-----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, NYterdHT3nWi7Nujy/2kshC00vvHeTr9IzgZGxNCb5ZbtBhB3RfZQZOutkLUulka 773p9846xppjaa+SRzjM2A== 0000893220-00-000394.txt : 20000403 0000893220-00-000394.hdr.sgml : 20000403 ACCESSION NUMBER: 0000893220-00-000394 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000101 FILED AS OF DATE: 20000330 FILER: 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: 10-K405 SEC ACT: SEC FILE NUMBER: 000-09576 FILM NUMBER: 589250 BUSINESS ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 BUSINESS PHONE: 8562563318 MAIL ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: P O BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 10-K405 1 FORM 10-K JAN 1 2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [NO FEE REQUIRED] for the fiscal year ended January 1, 2000 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [NO FEE REQUIRED] for the transition period from ________ to ________ COMMISSION FILE NUMBER 0-9576 K-TRON INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) New Jersey (State or other jurisdiction of 22-1759452 incorporation or organization) (I.R.S. Employer Identification No.) Routes 55 and 553 P.O. Box 888 Pitman, New Jersey 08071-0888 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (856)589-0500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No__ 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this annual report on Form 10-K or any amendment to this annual report on Form 10-K. /X/ As of March 24, 2000, the aggregate market value of the Common Stock held by non-affiliates of the Registrant was $34,979,438. Such aggregate market value was computed by reference to the closing sale price of the Common Stock as reported on the Nasdaq National Market on such date. For purposes of making this calculation only, the Registrant has defined affiliates as including all directors and executive officers, but excluding any institutional shareholders owning more than ten percent of the Registrant's Common Stock. As of March 24, 2000, there were 2,420,155 shares of the Registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: As stated in Part III of this annual report on Form 10-K, portions of the following document are incorporated herein by reference: Definitive proxy statement to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K. Unless the context indicates otherwise, the terms "K-Tron" and "Company" refer to K-Tron International, Inc. and, where appropriate, one or more of its subsidiaries. -2- 3 PART I ITEM 1. BUSINESS. GENERAL K-Tron International, Inc. was incorporated in New Jersey in 1964. The Company's operations are conducted primarily through subsidiaries, and its principal business is the design, production, marketing and servicing of gravimetric and volumetric feeders and related equipment for the processing of bulk solids in a wide variety of manufacturing processes. K-Tron feeders control by mass or weight (gravimetric feeding) or by volume (volumetric feeding) the rate at which ingredients are fed into the manufacturing processes of numerous products. The major industries served are plastics, food, chemical, detergent, pharmaceutical and cement, but the Company's feeders are also used in many other industries. In addition to feeding equipment, K-Tron designs, produces, markets and services pneumatic conveying systems and related equipment for the food, plastics and pharmaceutical industries, which may be used either in conjunction with certain K-Tron feeders or on a stand-alone basis, as well as electronic assemblies. K-Tron has manufacturing facilities in the United States, Switzerland and Canada, and its equipment is sold throughout the world. The Company provides service and spare parts for its feeding and pneumatic conveying equipment on a worldwide basis, and it offers customer and employee training through its K-Tron Institute in the United States and similar programs in Switzerland and elsewhere. See Note 12 of Notes to consolidated financial statements, included in Item 8 of this annual report on Form 10-K, for certain financial information about foreign and domestic operations. BRAND NAMES The Company markets its feeding and pneumatic conveying equipment under three brand names: K-Tron Soder (feeders for other than heavy industries), Hasler (feeders for heavy industries) and Hurricane (pneumatic conveying equipment). The Company markets these brands on both an equipment and total systems basis. FEEDING EQUIPMENT The Company's feeders control the flow of materials into a manufacturing process by mass or weight (gravimetric feeding) or by volume (volumetric feeding). Feeding equipment manufactured by the Company is used in many different industries. -3- 4 Weigh Belt Feeders. Weigh belt feeders move dry bulk material along a belt, continuously weighing the material and adjusting the belt speed in order to control precisely the flow rate of the material being fed into the manufacturing process. The feeder regulates the flow rate according to the set points in its electronic controller. A typical application would incorporate several feeders, each supplying an ingredient of the final product, and electronic controllers that determine the feed rate of each ingredient and are capable of instantly altering individual feed rates to maintain the desired proportion of each ingredient. Weigh belt feeders may also be used as batchers, to feed bulk material into bags and other containers, or as meters, to measure accurately the amount of material flowing into or out of a container. Loss-in-Weight Feeders. The loss-in-weight principle involves weighing the entire feeding system, both equipment and material, which may be either dry or liquid. The feeding mechanism controls the rate at which material is discharged into the manufacturing process based upon a change in the total weight of the system as material flows from the feeder. Electronic controllers determine the feed rate and are capable of instantly altering feed rates to maintain an accurate flow of materials. In dry material applications, loss-in-weight feeders usually utilize an auger (single or twin screw) or vibratory feeding mechanism, and the outflow is adjusted continuously to maintain the desired feed rate. In liquid applications, the flow rate is maintained by a pump or valve. Loss-in-weight feeders are especially suitable for applications requiring a very high degree of accuracy, as in adding minor ingredients to food processes or colorants to plastics, or applications requiring a closed system, as in feeding dusty materials. Loss-in-weight feeders virtually never need recalibration and may also be used as batchers. Volumetric Feeders. Volumetric feeders utilize single or twin screw feeding mechanisms or other systems to regulate flow by volume instead of weight, thereby offering an economical method of feeding bulk solids where demands for accuracy are less stringent. They also can be used to make batches by feeding sequentially into a hopper which is weighed and using the weight signal to start and stop each feeder. K-Tron Soder Brand. The K-Tron Soder brand of products offers feeding equipment and systems to control precisely the flow of ingredients in the manufacture of numerous products in industries other than heavy industries. K-Tron Soder feeders, including loss-in-weight feeders, weigh belt feeders, volumetric feeders, flow meters and related controls, are assembled at Company facilities in the United States and Switzerland in a complete range of feeding equipment types and sizes for these industries. The plastics, food, chemical, detergent and pharmaceutical industries are among those served by K-Tron Soder feeders. Hasler Brand. The Hasler brand of products includes weigh belt feeders, belt scales, flow meters, electronic ears, loss-in-weight feeders and related controls. Hasler feeders, like K-Tron Soder feeders, control the flow of ingredients into a process, but Hasler feeders serve heavy industry applications which generally require high rates of material flow in rugged environments. -4- 5 Hasler feeders are used in cement mills, mines and quarries and in the fertilizer, aluminum, coal, glass and steel industries. They are primarily assembled at Company facilities in Switzerland and also at Company facilities in the United States. PNEUMATIC CONVEYING EQUIPMENT In 1997, K-Tron acquired Hurricane Pneumatic Conveying Inc., a Canadian company that manufactures pneumatic conveying systems and related equipment primarily for the food, plastics and pharmaceutical industries. Hurricane's brand of products, which include both self-contained and central systems for powder and pellet applications, may be used in conjunction with certain K-Tron Soder feeders or on a stand-alone basis. Hurricane products are assembled at Company facilities in Canada. K-TRON ELECTRONICS K-Tron Electronics designs, produces and tests electronic assemblies for outside customers as well as for use by the Company in its products and also produces controller hardware for the Company. Its facilities, which are located in the United States, provide automated surface mount as well as through-hole assembly capabilities and testing equipment. CUSTOMERS The Company sells its equipment throughout the world to a wide variety of customers in its addressed markets, ranging from large, global companies to regional and local businesses. No single customer accounted for more than 10% of the Company's total revenues in fiscal 1999. MANUFACTURING AND SUPPLIERS The Company's primary manufacturing activities consist of the assembly, calibration and testing of equipment, the machining and fabrication of certain components and the producing of electronic assemblies and controllers. The Company also manufactures the weight sensors which are used in most of its gravimetric feeders. The Company assembles a number of components used in its products that are manufactured by others to its specifications. These components include sheet metal parts, screws, castings, integrated circuits, printed circuit boards and enclosures. The Company produces a number of basic feeder models. Feeder units are completed to specific customer orders, and customization is generally limited to combining existing mechanical and electronic modules to meet a customer's application requirements. Although certain components of the Company's products are currently purchased from sole sources, the Company believes that comparable components can be obtained readily from alternative suppliers or can be manufactured by the Company internally, at prices competitive -5- 6 with those of its current sources. The Company has never had a significant production delay which was primarily attributable to an outside supplier. PATENTS The Company's technology is protected by numerous patents in the United States and in other major countries which offer patent protection. Certain of the Company's patents have expired and others will expire at various future dates. The loss of such patent protection is not expected to have a significant adverse effect on the Company's operations. RESEARCH AND DEVELOPMENT The Company invests in research and development ("R&D") to maintain a technological leadership position in the feeding equipment industry. R&D focuses on new products as well as on improvements to existing products. Current efforts are aimed at developing new products, including new controls and a new belt feeder, shortening the time spent in the development of such products, recycling existing product designs into lower cost products and analyzing the price/performance relationship for both new and existing products. A centralized R&D approach facilitates the development of common or compatible products for the Company's three brands. The Company utilizes common weighing and control technologies for both of its feeder brands. The Company's research and development expenses were $3,353,000, $2,980,000 and $2,768,000 in fiscal 1999, 1998 and 1997, respectively. COMPETITION The Company is a leading worldwide producer of feeders and related equipment for the handling of bulk solids in manufacturing processes. The Company believes it has reached this position primarily because of its use of electronic and digital control technology, its use of digital weighing technology, its development of mechanical design improvements to its products and its knowledge of material handling. The Company also relies on other technological advantages and on its reputation and experience in serving the needs of its large customer base to maintain a competitive advantage. The Company entered the pneumatic conveying equipment market late in 1997 with its acquisition of the Hurricane brand. This is a very large market, and the Company's strategy is to target specific niches within the overall market and to sell its pneumatic conveying equipment in connection with certain K-Tron Soder feeders as well as on a stand-alone basis. K-Tron Electronics was established to design and manufacture electronic assemblies and controller hardware for use by the Company and also to sell such assemblies to third parties, -6- 7 generally focusing on small production runs for customers in New Jersey, eastern Pennsylvania and Delaware. The market for electronic assemblies is very large, and K-Tron Electronics is one of many suppliers to this market in the region identified. Strong competition exists in every major market that the Company serves. Competitors range in size from large corporations (or subsidiaries or divisions thereof) with a broad line of products to regional organizations which may specialize in a limited range of products. BACKLOG At the end of fiscal 1999, the Company's backlog of unfilled orders was approximately $17,835,000, compared to a backlog of approximately $22,354,000 at the end of fiscal 1998, a decrease of 20.2%. Using the end of fiscal 1999 exchange rates, the backlog of orders at the end of fiscal 1998 was approximately $20,585,000, representing a decrease in the 1999 backlog of approximately 13.4%. The backlog of orders at the end of fiscal 1999, excluding the effect of foreign currency exchange translations, was lower than the 1998 year-end backlog primarily due to the shipment of a large order in the fourth quarter of 1999 that was included in the 1998 year-end backlog. The bulk of the Company's backlog represents orders that will be ready for delivery in less than 120 days. Thus, except for shipments to be made later in the year in accordance with customer requests, it is expected that most of the backlog as of the end of fiscal 1999 will be shipped prior to April 30, 2000. EMPLOYEES At the end of fiscal 1999, the Company had 475 employees, of which 292 were located in Europe, 163 in the United States, 13 in Singapore, 4 in Canada and 3 in China. None of the Company's employees are represented by labor unions. The Company considers relations with its employees to be good. ITEM 2. PROPERTIES. In North America, the Company owns a 92,000 square foot building on 17 acres in Pitman, New Jersey where it has manufacturing facilities, administrative offices, its corporate headquarters, research and development offices and a tech center for product demonstrations and training. A portion (approximately 10,000 square feet) of the Company's Pitman facility is leased to a sheet metal business which is a major supplier to the Company. The Company also has leased facilities in Blackwood, New Jersey where it produces electronic assemblies and controller hardware, and in Brantford, Ontario where it assembles pneumatic conveying equipment. -7- 8 In Niederlenz, Switzerland, the Company owns a 60,000 square foot building where it has manufacturing facilities and a tech center for product demonstrations, and an adjacent five floor, 40,000 square foot office building which houses administrative offices, training facilities and research and development offices. In 1999, one floor of the office building was leased to third parties. The Company also occupies an adjacent leased facility where it manufactures weight sensors. In Colombier, Switzerland, the Company leases a 51,000 square foot building where it has manufacturing facilities, administrative offices, training facilities and research and development offices. The lease will not be renewed upon expiration in October 2000. During fiscal 2000, the sales, sales support and service activities conducted from that building will be moved to a 4,000 square foot leased facility in Neuchatel, Switzerland, near Colombier, while engineering, assembly and administration will be relocated to the Company's facility in Niederlenz, Switzerland. In Niederlenz, the manufacturing area will be expanded by 6,000 square feet and approximately half of the office building third-party leased space will be used for administration. Certain sales and service activities are conducted at Company-owned facilities in England (30% leased to a third party) and Germany and from leased office space in Germany, France, Singapore and China. The Company believes that its present facilities will be sufficient to meet its needs for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. This item is not applicable because there were no matters submitted to a vote of security holders during the fourth quarter of 1999. -8- 9 EXECUTIVE OFFICERS OF THE REGISTRANT The current executive officers of the Company are as follows:
Name Age Position ---- --- -------- Edward B. Cloues, II 52 Chairman of the Board of Directors and Chief Executive Officer Kevin C. Bowen 48 President and Chief Executive Officer of K-Tron America, Inc. Lukas Guenthardt 41 Senior Vice President - Strategic Planning, Product Development and Marketing Ronald R. Remick 53 Senior Vice President, Chief Financial Officer and Treasurer Beat Steger 43 Managing Director of K-Tron (Schweiz) AG ("K-Tron Switzerland")
Edward B. Cloues, II has been a director since July 1985 and was most recently reelected at the 1997 annual meeting of shareholders. He became Chairman of the Board of Directors and Chief Executive Officer of the Company on January 5, 1998. From May 1985 until May 1998, Mr. Cloues served as Secretary of the Company. Prior to joining the Company, Mr. Cloues was a senior partner in the law firm of Morgan, Lewis & Bockius LLP, which is the Company's general counsel. He is also a director and non-executive Chairman of the Board of AMREP Corporation and a director of AmeriQuest Technologies, Inc. Kevin C. Bowen has been President and Chief Executive Officer of K-Tron America, Inc. since March 1995. From March 1994 to March 1995, Mr. Bowen was President of K-Tron North America, the North American sales division of K-Tron America. Mr. Bowen served as President of K-Tron America from May 1990 to March 1994 and has been with the Company in various other capacities since 1979. Lukas Guenthardt has been Senior Vice President - Strategic Planning, Product Development and Marketing of the Company since June 1, 1998. Mr. Guenthardt was Managing Director of K-Tron Switzerland from July 1995 to June 1, 1998, Managing Director of the Soder Division of K-Tron Switzerland from March 1994 to July 1995, and Director of International -9- 10 Research and Development of the Company from July 1992, when he joined K-Tron, until March 1994. Ronald R. Remick has been Senior Vice President, Chief Financial Officer and Treasurer of the Company since May 10, 1999. Prior to joining the Company, Mr. Remick was Vice President of Planning and Treasury of ARCO Chemical Company from 1995 to 1998 and Vice President of Planning and Control of ARCO Chemical Company from 1993 to 1995. Beat Steger has been Managing Director of K-Tron Switzerland since June 1998. From 1995 to June 1998, Mr. Steger was Director of Operations for K-Tron Switzerland, and he has been with K-Tron Switzerland in various other capacities since 1988. The executive officers are elected or appointed by the Board of Directors of the Company or its appropriate subsidiary to serve until the appointment or election and qualification of their successors or their earlier death, resignation or removal. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock trades on the Nasdaq National Market under the symbol "KTII." The following table sets forth the high and low sales prices for each quarter in fiscal 1998 and 1999 as quoted on the Nasdaq National Market.
Fiscal Year 1998 High Low 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 March 24, 2000, the closing price of a share of K-Tron Common Stock as reported by the Nasdaq National Market was $15.625. There were 321 record holders of the Company's Common Stock on March 24, 2000. -10- 11 DIVIDEND POLICY The Company has never paid a cash dividend on its Common Stock, and it currently intends to retain all future earnings for use in its business. The declaration and payment of dividends in the future will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial condition, capital requirements and other factors. In addition, one of the Company's credit facilities contains certain restrictions on the transfer of funds that may restrict the Company's ability to declare dividends. ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated financial data presented below for, and as of the end of, each of the Company's last five fiscal years have been derived from and are qualified by reference to the Company's consolidated financial statements. The consolidated financial statements of the Company for the fiscal years ended January 1, 2000, January 2, 1999, January 3, 1998, December 28, 1996 and December 30, 1995 have been audited by Arthur Andersen LLP, independent public accountants. This information should be read in conjunction with the Company's consolidated financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere herein. The Company has not paid any cash dividends on its shares of Common Stock during the periods presented. -11- 12
FISCAL YEAR ENDED ------------------------------------------------------------------------------- JAN. 1 JAN. 2 JAN. 3 DEC. 28 PRO FORMA DEC. 30 2000 1999 1998 1996 1995(1) 1995 - --------------------------------------------------- ------------- -------------- ---------- ------------ ------------ ------------ FINANCIAL SUMMARY($000): Revenues $87,887 $89,142 $87,152 $89,871 $89,640 $110,394 Income before loss on disposition of businesses and taxes 8,644 8,718 7,309 5,841 2,717 834 Income (loss) on disposition of businesses (2) -- -- -- -- -- (11,278) Net income (loss) 6,759 6,593 5,444 4,026 1,408 (9,294) Total assets 54,770 56,617 54,249 55,330 69,296 Working capital 14,057 11,446 9,423 15,362 23,114 Additions to property, plant and equipment 2,605 2,713 3,000 2,081 370 Depreciation and amortization 3,362 3,158 2,977 3,334 4,844 PER SHARE ($): Basic net earnings (loss) $2.28 $2.10 $1.72 $1.29 $ .45 $(3.00) Diluted net earnings (loss) 2.23 2.03 1.69 1.28 .45 (3.00) Book value 8.61 7.34 5.87 4.21 3.03 CAPITALIZATION ($000): Shareholders' equity $25,210 $22,274 $18,892 $13,194 $9,421 Long-term debt 7,252 9,638 10,619 20,807 35,004 Short-term debt (3) 4,627 1,534 3,148 861 2,133 Total debt 11,879 11,172 13,767 21,668 37,137 RATIOS: Return on average shareholders' equity (%) 28.4 32.0 33.9 35.6 10.1 N/A Return on revenues (%) 7.7 7.4 6.2 4.5 1.6 N/A Long-term debt to shareholders' equity (%) 28.8 43.3 56.2 157.7 371.6 Current assets to current liabilities 1.6 1.5 1.4 1.8 2.1 Average inventory turnover 4.7 4.7 4.1 3.2 2.9 Average accounts receivable turnover 4.4 5.2 5.5 4.8 4.3 OTHER DATA: Shares outstanding (000) (4) 2,927 3,033 3,218 3,137 3,113 Shareholders of record (5) 287 304 342 350 383 Number of employees 475 496 491 461 466
(1) Reflects pro forma adjustments for loss on disposition of businesses described in (2) below and the discontinuance of the Company's other Colortronic brand business, all as more fully explained in Note 3 of the Company's fiscal year 1997 consolidated financial statements, as if such dispositions and discontinuances had been consummated as of the beginning of the 1995 fiscal year. (2) 1995 - loss on disposition of businesses of $10,529 from sale of Colortronic GmbH and rights to several related patents and patent applications and $749 loss on the sale of Hasler France and Brazilian businesses. (3) Including current portion of long-term debt. (4) Net of treasury stock of 1,063 shares for fiscal years 1995 and 1996, 1,053 for fiscal year 1997, 1,295 for fiscal year 1998 and 1,447 for fiscal year 1999. (5) Does not include shareholders whose shares are held in street name. -12- 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following provides information which management believes is relevant to an assessment and understanding of the Company's consolidated results of operations and financial condition. The discussion should be read in conjunction with the Company's consolidated financial statements and accompanying notes. All references to 1999, 1998 and 1997 mean the fiscal years ended January 1, 2000, January 2, 1999 and January 3, 1998, respectively. In the fourth quarter of 1999, the Company announced that it would integrate its Soder and Hasler operations worldwide to form a unified business serving the bulk material handling markets. The Company took a fourth quarter 1999 charge of $710,000 for this restructuring, of which $450,000 remained in accrued liabilities at the end of 1999. Implementation of the integration plan started in the fourth quarter of 1999 and will be completed with the closing of the Company's Hasler manufacturing facility in Colombier, Switzerland before its lease expires on October 31, 2000. On or about March 31, 2000, the sales, sales support and service activities conducted from Colombier will be moved to nearby leased office space in Neuchatel, Switzerland, while engineering, assembly and administration will be moved to the Company's existing facility in Niederlenz, Switzerland on or before June 30, 2000. On March 23, 2000, the Company completed a tender offer begun on February 16, 2000 and repurchased 508,000 shares of its Common Stock at $18.00 per share for a total of $9,144,000. The purchase represented approximately 17.3% of the shares then outstanding. The purchase was financed by using $1,194,000 of available cash, all of a $7,000,000 loan facility obtained from a U.S. bank on February 4, 2000 and $950,000 from an existing $5,000,000 line of credit with that same bank. The $7,000,000 loan is payable in equal monthly installments plus accrued interest over a period of four years commencing May 1, 2000. RESULTS OF OPERATIONS In 1999, 1998 and 1997, the Company reported net income of $6,759,000, $6,593,000 and $5,444,000, respectively. K-Tron is an international company which derived approximately 59%, 58% and 59% of its 1999, 1998 and 1997 revenues, respectively, from products manufactured in, and services performed from, its facilities located outside the United States, primarily in Europe. As such, the financial position and performance of the Company is sensitive to changes in foreign currency exchange rates ("foreign exchange rates"), which can affect both the translation of financial statement items into U.S. dollars and the impact of transactions where the revenues and related expenses may initially be accounted for in different currencies, such -13- 14 as sales made from the Company's Swiss manufacturing facilities in currencies other than the Swiss franc. The following table sets forth the Company's results of operations expressed as a percentage of total revenues for the periods indicated.
