ------------------------------------------------------ ------------------------------------------------------ Address(es): --------------------------------------- ------------------------------------------------------ ------------------------------------------------------ [ ] Area Code and Telephone Number: -------------------------------- CONDITIONAL TENDER Unless this box has been completed and a minimum specified, the tender will be deemed unconditional (see Section 2 of the Offer to Purchase). Minimum number of Shares that must be purchased, if they are purchased: --------------- Shares (fill in) Dated: , 2000 - --------------------------------- --------------------------------------- Signature 2 3 GUARANTEE The undersigned, a firm or other entity that is a member in good standing of the Security Transfer Agent's Medallion Program, hereby: (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended; (b) represents that the tender of such Shares complies with Rule 14e-4; and (c) guarantees to deliver to American Stock Transfer & Trust Company, the Depositary, certificates representing the Shares tendered hereby, in proper form for transfer (or to tender Shares pursuant to the procedure for book-entry transfer into the Depositary's account at the Depository Trust Company if so specified on the foregoing page), together with a properly completed and duly executed Letter of Transmittal with any required signature guarantees, and any other required documents, within three Nasdaq trading days after the date of receipt hereof by the Depositary. Name of Firm: -------------------------------------- (PLEASE PRINT) Authorized Signature: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Address: -------------------------------------- (INCLUDE ZIP CODE) -------------------------------------- (AREA CODE AND TELEPHONE NUMBER) Dated: - ---------------------------------, 2000 3 EX-99.A.1.V 6 LETTER TO BROKERS, DEALERS,... 1 OFFER BY K-TRON INTERNATIONAL, INC. TO PURCHASE FOR CASH 450,000 SHARES AT $18.00 PER SHARE TO: BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES: Pursuant to your request, we are enclosing herewith the material listed below relating to the offer by K-Tron International, Inc. (the "Company") to purchase 450,000 shares of its issued and outstanding common stock ("Shares") at a price equal to $18.00 per Share, subject to the terms and conditions set forth in the Offer to Purchase, dated February 16, 2000, and the related Letter of Transmittal (which together constitute the "Offer"). THE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). The following documents are enclosed: (1) OFFER TO PURCHASE DATED FEBRUARY 16, 2000; (2) LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF COMMON STOCK; (3) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER; (4) NOTICE OF GUARANTEED DELIVERY; (5) LETTER TO CLIENTS, WHICH SHOULD BE SENT TO CLIENTS FOR WHOSE ACCOUNT YOU HOLD SHARES REGISTERED IN YOUR NAME (OR IN THE NAME OF YOUR NOMINEE) WITH SPACE PROVIDED FOR OBTAINING SUCH CLIENTS' INSTRUCTIONS WITH REGARD TO THE OFFER; (6) RETURN ENVELOPE ADDRESSED TO THE DEPOSITARY; AND (7) LETTER TO SHAREHOLDERS FROM EDWARD B. CLOUES, II, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF K-TRON INTERNATIONAL, INC. PLEASE NOTE THAT THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000, UNLESS EXTENDED. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. No fees or commissions will be payable to brokers, dealers or other persons for soliciting tenders of Shares pursuant to the Offer. The Company will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. The Company will pay all transfer taxes on its purchase of Shares, subject to Instruction 6 of the Letter of Transmittal. Backup tax withholding at a 31% rate may be required unless an exemption is proved or unless the required taxpayer identification information is or has previously been provided. Certain withholdings may also apply with respect to payments to non-U.S. shareholders. See Instruction 11 of the Letter of Transmittal. 