Fiscal Year ------------------------------------------- 1999 1998 1997 --------- --------- --------- Total revenues 100.0% 100.0% 100.0% Cost of revenues 55.7 54.9 55.2 --------- --------- --------- Gross profit 44.3 45.1 44.8 Selling, general and administrative 30.1 31.2 31.9 Research and development 3.8 3.3 3.2 --------- --------- --------- Operating income 10.4 10.6 9.7 Interest 0.6 0.8 1.3 --------- --------- --------- Income before income taxes 9.8% 9.8% 8.4% ========= ========= ========= Year-end backlog (at year-end 1999 foreign exchange rates, in thousands) $ 17,835 $ 20,585 $ 17,340 ========= ========= =========
As noted above, more than half of the Company's revenues are normally derived from activities in foreign jurisdictions. Consequently, the Company's results can be significantly affected by changes in foreign exchange rates, particularly in U.S. dollar exchange rates with respect to the Swiss franc, German mark and euro and, to a lesser degree, the British pound sterling, French franc and other currencies. When the U.S. dollar strengthens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. When the U.S. dollar weakens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales increases. Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs increases when the U.S. dollar weakens and decreases when the U.S. dollar strengthens. Overall, the Company typically receives a majority of its revenues in currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide, especially those identified above. Accordingly, changes in foreign exchange rates, and in particular a strengthening of the U.S. dollar, may adversely affect the Company's total revenues, gross profit and operating income as expressed in U.S. dollars. -14- 15 In addition, revenues and income of the Company with respect to particular transactions may be affected by changes in foreign exchange rates where sales are made in currencies other than the functional currency of the facility manufacturing the product subject to the sale, including in particular the U.S. dollar/Swiss franc (for inter-company transactions) and the euro/Swiss franc and German mark/Swiss franc (for sales from the Company's Swiss manufacturing facilities which are made in euros or German marks) exchange rates. For 1999, 1998 and 1997, the changes in these and the U.S. dollar/euro and U.S. dollar/German mark exchange rates were as follows:
Fiscal Year ------------------------------------------------ 1999 1998 1997 ---- ---- ---- Average U.S. dollar equivalent of one Swiss franc 0.664 0.692 0.689 % change vs. prior year -4.0% NIL Average U.S. dollar equivalent of one euro 1.064 N/A N/A Average U.S. dollar equivalent of one German mark 0.544 0.570 0.577 % change vs. prior year -4.6% -1.2% Average Swiss franc equivalent of one German mark 0.819 0.824 0.837 % change vs. prior year -0.6% -1.6% Average Swiss franc equivalent of one euro 1.602 N/A N/A
Total revenues decreased by $1,255,000 or 1.4% in 1999 compared to 1998. Western European revenues increased and North American revenues decreased in 1999 compared to 1998. If the average foreign exchange translation rates for 1999 were applied to 1998, revenues would have increased by 1.0% in 1999. Total revenues increased by $1,990,000 or 2.3% in 1998 when compared to 1997. The increase was due to higher U.S. and European shipments offset by lower shipments to Asia from the Company's Swiss manufacturing facilities. Foreign exchange translation rates minimally affected 1998 when compared to 1997. -15- 16 Gross profit as a percent of total revenues decreased to 44.3% in 1999 as compared to 45.1% in 1998 and 44.8% in 1997. The reduction in gross margin in 1999 as compared to 1998 and 1997 was primarily due to sales mix. Selling, general and administrative (SG&A) expense decreased by $1,320,000 or 4.8% in 1999 compared to 1998, after remaining constant in 1998 when compared to 1997. The decrease in 1999 SG&A was due to the lower foreign exchange translation rates previously described offset in part by restructuring costs in Europe of $710,000 relating to the Hasler business. As a percent of total revenues, SG&A was 30.1% in 1999, 31.2% in 1998 and 31.9% in 1997. Research and development (R&D) expenditures increased by $373,000 or 12.5% in 1999 and by $212,000 or 7.7% in 1998 as compared to 1998 and 1997, respectively. R&D expenses increased due to greater emphasis on the development of new products. The 1999 increase as compared to 1998 was offset in part by lower foreign exchange translation rates. R&D expense as a percent of total revenues was 3.8% in 1999, 3.3% in 1998 and 3.2% in 1997. Interest expense decreased by $219,000 or 30.7% in 1999 and by $419,000 or 37.0% in 1998 as compared to 1998 and 1997, respectively. The 1999 and 1998 decreases from 1998 and 1997, respectively, were primarily due to weighted average lower debt levels and lower interest rates on some loans. Interest expense as a percent of total revenues was 0.6% in 1999, 0.8% in 1998 and 1.3% in 1997. Income before income taxes was $8,644,000 in 1999, $8,718,000 in 1998 and $7,309,000 in 1997. The changes during the periods were the result of the items discussed above. The 1999, 1998 and 1997 provisions for income tax of $1,885,000, $2,125,000 and $1,865,000, respectively, were related primarily to the Company's results in the United States and Germany. The effective tax rates were 21.8% for 1999, 24.4% for 1998 and 25.5% for 1997. The Company has New Jersey state and foreign tax loss carryforwards that total $4,300,000 and $2,600,000, respectively, which, if realized, would have an estimated future benefit of $212,000 and $735,000, respectively. The Company does not believe that inflation has had a material impact on the results of operations during the last three years. The Company's backlog decreased by 13.4% at the end of 1999 compared to 1998 (at constant foreign exchange rates), primarily due to the shipment of a large order in the fourth quarter of 1999 that was included in the 1998 year-end backlog. The bulk of the year-end 1999 backlog consists of orders that will be ready for delivery in less than 120 days. -16- 17 The Company's backlog increased by 19.6% at the end of 1998 compared to 1997 (at constant foreign exchange rates), primarily due to increased order volume at the United States and Swiss manufacturing facilities. Whereas in prior years the bulk of the Company's backlog represented orders that would be ready for delivery in less than 120 days, this was not the case at the end of 1998. The year-end 1998 backlog consisted of orders most of which would be delivered in 1999, but only about 40% of such backlog was expected to be shipped in the first quarter of 1999. LIQUIDITY AND CAPITAL RESOURCES All current loan agreements are with the Company's U.S. and Swiss manufacturing subsidiaries. At January 1, 2000, the Company's Swiss subsidiary had 7.0 million Swiss francs ($4.4 million) in short-term lines of credit with Swiss lenders, of which $2,543,000 was borrowed under these lines of credit and $1,854,000 was available for future borrowings. The annual interest rate on the amounts borrowed at January 1, 2000 was 6.25%. In addition to the short-term lines of credit, the Company's Swiss subsidiary had mortgage borrowings of 10.3 million Swiss francs ($6.4 million) with maturities through 2002. These mortgages carried annual interest rates ranging from 3.25% to 4.0%. In June 1998, the Company's U.S. manufacturing subsidiary refinanced its 20-year mortgage with a U.S. lender for $2,700,000 at an annual interest rate of 7.625%. Monthly principal and interest payments are $25,143. Every five years the bank has the right to review the mortgage and adjust its terms, including due dates and interest rates, with the first such right occurring in June 2003. At January 1, 2000, the amount borrowed under the mortgage was $2,562,000. Also in June 1998, the Company's U.S. manufacturing subsidiary entered into a two-year secured revolving credit facility with a U.S. lender that provides for a maximum borrowing of $5,000,000, subject to certain borrowing limitations based upon inventory and accounts receivable levels. During 1999, this credit facility was extended one year through July 2001. The annual interest rate as of January 1, 2000 was 8.5% (prime rate as published). At January 1, 2000, there were no outstanding borrowings under the facility, and $5,000,000 was available for future borrowings. On March 20, 2000, the Company borrowed $7,000,000 from a loan facility in the same amount that had been entered into with a U.S. bank on February 4, 2000 and used these funds, together with $1,194,000 of available cash and a borrowing of $950,000 on the $5,000,000 revolving credit facility referred to above, to repurchase 508,000 shares of its Common Stock. The $7,000,000 loan is payable in equal monthly installments of principal plus accrued interest over a four year period and is secured by liens on the same collateral securing other loans from the same U.S. bank. One-half of the loan bears interest at the fixed rate of 8.23% for the first -17- 18 two years and the other half is subject to a variable rate of interest equal to one month LIBOR plus 1.85 percent (7.66% at the date of borrowing). The Company's capitalization at the end of 1999, 1998 and 1997 is set forth below: (Dollars in thousands)
Fiscal Year ------------------------------------- 1999 1998 1997 ------- ------- ------- Short-term debt, including current portion of long-term debt $ 4,627 $ 1,534 $ 3,148 Long-term debt 7,252 9,638 10,619 ------- ------- ------- Total debt 11,879 11,172 13,767 Shareholders' equity 25,210 22,274 18,892 ------- ------- ------- Total debt and shareholders' equity $37,089 $33,446 $32,659 ======= ======= ======= (total capitalization) Percent total debt to total capitalization 32% 33% 42% Percent long-term debt to equity 29% 43% 56% Percent total debt to equity 47% 50% 73%
Total debt increased in 1999 and decreased in 1998 by $707,000 and $2,595,000, respectively. Total debt without the effect of foreign currency translation increased in 1999 and decreased in 1998 by $1,961,000 and $3,031,000, respectively. At the end of 1999 and 1998, working capital was $14,057,000 and $11,446,000, respectively, and the ratio of current assets to current liabilities was 1.65 and 1.49, respectively. Working capital increased in 1999 primarily due to funds provided from operations. In 1999, 1998 and 1997, the Company utilized internally generated funds to meet its working capital needs while in 1999 it also used short-term borrowings to meet its needs. Net cash provided by operating activities was $2,995,000 in 1999, $7,615,000 in 1998 and $12,594,000 in 1997. The decrease in operating cash flow since 1997 was primarily the result of an increase in accounts receivable and inventory and a reduction in accounts payable and accrued expenses. In 1999 and 1998, net income and depreciation and amortization were the principal components of cash provided by operating activities. The average number of days to convert accounts receivable to cash was 82 days in 1999 compared to 70 days in 1998 and 66 days in 1997. The average number of days to -18- 19 convert inventory into accounts receivable was 78 days in 1999 and 1998 compared to 88 days in 1997. Net cash used in investing activities was $2,804,000, $2,835,000 and $3,955,000 in 1999, 1998 and 1997, respectively. Capital expenditures were $2,605,000, $2,713,000, and $3,000,000 in 1999, 1998 and 1997, respectively. Funds used in 1997 to acquire a Canadian company were $783,000. The Company has a year 2000 commitment for capital of approximately $1,000,000 associated with its Hasler brand restructuring. In addition, the Company expects to make capital expenditures necessary to maintain its facilities and operations in a normal fashion and, where required, to further its growth and other business objectives. Cash used in financing activities in 1999 and 1998 was primarily used for the purchase of 166,400 shares in 1999 and 250,000 shares in 1998 of the Company's Common Stock as well as for debt reduction in 1998 and 1997. In 1999, cash was obtained from operations as well as from short-term borrowings. In 1998 and 1997, cash was primarily obtained from the cash flow provided by operations. Cash and short-term investments decreased to $3,093,000 at the end of 1999 from $3,220,000 a year earlier. Changes in foreign exchange rates, particularly with respect to the Swiss franc and German mark, caused a translation decrease in shareholders' equity of $1,754,000 in 1999 following an increase of $574,000 in 1998 and a decrease of $560,000 in 1997. EUROPEAN MONETARY UNION - EURO On January 1, 1999, the eleven member countries of the European Union, which does not include Switzerland, established fixed conversion rates between their existing sovereign currencies, and adopted the euro as their new common legal currency. As of that date, the euro began trading on currency exchanges, but the legacy currencies will remain legal tender in the participating countries for a transition period between January 1, 1999 and January 1, 2002. During the transition period, non-cash payments can be made in euros, and parties can elect to pay for goods and services and transact business using either the euro or a legacy currency. Between January 1, 2002 and July 1, 2002, the participating countries will introduce euro notes and coins and withdraw all legacy currencies so that they will no longer be available. The Company has not encountered significant difficulties with the euro. Since the Company's sales in Europe have been from two manufacturing plants located in Switzerland, and since some sales are made in Swiss francs and others in local currencies, the relationship of the euro to the Swiss franc is important to the Company, just as the relationship of the Swiss franc and German mark has been important in the past. -19- 20 The euro conversion may affect cross-border competition by creating cross-border price transparency. The Company regularly assesses its pricing and marketing strategies in order to ensure that it remains competitive in the European market. The Company also implemented a new information technology system in Europe on January 4, 1999 to allow for transactions to take place in both the legacy currencies and the euro and also for the eventual elimination of the legacy currencies. The Company's foreign currency exchange risk in participating countries may be reduced as the legacy currencies are converted to the euro. The Company will continue to evaluate issues involving the introduction of the euro, including accounting, tax and legal issues. Based on current information and the Company's current assessment, the Company does not believe that the euro conversion has had or will have a material adverse affect on its business, results of operations, cash flows or financial condition. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are "forward-looking," including statements contained in this report and other filings with the Securities and Exchange Commission, reports to the Company's shareholders and news releases. All statements that express expectations, estimates, forecasts and projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of the Company. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "may," "should," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A wide range of factors could materially affect future developments and the performance of the Company, including the following: (i) increasing price and product/service competition by domestic and foreign competitors, including new entrants; (ii) the mix of products/services sold by the Company; (iii) rapid technological changes and developments and the Company's ability to continue to introduce competitive new products on a timely and cost-effective basis; (iv) changes in U.S. and global financial and currency markets, including significant interest rate and foreign currency exchange rate fluctuations; (v) protection and validity of patent and other intellectual property rights, both of the Company and its competitors; (vi) the cyclical nature of the Company's business as a capital goods supplier; (vii) possible future litigation and governmental proceedings; (viii) the availability of financing and financial resources in the amounts, at the times and on the terms required to support the Company's future business, including capacity expansions and possible acquisitions; (ix) the loss of key customers, -20- 21 employees or suppliers; (x) the failure to carry out marketing and sales plans; (xi) the failure successfully to integrate acquired businesses, if any, into the Company without substantial costs, delays or other operational or financial problems; (xii) economic, business and regulatory conditions and changes which may affect the level of new investments and purchases made by customers, including general economic and business conditions that are less favorable than expected; and (xiii) domestic and international political and economic conditions. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but it is by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company and its subsidiaries and supplementary data required by this item are attached to this annual report on Form 10-K beginning on page F-1. ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information concerning directors and compliance with Section 16(a) of the Securities Exchange Act of 1934 called for by Item 10 of Form 10-K will be set forth under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive proxy statement, to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by reference. The required information as to executive officers is set forth in Part I hereof and incorporated herein by reference. -21- 22 ITEM 11. EXECUTIVE COMPENSATION. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information called for by Items 11 and 12 of Form 10-K will be set forth under the captions "Executive Compensation" and "Security Ownership of Certain Beneficial Owners and Management," respectively, in the Company's definitive proxy statement, to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K. (a) 1. Financial Statements. Financial Statements listed in the accompanying Index to Financial Statements and the Financial Statement Schedule appearing on page F-1 are filed as part of this annual report on Form 10-K. 2. Financial Statement Schedule. The Financial Statement Schedule listed in the accompanying Index to Financial Statements and the Financial Statement Schedule appearing on page F-1 are filed as part of this annual report on Form 10-K. 3. Exhibits. (see (c) below). (b) Reports on Form 8-K. The Company did not file a report on Form 8-K during the quarter ended January 1, 2000. (c) Exhibits. The following is a list of exhibits filed as part of this annual report on Form 10-K. Where so indicated, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated in parentheses. -22- 23 3.1 Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1 to the Company's annual report on Form 10-K for the year ended January 2, 1999 ("1998 Form 10-K") and incorporated herein by reference) 3.2 By-Laws, as amended (Filed as Exhibit 3.2 to the Company's annual report on Form 10-K for the year ended January 1, 1994 and incorporated herein by reference) 4.1 Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to the 1998 Form 10-K and incorporated herein by reference) 4.2 Rights Agreement dated as of October 3, 1991 with First Interstate Bank of Arizona, N.A., as Rights Agent (Filed as Exhibit 1 to the Company's report on Form 8-K dated October 3, 1991 and incorporated herein by reference) 4.3 Amendment, dated as of March 6, 2000, to Rights Agreement, dated as of October 3, 1991, with American Stock Transfer & Trust Company, as successor Rights Agent 10.1 1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to the to the Company's annual report on Form 10-K for the year ended January 4, 1992 ("1991 Form 10-K") and incorporated herein by reference)** 10.2 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.2.4 to the Company's annual report on Form 10-K for the year ended December 31, 1988 and incorporated herein by reference)** 10.3 K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (Filed as Exhibit 10.3 to the 1998 Form 10-K and incorporated herein by reference)** 10.4 K-Tron International, Inc. Amended and Restated Employee Stock Purchase Plan (Filed as Exhibit 10.2 to the Company's report on Form 10-Q for the quarterly period ended September 28, 1996 and incorporated herein by reference)** 10.5 Amended and Restated K-Tron International, Inc. Profit-Sharing and Thrift Plan** 10.6 K-Tron International, Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.2.7 to the 1991 Form 10-K and incorporated herein by reference)** 10.7 Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to the -23- 24 Company's report on Form 10-Q for the quarterly period ended September 27, 1997 and incorporated herein by reference)** 10.8 Amendment No. 1 to Employment Agreement dated October 5, 1998 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to the Company's report on Form 10-Q for the quarterly period ended October 3, 1998 and incorporated herein by reference)** 10.9 Employment Agreement dated as of May 7, 1999 by and between K-Tron International, Inc. and Ronald R. Remick** 10.10 Form of Employment Agreement with certain employees of the Company, which are identical in all material respects except for the employee, amount of salary to be paid and date of execution (Filed as Exhibit 10.12 to the Company's annual report on Form 10-K for the year ended January 3, 1998 and incorporated herein by reference)** 10.11 Form of Indemnification Agreement with certain directors and officers of the Company listed on Schedule 10.11, which are identical in all material respects except for the director or officer who is a party thereto and the date of execution** 10.12 Leasing Agreement dated October 30, 1990 between CS Immobilien Leasing AG, Zurich and Hasler Freres SA, with limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.1(b) to the Company's report on Form 8-K dated October 30, 1990 and incorporated herein by reference) 10.13 Amendment, dated January 25, 1991, to Leasing Agreement, dated October 30, 1990, between CS Immobilien Leasing AG, Zurich and Hasler Freres SA and to the related limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.3.3 to the Company's annual report on Form 10-K for the year ended December 29, 1990 and incorporated herein by reference) 10.14 Note dated February 4, 2000 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit (b)(1) to Amendment No.1 to the Company's Tender Offer Statement on Schedule TO dated February 16, 2000 and incorporated herein by reference) 10.15 Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of The Bank of Gloucester County 10.16 Loan Modification Agreement dated June 24, 1998 between K-Tron America, Inc and the Bank of Gloucester County -24- 25 10.17 Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank of Gloucester County 10.18 Loan Modification Agreement dated as of July 22, 1999 between K-Tron America, Inc. and The Bank of Gloucester County 21.1 Subsidiaries 23.1 Consent of Arthur Andersen LLP 24.1 Power of Attorney (Included on Signature Page) 27.1 Financial Data Schedule - ---------------- ** Management contract or compensatory plan or arrangement required to be filed or incorporated as an exhibit COPIES OF THE EXHIBITS ARE AVAILABLE TO SHAREHOLDERS (UPON PAYMENT OF A $.20 PER PAGE FEE TO COVER THE COMPANY'S EXPENSES IN FURNISHING THE EXHIBITS) FROM RONALD R. REMICK, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, K-TRON INTERNATIONAL, INC., ROUTES 55 AND 553, P.O. BOX 888, PITMAN, NEW JERSEY 08071-0888. -25- 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. K-TRON INTERNATIONAL, INC. Date: March 28, 2000 By /s/ Edward B. Cloues, II ------------------------------- Edward B. Cloues, II Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person in so signing also makes, constitutes and appoints Edward B. Cloues, II, Chairman and Chief Executive Officer of K-Tron International, Inc., and Ronald R. Remick, Senior Vice President, Chief Financial Officer and Treasurer of K-Tron International, Inc., and each of them acting alone, as his true and lawful attorneys-in-fact, in his name, place and stead, to execute and cause to be filed with the Securities and Exchange Commission any or all amendments to this report. Signature Date Capacity - --------- ---- -------- /s/ Edward B. Cloues, II March 28, 2000 Chief Executive Officer - ---------------------------- (principal executive Edward B. Cloues, II officer) and Chairman of the Board of Directors /s/ Ronald R. Remick March 28, 2000 Senior Vice President, - ---------------------------- Chief Financial Officer Ronald R. Remick and Treasurer (principal financial officer) /s/ Alan R. Sukoneck March 28, 2000 Vice President, Chief - ---------------------------- Accounting and Tax Alan R. Sukoneck Officer (principal accounting officer)
-26- 27
Signature Date Capacity - --------- ---- -------- /s/ Leo C. Beebe March 28, 2000 Director - ------------------------------ Leo C. Beebe /s/ Norman Cohen March 28, 2000 Director - ------------------------------ Norman Cohen /s/ Robert A. Engel March 28, 2000 Director - ------------------------------ Robert A. Engel /s/ Richard J. Pinola March 28, 2000 Director - ------------------------------ Richard J. Pinola /s/ Hans-Jurg Schurmann March 28, 2000 Director - ------------------------------ Hans-Jurg Schurmann /s/ Jean Head Sisco March 28, 2000 Director - ------------------------------ Jean Head Sisco
-27- 28 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF JANUARY 1, 2000 TOGETHER WITH AUDITORS' REPORT 29 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES: Consolidated Balance Sheets - January 1, 2000 and January 2, 1999 F-3 Consolidated Statements of Operations for the Fiscal Years Ended January 1, 2000, January 2, 1999 and January 3, 1998 F-5 Consolidated Statements of Changes in Shareholders' Equity for the Fiscal Years Ended January 1, 2000, January 2, 1999 and January 3, 1998 F-6 Consolidated Statements of Cash Flows for the Fiscal Years Ended January 1, 2000, January 2, 1999 and January 3, 1998 F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9 SCHEDULE: Schedule II--Valuation Reserves S-1
F-1 30 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To K-Tron International, Inc.: We have audited the accompanying consolidated balance sheets of K-Tron International, Inc. (a New Jersey corporation) and subsidiaries as of January 1, 2000 and January 2, 1999, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for each of the three fiscal years in the period ended January 1, 2000. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and this schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of K-Tron International, Inc. and subsidiaries as of January 1, 2000 and January 2, 1999, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 1, 2000, in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements as of January 1, 2000 and for each of the three fiscal years in the period ended January 1, 2000, is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Philadelphia, Pennsylvania February 16, 2000 F-2 31 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (dollars in thousands)
January 1, January 2, 2000 1999 CURRENT ASSETS: Cash and cash equivalents $ 3,093 $ 3,220 Accounts receivable (less allowance for doubtful accounts of $924 and $1,286) 20,500 19,034 Inventories 10,193 10,743 Deferred income taxes 473 819 Prepaid expenses and other current assets 1,516 1,177 ----------- ----------- Total current assets 35,775 34,993 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $27,307 and $27,066 14,611 16,215 PATENTS, net of accumulated amortization of $554 and $479 879 751 GOODWILL, net of accumulated amortization of $4,062 and $4,113 3,486 4,454 OTHER ASSETS 19 204 ----------- ----------- Total assets $ 54,770 $ 56,617 =========== ===========
The accompanying notes are an integral part of these financial statements. F-3 32 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (dollars in thousands except share data)
January 1, January 2, 2000 1999 CURRENT LIABILITIES: Notes payable to banks $ 2,543 $ 254 Current portion of long-term debt 2,084 1,280 Accounts payable 5,691 6,965 Accrued expenses and other current liabilities 3,200 4,034 Accrued payroll 2,713 4,307 Accrued commissions 1,971 2,609 Customer advances 1,134 1,810 Accrued warranty 1,294 1,055 Income taxes payable 1,088 1,233 --------------- --------------- Total current liabilities 21,718 23,547 --------------- --------------- LONG-TERM DEBT, net of current portion 7,252 9,638 --------------- --------------- DEFERRED INCOME TAXES 303 423 --------------- --------------- OTHER NONCURRENT LIABILITIES 287 735 --------------- --------------- COMMITMENTS AND CONTINGENCIES (Note 11) SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value, 50,000 shares -- -- authorized; none issued SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value; 950,000 shares authorized; none issued -- -- Common stock, $.01 par value; 50,000,000 shares authorized; 4,374,505 and 4,328,555 shares issued 44 43 Paid-in capital 16,103 15,505 Retained earnings 28,598 21,839 Cumulative translation adjustment (1,946) (192) --------------- --------------- 42,799 37,195 Treasury stock, 1,447,350 and 1,295,450 shares, at cost (17,589) (14,921) --------------- --------------- Total shareholders' equity 25,210 22,274 --------------- --------------- Total liabilities and shareholders' equity $ 54,770 $ 56,617 =============== ===============
The accompanying notes are an integral part of these financial statements. F-4 33 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands except share data)
For the Fiscal Year Ended January 1, January 2, January 3, 2000 1999 1998 REVENUES $ 87,887 $ 89,142 $ 87,152 COST OF REVENUES 48,931 48,946 48,121 --------------- --------------- --------------- Gross profit 38,956 40,196 39,031 --------------- --------------- --------------- OPERATING EXPENSES: Selling, general and administrative 26,464 27,784 27,821 Research and development 3,353 2,980 2,768 --------------- --------------- --------------- 29,817 30,764 30,589 --------------- --------------- --------------- Operating income 9,139 9,432 8,442 INTEREST EXPENSE 495 714 1,133 --------------- --------------- --------------- Income before income taxes 8,644 8,718 7,309 INCOME TAX PROVISION 1,885 2,125 1,865 --------------- --------------- --------------- Net income $ 6,759 $ 6,593 $ 5,444 ============== ============== ============== BASIC EARNINGS PER SHARE $ 2.28 $ 2.10 $ 1.72 ============= ============= ============= DILUTED EARNINGS PER SHARE $ 2.23 $ 2.03 $ 1.69 ============= ============= ============= AVERAGE COMMON SHARES OUTSTANDING 2,962,000 3,133,000 3,162,000 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 3,026,000 3,243,000 3,227,000
The accompanying notes are an integral part of these financial statements. F-5 34 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (dollars in thousands)
Common Stock Cumulative Treasury Stock Paid-in Retained Translation Shares Amount Capital Earnings Adjustment Shares Amount Total BALANCE, DECEMBER 29, 1996 4,200,328 $42 $14,120 $ 9,802 $ (206) 1,062,950 $ (10,564) $13,194 Comprehensive income- Net income -- -- -- 5,444 -- -- -- 5,444 Translation adjustments -- -- -- -- (560) -- -- (560) ------- Total comprehensive income 4,884 ------- Issuance of stock 70,972 1 713 -- -- (10,000) 100 814 --------- --- ------- ------- ------- ---------- ---------- ------- BALANCE, JANUARY 3, 1998 4,271,300 43 14,833 15,246 (766) 1,052,950 (10,464) 18,892 Comprehensive income- Net income -- -- -- 6,593 -- -- -- 6,593 Translation adjustments -- -- -- -- 574 -- -- 574 ------- Total comprehensive income 7,167 ------- Issuance of stock 57,255 -- 672 -- -- (7,500) 74 746 Purchase of treasury shares -- -- -- -- -- 250,000 (4,531) (4,531) --------- --- ------- ------- ------- ---------- ---------- ------- BALANCE, JANUARY 2, 1999 4,328,555 43 15,505 21,839 (192) 1,295,450 (14,921) 22,274 ---------- --- ------- ------- ------- ---------- ---------- ------- Comprehensive income- Net income -- -- -- 6,759 -- -- -- 6,759 Translation adjustments -- -- -- -- (1,754) -- -- (1,754) ------- Total comprehensive income 5,005 ------- Issuance of stock 45,950 1 598 -- -- (14,500) 168 767 Purchase of treasury shares -- -- -- -- -- 166,400 (2,836) (2,836) ---------- --- ------- ------- ------- ---------- ---------- ------- BALANCE, JANUARY 1, 2000 4,374,505 $44 $16,103 $28,598 $(1,946) 1,447,350 $ (17,589) $25,210 ========== === ======= ======= ======= ========== ========== =======
The accompanying notes are an integral part of these financial statements. F-6 35 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
For the Fiscal Year Ended January 1, January 2, January 3, 2000 1999 1998 OPERATING ACTIVITIES: Net income $ 6,759 $ 6,593 $ 5,444 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 3,362 3,158 2,977 Amortization of deferred gain on sale/leaseback transaction (367) (374) (380) Deferred income taxes 226 81 (321) Changes in assets and liabilities-- Accounts receivable, net (3,298) (3,113) 250 Inventories (299) (442) 2,991 Prepaid expenses and other current assets (495) (53) 88 Other assets 170 229 (532) Accounts payable (786) 1,314 (286) Accrued expenses and other current liabilities (2,571) 285 1,928 Accrued warranty 394 99 112 Income taxes payable (100) (162) 323 -------- -------- -------- Net cash provided by operating activities 2,995 7,615 12,594 -------- -------- -------- INVESTING ACTIVITIES: Business acquired -- -- (783) Capital expenditures (2,605) (2,713) (3,000) Investment in patents (199) (122) (172) -------- -------- -------- Net cash used in investing activities (2,804) (2,835) (3,955) -------- -------- --------
(Continued) F-7 36 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (Continued)
For the Fiscal Year Ended January 1, January 2, January 3, 2000 1999 1998 FINANCING ACTIVITIES: Net borrowings (payments) under notes payable to banks $ 2,511 $ (1,142) $ (6,925) Proceeds from issuance of long-term debt -- 1,005 689 Principal payments on long-term debt (550) (2,894) (867) Purchase of treasury stock (2,836) (4,531) -- Proceeds from issuance of common stock 767 746 814 --------------- --------------- --------------- Net cash used in financing activities (108) (6,816) (6,289) --------------- --------------- --------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (210) 102 (275) --------------- --------------- --------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (127) (1,934) 2,075 CASH AND CASH EQUIVALENTS: Beginning of year 3,220 5,154 3,079 --------------- --------------- --------------- End of year $ 3,093 $ 3,220 $ 5,154 =============== =============== =============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for- Interest $ 496 $ 772 $ 1,182 =============== =============== =============== Income taxes $ 1,663 $ 2,275 $ 1,951 =============== =============== ===============
The accompanying notes are an integral part of these financial statements. F-8 37 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS: K-Tron International, Inc. and its subsidiaries (the "Company") design, produce, market, and service gravimetric and volumetric feeders, pneumatic conveying systems and related equipment for processing bulk solids in a wide variety of manufacturing processes. The Company has manufacturing facilities in the United States, Switzerland and Canada, and its equipment is sold throughout the world. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All material intercompany accounts and transactions have been eliminated. Fiscal Year The Company's fiscal year is reported on a fifty-two/fifty-three week period. Fiscal years ended January 1, 2000 (referred to herein as "1999") and January 2, 1999 (referred to herein as "1998") each include fifty-two weeks, while the fiscal year ended January 3, 1998 (referred to herein as "1997") includes fifty-three weeks. Cash and Cash Equivalents Cash equivalents represent all highly liquid, interest-bearing investments purchased with maturities of three months or less. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market. Property, Plant and Equipment Property, plant and equipment is carried at cost and is depreciated on a straight-line basis over the following estimated useful lives: buildings and improvements, 30 to 50 years; automotive equipment, 3 years; machinery and equipment, 3 to 10 years; and furniture and fixtures, 5 to 7 years. Leasehold improvements are amortized over the shorter of the estimated useful lives of such assets or the remaining term of the applicable lease. F-9 38 Patents Patents are stated at cost less accumulated amortization. The costs of patents are amortized on a straight-line basis over the remaining economic life of the respective asset, but in no event longer than the remaining legal life. Goodwill Excess of cost over net assets acquired is amortized on a straight-line basis over 15 years. Subsequent to an acquisition, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of this asset may warrant revision or that the remaining balance may not be recoverable. Income Taxes Income taxes are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income taxes are provided for differences between amounts shown for financial reporting purposes and those included with tax return filings that will reverse in future periods. Additionally, the effects of income taxes are measured based upon enacted tax laws and rates. Revenue Recognition Revenue is recognized when goods are shipped. Research and Development Expenditures for research, development and engineering of products are expensed as incurred. Foreign Currency Assets and liabilities denominated in foreign currencies are translated to U.S. dollars at current rates of exchange at year-end. Revenues and expenses are translated at average rates prevailing during the year. The Company incurred foreign currency transaction gains of approximately $98,000, $4,000 and $177,000 for 1999, 1998 and 1997, respectively. Translation gains and losses are recorded as a separate component of shareholders' equity. Fair Value Disclosures The carrying value of financial instruments such as cash, accounts receivables and payables and other current assets and liabilities approximates their fair value, based on the short-term nature of these instruments. The carrying amount of the Company's long-term debt and notes payable approximates their fair value. The fair value is estimated based on the current rates offered to the Company for debt and notes payable of the same remaining maturities. F-10 39 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. New Accounting Pronouncements In fiscal 2001, the Company is required to adopt the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company does not anticipate that the adoption will have a material impact on the consolidated financial statements. 3. INVENTORIES: Inventories consist of the following:
January 1, January 2, 2000 1999 (in thousands) Components $ 8,299 $ 8,504 Work-in-process 1,755 1,820 Finished goods 139 419 --------------- --------------- $ 10,193 $ 10,743 =============== ===============
4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following:
January 1, January 2, 2000 1999 (in thousands) Land $ 1,064 $ 1,215 Buildings and improvements 15,797 17,240 Automotive equipment 686 676 Machinery and equipment 12,441 12,169 Furniture and fixtures 11,930 11,981 --------------- --------------- 41,918 43,281 Less- Accumulated depreciation and amortization (27,307) (27,066) --------------- --------------- $ 14,611 $ 16,215 =============== ===============
Depreciation of property, plant and equipment for 1999, 1998 and 1997 was $2,760,000, $2,345,000 and $2,457,000, respectively. F-11 40 5. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT: At January 1, 2000, the Company's Swiss subsidiary had 7.0 million Swiss francs ($4.4 million) in short-term lines of credit with Swiss lenders, of which $2,543,000 was borrowed under these lines of credit with $1,854,000 available for future borrowings. The annual interest rate on the amounts borrowed at January 1, 2000 was 6.25%. In addition to the short-term lines of credit, the Company's Swiss subsidiary had mortgage borrowings of 10.3 million Swiss francs ($6.4 million) with maturities through 2002 and with annual interest rates ranging from 3.25% to 4.0% from its Swiss lenders. In June 1998, the Company's U.S. manufacturing subsidiary refinanced its 20-year mortgage with a U.S. lender for $2.7 million at an annual interest rate of 7.625%. Monthly principal and interest payments are $25,143. The lender has the right to review and adjust the terms of the mortgage every five years. Also in June 1998, the U.S. manufacturing subsidiary entered into a two-year secured revolving credit facility with a U.S. lender that provides for a maximum borrowing of $5.0 million, subject to certain maximum borrowing limitations based upon inventory and receivable levels. During fiscal 1999, this credit facility was extended one year through July 2001. The annual interest rate as of January 1, 2000 was 8.5%. As of January 1, 2000, there were no outstanding borrowings under this credit facility, and $5.0 million was available for future borrowings. Under the terms of the U.S. mortgage and revolving credit facilities, fixed assets with a book value of $2,870,000, and accounts receivable and inventory with a book value of $13,681,000 are pledged as collateral. In addition, fixed assets with a book value of $4,175,000 are pledged as collateral under the Swiss mortgages. Long-term debt consists of the following:
January 1, January 2, 2000 1999 (in thousands) U.S. mortgage, interest at 7.625% per annum $ 2,562 $ 2,644 Non-U.S. mortgages, interest at market rates (3.25% to 4.0% at January 1, 2000 and 2.95% to 5.0% at January 2, 1999) 6,444 7,542 Other 330 732 --------------- --------------- 9,336 10,918 Less- Current portion (2,084) (1,280) --------------- --------------- $ 7,252 $ 9,638 =============== ===============
F-12 41 Future annual payments required on long-term debt are as follows (in thousands):
Fiscal Year Amount ----------- ------ 2000 $ 2,084 2001 1,772 2002 3,266 2003 2,214 2004 -- Thereafter -- ----------- $ 9,336 ===========
6. EMPLOYEE BENEFIT PLANS: The Company has a profit-sharing and thrift plan (the "Plan") for all U.S. employees who have worked for the Company for at least six months and who are employed at the end of the year. All Company contributions to the Plan are at the discretion of the Board of Directors. The Company's profit-sharing contribution vests over a five-year period. In addition, employees may voluntarily participate in the thrift plan and authorize payroll deductions ranging from 1% to 15% of their compensation. Related matching Company contributions are vested immediately. The Board of Directors authorized matching contributions of 100% of the first 6% of participants' compensation for 1999 and 1997, and 110% of the first 6% of participants' compensation for 1998. The Board of Directors did not authorize any 1999, 1998 or 1997 contribution to the profit-sharing portion of the Plan. Substantially all foreign employees participate in defined contribution group pension plans. Contributions are paid by the employee and employer at percentages that vary according to age and other factors. The expense associated with the thrift plan for 1999, 1998 and 1997 was $405,000, $443,000 and $355,000, respectively. The foreign pension expense for 1999, 1998 and 1997 was $1,008,000, $1,231,000 and $1,066,000, respectively. In June 1981, the Company adopted an employee stock purchase plan under which eligible employees of the Company may elect to participate through payroll deductions for up to 10% of their gross compensation. Such deductions are used to purchase common stock of the Company at a price equal to 85% of the market value, not to exceed $25,000 in stock in any year. Under this plan, the Company issued 15,706 shares of common stock at an average price of $13.25 in 1999, 14,241 shares of common stock at an average price of $14.92 in 1998 and 17,468 shares of common stock at an average price of $10.72 in 1997. F-13 42 7. SHAREHOLDERS' EQUITY: In 1991, the Board of Directors determined the rights on 50,000 shares of the authorized preferred stock as the Series A Junior Participating Preferred Shares (the "Series A Preferred Shares"). Each one one-hundredth of a share of the Series A Preferred Shares carries voting and dividend rights that are equivalent to one share of the common stock. The voting and dividend rights are subject to adjustment in the event of a dividend on common stock which is payable in common stock or any subdivisions or combinations with respect to the outstanding shares of common stock (see Note 8). The Board of Directors has not determined the rights on the remaining 950,000 shares of the authorized preferred stock as of January 1, 2000. The Company had a stock option plan for nonemployee directors (the "1988 plan") which expired in November 1998, but under which option grants remain outstanding. The plan provided that each eligible director was granted a single option to purchase 10,000 shares of the Company's common stock at a price equal to the fair market value at the date of grant. The aggregate number of shares which could be issued under the plan was 100,000. These options had a term of ten years and became exercisable in four equal annual installments beginning on the date of the grant. The Company's 1986 Stock Option Plan, as amended (the "1986 plan"), expired in January 1996, but option grants under the 1986 plan remain outstanding. Key employees of and consultants to the Company could be granted options to purchase shares of the Company's common stock. These options could be either incentive stock options or nonqualified stock options. The Stock Option Committee under the 1986 plan determined the term of each option, but no option could be exercisable more than ten years from the date the option was granted. The Stock Option Committee also determined the option exercise price per share. With respect to incentive stock options, the exercise price must at least equal the fair market value of a share of common stock as of the date the option was granted. In 1996, the Company adopted the 1996 Equity Compensation Plan (the "1996 plan"), with features similar to the 1986 plan, except that the maximum number of shares that may be issued is 450,000. The 1996 plan was amended in 1998, increasing the maximum number of shares that may be issued to 600,000, and allowing nonemployee directors to receive grants thereunder at fair market value. The 1996 plan is administered by a committee selected by the Board of Directors. F-14 43 A summary of the Company's stock option and restricted stock grant activity for the plans referred to above for the three fiscal years ended January 1, 2000 is as follows:
Average Price Outstanding Per Share Available ----------- --------- --------- BALANCE, DECEMBER 29, 1996 248,684 500,000 Granted 100,000 $ 14.00 (100,000) Canceled (1,500) 8.00 -- Exercised (56,150) 9.37 -- BALANCE, JANUARY 3, 1998 291,034 400,000 1996 plan amendment 150,000 Granted 105,000 17.75 (105,000) Canceled (5,850) 9.33 1,000 Exercised (43,550) 10.07 -- Restricted stock granted 20,000 -- (20,000) Restricted stock exercised (7,500) -- -- 1988 plan expiration -- -- (50,000) ------- ------- BALANCE, JANUARY 2, 1999 359,134 376,000 Granted 59,500 17.80 (59,500) Canceled (15,534) 11.47 5,334 Exercised (32,933) 9.15 -- Restricted stock granted 2,000 -- (2,000) Restricted stock exercised (14,500) -- -- ------- ------- BALANCE, JANUARY 1, 2000 357,667 319,834 ======= =======
As of January 1, 2000, thirty-one employees held options under the 1986 plan for an aggregate of 72,600 shares at exercise prices from $6.25 to $12.50 with a weighted average price of $8.22. These options expire in varying amounts through the year 2005. As of January 1, 2000, thirty-nine employees and six nonemployee directors held options under the 1996 plan for an aggregate of 256,167 shares at exercise prices from $14.00 to $19.00 with a weighted average price of $16.33. These options expire through 2009. As of January 1, 2000, under the 1988 plan, three directors held options for an aggregate of 28,900 shares at exercise prices from $9.25 to $11.00 with a weighted average price of $10.18. These options expire in varying amounts through the year 2004. In July 1998, the Company repurchased 250,000 shares of its common stock, representing approximately 7.7% of its then outstanding common stock. The purchase price was $4,531,250, or $18.125 a share. During fiscal 1999, the Company repurchased an additional 166,400 shares of its common stock in three separate transactions, representing approximately 5.5% of its outstanding common stock as of the beginning of the fiscal year. The total purchase price was $2,836,000, or an average of $17.04 a share. F-15 44 On February 16, 2000, the Company commenced a tender offer to purchase for cash up to 450,000 shares of its common stock, representing approximately 15.4% of the Company's then outstanding shares, for $18.00 per share. The tender offer will expire, unless extended, at 5:00 p.m., New York City time, on Friday, March 17, 2000. The share repurchase will be financed partly with available cash, but primarily by using a new $7.0 million credit facility that was obtained from a U.S. bank on February 4, 2000. Pro Forma Information As permitted under SFAS No. 123, the Company has elected to continue to account for compensation cost using the intrinsic value-based method of accounting as prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123 does require the Company to disclose pro forma net income and pro forma earnings per share amounts, as if compensation expense were recognized for options granted after fiscal year 1994. Using this approach, net income and earnings per share would have been reduced to the pro forma amounts indicated in the table:
1999 1998 1997 ------------ ----------- ----------- (in thousands, except per share) Net income - as reported $ 6,759 $ 6,593 $ 5,444 Net income - pro forma 6,340 6,090 5,256 Basic earnings per share - as reported 2.28 2.10 1.72 Basic earnings per share - pro forma 2.14 1.94 1.66 Diluted earnings per share - as reported 2.23 2.03 1.69 Diluted earnings per share - pro forma 2.10 1.88 1.63