2 The Offer is not being made to (nor will tenders be accepted from or on behalf of) shareholders residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. Additional copies of the enclosed material may be obtained from D. F. King & Co., Inc., the Information Agent (bankers and brokers call collect (212) 269-5550, all others call toll free (800) 755-7250). Any question you have with respect to the Offer should be directed to the Information Agent at one of the telephone numbers listed in the previous sentence. Very truly yours, K-TRON INTERNATIONAL, INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS THE AGENT OF THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON (A) TO MAKE ANY STATEMENTS WITH RESPECT TO THE OFFER, OTHER THAN THE STATEMENTS SPECIFICALLY SET FORTH IN THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL, OR (B) TO DISTRIBUTE ANY MATERIAL WITH RESPECT TO THE OFFER OTHER THAN AS AUTHORIZED HEREIN. 2 EX-99.A.1.VI 7 LETTER TO CLIENTS 1 OFFER BY K-TRON INTERNATIONAL, INC. TO PURCHASE FOR CASH To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated February 16, 2000 (the "Offer to Purchase"), of K-Tron International, Inc. (the "Company") and the related Letter of Transmittal, pursuant to which the Company is offering to purchase 450,000 shares of its issued and outstanding common stock ("Shares"), for cash of $18.00 per Share, subject to the terms and conditions set forth in the Offer to Purchase and the related Letter of Transmittal (which together constitute the "Offer"). THE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000 UNLESS EXTENDED (THE "EXPIRATION DATE"). The Offer to Purchase and the Letter of Transmittal are being forwarded to you as the beneficial owner of Shares held by us for your account but not registered in your name. We are sending you the Letter of Transmittal for your information only; you cannot use it to tender Shares we hold for your account. A tender of such Shares can be made only by us as the holder of record and only pursuant to your instructions. Your attention is called to the following: (1) The purchase price is $18.00 per Share, subject to the terms and conditions set forth in the Offer to Purchase and the related Letter of Transmittal. (2) The Offer is for 450,000 of the issued and outstanding Shares of the Company and is subject to certain conditions set forth in the Offer to Purchase. Under the conditions described in the Offer to Purchase, the Company may reduce the number of Shares to be purchased, terminate or amend the Offer, or postpone acceptance for payment of, payment for, or purchase of any Shares. (3) The Offer is not conditioned on any minimum number of Shares being tendered. (4) Assuming more than 450,000 Shares are duly tendered prior to the expiration of the Offer (as may be extended), the Company will purchase Shares from tendering shareholders in accordance with the terms and conditions specified in the Offer to Purchase pro rata in accordance with the number of Shares tendered by each shareholder during the period the Offer remains open, unless the Company determines not to purchase any Shares. (5) Tendering shareholders will not be obligated to pay brokerage commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the Company pursuant to the Offer; however, a broker, dealer or other person may charge a fee for processing the transactions on behalf of shareholders. Shareholders are not required to pay a service charge to the Company or the Depositary in connection with their tender of Shares. If you wish to have us tender your Shares, please so instruct us by completing, executing and returning to us the instruction form included herein. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER. THE EXPIRATION DATE AND WITHDRAWAL DEADLINE IS 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000, UNLESS EXTENDED. This Offer it not being made to (nor will tenders be accepted from or on behalf of) owners of Shares in any jurisdiction in which the Offer or its acceptance would violate the laws of such jurisdiction. 2 INSTRUCTIONS REGARDING THE OFFER BY K-TRON INTERNATIONAL, INC. TO PURCHASE FOR CASH 450,000 SHARES AT $18.00 PER SHARE THIS FORM IS NOT TO BE USED TO TENDER SHARES DIRECTLY TO THE DEPOSITARY. IT SHOULD BE SENT TO YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE ONLY IF SUCH FIRM IS THE HOLDER OF RECORD OF YOUR SHARES AND WILL BE EFFECTING THE TENDER ON YOUR BEHALF. THE DEPOSITARY MUST RECEIVE YOUR SHARES ON OR PRIOR TO MARCH 17, 2000. DO NOT COMPLETE THIS FORM IF YOU HAVE DECIDED NOT TO TENDER YOUR SHARES. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated February 16, 2000, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by K-Tron International, Inc. (the "Company") to purchase 450,000 shares of its issued and outstanding common stock, par value $.01 per share ("Shares"), at $18.00 per Share, expiring on March 17, 2000 (or, if the Offer is extended, on the new Expiration Date), on the terms and subject to the conditions of the Offer. The undersigned hereby instructs you to tender to the Company the number of Shares indicated below or, if no number is indicated, all Shares held by you for the account of the undersigned, upon the terms and subject to the conditions of the Offer. The undersigned hereby represents and warrants that: (i) the undersigned has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended; and (ii) the tender of such shares complies with Rule 14e-4. NUMBER OF SHARES TO BE TENDERED ____________ Shares* * Unless otherwise indicated, it will be assumed by us that all of the Shares held by us for your account are to be tendered. CONDITIONAL TENDER By completing this box, the undersigned conditions the tender authorized hereby on the following minimum number of Shares being purchased if any are purchased: ____________ Shares Unless this box is completed, the tender authorized hereby will be made unconditionally. 2 3 Account Number: ----------------------------------------------------- Tax Identification or Social Security Number: ----------------------------------------------------- ----------------------------------------------------- Name(s) of Beneficial Owner(s): (PLEASE PRINT) ----------------------------------------------------- (PLEASE PRINT) ----------------------------------------------------- (PLEASE PRINT) Address: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- Area Code and Telephone Number: (SIGNATURE OF BENEFICIAL OWNER) ----------------------------------------------------- (SIGNATURE OF ADDITIONAL BENEFICIAL OWNER, IF ANY) Date: ------------------------, 2000
3 EX-99.A.1.VII 8 LETTER TO SHAREHOLDERS 1 K-Tron International, Inc. [K-TRON LOGO] Routes 55 & 553 P.O. Box 888 Pitman, NJ 08071-0888 Phone (856) 589-0500 Direct Dial (856) 256-3310 FAX (856) 582-7968 E-mail: ecloues@ktron.com www.ktron.com EDWARD B. CLOUES, II Chairman and Chief Executive Officer February 16, 2000 Dear Shareholder: Enclosed is a copy of K-Tron International, Inc.'s offer to purchase dated February 16, 2000 (the "Offer to Purchase") 450,000 shares of its issued and outstanding common stock ("Shares"), at a price of $18.00 per Share, subject to the terms and conditions set forth in the Offer to Purchase and the related Letter of Transmittal (which together constitute the "Offer"). THE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 17, 2000, UNLESS EXTENDED. If, after reviewing the information set forth in the Offer to Purchase and Letter of Transmittal, you wish to tender Shares for purchase by K-Tron International, Inc. (the "Company"), please contact your broker, dealer, commercial bank, trust company or other nominee to effect the tender for you or, if you have the certificates for your Shares and they are in your name, you may follow the instructions contained in the Offer to Purchase and Letter of Transmittal. Tendering shareholders will not be obligated to pay brokerage commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer taxes, on the purchase of Shares by the Company pursuant to the Offer; however, a broker, dealer or other person may charge a fee for processing the transactions on behalf of shareholders. Shareholders are not required to pay a service charge to the Company or to American Stock Transfer & Trust Company, the Depositary, in connection with their tender of Shares. Neither the Company nor its Board of Directors is making any recommendation to any holder of Shares as to whether to tender Shares. Each shareholder is urged to consult his or her broker, investment advisor or tax advisor before deciding to tender any Shares. Should you have any other questions on the enclosed material, please do not hesitate to contact your broker, dealer or other nominee or call D. F. King & Co., Inc., the Information Agent, toll free at (800) 755-7250. Yours truly, /s/ Edward B. Cloues, II Edward B. Cloues, II Chairman and Chief Executive Officer EX-99.B.1 9 NOTE DATED FEDRUARY 4, 2000. 1 (b)(1) Prepared by: JEFFREY G. ALBERTSON, ESQ. Albertson Ward 36 Euclid Street, P.O. Box 685 Woodbury, NJ 08096 (856) 853-7770 NOTE $7,000,000.00 WOODBURY, NEW JERSEY February 4, 2000 BETWEEN the Borrower(s) K-TRON AMERICA, INC., A DELAWARE CORPORATION, whose address is Routes 55 and 553, P.O. Box 888, Pitman, New Jersey 08071-0888, referred to as "Borrower". AND the Lender, THE BANK of Gloucester County, whose address is 100 Park Avenue, Woodbury, New Jersey 08096, referred to as "THE BANK". 