This pro forma impact may not be representative of the effects for future years, and could increase if additional options are granted and amortized over the vesting period. For disclosure purposes, the fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield; expected volatility of 41.45%, 44.13% and 43.60%; risk-free interest rate of 5.17%, 5.85% and 6.02%; and expected life of 6.00 years, 6.38 years and 6.00 years in 1999, 1998 and 1997, respectively. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the expected stock price volatility. F-16 45 8. SHAREHOLDER RIGHTS PLAN: The Company has a Shareholder Rights Plan (the "Rights Agreement") which was adopted by the Board of Directors on October 3, 1991. The Rights Agreement provides that each share of the Company's common stock outstanding as of October 14, 1991 has associated with it one right ("Right") to purchase one one-hundredth of a share of the Series A Preferred Shares at an exercise price of $40 per share. Such exercise price is subject to adjustment as described in the Rights Agreement. The Rights will be exercisable only 10 days following a public announcement that a person or group has acquired or obtained the right to acquire beneficial ownership of 20% or more of the outstanding common stock of the Company, or not later than 65 days after the commencement of a tender offer or an exchange offer that would result in a person or group beneficially owning 20% or more of the outstanding common stock. In either such case, the Rights would entitle shareholders (other than the 20% acquiror) to purchase for $40 the number of shares of the Company's common stock which would have a market value of $80. In the event that the Company is acquired in a merger or other business combination, the Rights would entitle the shareholders (other than the acquiror) to purchase securities of the surviving company at a similar discount. In lieu of requiring payment of the exercise price of the Rights upon the occurrence of the above-noted events, the Company may permit the holders to simply surrender the Rights and receive the number of shares of the Company's common stock which would have a market value of $40. The Company can redeem the Rights at $.01 per Right at any time until the 20th day following a public announcement that a person or a group has acquired or obtained the right to acquire beneficial ownership of at least 20% of the Company's outstanding common stock. The redemption period may be extended by the Board of Directors as long as the Rights are still redeemable. The Rights expire October 14, 2001. 9. INCOME TAXES: Following are the domestic and foreign components of the income before income taxes:
Fiscal Year Ended January 1, January 2, January 3, 2000 1999 1998 ------------ ------------- --------------- (in thousands) United States $ 5,196 $ 6,595 $ 2,387 Foreign 3,448 2,123 4,922 -------------- ---------------- ---------------- Income before income taxes $ 8,644 $ 8,718 $ 7,309 ============ ============== ==============
F-17 46 The income tax provision (benefit) consists of the following:
Fiscal Year Ended --------------------------------------------------- January 1, January 2, January 3, 2000 1999 1998 ---------- ----------- ----------- (in thousands) Current: Federal and state $ 1,524 $ 1,938 $ 2,061 Foreign 103 106 125 ---------- ----------- ----------- Total current 1,627 2,044 2,186 Deferred: Federal and state 270 56 (325) Foreign (12) 25 4 ---------- ----------- ----------- Total deferred 258 81 (321) ---------- ----------- ----------- Total income tax provision $ 1,885 $ 2,125 $ 1,865 ========== ----------- ===========
Significant components of the deferred tax accounts at January 1, 2000 and January 2, 1999, are as follows:
January 1, January 2, 2000 1999 ----------- ------------ (in thousands) Deferred tax assets: Depreciation $ 22 $ 126 Accrued liabilities 310 501 Net operating loss carryforwards 1,112 2,445 Inventory basis differences 138 223 Other 478 213 -------- -------- 2,060 3,508 Valuation allowance (1,248) (2,580) -------- -------- Total assets 812 928 -------- -------- Deferred tax liabilities: Depreciation (566) (230) Other (76) (302) -------- -------- Total liabilities (642) (532) -------- -------- Net deferred asset $ 170 $ 396 ======== ========
F-18 47 Foreign and U.S. state operating loss carryforwards as of January 1, 2000 were $2.6 million and $4.3 million, respectively. Of the $2.6 million of foreign losses, $1.7 million are available to offset future income through 2002. The balance of $900,000 has an unlimited carryforward period. U.S. state operating losses are available through 2006. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has established valuation allowances for all foreign and state net operating loss carryforwards and certain other deferred tax assets for which realization is dependent on future taxable earnings. At January 1, 2000, retained earnings include $12.9 million of undistributed net income of foreign subsidiaries. Management considers such income to have been permanently invested and, therefore, no federal income taxes have been provided for these items. A reconciliation of the provision for income taxes and the amounts that would be computed using the statutory federal income tax rates is set forth below:
Fiscal Year Ended January 1, January 2, January 3, 2000 1999 1998 ---------- ------------ -------------- (in thousands) Income tax provision on income before income tax at statutory federal income tax rates $ 2,939 $ 2,964 $ 2,485 Foreign tax rate differential (199) (58) (237) State tax, net of federal benefit 134 263 133 U.S. and foreign permanent tax differences 21 (440) 708 Change in valuation allowance (870) (532) (1,307) Other (140) (72) 83 ----------- ------------ ----------- Income tax provision $ 1,885 $ 2,125 $ 1,865 =========== =========== ===========
10. EARNINGS PER SHARE: The Company adopted SFAS No. 128, "Earnings Per Share," which requires that the Company report Basic and Diluted Earnings Per Share. Basic Earnings Per Share represents net income less preferred dividends divided by the weighted average number of common shares outstanding. Diluted Earnings Per Share is calculated similarly, except that the denominator includes weighted average number of common shares outstanding plus the dilutive effect of options, warrants, convertible securities and other instruments with dilutive effects if exercised. F-19 48 The Company's Basic and Diluted Earnings Per Share are calculated as follows:
Net Income Available To Common Earnings Shareholders Shares Per Share ------------ --------- --------- For the Fiscal Year Ended January 1, 2000 ----------------------------------------- Basic $6,759,000 2,962,000 $2.28 Common Share Equivalent of Options Issued -- 64,000 (.05) ---------- --------- ------ Diluted $6,759,000 3,026,000 $2.23 ========== ========== ===== For the Fiscal Year Ended January 2, 1999 ----------------------------------------- Basic $6,593,000 3,133,000 $2.10 Common Share Equivalent of Options Issued -- 110,000 (.07) ---------- --------- ------ Diluted $6,593,000 3,243,000 $2.03 ========== ========== ===== For the Fiscal Year Ended January 3, 1998 ----------------------------------------- Basic $5,444,000 3,162,000 $ 1.72 Common Share Equivalent of Options Issued -- 65,000 (.03) ---------- --------- ------ Diluted $5,444,000 3,227,000 $1.69 ========== ========== =====
Diluted earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during each year. Such average shares include the weighted average number of common shares outstanding plus the shares issuable upon exercise of stock options after the assumed repurchase of common shares with the related proceeds. F-20 49 11. COMMITMENTS AND CONTINGENCIES: The Company leases certain office and plant facilities and equipment under noncancellable leases. These leases expire in periods ranging from one to five years and, in certain instances, provide for purchase options. Immediately prior to the 1990 acquisition of Hasler, the Company's heavy feeder division, the acquired company entered into a sale/leaseback agreement on its real property in Switzerland. The net proceeds of this transaction were distributed to the seller as a dividend. The gain from this transaction has been classified as Other Noncurrent Liabilities in the Company's consolidated balance sheets. This deferred gain is being amortized over the life of the resulting operating lease (ten years). Amortization of the deferred gain for 1999, 1998 and 1997 was $367,000, $374,000 and $380,000, respectively. As of January 1, 2000, future minimum payments under operating leases having noncancellable terms in excess of one year are summarized below:
Operating Leases -------------- (in thousands) 2000 $ 717 2001 218 2002 67 2003 44 2004 21 --------- $ 1,067 ==========
Rent expense for 1999, 1998 and 1997 was $768,000, $702,000 and $647,000, respectively. The Company has employment contracts with eight executives. Except in one case when two years advance notice is required, these contracts may be terminated by the Company on one year's advance notice. Under the agreements, each individual is guaranteed minimum compensation over the contract period. As of January 1, 2000, the estimated future obligation under these contracts is $977,200 (2000) and $420,000 (2001). 12. MANAGEMENT SEGMENT INFORMATION: The Company has adopted the provisions of SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 introduced a new model for segment reporting called the management approach. The management approach is based on the way that the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance. The Company is engaged in one business segment, the development, manufacturing and marketing of gravimetric and volumetric feeders, pneumatic conveying systems and related equipment. The Company operates in two primary geographic locations, North America and Western Europe. F-21 50
North Western Elimi- Consoli- America Europe nations dated (in thousands) FISCAL YEAR ENDED JANUARY 1, 2000 Revenues- Sales to unaffiliated customers $ 36,226 $ 51,661 $ -- $ 87,887 Sales to affiliates 3,509 2,907 (6,416) -- -------------- ----------- ----------- ------------- Total sales $ 39,735 $ 54,568 $ (6,416) $ 87,887 ============== =========== =========== ============= Operating income $ 5,405 $ 3,752 $ (18) $ 9,139 ============== =========== =========== ============= Interest expense (495) ------------- Income before income taxes $ 8,644 ============= Capital expenditures $ 826 $ 1,779 $ 2,605 Depreciation and amortization expense 1,265 2,097 3,362 Total assets 21,700 33,070 54,770 FISCAL YEAR ENDED JANUARY 2, 1999: Revenues- Sales to unaffiliated customers $ 37,642 $ 51,500 $ -- $ 89,142 Sales to affiliates 3,645 1,881 (5,526) -- -------------- ----------- ----------- ------------- Total sales $ 41,287 $ 53,381 $ (5,526) $ 89,142 ============== =========== =========== ============= Operating income $ 6,860 $ 2,425 $ 147 $ 9,432 ============== =========== =========== Interest expense (714) ------------- Income before income taxes $ 8,718 ============= Capital expenditures $ 1,121 $ 1,592 $ 2,713 Depreciation and amortization expense 1,376 1,782 3,158 Total assets 20,212 36,405 56,617 FISCAL YEAR ENDED JANUARY 3, 1998: Revenues- Sales to unaffiliated customers $ 35,507 $ 51,645 $ -- $ 87,152 Sales to affiliates 1,976 1,931 (3,907) -- -------------- ----------- ----------- ------------- Total sales $ 37,483 $ 53,576 $ (3,907) $ 87,152 ============== =========== =========== ============= Operating income $ 3,040 $ 5,607 $ (205) $ 8,442 ============== =========== =========== Interest expense (1,133) ------------- Income before income taxes $ 7,309 ============= Capital expenditures $ 1,003 $ 1,997 $ 3,000 Depreciation and amortization expense 1,005 1,972 2,977 Total assets 21,276 32,973 54,249
F-22 51 13. QUARTERLY FINANCIAL INFORMATION (Unaudited): The following table summarizes quarterly financial data for fiscal 1999 and 1998:
1999 First Second Third Fourth - --------- ----- ------ ----- ------ Revenues $19,840 $22,617 $21,688 $23,742 Gross Profit 9,121 10,027 9,925 9,883 Net Income 1,360 1,819 1,670 1,910 Basic Earnings Per Share .46 .62 .56 .65 Diluted Earnings Per Share .44 .60 .55 .63
1998 First Second Third Fourth - --------- ----- ------ ----- ------ Revenues $21,455 $22,366 $21,244 $24,077 Gross Profit 9,640 10,373 9,493 10,690 Net Income 1,307 1,815 1,578 1,893 Basic Earnings Per Share .40 .56 .52 .63 Diluted Earnings Per Share .39 .54 .51 .60
F-23 52 SCHEDULE II K-TRON INTERNATIONAL, INC. VALUATION RESERVES
Balance at Additions Beginning Charged Balance at of Period to Income Deductions(1) End of Period ------------- ------------ ------------- --------------- FISCAL YEAR ENDED JANUARY 1, 2000: Allowance for doubtful accounts $ 1,286,000 $ 39,000 $ 401,000 $ 924,000 FISCAL YEAR ENDED JANUARY 2, 1999: Allowance for doubtful accounts 1,119,000 208,000 41,000 1,286,000 FISCAL YEAR ENDED JANUARY 3, 1998: Allowance for doubtful accounts 1,037,000 184,000 102,000 1,119,000 FISCAL YEAR ENDED JANUARY 1, 2000: Provision for restructuring reserve -- 710,000 260,000 450,000 FISCAL YEAR ENDED JANUARY 2, 1999: Provision for restructuring reserve -- -- -- -- FISCAL YEAR ENDED JANUARY 3, 1998: Provision for restructuring reserve -- -- -- --
(1) Accounts written off less recoveries, net of foreign exchange translation adjustment. S-1 53 EXHIBIT INDEX Exhibit Number Description [S] [C] 3.1 Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1 to the Company's annual report on Form 10-K for the year ended January 2, 1999 ("1998 Form 10-K") and incorporated herein by reference) 3.2 By-Laws, as amended (Filed as Exhibit 3.2 to the Company's annual report on Form 10-K for the year ended January 1, 1994 and incorporated herein by reference) 4.1 Form of Certificate for Shares of Common Stock (Filed as Exhibit 4.1 to the 1998 Form 10-K and incorporated herein by reference) 4.2 Rights Agreement dated as of October 3, 1991 with First Interstate Bank of Arizona, N.A., as Rights Agent (Filed as Exhibit 1 to the Company's report on Form 8-K dated October 3, 1991 and incorporated herein by reference) 4.3 Amendment, dated as of March 6, 2000, to Rights Agreement, dated as of October 3, 1991, with American Stock Transfer & Trust Company, as successor Rights Agent 10.1 1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to the to the Company's annual report on Form 10-K for the year ended January 4, 1992 ("1991 Form 10-K") and incorporated herein by reference)** 10.2 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.2.4 to the Company's annual report on Form 10-K for the year ended December 31, 1988 and incorporated herein by reference)** 10.3 K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (Filed as Exhibit 10.3 to the 1998 Form 10-K and incorporated herein by reference)** 10.4 K-Tron International, Inc. Amended and Restated Employee Stock Purchase Plan (Filed as Exhibit 10.2 to the Company's report on Form 10-Q for the quarterly period ended September 28, 1996 and incorporated herein by reference)** 10.5 Amended and Restated K-Tron International, Inc. Profit-Sharing and Thrift Plan** 54 10.6 K-Tron International, Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.2.7 to the 1991 Form 10-K and incorporated herein by reference)** 10.7 Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to the Company's report on Form 10-Q for the quarterly period ended September 27, 1997 and incorporated herein by reference)** 10.8 Employment Agreement dated as of May 7, 1999 by and between K-Tron International, Inc. and Ronald R. Remick** 10.9 Amendment No. 1 to Employment Agreement dated October 5, 1998 by and between K-Tron International, Inc. and Edward B. Cloues, II (Filed as Exhibit 10.1 to the Company's report on Form 10-Q for the quarterly period ended October 3, 1998 and incorporated herein by reference)** 10.10 Form of Employment Agreement with certain employees of the Company, which are identical in all material respects except for the employee, amount of salary to be paid and date of execution (Filed as Exhibit 10.12 to the Company's annual report on Form 10-K for the year ended January 3, 1998 and incorporated herein by reference)** 10.11 Form of Indemnification Agreement with certain directors and officers of the Company listed on Schedule 10.11, which are identical in all material respects except for the director or officer who is a party thereto and the date of execution** 10.12 Leasing Agreement dated October 30, 1990 between CS Immobilien Leasing AG, Zurich and Hasler Freres SA, with limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.1(b) to the Company's report on Form 8-K dated October 30, 1990 and incorporated herein by reference) 10.13 Amendment, dated January 25, 1991, to Leasing Agreement, dated October 30, 1990, between CS Immobilien Leasing AG, Zurich and Hasler Freres SA and to the related limited guaranty of K-Tron Soder AG (Filed as Exhibit 10.3.3 to the Company's annual report on Form 10-K for the year ended December 29, 1990 and incorporated herein by reference) 10.14 Note dated February 4, 2000 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit (b)(1) on Amendment No.1 to the Company's Tender Offer Statement on Schedule TO dated February 16, 2000 and incorporated herein by reference) 55 10.15 Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of The Bank of Gloucester County 10.16 Loan Modification Agreement dated June 24, 1998 between K-Tron America, Inc. and The Bank of Gloucester County 10.17 Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank of Gloucester County 10.18 Loan Modification Agreement dated as of July 22, 1999 between K-Tron America, Inc. and The Bank of Gloucester County 21.1 Subsidiaries 23.1 Consent of Arthur Andersen LLP 24.1 Power of Attorney (Included on Signature Page) 27.1 Financial Data Schedule ** Management contract or compensatory plan or arrangement required to be filed or incorporated as an exhibit EX-4.3 2 AMENDMENT RIGHTS AGREEMENT AMERICAN STOCK TRANSFER 1 Exhibit 4.3 AMENDMENT NO. 1 TO RIGHTS AGREEMENT THIS AMENDMENT NO. 1 TO RIGHTS AGREEMENT (this "Amendment") is made and entered into as of March 6, 2000 by and between K-Tron International, Inc., a New Jersey corporation (the "Company") and American Stock Transfer & Trust Company (the "Rights Agent"). This Amendment amends and otherwise modifies the Rights Agreement (the "Agreement") dated as of October 3, 1991 by and between the Company and First Interstate Bank of Arizona, N.A., the predecessor Rights Agent. Terms used herein that are not defined herein shall have the meanings ascribed thereto in the Agreement. WHEREAS, in accordance with Section 26(a) of the Agreement, the Company and the Rights Agent wish to change certain provisions of the Agreement in a manner that the Company deems necessary or desirable and that does not adversely affect the interests of the holders of Rights Certificates. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 1(g) shall be amended and restated in its entirety to read as follows: (g) Intentionally left blank. 2. Section 11(a)(ii)(B) of the Agreement shall be amended and restated in its entirety to read as follows: (B) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates, shall, at any time after the Rights Dividend Declaration Date, become the Beneficial Owner of 20% or more of the Common Shares then outstanding, unless the event causing the 20% threshold to be crossed is a Section 13 Event, or is an acquisition of Common Shares pursuant to a tender offer or an exchange offer for all outstanding Common Shares at a price and on terms that provide fair value to all shareholders, as determined by at least a majority of the Board of Directors of the Company, after taking into consideration all factors that such members of the 2 Board of Directors deem relevant, including, without limitation, the long-term prospects and value of the Company and the prices and terms that such members of the Board of Directors believe, in good faith, could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value, or 3. Section 11(a)(iii) of the Agreement shall be amended and restated in its entirety to read as follows: (iii) In the event that the number of Common Shares that are authorized by the Company's Restated Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the excess of the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares of the same or a different class or other equity securities of the Company (including, without limitation, preferred shares or units of preferred shares that a majority of the Board of Directors of the Company has deemed (based, among other things, on the dividend and liquidation rights of such preferred shares) to have substantially the same economic value as Common Shares (such preferred shares, hereinafter referred to as "common share equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by a majority of the Board of Directors of the Company after considering the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and 2 3 without requiring payment of the Purchase Price, Common Shares (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. The Company shall make a public announcement when the exercisability of the Rights has been temporarily suspended, and again when such suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Shares shall be the current market price (as determined pursuant to Section 11(d) hereof) per Common Share on the Section 11(a)(ii) Trigger Date and the value of any "common share equivalent" shall be deemed to have the same value as the Common Shares on such date. 4. Section 11(q) of the Agreement shall be amended and restated in its entirety to read as follows: (q) In the event that the Rights become exercisable following a Section 11(a)(ii) Event, the Company, by action of a majority of the Board of Directors of the Company, may permit the Rights, subject to Section 7(e) hereof, to be exercised for 50% of the Common Shares (or cash or other securities or assets to be substituted for the Adjustment Shares pursuant to subsection (a)(iii)) that would otherwise be purchasable under subsection (a), in consideration of the surrender to the Company of the Rights so exercised and without other payment of the Purchase Price. Rights exercised under this subsection (q) shall be deemed to have been exercised in full and shall be canceled. 3 4 5. Section 13(e) of the Agreement shall be amended and restated in its entirety to read as follows: (e) In the event that the Rights become exercisable under subsection (a) (except as provided in subsection (d)), the Company, by action of a majority of the Board of Directors of the Company, may agree with the Principal Party that the Principal Party shall permit the Rights to be exercised for 50% of the Common Shares of the Principal Party that would otherwise be purchasable under subsection (a), in consideration of the surrender to the Principal Party, as the successor to the Company under subsection (a)(ii), of the Rights so exercised and without other payment of the Purchase Price. Rights exercised under this subsection (e) shall be deemed to have been exercised in full and shall be canceled. 6. Section 21 of the Agreement shall be amended and restated in its entirety to read as follows: SECTION 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' prior written notice mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' prior written notice mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares, by registered or certified mail, and to the holders of Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the 4 5 Company or by such a court, shall be (a) a corporation organized, doing business and in good standing under the laws of the United States or of any state, having a principal office in the State of New York or the State of New Jersey, that is authorized by law to exercise corporate trust and stock transfer powers and is subject to supervision or examination by federal or state authority and that has at the time of its appointment as Rights Agent a combined capital and surplus adequate in the judgment of a majority of the Board of Directors of the Company to assure the performance of its duties hereunder and the protection of the interests of the Company and the holders of Rights or beneficial interests therein, or (b) an Affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for that purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and Preferred Shares and mail a notice thereof in writing to the registered holders of the Rights Certificates or, prior to the Distribution Date, to the registered holders of the Common Shares. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. 7. Section 23(a) of the Agreement shall be amended and restated in its entirety to read as follows: (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following a Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth day following the Record Date), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $0.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the 5 6 "Redemption Price") and the Company may, at its option, pay the Redemption Price either in Common Shares (based on the "current market price", as defined in Section 11(d)(i) hereof, of the Common Shares at the time of redemption) or cash; provided, however, if, following the occurrence of a Stock Acquisition Date and following the expiration of the right of redemption hereunder but prior to any Triggering Event, (i) an Acquiring Person shall have transferred or otherwise disposed of a number of Common Shares in one transaction or a series of transactions, not directly or indirectly involving the Company or any of its Subsidiaries, which did not result in the occurrence of a Triggering Event or the Company shall have issued additional equity securities, in either instance such that such Person is thereafter a Beneficial Owner of 10% or less of the outstanding Common Shares, and (ii) there is no other Acquiring Person immediately following the occurrence of the event described in clause (i), then the right of redemption shall be reinstated and thereafter be subject to the provisions of this Section 23. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired. 8. Section 26(a) of the Agreement shall be amended and restated in its entirety to read as follows: (a) Prior to the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing Common Shares. From and after the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner that the Company may deem necessary or desirable and that shall not adversely affect the interests of the holders of Rights Certificates; provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period 6 7 relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment and shall be fully protected hereunder by doing so. Nothing herein shall require the Rights Agent to execute any supplement or amendment adversely affecting its rights and protections hereunder. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made that changes the Redemption Price, the Final Expiration Date, the Purchase Price or the number of Preferred Share Fractions for which a Right is exercisable. Prior to the Distribution Date, the interests of the beneficial owners of Rights shall be deemed coincident with the interests of the holders of Common Shares. 9. Section 28 of the Agreement shall be amended and restated in its entirety to read as follows: SECTION 28. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend or supplement the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) that are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights 7 8 Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. 10. This Amendment shall be effective as of March 6, 2000 and shall be governed by and interpreted under the laws of the State of New Jersey, without giving effect to any conflict of laws provisions. 11. As amended and modified hereby, the Agreement is ratified and confirmed in all respects. IN WITNESS WHEREOF, the Company and the Rights Agent have executed this Amendment as of March 6, 2000. [corporate seal] K-TRON INTERNATIONAL, INC. Attest: /s/ Mary E. Vaccara By: /s/ Edward B. Cloues, II - --------------------- -------------------------- Mary E. Vaccara Edward B. Cloues, II As its Secretary As its Chairman of the Board and Chief Executive Officer AMERICAN STOCK TRANSFER & TRUST COMPANY By: /s/ Isaac Kagan ----------------------- Isaac Kagan As its Vice President 8 EX-10.5 3 AMENDED & RESTATED PROFIT SHARING & THRIFT PLAN 1 Exhibit 10.5 K-TRON INTERNATIONAL, INC. AND AFFILIATED COMPANIES PROFIT-SHARING AND THRIFT PLAN As Amended and Restated Effective As Of January 1, 1999 2 K-TRON INTERNATIONAL, INC. AND AFFILIATED COMPANIES PROFIT-SHARING AND THRIFT PLAN ARTICLE I. STATEMENT OF HISTORY AND PURPOSE 1.1. History. K-Tron International, Inc. has had in effect since December 1, 1984, the K-Tron International, Inc. and Affiliated Companies Profit-Sharing and Thrift Plan, to which it has made contributions for the purpose of sharing its profits with its employees in order to provide for the accumulation of funds for the benefit of eligible employees and their beneficiaries in the manner and to the extent set forth in such plan. The K-Tron International, Inc. and Affiliated Companies Profit-Sharing and Thrift Plan, as amended and restated herein, and its related trust agreement, constitute an amendment in its entirety to the K-Tron International, Inc. and Affiliated Companies Profit-Sharing and Thrift Plan which is continued effective as of January 1, 1999. The purpose of this amendment and restatement is to reflect changes required by the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the IRS Restructuring and Reform Act of 1998 and also to make other desired changes. 1.2. Qualification under the Internal Revenue Code. It is intended that the Plan be a qualified profit-sharing plan within the meaning of section 401(a) of the Code, that the requirements of section 401(k) of the Code be satisfied as to that portion of the Plan represented by contributions made pursuant to Participant Salary Deferral elections, that the requirements of section 401(m) of the Code be satisfied as to that portion of the Plan represented by Employer Matching Contributions and that the trust or other funding vehicle associated with the Plan be exempt from federal income taxation pursuant to the provisions of section 501(a) of the Code. 1.3. Documents. The Plan consists of the Plan document as set forth herein, and any amendments thereto. Certain provisions relating to the Plan and its operation are contained in the corresponding Trust Agreement (or documents establishing any other funding vehicle for the Plan), and any amendments, supplements, appendices and riders to any of the foregoing. 1 3 ARTICLE II. DEFINITIONS 2.1. "Account" means the entire interest of a Participant in the Plan. A Participant's Account will consist of one or more separate accounts reflecting the various types of contributions permitted under the Plan, as hereinafter provided. 2.2. "Actual Deferral Percentage" means the ratio (expressed as a percentage to the nearest one-hundredth of one percent) of (a) (1) an Eligible Employee's Salary Deferrals for the Plan Year (excluding any Salary Deferrals that are (A) taken into account in determining the Contribution Percentage, (B) distributed to an Eligible Employee who is not a Highly Compensated Employee pursuant to a claim for distribution under Section 5.1, or (C) returned to the Eligible Employee pursuant to Section 5.4), plus (2) at the election of the Committee, any portion of the Qualified Employer Contributions allocated to the Participant for the Plan Year permitted to be taken into account under section 401(k) of the Code, plus (3) in the case of any Highly Compensated Employee who is eligible to participate in more than one cash or deferred arrangement maintained by the Employer or an Affiliated Company, elective deferrals made on his behalf under all such arrangements (excluding those that are not permitted to be aggregated with the Plan under Treas. Reg. Section 1.401(k)-1(b)(3)(ii)(B)) for the Plan Year, to (b) the Eligible Employee's Compensation for the portion of the Plan Year that the individual was an Eligible Employee. 2.3. "Affiliated Company" means any entity which (a) with any Employer, constitutes (1) a "controlled group of corporations" within the meaning of section 414(b) of the Code, (2) a "group of trades or businesses under common control" within the meaning of section 414(c) of the Code, or (3) an "affiliated service group" within the meaning of section 414(m) of the Code or (b) is required to be aggregated with any Employer pursuant to Treasury regulations under section 414(o) of the Code. An entity will be considered an Affiliated Company only with respect to such period as the relationship described in the preceding sentence exists. For purposes of Section 2.5 or 5.4, "Affiliated Company" will mean an Affiliated Company, but determined with "more than 50 percent" substituted for the phrase "at least 80 percent" in section 1563(a)(1) of the Code when applying sections 414(b) and (c) of the Code. 2.4. "Alternate Payee" means the person entitled to receive payment of benefits under the Plan pursuant to a QDRO. 2.5. "Annual Addition" means, for any Participant for any Plan Year, the sum of the following amounts allocated to a Participant's accounts under the Plan and any other qualified defined contribution plan maintained by the Employer or an Affiliated Company: (a) Employer contributions (including Matching Contributions, Salary Deferral amounts except Salary Deferrals distributed pursuant to Section 5.1, and Qualified Employer Contributions); 2 4 (b) Participant contributions (including mandatory or voluntary employee contributions made under a qualified defined benefit plan of the Employer or an Affiliated Company, but excluding Rollover Contributions and amounts repaid pursuant to Section 7.1(d)(4); (c) forfeitures; and (d) amounts described in section 415(l)(1) of the Code (relating to contributions allocated to individual medical accounts which are part of a pension or annuity plan) and section 419A(d)(2) of the Code (relating to contributions allocated to post-retirement medical benefit accounts for key employees). 2.6. "Applicable Computation Period" means the following: (a) For purposes of Hours of Employment for eligibility in accordance with Section 3.1, an Employee's first Applicable Computation Period shall be the 12-month period beginning as of the date he first completed an Hour of Employment with an Employer. Thereafter, such Employee's Applicable Computation Period shall be each Plan Year, commencing with the Plan Year which begins after the date he first completed an Hour of Employment. (b) For purposes of contributions in accordance with Articles IV and VIII, Applicable Computation Period means the Plan Year. (b) For all other purposes, Applicable Computation Period means the 12-month period beginning as of the first day of the month during which a person first completes an Hour of Employment with an Employer and each anniversary thereof. 2.7. "Average Actual Deferral Percentage" means the average (expressed as a percentage to the nearest one-hundredth of one percent) of the Actual Deferral Percentages of a specified group of Eligible Employees. 2.8. "Average Contribution Percentage" means the average (expressed as a percentage to the nearest one-hundredth of one percent) of the Contribution Percentages of a specified group of Eligible Employees. 2.9. "Beneficiary" means the person or entity designated or otherwise determined to be such in accordance with Section 7.5. 2.10. "Benefit Payment Date" means, for any Participant or Beneficiary of a deceased Participant, the date as of which the first benefit payment from a Participant's Account is due; provided, however, that the Benefit Payment Date applicable to any amount withdrawn pursuant 3 5 to Section 7.3 will not be taken into account in determining the Participant's Benefit Payment Date with respect to the remainder of his Account. 2.11. "Board of Directors" means the board of directors of the Company or a committee of the Board of Directors to which the Board has delegated some or all of its responsibilities hereunder. 2.12. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time, and any successor statute of similar purpose. 2.13. "Committee" means the committee described in Article IX. 2.14. "Company" means K-Tron International, Inc. and any successor which shall maintain this Plan. 2.15. "Compensation" means, for any Employee, for any Plan Year: (a) except as otherwise provided below in this definition, for purposes of Article IV, the amount described in Subsection (c) below, exclusive of any (i) amount paid by an Employer for any period during which the Participant was not an Employee and (ii) amount paid before an Employee was eligible to become a Participant in accordance with Section 3.1 except for purposes of Regular Contributions. (b) for purposes of Section 5.4, the Participant's wages, salaries, fees for professional services and other amounts received during the Plan Year for personal services actually rendered in the course of employment with an Employer. Such other amounts include commissions, bonuses and tips, vacation and holiday pay, sick/disability pay paid directly by the Employer or by a third party under the Employer's short-term disability program; severance pay on a payroll in lieu of notice; earned income as described in section 401(c)(2) of the Code; and, for Plan Years beginning after December 31, 1997, amounts that are contributed by the Employer under a salary reduction agreement and excluded from gross income under sections 125, 402(e)(3), 402(h), 403(b) and 457 of the Code. Such other amounts exclude amounts paid under an Employer's long-term disability program; worker's compensation payments; fringe benefits such as moving expenses, employee discounts, meals, van pooling, reimbursed medical and educational expenses and life insurance, whether or not includible in gross income; expenses reimbursed in connection with the performance of duties; accidental injury payments; contributions made by the Employer to any qualified deferred compensation, cafeteria or pension plan, including salary reduction contributions, contributions to a simplified employee pension plan described in Code section 408(k) and contributions toward the purchase of an annuity contract described in Code section 403(b); deferrals under any non-qualified deferred compensation plan until such time as such deferrals are includable in gross income during a period of employment; amounts realized from the exercise of a stock option, whether or not qualified, or when restricted stock or property held by a Participant either becomes freely 4 6 transferrable or is no longer subject to a substantial risk of forfeiture; and any other amounts which receive special tax benefits. (c) for purposes of the definitions of Highly Compensated Employee, Actual Deferral Percentage, Actual Contribution Percentage and Article VIII, the amount described in Subsection (b) above increased, for Plan Years beginning before December 31, 1997, by the amount of any contributions made by the Employer under any salary reduction or similar arrangement to a qualified deferred compensation, pension or cafeteria plan, contributions to a simplified employee pension plan described in Code section 408(k), and contributions toward the purchase of an annuity contract described in Code section 403(b). For purposes of the definition of Highly Compensated Employee, the amount described above shall be for the applicable period for making the determination of Highly Compensated Employees. (d) for purposes of Section 4.6, "compensation" means the Compensation, as defined in subsection (a), that the Participant would have received during a period of Qualified Military Service (or, if the amount of such Compensation is not reasonably certain, the Participant's average earnings from the Employer or an Affiliated Company for the twelve-month period immediately preceding the Participant's period of Qualified Military Service); provided, however, that the Participant returns to work within the period during which his right to reemployment is protected by law. (e) only the first $160,000, or such other amount as may be applicable under section 401(a)(17) of the Code, of the amount otherwise described in subsection (b) and the aggregate amount described in subsections (a) and (d) of this definition will be counted. In determining Compensation for purposes of this limitation, the family aggregation rules of section 401(a)(17)(A) of the Code shall apply for Plan Years beginning before January 1, 1997. (f) if the Compensation of a Participant is determined for a Plan Year that contains fewer than 12 calendar months, then the annual compensation limitation described in subsection (e) above will be adjusted with respect to that Participant by multiplying the annual compensation limitation in effect for the Plan Year by a fraction the numerator of which is the number of full months in the Plan Year and the denominator of which is 12; provided, however, that no proration is required for a Participant who is covered under the Plan for less than one full Plan Year if the formula for allocations is based on Compensation for a period of at least 12 months. 2.16. "Contribution Percentage" means the ratio (expressed as a percentage to the nearest one-hundredth of one percent) of (a) (1) the Matching Contributions allocated to an Eligible Employee's Account for the Plan Year (excluding any Matching Contributions forfeited pursuant to Section 5.1(b) or 5.3(a)), plus (2) at the election of the Committee, any portion of the Qualified Employer Contributions allocated to the Eligible Employee for the Plan Year required or permitted to be taken into account under section 401(m) of the Code, plus (3) in the case of any Highly Compensated Employee who is eligible to participate in more than one plan 5 7 maintained by the Employer or an Affiliated Company to which employee or matching contributions are made, after-tax employee contributions and employer matching contributions made on his behalf under all such plans (excluding those that are not permitted to be aggregated with the Plan under Treas. Reg. Section 1.401(m)-1(b)(3)(ii)) for the Plan Year), to (b) the Eligible Employee's Compensation for the portion of the Plan Year that the individual was an Eligible Employee. For purposes of determining Contribution Percentages, the Employer or the Committee may take Salary Deferrals into account, in accordance with Treasury regulations, so long as the requirements of Section 5.2(a) are met both when the Salary Deferrals used in determining Contribution Percentages are and are not included in determining Actual Deferral Percentages. 2.17. "Deferred Retirement Date" means the first day of any month subsequent to a Participant's Normal Retirement Date. 2.18. "Disability" means any physical or mental condition for which a Participant shall be eligible to receive benefits under the disability insurance provisions of the Social Security Act. 2.19. "Effective Date" means December 1, 1984, except as otherwise provided herein. 2.20. "Eligible Employee" means each Employee of an Employer for whom the Employer is required to contribute Federal Insurance Contributions Act taxes, other than (a) any person who is transferred from a foreign subsidiary on temporary assignment in the United States, (b) any person whose terms and conditions of employment are determined through collective bargaining, unless the collective bargaining agreement provides for the eligibility of such person to participate in this Plan, (c) any person who is an Employee solely by reason of being a "leased employee" as defined under section 414(n) or 414(o) of the Code, or (d) an independent contractor or any other person who is not treated by the Employer as an employee for purposes of withholding federal employment taxes, regardless of any contrary governmental or judicial determination relating to such employment status or tax withholding. If a person described in clause (d) of the preceding sentence is subsequently reclassified as, or determined to be, an employee by the Internal Revenue Service, any other governmental agency or authority, or a court, or if an Employer or Affiliated Company is required to reclassify such an individual as an employee as a result of such reclassification or determination (including any reclassification by an Employer or Affiliated Company in settlement of any claim or action relating to such individual's employment status), such individual will not become eligible to become a Participant in this Plan by reason of such reclassification or determination. 2.21. "Employee" means a person who is employed by an Employer or an Affiliated Company. A person who is not otherwise employed by an Employer will be deemed to be employed by any such company if he is a leased employee with respect to whose services such Employer or Affiliated Company is the recipient, within the meaning of section 414(n) or 414(o) of the Code, but to whom section 414(n)(5) of the Code does not apply. 6 8 2.22. "Employer" means the Company and each Affiliated Company which adopts this Plan and joins in the corresponding Trust Agreement. 2.23. "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, and any successor statute of similar purpose. 2.24. "Highly Compensated Employee" means, for Plan Years beginning on or after January 1, 1997, any Employee who performed services for an Employer or an Affiliated Company during the Plan Year for which a determination is being made (the "Determination Year") and who: (a) was at any time in the Determination Year or the immediately preceding Determination Year a five-percent (5%) owner, as defined in section 416(i) of the Code; or (b) for the immediately preceding Determination Year, received Compensation from the Employer or an Affiliated Company in excess of $80,000, as adjusted by the Secretary of the Treasury in accordance with section 414(q) of the Code. 2.25. "Investment Fund" means any of the funds established pursuant to Section 6.2 for the investment of the assets of the Trust Fund. 2.26. "Investment Manager" means any fiduciary (other than the Trustee or other Named Fiduciary) who has the power to manage, acquire, or dispose of any asset of the Plan and who is qualified as an "investment manager" within the meaning of section 3(38) of ERISA. 2.27. "Matching Contribution" means an Employer contribution made pursuant to Section 4.2. 2.28. "Matching Contribution Account" means so much of a Participant's Account as consists of amounts attributable to Matching Contributions allocated to such Participant's Account, including all earnings and gains attributable thereto and reduced by all losses attributable thereto, all expenses chargeable thereagainst and by all withdrawals and distributions therefrom. 2.29. "Named Fiduciary" means the Board of Directors, the Trustee, and the Committee. Each Named Fiduciary will have only those particular powers, duties, responsibilities and obligations as are specifically delegated to him under the Plan or the Trust Agreement. Any fiduciary, if so appointed, may serve in more than one fiduciary capacity and may also serve in a non-fiduciary capacity. 2.30. "Normal Retirement Date" means as to Participants who attained age 65 prior to January 1, 1992, the date on which on which a Participant attained age 65 and as to all other 7 9 Participants, the later to occur of (a) the date on which the Participant attains age 62, or (b) January 1, 1992. 2.31. "Participant" means an Eligible Employee who has elected to participate in the Plan and has filed the required authorizations operative under the Plan as provided in Article III hereof, or a person who has an undistributed interest in the Trust Fund. 2.32. "Plan" means the K-Tron International, Inc. and Affiliated Companies Profit-Sharing and Thrift Plan as set forth herein, and as the same may from time to time hereafter be amended. 2.33. "Plan Year" means each consecutive 12-month period beginning on each January 1 and ending on each December 31. 2.34. "QDRO" means a "qualified domestic relations order" within the meaning of section 206(d)(3)(B) of ERISA and section 414(p) of the Code. 2.35. "Qualified Employer Contribution" means a contribution made by an Employer pursuant to Section 4.4. 2.36. "Qualified Employer Contribution Account" means so much of a Participant's Account as consists of amounts attributable to Qualified Employer Contributions allocated to such Participant's Account, including all earnings and gains attributable thereto and reduced by all losses attributable thereto, all expenses chargeable thereagainst and by all withdrawals and distributions therefrom. 2.37. "Qualified Military Service" means any service in the uniformed services (as defined in chapter 43 of title 38, United States Code) where the Participant's right to reemployment is protected by law. 2.38. "Regular Contribution" means an Employer contribution made pursuant to Section 4.3. 2.39. "Regular Contribution Account" means so much of a Participant's Account as consists of amounts attributable to Regular Contributions and top-heavy contributions pursuant to Article VIII that are allocated to such Participant's Account, including all earnings and gains attributable thereto and reduced by all losses attributable thereto, all expenses chargeable thereagainst and by all withdrawals and distributions therefrom. 2.40. "Retirement" means the termination of a Participant's employment on his Normal or Deferred Retirement Date. 8 10 2.41. "Rollover Account" means so much of a Participant's Account as consists of his Rollover Contributions, including all earnings and gains attributable thereto, and reduced by all losses attributable thereto, all expenses chargeable thereto and all withdrawals and distributions therefrom. 2.42. "Rollover Contributions" means amounts contributed by an Eligible Employee pursuant to Section 4.7. 2.43. "Salary Deferral Account" means so much of a Participant's Account as consists of his Salary Deferrals, including all earnings and gains attributable thereto, and reduced by all losses attributable thereto, all expenses chargeable thereto and all withdrawals and distributions therefrom. 2.44. "Salary Deferrals" means the portion of a Participant's Compensation which is reduced in accordance with Section 4.1(a) and with respect to which a corresponding contribution is made to the Plan by the Employer pursuant to Section 4.1(c). 