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 the loan that Borrower may receive hereunder, Borrower promises to pay the maximum principal sum of $7,000,000.00 or such lesser amount as may be advanced by THE BANK as hereinafter set forth (called "principal"), plus interest to the order of THE BANK. The Borrower may borrow up to one-half of the amount of the loan, not to exceed $3,500,000.00, on a fixed interest rate basis, and all or any part of the loan on a floating rate basis as Borrower elects at time of funding under this Note. Interest will be charged on that part of the principal which has not been paid from the date of funding 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. Interest rate charged shall be as follows: 2 1. For the fixed rate portion of the Note, a fixed interest rate equal to the two (2) year Treasury rate plus 175 basis points, such rate to be determined as of the date of funding under the terms of this Note. Said rate established at time of funding shall be fixed for two (2) years from the date of funding of the Note. At the two (2) year anniversary of the funding under the terms of this Note, the rate on this fixed interest rate portion of the Note shall change to the variable rate of interest described in paragraph 2 below, unless the Borrower then elects to accept a fixed rate option to be determined and offered by THE BANK at that time. 2. For the floating rate portion of the Note, a variable interest rate equal to the one (1) month LIBOR rate plus 185 basis points. The rate of interest shall be established on the twenty-fifth (25th) day of each calendar month, or the next business day thereafter, and said interest rate to commence on the first business day of each calendar month thereafter. For purpose of this Note, LIBOR interest rate shall be defined as the rate of interest equal to the sum of (a) the London Interbank Offered Rate (LIBOR) for maturities of one (1) month, expressed as an annual yield, as reported in the Wall Street Journal or a comparable source on the date the quote by THE BANK is given (the "LIBOR Index Rate"); and (b) 185 basis points. The rate of interest so established shall remain in effect until the first business day of the succeeding calendar month, at which time the rate of interest shall be reestablished as provided herein. The interest rate established at time of funding under the terms of this Note shall be the same as if established on the first of said month. TERM AND PAYMENTS. Borrower will pay principal together with interest accrued based on a FOUR (4) YEAR schedule with equal principal monthly payments, PLUS INTEREST AS SET FORTH ABOVE commencing on MAY 1, 2000 and continuing on the first business day of each month thereafter during the term hereof with a final payment to be due and payable on the FIRST DAY OF -2- 3 APRIL 2004. An amount of each principal payment equal to 1/48th of the amount borrowed under the fixed rate portion shall be allocated to the fixed rate portion of the loan, and the balance to the variable rate portion. All payments will be made to THE BANK at the address shown above or to a different place if required by THE BANK. SECURITY. The Borrower hereunder has delivered as security for this instrument a second mortgage bearing even date herewith covering premises designated on the official tax map as Lot 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. The provisions of any mortgage given as security for this Note are incorporated herein by reference. Further, the Borrower shall deliver a second lien perfected security interest in the accounts receivable, inventory, machinery and equipment now owned or hereafter acquired by Borrower located at Routes 55 and 553, Pitman, New Jersey 08071 and Suite 601, VPR Commerce Center, 1001 Lower Landing Road, Blackwood, New Jersey 08012. Borrower shall also deliver the Guaranty of K-Tron International, Inc. ("Guarantor"). PREPAYMENT PENALTY: This Note may be prepaid at any time, subject to the following provision. There shall be a Prepayment Penalty on the fixed interest rate portion of this Note as set forth above in the amount of 2% OF THE AMOUNT OF PREPAYMENT AS DEFINED HEREIN for the first two (2) years following funding under the terms of this Note, provided however that the Borrower may prepay up to 30% of the principal balance per year without penalty. The said 30% shall be calculated on the original principal balance or the outstanding principal balance at the beginning of each anniversary of funding under the terms of this Note, as applicable. After two (2) years from funding under the terms of this Note, the balance on the fixed interest rate portion of this -3- 4 Note may be prepaid without penalty. At no time will there be a prepayment penalty on the variable interest rate portion of this Note. BORROWER COVENANTS. Borrower agrees that until all obligations under the terms of this Note and the loan commitment dated January 21, 2000 are fully paid and discharged, without prior written consent of THE BANK: A. The consolidated debt to net worth ratio of Guarantor shall not be more than 1.55 at fiscal year-end 2000 or more than 1.50 at fiscal year-end 2001 and each fiscal year-end thereafter. B. The consolidated annual debt coverage ratio of Guarantor at each fiscal year-end shall not be less than 1.20. C. The consolidated net worth of Guarantor shall not be less than $22,000,000.00 at fiscal year-end 2000 or less than $24,000,000.00 at fiscal year-end 2001 and each fiscal year-end thereafter, excluding any declines due to changes in foreign exchange rates subsequent to January 1, 2000. D. There shall be no additional borrowing of funded debt by Guarantor or its subsidiaries from any party other than THE BANK in an amount greater than the sum of (i) $2,000,000.00 above the borrowings on Guarantor's consolidated January 1, 2000 financial statements, exclusive of changes in borrowings due to foreign exchange rate changes, and (ii) the difference between $12,000,000.00 and the amount of Borrower's borrowings from THE BANK outstanding at the time of any such additional borrowing, excluding the existing $2,700,000.00 mortgage for all purposes of this calculation. E. There shall be no upstreaming of funds from Borrower to Guarantor or K-Tron Technologies, Inc. except for management fees consistent with past practice and royalties paid in the -4- 5 ordinary course of business at the new royalty rate established as of January 2, 2000, and except for dividends paid with the proceeds of this loan. F. For two (2) years from the date of funding under the terms of this Note, there shall be no mergers or acquisitions by Guarantor or its subsidiaries involving consideration of more than $2,000,000.00. 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. 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, 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 and after THE BANK has given the Borrower fifteen (15) days written notice to cure said default, 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. It shall be a default of this Note if Borrower shall default in any payment of principal or interest on any indebtedness or contingent obligation for money borrowed (other than Borrower's obligations under this Note) or any other event shall occur, the effect of which is to permit such indebtedness or contingent obligation to be declared or such indebtedness or contingent obligation shall otherwise become due prior to its stated maturity, provided, however, that this provision shall -5- 6 not apply concerning obligations other than Borrower's obligations under this Note unless the amount involved exceeds $50,000.00. 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. 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 agrees to pay the reasonable fees and costs of such attorney, whether or not legal action is instituted and further consents 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: Funding under this Note is contingent only upon Borrower's compliance with all of the terms and conditions contained in the commitment letter issued by THE BANK to Borrower on January 21, 2000. Also 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. -6- 7 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 MORTGAGE SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER APPLICABLE 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. 