2.45. "Service" means the following: (a) All periods of employment with an Employer. A period of employment begins as of the date the Employee first completes an Hour of Employment for the Employer and ends on the earlier of the date the Employee resigns, is discharged, retires or dies or, if the Employee is absent for any other reason, on the first anniversary of the first day of such absence (with or without pay) from the Employer. If an Employee is absent for any reason and returns to the employ of the Employer before incurring a Break-in-Service, as provided in Subsection (b), he shall receive credit for his period of absence up to a maximum of 12 months. Service subsequent to a Break-in-Service will be credited as a separate period of employment. (b) "Break-in-Service" means a period of 12-consecutive months during which an Employee fails to accrue an Hour of Employment with the Employer. Such period begins on the earlier of the date the Employee resigns, is discharged, retires or dies or, if the Employee is absent for any other reason, on the first anniversary of the first day of such absence (with or without pay) from the Employer. If an Employee is absent by reason of (i) the pregnancy of the Employee, (ii) the birth of a child of the Employee, (iii) the placement of a child with the Employee in connection with an adoption of such child by such Employee, or (iv) caring for such child immediately following such birth or placement, such Employee will not be treated as having retired, resigned or been discharged and the period between the first and second anniversary of the first day of such absence shall not be deemed a Break-in-Service. 9 11 (c) "Month of Service" means a calendar month any part of which is in a period of employment or credited absence. (d) "Year of Service" means, unless otherwise indicated, twelve (12) Months of Service. (e) "Hour of Employment" means the following: (1) For an Employee paid on an hourly basis or for whom hourly records of employment are required to be maintained, each hour for which the person is directly or indirectly paid or entitled to payment for the performance of duties or for the period of time when no duties are performed, irrespective of whether the employment relationship has terminated, such as vacation, holiday or illness. (2) For an Employee paid on a non-hourly basis or for whom hourly records of employment are not required to be maintained, each week for which the person directly or indirectly paid or entitled to payment shall be equal to 45 Hours of Employment. (3) A person shall receive an Hour of Employment for each hour for which back pay has been awarded or agreed to irrespective of mitigation of damages, provided that each such hour shall be credited to the Applicable Computation Period to which it pertains, rather than the Applicable Computation Period in which the award or agreement is made, and further provided that no such award or agreement shall have the effect of crediting an Hour of Employment for any hour for which the person previously received credit under (1) or (2) above. (4) Notwithstanding the foregoing, Hours of Employment shall be computed and credited in accordance with Department of Labor Regulations 2530.200(b)-2, subparagraphs (b) and (c). (f) An Employee shall receive credit for the period of his employment with another business entity to which he had been transferred by the Company solely for purposes of determining his vested interest in accordance with Section 7.1. 2.46. "Social Security Taxable Wage Base" means the amount of wages from which Social Security taxes are required to be withheld in accordance with the Federal Insurance Contributions Act, or any successor act, regulation, or ruling pertaining thereto, which is in effect at the beginning of each Plan Year. 10 12 2.47. "Trust Agreement" means the trust instrument executed by the Company and the Trustee for purposes of providing a vehicle for investment of the assets of the Plan. 2.48. "Trustee" means the party or parties so designated pursuant to the Trust Agreement and each of their respective successors. 2.49. "Trust Fund" means all of the assets of the Plan held by the Trustee under the Trust Agreement. 2.50. "Valuation Date" means the last day of each calendar month or such other dates as the Committee may determine from time to time. The date or dates designated by the Committee and communicated in writing to the Trustee for the purpose of valuing each Investment Fund and adjusting Accounts hereunder need not be uniform with respect to each Investment Fund or Participant Accounts; provided, however, that each Investment Fund will be valued and each Participant Account will be adjusted no less often than once annually. 2.51. Other Defined Terms. Other terms may be defined within the text of subsequent Sections of this Plan. Unless specifically indicated otherwise, such terms will have those defined meanings for all purposes under this Plan, with the same force and effect as if set out in this Article II. 11 13 ARTICLE III. PARTICIPATION ELIGIBILITY 3.1. Eligibility for Participation. (a) Each Employee who was a Participant on December 31, 1998 shall continue to be a Participant as of January 1, 1999. Each Employee who was an Eligible Employee on December 31, 1998 shall continue to be an Eligible Employee as of January 1, 1999. (b) Prior to October 1, 1999, each other Eligible Employee may: (1) for purposes of Section 4.1, become a Participant as of the first day of the calendar quarter next following the date he completes one (1) Year of Service. (2) for all other purposes of the Plan, become a Participant as of the last day of the calendar quarter in which he completes one (1) Year of Service. For purposes of this Section 3.1, "Year of Service" shall mean an Applicable Computation Period in which the Eligible Employee completes 1,000 Hours of Employment with an Employer. (c) Effective October 1, 1999, each other Eligible Employee may: (1) for purposes of Section 4.1, become a Participant as of the first day of the calendar quarter next following the date he completes six (6) Months of Service. (2) for all other purposes of the Plan, become a Participant as of the last day of the calendar quarter in which he completes six (6) Months of Service. For purposes of this Section 3.1, "six (6) Months of Service" shall mean an Applicable Computation Period in which the Eligible Employee completes 500 Hours of Employment with an Employer. 3.2. Procedure for and Effect of Participation. Each Participant will complete such forms and provide such data as are reasonably required by the Committee as a precondition of such participation. By becoming a Participant, an Eligible Employee will for all purposes be deemed conclusively to have assented to the terms and provisions of the Plan, the corresponding Trust Agreement, and to all amendments to such instruments. 3.3. Reemployment. (a) If an Eligible Employee satisfies the requirements of Section 3.1, terminates employment with the Employers and Affiliated Companies and is later reemployed, he will again 12 14 be eligible to participate in the Plan on the date he is reemployed or on the first day of any subsequent calendar quarter. (b) If an Employee satisfies the requirements of Section 3.1 and subsequently becomes an Eligible Employee, he will be eligible to participate in the Plan on the date he becomes an Eligible Employee or on the first day of any subsequent calendar quarter. 3.4. Effect of Collective Bargaining. In the event a collective bargaining agreement is entered into between an Employer and a representative for any class of Employees in the employ of the Employer subsequent to January 1, 1999, eligibility for participation in the Plan by such Employees who are not Participants shall not be extended beyond the effective date of the collective bargaining agreement unless the agreement extends membership in the Plan to such Employees. If, under the collective bargaining agreement, participation in the Plan is not extended, such Employees who are Participants in the Plan shall remain Participants but shall not be permitted to contribute in accordance with Article IV or share in any Employer contributions or forfeitures allocated in accordance with Articles IV and VIII for the period beyond the effective date of the collective bargaining agreement. 13 15 ARTICLE IV. CONTRIBUTIONS 4.1. Salary Deferral Contributions. (a) Elections. Subject to the limitations set forth in Article V, each Participant may elect, in the manner prescribed by the Committee, to reduce his Compensation received on and after the effective date of the election through payroll reductions by an amount equal to from one percent (1%) to fifteen percent (15%), in whole percentages, of his Compensation payable with respect to any payroll period. The Salary Deferrals elected by a Participant will be tentative and will become final only after the Committee has made such adjustments thereto as it deems necessary to maintain the qualified status of the Plan and to satisfy all requirements of section 401(k) of the Code. (b) Increase in or Reduction of Salary Deferrals. A Participant may, in the manner prescribed by the Committee, elect to increase or reduce the rate of his Salary Deferrals (including cessation or recommencement of such Salary Deferrals), or change the type of contribution being made, within the limits described in Section 4.1. Any new election made pursuant to this subsection (b) at least 30 days (or such other period as the Committee may designate from time to time) prior to the first day of the next following calendar month (for periods prior to August 1, 1999, the next following calendar quarter) (or as of such other dates as the Committee may designate from time to time), will be effective as of such date. (c) Contribution and Allocation of Salary Deferrals. The Employer will contribute to the Plan with respect to each Plan Year an amount equal to the Salary Deferrals of its Participants for such Plan Year, as determined pursuant to Salary Deferral elections in force pursuant to this Section. There will be allocated to the Salary Deferral Account of each Participant the Salary Deferral amounts contributed by the Employer to the Plan with respect to that Participant. 4.2. Matching Contributions. (a) Matching Contributions. Subject to the limitations described in Article V, an Employer will contribute to the Plan, on behalf of each Participant who is eligible to receive an allocation of Matching Contributions and who has made Salary Deferrals during a Plan Year, an amount equal to the designated percentage rate of each Participant's Salary Deferrals for the Plan Year. Such designated percentage rate shall be determined by the Company and announced to Employees at the end of the Plan Year of reference. Notwithstanding the foregoing and subject to the limitations described in Article V, an Employer may contribute to the Plan, on behalf of each Participant who is eligible to receive an allocation of additional Matching Contributions and who has made Salary Deferrals during a Plan Year, an additional amount of Matching Contributions. 14 16 (b) Allocation of Matching Contributions. Matching Contributions made pursuant to this Section 4.2 will be allocated, as of the last day of the Plan Year for which such contributions are made, to the Matching Contribution Accounts of Participants who are employed by an Employer on the last business day of the Plan Year. Additional Matching Contributions will be allocated, as of the last day of the Plan Year for which such contributions are made, to the Matching Contribution Accounts of Participants who are employed by the Employer on the last business day of the Plan Year, in the same proportion that the Salary Deferrals of each such Participant for such Plan Year bears to the aggregate Salary Deferrals of all Participants for such Plan Year. 4.3. Regular Contributions. Subject to the limitations described in Article V, the Employers may contribute for each Plan Year an amount which, along with forfeitures, shall be allocated to Participants in the employ of the Employers on the last business day of such Plan Year, which amount shall be credited at the end of such Plan Year. Such amount shall be allocated to a Participant in the same proportion as (i) the sum of such Participant's Compensation and Compensation in excess of the Social Security Taxable Wage Base, bears to (ii) the sum of Compensation and Compensation in excess of the Social Security Taxable Wage Base for all such Participants. Notwithstanding the foregoing, the maximum percentage allocated to a Participant pursuant to the preceding sentence shall be the greater of (i) 5.7% or (ii) the portion of the rate of tax payable by an Employer under Section 3111(a) of the Code which is attributable to old-age insurance at the beginning of each Plan Year; provided, however, that if the total amount to be allocated to a Participant exceeds this limitation, the excess allocation to which the Participant is entitled shall be in the same proportion as the Participant's Compensation bears to the sum of all Participants' Compensation. 4.4. Qualified Employer Contributions. Subject to the limitations described in Article V, the Employer may, in its discretion, make Qualified Employer Contributions for a Plan Year, which will be allocated as of the last day of the Plan Year for which such contributions are made to the Qualified Employer Contribution Accounts of some or all of those Participants who are not Highly Compensated Employees for the Plan Year, as determined by the Employer at the time such contributions are made, in an amount necessary to satisfy at least one of the tests in Section 5.2. The allocable share of each such Participant will be in the ratio which his Salary Deferrals for the Plan Year bears to the aggregate Salary Deferrals for all such Participants. 4.5. Contributions for Additional Participants. Notwithstanding the foregoing provisions of this Article IV, a Participant shall be entitled to share in the Matching Contributions, additional Matching Contributions, Qualified Employer Contributions and Regular Contributions and forfeitures, if any, for the Plan Year of (i) his Retirement, Disability or death, (ii) the commencement or end of a "leave of absence" authorized by the Employer, or (iii) his transfer to another business entity to which such Participant had been transferred by the Employer, even if the Participant is not in the employ of the Employer on the last business day of such Plan Year. 15 17 As used herein, "leave of absence" shall mean a leave granted for pregnancy, sickness, death or any other family obligation or status; personal or family hardship or special business circumstances; educational purposes; and/or civic, charitable or governmental services, provided that all Participants under similar circumstances are treated in a similar manner. A Participant shall not share in the allocation of an Employer's Regular Contributions or forfeitures for any Plan Year during which he terminated his employment for reasons other than those specified above. 4.6. Contributions With Respect to Military Service. (a) Salary Deferrals. A Participant who returns to employment with an Employer or an Affiliated Company following a period of Qualified Military Service will be permitted to make additional Salary Deferrals, within the limits described in Section 4.1, up to an amount equal to the Salary Deferrals that the Participant would have been permitted to contribute to the Plan if he had continued to be employed and received Compensation during the period of Qualified Military Service. Salary Deferrals under this Section may be made during the period which begins on the date such Participant returns to employment and which has the same length as the lesser of (a) 3 multiplied by the period of Qualified Military Service and (b) 5 years. (b) Matching Contributions. The Employer will contribute to the Plan, on behalf of each Participant who is eligible for Matching Contributions and who has made Salary Deferrals under paragraph (a) above, an amount equal to the Matching Contributions that would have been required under Section 4.2 had such Salary Deferrals been made during the period of Qualified Military Service. (c) Other Employer Contributions. The Employer will contribute to the Plan, on behalf of each Participant who returns from Qualified Military Service as described in subsection (a), an amount equal to any other Employer contributions that would have been required under Sections 4.3, 4.4 or 4.5 had such Participant continued to be employed and received Compensation during the period of Qualified Military Service. (d) Limitations on Contributions. The Salary Deferrals, Matching Contributions, additional Matching Contributions, Qualified Employer Contributions and Regular Contributions made under this Section will be subject to the limitations described in Article V for the Plan Year to which such contributions relate. 4.7. Rollover Contributions. Effective September 1, 1999, the Plan will accept, as "Rollover Contributions" made on behalf of any Eligible Employee, cash equal to (a) all or a portion of the amount received by the Eligible Employee as a distribution from (either directly or through a conduit individual retirement account), or (b) an amount transferred directly to the Plan (pursuant to section 401(a)(31) of the Code) on the Eligible Employee's behalf, by the trustee of another qualified trust forming a part of a plan described in section 401(a) or 403(a) 16 18 of the Code, but only if the deposit qualifies as a tax-free rollover as defined in section 402 of the Code as determined in accordance with procedures established by the Committee. If the amount received does not qualify as a tax-free rollover, the amount will be refunded to the Eligible Employee. Rollover amounts will be allocated to the Eligible Employee's Rollover Account and invested in accordance with the provisions of Article VI. 4.8. Timing of Contributions. Matching Contributions, additional Matching Contributions, Qualified Employer Contributions and Regular Contributions for any Plan Year under this Article IV will be made no later than the last date on which amounts so paid may be deducted for federal income tax purposes for the taxable year of the Employer in which the Plan Year ends. Amounts contributed as Salary Deferrals will be remitted to the Trustee as soon as such practicable, but no later than the fifteenth (15th) business day of the month following the month in which such contributions were withheld from the Participant's Compensation. The requirements of this Section do not apply to contributions made pursuant to Section 4.6. 4.9. Contingent Nature of Contributions. Each contribution made by the Employer pursuant to the provisions of Sections 4.1, 4.2, 4.3, 4.4, 4.5 or 4.6 is made expressly contingent on its deductibility for federal income tax purposes for the fiscal year with respect to which such contribution is made, and no such contribution will be made for any year to the extent it would exceed the deductible limit for such year as set forth in section 404 of the Code. 4.10. Exclusive Benefit; Refund of Contributions. All contributions made to the Plan are made for the exclusive benefit of the Participants and their Beneficiaries, and such contributions will not be used for, nor diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries (including the costs of maintaining and administering the Plan and corresponding trust). Notwithstanding the foregoing, to the extent that such refunds do not, in themselves, deprive the Plan of its qualified status, refunds of contributions will be made to the Employer under the following circumstances and subject to the following limitations: (a) Disallowance of Deduction. To the extent that a federal income tax deduction is disallowed, in whole or in part, for any contribution made by an Employer, or such contribution is otherwise nondeductible and recovery thereof is permitted, the Trustee will refund to the Employer the amount so disallowed within one (1) year of the date of such disallowance or as otherwise permitted by applicable administrative rules. (b) Mistake of Fact. In the case of a contribution which is made in whole or in part by reason of a mistake of fact, so much of the Employer contribution as is attributable to the mistake of fact will be returnable to the Employer upon demand, upon presentation of evidence of the mistake of fact to the Trustee and of calculations as to the impact of such mistake. Demand and repayment must be effectuated within one (1) year after the payment of the contribution to which the mistake applies. 17 19 In the event that any refund is paid to the Employer hereunder, such refund will be made without regard to net investment gains attributable to the contribution, but will be reduced to reflect net investment losses attributable thereto. 18 20 ARTICLE V. LIMITATIONS ON CONTRIBUTIONS 5.1. Calendar Year Limitation on Salary Deferrals. (a) Notwithstanding anything contained herein to the contrary, Salary Deferrals made on behalf of an active Participant under this Plan together with elective deferrals (as defined in section 402(g) of the Code) under any other plan or arrangement maintained by the Employer or an Affiliated Company will not exceed $10,000 (as adjusted in accordance with section 402(g) of the Code and Treasury regulations thereunder) for any calendar year. Furthermore, should a Participant claim that his Salary Deferrals under this Plan when added to his other elective deferrals under any other plan or arrangement (whether or not maintained by an Employer or an Affiliated Company) exceed the limit imposed by section 402(g) of the Code for the calendar year in which the deferrals occurred, the Committee will distribute, by April 15 of the following calendar year, the amount of Salary Deferrals specified in the Participant's claim, plus income thereon determined in the manner described in Section 5.3(c). The Participant's claim will be in writing and will be submitted to the Committee prior to April 1 following the calendar year in which such deferrals occurred. A Participant will be deemed to have made a claim for distribution of excess deferrals from the Plan to the extent that his Salary Deferrals together with his elective deferrals under any other plan or arrangement maintained by the Employer or an Affiliated Company exceed the limit imposed by section 402(g) of the Code for the calendar year. For purposes of determining the necessary reduction, (1) Salary Deferrals previously distributed pursuant to Section 5.3(a) or returned to the Participant pursuant to Section 5.4 will be treated as distributed under this Section 5.1 and (2) Salary Deferrals not taken into account in determining Matching Contributions under Section 4.2 will be reduced first. (b) In the event a Participant receives a distribution of excess Salary Deferrals pursuant to paragraph (a), the Participant will forfeit any Matching Contributions (plus income thereon determined as described in Section 5.3(c)) allocated to the Participant by reason of the distributed Salary Deferrals. Amounts forfeited will be used to reduce future Matching Contributions made pursuant to Section 4.2. 