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. INCONSISTENCY: In the event of any inconsistency between this Note and any other loan document, this Note shall govern. IN WITNESS WHEREOF, the Borrower hereunder has hereunto set its hands and seals the day and year first above written. ATTEST: K-TRON AMERICA, INC. BY: /s/ MARY VACCARA /s/ PATRICIA M. MOORE - ------------------------------------- --------------------------------- MARY VACCARA, SECRETARY PATRICIA M. MOORE, VICE PRESIDENT-FINANCE -7- 8 100 Park Avenue Woodbury, New Jersey 08096 (856) 845-0700 January 21, 2000 Edward B. Cloues, II K-Tron America, Inc. Routes 55 & 553 P.O. Box 888 Pitman, New Jersey 08071-0888 Dear Mr. Cloues: This commitment letter replaces the one dated January 19, 2000, which is now null and void. We are pleased to advise you that The Bank of Gloucester County ("The Bank") has approved your request for a Term Loan under the following terms and conditions: BORROWER: K-Tron America, Inc. GUARANTOR: K-Tron International, Inc. AMOUNT: up to $7,000,000.00 USE OF PROCEEDS: The loan proceeds shall be used to finance the purchase by K-Tron International, Inc. of up to 450,000 shares of K-Tron International, Inc. stock. INTEREST RATE: Variable Interest Rate Option: A variable interest rate equal to the one (1) month LIBOR rate plus 185 basis points, such rate to change as of the first business day of each calendar month. 9 K-Tron America, Inc. January 19, 2000 Page 2 of 9 Fixed Interest Rate Option: For up to $3,500,000.00 or one-half the loan amount, whichever is less, a fixed interest rate equal to the two (2) year Treasury rate plus 175 basis points, such rate to be determined as of the date of the note. Said rate shall be fixed for two (2) years from the date of the note. At the two (2) year anniversary of the note, the rate on the Fixed Interest Rate portion of the loan shall change to a variable rate as described under Variable Interest Rate Option above, unless the Borrower then elects to accept a fixed rate option to be determined and offered by The Bank at that time. Of the balance of this loan for which Borrower now elects not to take the Fixed Interest Rate Option, said balance shall accrue interest at the Variable Interest Rate Option described above. COMMITMENT FEE: None TERM OF LOAN AND REPAYMENT TERMS: The loan is to be repayable in forty-seven (47) monthly principal installments of $145,833.33, plus interest, and one final payment of the remaining principal balance and interest owing in the forty-eighth (48th) month. Payments shall commence one month from the date of settlement of the loan. In the event that less than $7 million is borrowed hereunder, the amount of the monthly principal installment shall be correspondingly reduced so that the amount borrowed is scheduled to amortize over 48 months. COLLATERAL: This loan is to be secured by: 1. Second lien perfected security interest, subject only to The Bank's first lien security interest, in the 10 K-Tron America, Inc. January 19, 2000 Page 3 of 9 accounts receivable, inventory, machinery and equipment now owned or hereafter acquired by Borrower located at Routes 55 and 553, Pitman, NJ 08071 and Suite 601, VPR Commerce Center, 1001 Lower Landing Road, Blackwood, NJ 08012. 2. Second mortgage, behind The Bank's $2.7 million first mortgage, on the commercial real estate located at Routes 55 & 553 (Block 249 Lot 3.01) in Mantua Township, New Jersey ("Mortgaged Property"). 3. The corporate unconditional, unlimited guarantee of K-Tron International, Inc. ATTORNEY: The Bank will be represented in this transaction by Jeffrey G. Albertson, Esquire, of Albertson Ward, 36 Euclid Street, Woodbury, New Jersey 08096, 856-853-7770. All documents pertaining to this transaction must be prepared by or reviewed by the Bank's attorney. All fees charged by The Bank's counsel in connection with this transaction shall be borne by the Borrower. The Borrower shall have the right to be represented in this transaction by an attorney of the Borrower's selection, whose fee shall be borne by the Borrower. Upon acceptance of this commitment, the Borrower shall contact Mr. Albertson's office concerning the loan closing procedure. OTHER CONDITIONS The funding of this commitment and the satisfactory continuance of this Term Loan are contingent upon: 1. The loan documents shall include a fifteen (15) day default clause. The Borrower shall have fifteen (15) days to cure said default after receiving written notice of same. The loan documents shall include a due on transfer clause. The Bank shall require the 11 K-Tron America, Inc. January 19, 2000 Page 4 of 9 maintenance of adequate insurance coverage on the Mortgaged Property and require payment of real estate taxes, when due. A hazard insurance policy must be obtained for a term of not less than one year. The original insurance policy and proof that the first year's premium is paid must be provided at settlement. The policy must be dated on or before the date of settlement, must provide coverage in an amount not less than the lesser of (i) this loan balance or (ii) $2,700,000.00, and the "Mortgagee Clause" must indicate: The Bank of Gloucester County, its successors and/or assigns, 100 Park Avenue, Woodbury, NJ 08096. 