5.2. Nondiscrimination Limitations on Salary Deferrals and Matching Contributions. (a) Salary Deferral Limitations. With respect to Salary Deferrals for any Plan Year beginning on or after January 1, 1997, one of the following tests must be satisfied: (1) The Average Actual Deferral Percentage for active Participants who are Highly Compensated Employees for the Plan Year will not exceed the Average Actual Deferral Percentage for all other active Participants for the preceding Plan Year multiplied by 1.25; or (2) The Average Actual Deferral Percentage for active Participants who are Highly Compensated Employees for the Plan Year will not exceed the Average Actual Deferral 19 21 Percentage for all other active Participants for the preceding Plan Year multiplied by two (2), provided that the Average Actual Deferral Percentage for such Highly Compensated Employees does not exceed the applicable Average Actual Deferral Percentage for all other active Participants by more than two (2) percentage points. (b) Matching Contribution Limitations. With respect to Matching Contributions for any Plan Year beginning on or after January 1, 1997, one of the following tests must be satisfied: (1) The Average Contribution Percentage for active Participants who are Highly Compensated Employees for the Plan Year will not exceed the Average Contribution Percentage for all other active Participants for the preceding Plan Year multiplied by 1.25; or (2) The Average Contribution Percentage for active Participants who are Highly Compensated Employees for the Plan Year will not exceed the Average Contribution Percentage for all other active Participants for the preceding Plan Year multiplied by two (2), provided that the Average Contribution Percentage for such Highly Compensated Employees does not exceed the applicable Average Contribution Percentage for all other active Participants by more than two (2) percentage points. (c) Aggregate Limitation. For any Plan Year in which both the limitations in Sections 5.2(a)(1) and (b)(1) are exceeded, the sum of the Average Actual Deferral Percentage and the Average Contribution Percentage for active Participants who are Highly Compensated Employees (determined after adjustments are made under Sections 5.3(a) and (b) for purposes of satisfying the limitations described in Sections 5.2(a) and (b)) will not exceed the greater of: (1) the sum of (A) the greater of the applicable Average Actual Deferral Percentage or the Average Contribution Percentage for all other active Participants multiplied by 1.25, plus (B) the lesser of (i) two (2) multiplied by the lesser of the applicable Average Actual Deferral Percentage or the Average Contribution Percentage for all other Participants, or (ii) two percent (2%) plus the lesser of the applicable Average Actual Deferral Percentage or the Average Contribution Percentage for all other active Participants; or (2) the sum of (A) the lesser of the applicable Average Actual Deferral Percentage or the Average Contribution Percentage for all other active Participants multiplied by 1.25, plus (B) the lesser of (i) two (2) multiplied by the greater of the applicable Average Actual Deferral Percentage or the Average Contribution Percentage for all other active Participants, or (ii) two percent (2%) plus the greater of the applicable Average Actual Deferral Percentage or the Average Contribution Percentage for all other active Participants. (d) For purposes of subsections (a) through (c), this Plan will be aggregated and treated as a single plan with other plans maintained by the Employer or an Affiliated Company 20 22 to the extent that this Plan is aggregated with any such other plan for purposes of satisfying section 410(b) (other than section 410(b)(2)(A)(ii)) of the Code. (e) The determination and treatment of the Salary Deferrals, Matching Contributions, Qualified Employer Contributions, Actual Deferral Percentage and Contribution Percentage of any Participant will satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 5.3. Correction of Discriminatory Contributions. (a) If the nondiscrimination tests of Section 5.2(a) are not satisfied with respect to Salary Deferrals for any Plan Year beginning on or after January 1, 1997, the Committee will (1) determine the amount by which the Actual Deferral Percentage for the Highly Compensated Employee or Employees with the highest Actual Deferral Percentage for the Plan Year would need to be reduced to comply with the limit in Section 5.2(a), (2) convert the excess percentage amount determined under clause (1) into a dollar amount, and (3) reduce the Salary Deferrals of the Highly Compensated Employee or Employees with the greatest dollar amount of Salary Deferrals by the lesser of (A) the amount by which the Highly Compensated Employee's Salary Deferrals exceeds the Salary Deferrals of the Highly Compensated Employee with the next highest dollar amount of Salary Deferrals, or (B) the amount of the excess dollar amount determined under clause (2). This process will be repeated until the Salary Deferrals of Highly Compensated Employees have been reduced by an amount equal to the excess dollar amount determined under clause (2). The Salary Deferrals of any Highly Compensated Employee which must be reduced pursuant to this subsection (a) will be reduced (i) first, by distributing Salary Deferrals not taken into account in determining Matching Contributions under Section 4.2, and (ii) then, by distributing Salary Deferrals not described in (i), within twelve (12) months of the close of the Plan Year with respect to which the reduction applies, and the provisions of Section 5.1(b) regarding the forfeiture of related Matching Contributions will apply. For purposes of determining the necessary reduction, Salary Deferrals previously distributed pursuant to Section 5.1 will be treated as distributed under this Section 5.3(a). (b) If the nondiscrimination tests of Section 5.2(b) are not satisfied with respect to Matching Contributions for any Plan Year beginning on or after January 1, 1997, the Committee will (1) determine the amount by which the Actual Contribution Percentage for the Highly Compensated Employee or Employees with the highest Actual Contribution Percentage for the Plan Year would need to be reduced to comply with the limit in Section 5.2(b), (2) convert the excess percentage amount determined under clause (1) into a dollar amount, and (3) reduce the excess contributions of the Highly Compensated Employee or Employees with the greatest dollar amount of Matching Contributions by the lesser of (A) the amount by which the dollar amount of the affected Highly Compensated Employees's Matching Contributions exceeds the dollar amount of the Matching Contributions of the Highly Compensated Employee with the next highest dollar amount of Matching Contributions, or (B) the amount of the excess dollar amount determined under clause (2). This process will be repeated until the 21 23 Matching Contributions of the Highly Compensated Employees has been reduced by an amount equal to the excess dollar amount determined under clause (2). The Matching Contributions of any Highly Compensated Employee which must be reduced pursuant to this subsection (b) will be reduced by distributing any Matching Contributions, within twelve (12) months of the close of the Plan Year with respect to which the reduction applies. Amounts forfeited under this subsection (b) will be applied to reduce future Matching Contributions made pursuant to Section 4.2. (c) Any distribution, recharacterization or forfeiture of Salary Deferrals or Matching Contributions necessary pursuant to subsections (a) or (b) will include a distribution or forfeiture of the income, if any, allocable to such contributions. Such income will be equal to the sum of (1) the allocable gain or loss for the Plan Year (determined by multiplying the income allocable to the Participant's Salary Deferrals or Matching Contributions, as applicable, for the Plan Year by a fraction, the numerator of which is the Participant's excess Salary Deferrals or Matching Contributions, as applicable, for the Plan Year and the denominator is the Participant's Salary Deferral Account or Matching Contribution Account, as applicable, as of the beginning of the Plan Year), plus (2) ten percent (10%) of the amount determined under clause (1) multiplied by the number of whole calendar months between the end of the Plan Year and the date of distribution, counting the month of distribution if distribution occurs after the fifteenth day of the month. (d) For purposes of satisfying the nondiscrimination test described in Section 5.2(c), the Salary Deferrals of all Highly Compensated Employees will be reduced as described in subsections (a) and (b), (i) first, by distributing Salary Deferrals not taken into account in determining Matching Contributions under Section 4.2, and (ii) then, by distributing Salary Deferrals not described in clause (i) and forfeiting Matching Contributions corresponding to such distributed Salary Deferrals. (e) Notwithstanding anything in this Section to the contrary, for any Highly Compensated Employee who is an active Participant in the Plan while eligible to participate in any other qualified retirement plan maintained by the Employer or an Affiliated Company (excluding any such plan which is not permitted to be aggregated with the Plan pursuant to Treas. Reg. Section 1.401(k)-1(g)(11) or Section 1.401(m)-1(f)(14)) under which the Employee has made employee contributions or elective deferrals, or is credited with employer matching contributions for the year, the Committee will coordinate corrective actions under this Plan and such other plan for the year. (f) In lieu of or in addition to the actions described in subsections (a) through (e) of this Section, to satisfy the tests in Section 5.2, the Employer may make Qualified Employer Contributions as described in Section 4.4. 22 24 5.4. Annual Additions Limitations. (a) In no event will the Annual Additions on behalf of any Participant for any Plan Year exceed the lesser of: (1) $30,000, or (2) twenty-five percent (25%) of such Participant's Compensation for the Plan Year. The limitation referred to in Section 5.4(a)(2) will not apply to any contribution for medical benefits within the meaning of section 401(h) or section 419A(f)(2) of the Code which is otherwise treated as an Annual Addition under section 415(l)(1) or 419A(d)(2) of the Code. If the amount otherwise allocable to the Account of a Participant would exceed the amount described above as a result of the reallocation of forfeitures, a reasonable error in estimating the Participant's Compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of section 402(g) of the Code) that may be made under the limitations of section 415 of the Code, or such other circumstances as permitted by law, the Committee will determine which portion, if any, of such excess amount is attributable to the Participant's Salary Deferrals and/or Matching Contributions and/or Qualified Employer Contributions, if any, until such excess amount has been exhausted. To the extent any portion of a Participant's Salary Deferrals are determined to be excess under this Section, such Salary Deferrals, with income thereon, will be returned to the Participant as soon as administratively practicable. To the extent any portion of the Matching Contributions and/or Qualified Employer Contributions allocable to a Participant are determined to be excess under this Section, while the Participant remains an Eligible Employee, his excess Matching Contributions and/or Qualified Employer Contributions will be held in a suspense account (which will share in investment gains and losses of the Fund) by the Trustee until the following Plan Year (or any succeeding Plan Years), at which time such amounts will be allocated to the Participant's Account before any Matching Contributions and/or Qualified Employer Contributions are made on his behalf for the Plan Year. When the Participant ceases to be an Eligible Employee, his excess Matching Contributions and/or Qualified Employer Contributions held in the suspense account will be allocated in the following Plan Year (or any succeeding Plan Years) to the Accounts of other Participants in the Plan. Furthermore, the Committee will perform any other actions as may be necessary to preserve the Plan's status as a qualified plan. (b) Effective for Plan Years beginning before January 1, 2000, the amount allocated to the Account of any Participant for any Plan Year will not cause the sum of the "defined contribution fraction" and the "defined benefit fraction," as such terms are defined in section 415(e) of the Code, to exceed 1.0, or such other limitation as may be applicable under section 415 of the Code with respect to any combination of qualified plans without disqualification of 23 25 any such plan. In the event that the amount tentatively available for allocation to the Account of any Participant in any Plan Year beginning before January 1, 2000 exceeds the maximum amount permissible hereunder, benefits under the defined benefit plan or plans in which the Participant is participating will be adjusted to the extent necessary to satisfy the requirements of section 415(e) of the Code. 24 26 ARTICLE VI. INVESTMENT AND VALUATION OF TRUST FUND; MAINTENANCE OF ACCOUNTS 6.1. Investment of Assets. All existing assets of the Trust Fund and all future contributions will be invested by the Trustee in accordance with the terms of the Trust Agreement and Section 6.2. 6.2. Investment in Investment Funds. The Committee will designate the available Investment Funds to which a Participant may direct the investment of amounts credited to his Account. The Committee, in its sole discretion, may from time to time designate additional Investment Funds of the same or different types or modify, cease to offer or eliminate any existing Investment Funds. Anything contained in this Section 6.2 to the contrary notwithstanding, all or any part of the Trust Fund may be invested by one or more Investment Managers appointed by the Committee, under one or more pooled or commingled funds maintained by a bank or insurance company, together with commingled assets of other plans of deferred compensation qualified under section 401(a) of the Code. A portion of the Trust Fund, as determined by the Committee, may be held in the form of uninvested cash or in a liquid asset account for temporary periods pending reinvestment or distribution. 6.3. Investment Elections. Each Participant, upon commencing or recommencing active participation under Section 4.1, will direct in the form and at the time prescribed by the Committee the investment of contributions made by him or on his behalf in any one or more of the available Investment Funds, in whole percentage increments, subject to such limitations as the Committee may prescribe. In the event a Participant fails to direct the investment of all or a portion of his Account, the Committee will designate a default Investment Fund in which such amount will be invested. 6.4. Change of Election. Each Participant may change his investment direction with respect to the investment of his future contributions by written notice to the Committee (or its delegate) at least 30 days (or such shorter period as is acceptable to the Committee) prior to the first day of the first calendar month as of which such election is to be effective. Until changed in accordance with this Section 6.4, an Investment Fund election shall remain in effect for all subsequent Plan Years. 6.5. Transfers Between Investment Funds. Each Participant or Beneficiary of a deceased Participant may elect to transfer all or a portion of his interest in any Investment Fund to any other available Investment Fund by written notice to the Committee (or its delegate) at least 30 days (or such shorter period as is acceptable to the Committee) prior to the first day of the first calendar month as of which such election is to be effective (or at such other time as determined in accordance with Section), provided such change (i) results in multiples of 5% in 25 27 any one Investment Fund; (ii) is applied to the ending balance determined as of the applicable Valuation Date; and (iii) is applicable equally to each of the Participant's Accounts. Such change shall become effective within such period of time as may be administratively required for the orderly liquidation of investments following the applicable Valuation Date. 6.6. Individual Accounts. There will be maintained on the books of the Plan with respect to each Participant, as applicable, a Salary Deferral Account, a Matching Contribution Account, a Regular Contribution Account, a Qualified Employer Contribution Account and a Rollover Account. Each such Account will separately reflect the Participant's interest in each Investment Fund relating to such Account. Each Participant will receive, at least annually or at more frequent intervals determined by the Committee, a statement of his Account showing the balances in each Investment Fund. A Participant's interest in any Investment Fund will be determined and accounted for based on his beneficial interest in any such fund, and no Participant will have any interest in or rights to any specific asset of any Investment Fund. 6.7. Valuation. The Trust Fund shall be valued by the Trustee as of each Valuation Date on the basis of its fair market value. The Trust Fund may also be valued by the Trustee as of any other date as the Committee may authorize for any reason the Committee deems appropriate. 6.8. Allocation of Investment Earnings and Expenses. On the basis of the valuation as of a Valuation Date, subject to the provisions of Article VII, the Accounts of all Participants shall be (a) proportionately adjusted to reflect expenses and investment earnings such as interest, dividends, realized and unrealized investment profits and losses, and (b) directly adjusted to reflect all other applicable transactions during the Plan Year attributable to such Accounts including, but not limited to, any distributions or annuity purchases. 6.9. Fiduciary Responsibility. This Plan is intended to constitute a plan described in section 404(c) of the Employee Retirement Security Act of 1974, as amended, and Title 29 of the Code of Federal Regulations Section 2550.404c-1. None of the Company, an Employer, the Committee, the Trustee nor any other Plan fiduciary will be liable for any losses which are the direct and necessary result of investment instructions provided by any Participant, Beneficiary or Alternate Payee. 26 28 ARTICLE VII. VESTING AND BENEFIT DISTRIBUTIONS 7.1. Vesting. (a) Upon Retirement. A Participant shall be 100% vested in his Account at all times after first becoming eligible for Retirement. A Participant shall be eligible to retire on his Normal or Deferred Retirement Date. In the event a Participant does not retire on his Normal Retirement Date, he shall continue to be credited with contributions in accordance with Articles IV and VIII until his actual retirement. (b) Upon Disability. A Participant who incurs a Disability prior to his termination of employment shall be 100% vested in his Account. The Committee shall require evidence that the application for such benefits has been approved by the Social Security Administrator. The final determination shall be made by the Committee on the basis of such evidence. If such Participant returns to the employ of an Employer, he shall resume his participation as of the date of his return. The Participant's vested interest in that portion of his Account attributable to Service from the date of his last reemployment shall be determined in accordance with the provisions of this Article VII, without regard to his prior Disability. (c) Upon Death. A Participant who dies prior to his termination of employment shall be 100% vested in his Account. Upon the death of a Participant, his Beneficiary shall be entitled to 100% of such Participant's vested Account. (d) Upon Termination of Employment. Upon a Participant's termination of employment for reasons other than his Retirement, Disability or death, the following provisions shall apply: (1) A Participant shall at all times be 100% vested in his Account, except for the portion of his Account that is his Regular Contribution Account. (2) (a) Subject to Section 7.1(d)(4), for periods prior to December 31, 1999, a Participant shall be vested in his Regular Contribution Account in accordance with the following schedule on the basis of the Participant's full Years of Service:
Number of Years Percentage of Account --------------- --------------------- Less than 3 full Years of Service 0 3 full Years of Service 20% 4 full Years of Service 40% 5 full Years of Service 60% 6 full Years of Service 80% 7 or more full Years of Service 100%
27 29 (b) Subject to Section 7.1(d)(4), for periods on and after December 31, 1999, a Participant shall be vested in his Regular Contribution Account in accordance with the following schedule on the basis of the Participant's full Years of Service:
Number of Years Percentage of Account --------------- --------------------- Less than 1 full Year of Service 0 1 full Year of Service 20% 2 full Years of Service 40% 3 full Years of Service 60% 4 full Years of Service 80% 5 or more full Years of Service 100%
(3) The portion of a Participant's Account which is not vested shall be forfeited on the earlier of the date on which the Participant receives a distribution of his vested benefits or the date on which such Participant incurs five consecutive Breaks-in-Service, but in no event shall such forfeiture occur earlier than the first day after the Valuation Date next following the date on which the Participant terminated employment. If a Participant does not have a vested interest in his Account, he shall be deemed to have received an immediate distribution as of the first day after the Valuation Date next following the date on which such Participant terminated employment. That portion of a Participant's Regular Contribution Account which is forfeited shall be reallocated in accordance with Section 4.3 and Article VIII. (4) If a Participant is reemployed by the Employer prior to incurring five consecutive Breaks-in-Service, the dollar amount which was subject to forfeiture in accordance with Section 7.1(d)(3) will be restored to the Participant's Account if the Participant repays the amount distributed from his Account. Such amounts must be repaid to the Trust Fund in a lump sum within five years from the date such Participant resumes his employment with the Employer. The funds required for the restoration of such Account may, as determined by the Committee, be paid from forfeitures, Regular Contributions, or investment gains of the Trust Fund attributable to the Regular Contribution Accounts of all Participants. Such repaid amounts shall be credited to the Participant's Accounts as determined by the Committee, taking into account the applicable vesting schedules, amounts subject to special tax treatment and withdrawal rules. Additional Accounts will be established, if required, to accommodate these objectives. Amounts repaid and restored in accordance with this Subsection will not be treated as Annual Additions. Notwithstanding the foregoing, no restoration shall be made to a Participant's Account and no repayment shall be permitted with respect to funds accumulated prior to reemployment in the case of (i) any Participant who was fully vested; 28 30 (ii) any Participant who is reemployed after incurring five consecutive Breaks-in-Service, or (iii) any Participant who incurred a one year Break-in-Service prior to January 1, 1985 and reemployment. 7.2. Commencement of Benefits. (a) Death Benefits. (1) Form and Timing of Benefit. Unless otherwise elected by the Beneficiary and subject to Section 7.2(a)(2), death benefits will be paid in a single lump sum to the Participant's Beneficiary as soon as practicable after the Participant's death. (2) Required Distribution Dates. Notwithstanding any provision in the Plan to the contrary, the Benefit Payment Date: (a) for a non-spouse Beneficiary will be no later than December 31 of the year containing (i) the fifth anniversary of the Participant's death or (ii) with respect to death benefits payable from the Participant's Account in the form of installments, the first anniversary of the Participant's death. (b) for a spouse Beneficiary will be no later than December 31 of the later of (i) the calendar year following the year of the Participant's death or (ii) the calendar year in which the Participant would have attained age 70-1/2. Distributions under this Section 7.2(a) will otherwise comply with the requirements of section 401(a)(9) of the Code and the regulations thereunder, including the incidental death benefit requirements of proposed Treas. Reg. Section 1.401(a)(9)-2. (b) Upon Other Events. (1) Amount of Benefit. The Plan benefit payable to a Participant upon such Participant's termination of employment for reasons other than his death, will be equal to the balance of his vested Account, determined as of the Valuation Date related to the Benefit Payment Date for the Participant. (2) Time of Distribution. (a) General Rule. Distribution of benefits under this Section 7.2(b) to the Participant will be made no later than the 60th day following the Valuation Date next subsequent to the Participant's termination of employment; provided, however, that in the case of a Participant who has not reached his Normal Retirement Date and whose Account balance 29 31 exceeds $5,000 ($3,500 for Benefit Payment Dates before January 1, 1999), no distribution will be made at such time without the written consent of the Participant. If the Participant does not so consent, then distribution will be deferred until any subsequent date elected by the Participant in a manner prescribed by the Committee, but not later than the 60th day following the last day of the Plan Year during which the anniversary of the Participant's Normal Retirement Date occurs. (b) Required Distribution Dates. Except as otherwise provided in this Section, the Benefit Payment Date for any Participant will not be later than the 60th day following the close of the Plan Year in which (A) the Participant attains age 65, (B) occurs the tenth anniversary of the year in which the Participant commenced participation in the Plan, or (C) the Participant terminates from employment, whichever occurs last. Notwithstanding any provision in the Plan to the contrary, a Participant's Benefit Payment Date shall not be later than April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 70-1/2, or (ii) for distributions after December 31, 1996, in the case of a Participant who is not a 5% owner (within the meaning of section 416(i) of the Code) with respect to the Plan Year ending in the calendar year in which the Participant attains age 70-1/2, the calendar year in which the Participant's termination of employment occurs. Notwithstanding the foregoing, a Participant who attains age 70-1/2 prior to January 1, 2000 shall be entitled to elect the April 1 of the calendar year following the calendar year in which he attains age 70-1/2 as his Benefit Payment Date. Distributions under this Section 7.2 will otherwise comply with the requirements of section 401(a)(9) of the Code and the regulations thereunder, including the incidental death benefit requirements of proposed Treas. Reg. Section 1.401(a)(9)-2. (3) Election Period. A Participant's election to commence payment prior to his Normal Retirement Date must be made within the ninety (90) day period ending on the Benefit Payment Date elected by the Participant and in no event earlier than the date the Committee provides the Participant with written information relating to his right to defer payment until his Normal Retirement Date and his right to make a direct rollover as set forth in Section 7.8. Such information must be supplied not less than thirty (30) days nor more than ninety (90) days prior to the Benefit Payment Date. Notwithstanding the preceding sentence, a Participant's Benefit Payment Date may occur less than thirty (30) days after such information has been supplied to the Participant provided that, after the Participant has received such information and has been advised of his right to a thirty (30) day period to make a decision regarding the distribution, the Participant affirmatively elects a distribution. 