2. The loan documents shall contain such other provisions as The Bank or its counsel may deem appropriate in order to maintain the adequacy of its security and primarily obligate the Borrower and Guarantor for repayment of the loan. This commitment and the obligations and undertakings therein shall be incorporated in the loan documents and become an integral part thereof. 3. In regard to the second mortgage on the Mortgaged Property located at Routes 55 & 553 (Block 249 Lot 3.01) in Mantua Township, New Jersey: A. The Bank is in receipt of a satisfactory appraisal on the Mortgaged Property. B. Receipt by the Bank of a satisfactory title report and superior court searches which must indicate that our lien position on Mortgaged Property is a second lien position, the cost of which is to be borne by the Borrower. C. If flood insurance is required at settlement or subsequently the Mortgaged Property becomes designated by HUD as 12 K-Tron America, Inc. January 19, 2000 Page 5 of 9 containing special flood or mud-slide hazards, then in accordance with Federal regulations evidence of coverage and proof that the first year's premium is paid will be required. The Flood Insurance Policy, if required, must be in an amount not less than the lesser of (i) this loan balance or (ii) the fair market value of the Mortgaged Property, and the "Mortgagee Clause" must indicate: The Bank of Gloucester County, its successors and/or assigns, 100 Park Avenue, Woodbury, NJ 08096. 4. Receipt by The Bank of a Corporate Status Search for the Borrower and Guarantor, the cost of which shall be borne by the Borrower. 5. Receipt by the Bank of satisfactory state and county UCC searches, which must indicate that our lien position on the assets of the Borrower, referenced above, is in second position, subject only to The Bank's first position, the cost of which is to be borne by the Borrower. 6. Receipt by the Bank of acceptable current financial statements and annual updates on the Borrower and Guarantor. The updates for financial statements and tax returns are to be submitted within thirty (30) days of the date requested by the Bank. Should the Borrower or Guarantor fail to submit required financial information within 30 days of the date of request, the Bank may, at its sole option, increase the interest rate on the note by one half (1/2) of one (1) percent per annum. 7. The Borrower must develop and maintain with The Bank a meaningful deposit relationship satisfactory to The Bank. 8. 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 13 K-Tron America, Inc. January 19, 2000 Page 5 of 9 shall, after declaring the loan to be in default, have the right to increase the applicable interest rate to two (2%) percent in excess of the contract rate. This provision is in addition to any late charges that may be due. 9. Borrower and Guarantor agree that until all obligations hereunder are fully paid and discharged, Borrower and Guarantor will not without the prior written consent of The Bank: A. Permit the consolidated debt to worth ratio of Guarantor to be more than 1.55 at fiscal year-end 2000 or more than 1.50 at fiscal year-end 2001 and each fiscal year-end thereafter. B. Permit the consolidated annual debt coverage ratio of Guarantor to be less than 1.20. C. Permit the consolidated net worth of Guarantor to be less than $22 million at fiscal year-end 2000 or less than $24 million at fiscal year-end 2001 and each fiscal year-end thereafter. D. Permit additional borrowing elsewhere by Guarantor or its subsidiaries in an amount greater than the sum of (i) $2 million above the borrowings on Guarantor's consolidated 1/1/00 financial statements, exclusive of changes in borrowings due to foreign exchange rate changes, and (ii) the difference between $12 million and the amount of Borrower's borrowings from The Bank outstanding at the time of any such additional borrowing, excluding the existing $2.7 million mortgage for all purposes of this calculation. 14 K-Tron America, Inc. January 19, 2000 Page 7 of 9 E. Permit upstreaming of funds from Borrower to Guarantor or K-Tron Technologies, Inc. except for management fees consistent with past practice and royalties paid in the ordinary course of business at the new royalty rate established as of January 2, 2000, and except for dividends paid in connection with the proceeds of this loan. F. For two years from the date of the loan, permit mergers or acquisitions by Guarantor or its subsidiaries involving consideration of more than $2 million without the written approval of The Bank. 10. As to the amount borrowed under the Fixed Interest Rate Option, Borrower shall have the right at any time during the term hereof to prepay all or a part of the principal balance then outstanding under the note upon payment of the premiums and charges hereinafter set forth. A principal prepayment shall be deemed to have occurred upon Borrower's payment to The Bank in any Loan Year during the first two (2) Loan Years of the note of any sum in reduction of principal which exceeds 30% of the outstanding principal balance at the beginning of that Loan Year, excluding principal payments (including scheduled amortization) the Borrower is obligated to make under any other term or provision of the note, the mortgage securing the note or any other document constituting a part of the loan transaction evidenced by the note. Upon the occurrence of a principal prepayment including prepayment of the entire debt, The Bank shall be entitled to charge and Borrower shall be obligated to pay, in addition to interest and all other charges then properly due, a prepayment premium equal to 2% of the amount prepaid. No premium shall be charged on any principal reduction made after the second (2nd) anniversary of the note. The term "Loan Year" as used herein is defined as any period 15 K-Tron America, Inc. January 19, 2000 Page 8 of 9 of one year commencing on the date of the note or on any anniversary of such date. At no time will there be a prepayment penalty on the Variable Interest Rate portion of the loan. This commitment will expire at the end of fifteen (15) days from the date hereof unless written acceptance is received from the Borrower, and in any case, at the end of sixty (60) days from the date hereof if settlement has not been held hereunder. Your signature and return of the enclosed copy of this letter shall constitute written acceptance. Upon acceptance of this commitment, borrower agrees to reimburse The Bank of Gloucester County for all expenses incurred for ordering appraisals, surveys, title insurance, environmental evaluations, and the like as may be necessary to meet the requirements on this loan commitment. IMPORTANT: THE BANK (AND ITS COUNSEL) CANNOT BEGIN PROCESSING YOUR LOAN UNTIL YOU HAVE RETURNED THIS EXECUTED COMMITMENT LETTER TO THE BANK. FURTHERMORE, YOUR ELECTIONS AS TO THE AMOUNT BORROWED AND THE INTEREST RATE OPTIONS MUST BE MADE NO LESS THAN TEN (10) DAYS PRIOR TO THE CLOSING OF THIS LOAN. Sincerely, The Bank of Gloucester County /s/ DAVID J. HANRAHAN, SR. David J. Hanrahan, Sr. Vice President 16 K-Tron America, Inc. January 19, 2000 Page 9 of 9 NOTICE PURSUANT TO THE PROVISIONS OF N.J.S.A. 46:10A-6, AS AMENDED, YOU ARE PUT ON NOTICE THAT THE INTERESTS OF THE BORROWER AND LENDER ARE OR MAY BE DIFFERENT AND MAY CONFLICT, AND THAT THE LENDER'S ATTORNEY REPRESENTS ONLY THE LENDER AND NOT THE BORROWER AND THE BORROWER IS THEREFORE ADVISED TO EMPLOY AN ATTORNEY OF THE BORROWER'S CHOICE LICENSED TO PRACTICE LAW IN THE STATE OF NEW JERSEY TO REPRESENT THE INTERESTS OF THE BORROWER. The fee of The Bank's counsel is based upon a fixed fee basis and is estimated to be $3,000.00. ACCEPTED BY: K-TRON AMERICA, INC. /s/ KEVIN C. BOWEN FEBRUARY 4, 2000 ____________________________________ __________________ Kevin C. Bowen, President Date /s/ MARY E. VACCARA FEBRUARY 4, 2000 ____________________________________ __________________ Mary E. Vaccara, Corp. Secretary Date GUARANTOR: K-TRON INTERNATIONAL, INC. /s/ EDWARD B. CLOUES, II FEBRUARY 4, 2000 ____________________________________ __________________ Edward B. Cloues, II, Chairman/CEO Date /s/ MARY E. VACCARA FEBRUARY 4, 2000 ____________________________________ __________________ Mary E. Vaccara, Corp. Secretary Date
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