7.3. Withdrawals. A Participant may, in a manner prescribed by the Committee thirty (30) days prior to the requested date of withdrawal, request a withdrawal from his Account in accordance with the following rules: (a) 59-1/2 Withdrawals. A Participant, while still employed, may request a withdrawal of (i) all or a portion of his Salary Deferral Account at any time after he attains age 59-1/2, provided, however, that at least three Plan Years must elapse before such Participant is 30 32 eligible for another withdrawal from his Salary Deferral Account pursuant to this clause; or (ii) all or a portion of his Salary Deferral Account at any time before he attains age 59-1/2, provided such withdrawal meets the financial hardship provisions set forth in paragraph (b) below; or (iii) all or a portion of his Qualified Employer Contribution Account at any time after he attains age 59-1/2. (b) Hardship Withdrawals. Each Participant will have the right to make a withdrawal from his Account on account of hardship. If the Committee or its delegate determines that a requested withdrawal is on account of an immediate and heavy financial need of the Participant, and the withdrawal is necessary to satisfy such financial need, the Participant will be permitted to withdraw all or a portion of his Account; provided, however, the aggregate amount of a Participant's withdrawals from his Salary Deferral Account (including any such withdrawals under any predecessor plan from elective deferrals and earnings attributable thereto under such predecessor plan) will not exceed the balance of his Account to the extent attributable to elective deferrals under any predecessor plan as of December 31, 1988, plus the sum of his Salary Deferrals and any elective deferrals made to any predecessor plan after December 31, 1988. Withdrawals pursuant to this Section will be subject to the following additional rules: (1) A distribution will be deemed to be on account of an immediate and heavy financial need of a Participant when the distribution is on account of: (A) expenses for medical care described in section 213(d) of the Code incurred by the Participant, the Participant's spouse, or any dependents of the Participant as defined in section 152 of the Code (or the distribution is necessary for such persons to obtain such medical care); (B) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant; (C) payment of tuition, related educational fees, room and board for the next twelve (12) months of post-secondary education for the Participant, his spouse, children or dependents; (D) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of his principal residence; or (E) any other financial need as may be promulgated by the Internal Revenue Service. (2) A withdrawal will be deemed necessary to satisfy the financial need of a Participant if: (A) the amount of the withdrawal does not exceed the amount of the Participant's immediate and heavy financial need, including, at the election of the Participant, 31 33 any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution; (B) the Participant provides the Committee with a signed, written statement certifying that the financial hardship cannot be relieved: (i) through reimbursement of compensation by insurance or otherwise; (ii) by reasonable liquidation of such Participant's assets, including those of his spouse and minor children if they are reasonably available to him; (iii) by discontinuance of Salary Deferrals; or (iv) by other distributions or loans from the Plan or any other qualified plan or loans from commercial sources on reasonably commercial terms. (C) in the absence of the certification described in (B), the following requirements will apply: (i) The Participant must have obtained all other distributions and loans available under all plans maintained by the Employer. (ii) Salary Deferrals and any other Employee contributions under all plans maintained by the Employer will be suspended for 12 months following the receipt of the financial hardship withdrawal. The Participant's Salary Deferrals will automatically be resumed following the required period of suspension, unless the Participant elects otherwise. (iii) The limitation of Section 5.1 which is imposed on a Participant's Salary Deferrals for the calendar year immediately following the calendar year of the financial hardship withdrawal will be reduced by the amount of such contributions and/or deferrals for the calendar year of such withdrawal. (3) The amount of such financial hardship withdrawal may not exceed the amount required to meet the specified need. In addition, the amount of such withdrawal from a Participant's Salary Deferral Account shall be limited to the sum of the Participant's Salary Deferrals made, plus the income credited to the Salary Deferral Account as of the last Valuation Date in 1988. (4) A financial hardship withdrawal from a Participant's Salary Deferral Account will be available only after the total amount available from all other Accounts has been withdrawn. 32 34 (5) A hardship withdrawal will be made in a single sum payment. (c) General Withdrawal Rules. Any withdrawal pursuant to this Section 7.3 shall be subject to the following requirements: (1) Only one withdrawal will be permitted during any Plan Year. (2) A written request for a withdrawal must be submitted to the Committee at least 30 days prior to the withdrawal date and must specify the Investment Fund from which the withdrawal is to be taken. (3) A withdrawal may be requested as of any January 1, or at such other dates as the Committee may fix from time to time with respect to a hardship withdrawal. If requested as of any date other than the day after a Valuation Date, no investment earnings will be credited on the amount withdrawn from the period from the last Valuation Date to the date specified for the withdrawal. (4) The minimum amount that may be withdrawn is $1,000, or the balance in the Participant's Account from which a current withdrawal is permitted, if less. The minimum amount limitation shall not apply in the case of a hardship withdrawal. 7.4. Form of Benefit Payment. (a) General Rule. Except as otherwise provided in this Section 7.4, all distributions of benefits payable to a Participant under Section 7.2 or 7.3 of the Plan will be made in the form of a single lump sum. Any benefits payable under this Article VII may be paid in cash, securities or such other assets of the Trust Fund as the Committee may direct. The distribution of a lump sum to a Participant or his Beneficiary shall constitute the complete discharge of all obligations of the Plan. (b) Small Benefits. Notwithstanding any provisions of the Plan to the contrary, the Committee will direct that a Participant's Account will be paid in a single sum without the Participant's consent (or, in the event of the Participant's death, his Beneficiary's) if, as of a Benefit Payment Date which occurs on or after January 1, 1999, the total value of the Participant's Account is $5,000 or less ($3,500 for Benefit Payment Dates before January 1, 1999). Any such distribution shall occur not later than the earlier to occur of (1) the 90th day following the Valuation Date next subsequent to such termination, or (2) the 60th day following the Valuation Date occurring at the end of the Plan Year in which such termination occurs if, by the end of such Plan Year, the Participant has attained his Normal Retirement Date and there has occurred the 10th anniversary of the date on which the Participant's Plan participation commenced. 33 35 7.5. Beneficiary Designation Right. (a) Spouse as Beneficiary. The Beneficiary of a death benefit payable pursuant to Section 7.1 will be the Participant's spouse as of the Participant's date of death; provided, however, that the Participant may designate a Beneficiary other than his spouse pursuant to Section 7.5(b) if: (1) the requirements of Section 7.5(c) are satisfied, or (2) the Participant has no spouse, or (3) the Committee determines that the spouse cannot be located or such other circumstances exist under which spousal consent is not required, as prescribed by Treasury regulations. (b) Beneficiary Designation Right. Each Participant who is permitted to designate a Beneficiary other than his spouse pursuant to Section 7.5(a) will have the right to designate one or more primary and one or more secondary Beneficiaries to receive any benefit becoming payable upon the Participant's death. All Beneficiary designations will be in writing in a form satisfactory to the Committee. Each Participant will be entitled to change his Beneficiaries at any time and from time to time by filing a written notice of such change with the Committee. However, the Participant's spouse must again consent in writing to such change, unless (1) the prior consent of the spouse expressly permits designations by the Participant without any requirement of further consent by the spouse or (2) one of the exceptions described in Sections 7.5(a)(2) and 7.5(a)(3) applies. If no designation is made, or if all of the Beneficiaries named in such designation predecease the Participant or cannot be located by the Committee, then the Participant will be deemed to have designated the following as his Beneficiaries and contingent Beneficiaries, with priority in the order named: (1) his spouse; (2) his estate. (c) Form and Content of Spouse's Consent. A spouse may consent to the designation of one or more Beneficiaries other than such spouse provided that such consent will be in writing, must consent to the specific alternate beneficiary or beneficiaries designated (or permit beneficiary designations by the Participant without the spouse's further consent), must acknowledge the effect of such consent, and must be witnessed by a Plan representative or notary public. Such spouse's consent will be irrevocable, unless expressly made revocable. The consent of a spouse in accordance with this Section 7.5(c) will not be effective with respect to any subsequent spouse of the Participant. 34 36 7.6. Domestic Relations Orders. (a) General. Except as otherwise provided in this Section 7.6, an Alternate Payee will have no rights to a Participant's benefit and will have no rights under this Plan other than those rights specifically granted to the Alternate Payee pursuant to a QDRO. Notwithstanding the foregoing, an Alternate Payee will have the right to make a claim for any benefits awarded to the Alternate Payee pursuant to a QDRO, as provided in Article XI. Any interest of an Alternate Payee in the Account of a Participant, other than an interest payable solely upon the Participant's death pursuant to a QDRO which provides that the Alternate Payee will be treated as the Participant's surviving spouse, will be separately accounted for by the Trustee in the name and for the benefit of the Alternate Payee. (b) Distribution. (1) Notwithstanding anything in this Plan to the contrary, a QDRO may provide that any benefits of a Participant payable to an Alternate Payee that are separately accounted for will be distributed immediately or at any other time specified in the order but not later than the latest date benefits would be payable to the Participant pursuant to this Article. If the order does not specify the time at which benefits will be payable to the Alternate Payee, the Alternate Payee may elect, in writing on a form prescribed by the Committee, to have benefits commence (A) in accordance with Section 7.2, as of the earlier of (i) the Participant's 50th birthday or (ii) the Participant's termination of employment, or as of any date thereafter that is not later than the latest date on which benefits would be payable to the Participant pursuant to that Section or (B) in accordance with Section 7.1, but as of the Alternate Payee's death; provided, however, that in the event the amount payable to the Alternate Payee under the QDRO does not exceed $5,000 ($3,500 for Benefit Payment Dates occurring before January 1, 1999), such amount will be paid to the Alternate Payee in a single sum as soon as practicable following the Committee's receipt of the order and verification of its status as a QDRO. (2) If the QDRO does not specify the Participant's Accounts, or Investment Funds in which the Participant's Accounts are invested, from which amounts that are separately accounted for will be paid to an Alternate Payee, such amounts will be distributed, or segregated, from the Participant's Accounts, and the Investment Funds in which such Accounts are invested, on a pro rata basis. (3) The benefit payable to an Alternate Payee will be paid in the form of a single sum. (c) Withdrawals. An Alternate Payee will not be permitted to make any withdrawals under Article VII. (d) Death Benefits. Unless a QDRO establishing a separate account for an Alternate Payee provides to the contrary, an Alternate Payee for whom a separate account is established 35 37 will have the right to designate a Beneficiary, in the same manner as provided in Section 7.5 with respect to a Participant (except that no spousal consent will be required), who will receive benefits payable to an Alternate Payee which have not been distributed at the time of an Alternate Payee's death. If the Alternate Payee for whom a separate account is established does not designate a Beneficiary, or if the Beneficiary predeceases the Alternate Payee, benefits payable to the Alternate Payee which have not been distributed will be paid to the Alternate Payee's estate. Any death benefit payable to the Beneficiary of an Alternate Payee will be paid in a single sum in cash as soon as administratively practicable after the Alternate Payee's death. (e) Investment Direction. Unless a QDRO establishing a separate account for an Alternate Payee provides to the contrary, an Alternate Payee for whom a separate account is established will have the right to direct the investment of any portion of a Participant's Accounts payable to the Alternate Payee under such order in the same manner as provided in Article VI with respect to a Participant, which amounts will be separately accounted for by the Trustee in the Alternate Payee's name; provided, however, that the Alternate Payee shall not be permitted to elect to invest any such amounts in "employer securities" within the meaning of section 409(l) of the Code. 7.7. Post Distribution Credits. In the event that, after the payment of a single-sum distribution under this Plan (other than an in-service benefit distribution described in Section 7.3), any funds will be subsequently credited to the Participant's Account, such additional funds will be paid to the Participant or applied for the Participant's Account as promptly as practicable thereafter; provided, that the Participant is not then an Employee or, if he is an Employee, he has reached the required distribution date described in Section 7.2(b)(2). 7.8. Direct Rollovers. In the event any payment or payments to be made under the Plan to a Participant, a Beneficiary who is the surviving spouse of a Participant, or an Alternate Payee who is the spouse or former spouse of a Participant, would constitute an "eligible rollover distribution," such individual may request that such payment or payments be transferred directly from the Trust to the trustee of (i) an individual retirement account described in section 408(a) of the Code, (ii) an individual retirement annuity described in section 408(b) of the Code (other than an endowment contract), (iii) an annuity plan described in section 403(a) of the Code, or (iv) a qualified defined contribution plan the terms of which permit the acceptance of rollover distributions; provided, however, that (iii) and (iv) will not apply to a Beneficiary who is the surviving spouse of a Participant. Any such request will be made in writing, on the form prescribed by the Committee for such purpose, at such time in advance as the Committee may specify. For purposes of this Section 7.8, "eligible rollover distribution" will mean a distribution from the Plan, excluding (1) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) over the life (or life expectancy) of the individual, the joint lives (or joint life expectancies) of the individual and the individual's designated Beneficiary, or a specified period of ten (10) or more years, (2) any distribution to 36 38 the extent such distribution is required under section 401(a)(9) of the Code, (3) any distribution to the extent such distribution is not included in gross income, and (4) for distributions after December 31, 1998 (in accordance with guidance issued by the Internal Revenue Service), any hardship distribution described in section 401(k)(2)(B)(i)(IV) of the Code. 7.9. Delay of Payment. (a) If the amount of any payment under this Article VII would adversely affect the Trust Fund by forcing the premature liquidation of assets, such payment may be delayed until the timely and orderly liquidation of investments can be accomplished, but in no event later than the 60th day following the last day of the Plan Year during which the Participant's Normal Retirement Date occurs. If the amount of any payment under this Section would adversely affect the Trust Fund by permitting former Participants to enter into direct competition with the Company, such payment will be delayed until the 60th day after the end of the Plan Year during which the Participant's Normal Retirement Date occurs. If the amount of any payment under this Section cannot be ascertained by the applicable commencement date, payment shall be made no later than 60 days after the earliest day on which the amount of such payment can be ascertained. If a Participant is in receipt of benefits from the Company's insured long-term disability program, payment of the Participants Account shall be deferred to the first day of the month in which such Participant is no longer eligible to receive such benefits or, if earlier, the 60th day following the last day of the Plan Year during which the Participant's Normal Retirement Date occurs, provided the benefits payable under the long-term disability program would otherwise be reduced by the benefits payable under the Plan. (b) When distribution of benefits from the Trust Fund is to be deferred in accordance with Section 7.2(b)(2), after the applicable Valuation Date, the provisions of Section 6.8 shall apply to a Participant's Account until distribution is made. 37 39 ARTICLE VIII. PROVISIONS RELATING TO TOP-HEAVY PLANS 8.1. Definitions. For purposes of this Article VIII, the following terms will have the following meanings: (a) "Aggregation Group" will mean the group of qualified plans sponsored by the Employer or by an Affiliated Company formed by including in such group (1) all such plans in which a Key Employee participates in the Plan Year containing the Determination Date, or any of the four (4) preceding Plan Years, including any frozen or terminated plan that was maintained within the five-year-period ending on the Determination Date, (2) all such plans which enable any plan described in clause (1) to meet the requirements of either section 401(a)(4) of the Code or section 410 of the Code, and (3) such other qualified plans sponsored by the Employer or an Affiliated Company as the Employer elects to include in such group, as long as the group, including those plans electively included, continues to meet the requirements of sections 401(a)(4) and 410 of the Code. (b) "Determination Date" will mean the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of such Plan Year. (c) "Key Employee" will mean a person employed or formerly employed by the Employer or an Affiliated Company who, during the Plan Year or during any of the preceding four (4) Plan Years, was any of the following: (1) An officer of the Employer having an annual Compensation of more than fifty percent (50%) of the amount in effect under section 415(b)(1)(A) of the Code for the Plan Year. The number of persons to be considered officers in any Plan Year and the identity of the persons to be so considered will be determined pursuant to the provisions of section 416(i) of the Code and the regulations published thereunder. (2) One (1) of the ten (10) Employees who owns (or is considered as owning under the attribution rules set forth at section 318 of the Code and the regulations thereunder) the largest interest in the Employer or such Affiliated Company, provided that no person will be considered a Key Employee under this paragraph (2) if his annual Compensation is not greater than the limitation in effect for such Plan Year under section 415(c)(1)(A) of the Code, nor will any person be considered a Key Employee under this paragraph (2) if his ownership interest in the Plan Year being tested and the preceding four Plan Years was at all times less than one-half of one percent (1/2%) in value of any of the entities forming the Employer and the Affiliated Companies. (3) A five-percent (5%) owner of the Employer. 38 40 (4) A person who is both an Employee whose annual Compensation exceeds $150,000 and who is a one-percent (1%) owner of the Employer. The beneficiary of any deceased Participant who was a Key Employee will be considered a Key Employee for the same period as the deceased Participant would have been so considered. (d) "Key Employee Ratio" will mean the ratio (expressed as a percentage) for any Plan Year, calculated as of the Determination Date with respect to such Plan Year, determined by dividing the amount described in paragraph (1) hereof by the amount described in paragraph (2) hereof, after deduction from both such amounts of the amount described in paragraph (3) hereof. (1) The amount described in this paragraph (1) is the sum of (A) the aggregate of the present value of all accrued benefits of Key Employees under all qualified defined benefit plans included in the Aggregation Group, (B) the aggregate of the balances in all of the accounts standing to the credit of Key Employees under all qualified defined contribution plans included in the Aggregation Group, and (C) the aggregate amount distributed from all plans in such Aggregation Group to or on behalf of any Key Employee during the period of five (5) Plan Years ending on the Determination Date. (2) The amount described in this paragraph (2) is the sum of (A) the aggregate of the present value of all accrued benefits of all Participants under all qualified defined benefit plans included in the Aggregation Group, (B) the aggregate of the balances in all of the accounts standing to the credit of all Participants under all qualified defined contribution plans included in the Aggregation Group, and (C) the aggregate amount distributed from all plans in such Aggregation Group to or on behalf of any Participant during the period of five (5) Plan Years ending on the Determination Date. (3) The amount described in this paragraph (3) is the sum of (A) all rollover contributions (or similar transfers) to plans included in the Aggregation Group initiated by an Employee from a plan sponsored by an employer which is not the Employer or an Affiliated Company, (B) any amount that would have been included under paragraph (1) or (2) hereof with respect to any person who has not rendered service to any Employer at any time during the five-year-period ending on the Determination Date, and (C) any amount that is included in paragraph (2) hereof for, on behalf of, or on account of, a person who is a Non-Key Employee as to the Plan Year of reference but who was a Key Employee as to any earlier Plan Year. The present value of accrued benefits under any defined benefit plan will be determined under the method used for accrual purposes for all plans maintained by the Employer and all Affiliated Companies if a single method is used by all such plans, or otherwise, the slowest accrual method permitted under section 411(b)(1)(C) of the Code. 39 41 (e) "Non-Key Employee" will mean any Employee or former Employee who is not a Key Employee as to that Plan Year, or a beneficiary of a deceased Participant who was a Non-Key Employee. 8.2. Determination of Top-Heavy Status. The Plan will be deemed "top-heavy" as to any Plan Year if, as of the Determination Date with respect to such Plan Year, either of the following conditions is met: (a) The Plan is not part of an Aggregation Group and the Key Employee Ratio, determined by substituting the "Plan" for the "Aggregation Group" each place it appears in Section 8.1(d), exceeds sixty percent (60%), or (b) The Plan is part of an Aggregation Group, and the Key Employee Ratio of such Aggregation Group exceeds sixty percent (60%). The Plan will be deemed "super top-heavy" as to any Plan Year if, as of the Determination Date with respect to such Plan Year, the conditions of subsections (a) or (b) hereof are met with "ninety percent (90%)" substituted for "sixty percent (60%)" therein. 8.3. Top-Heavy Plan Minimum Allocation. The aggregate allocation made under the Plan to the Account of each active Participant who is a Non-Key Employee for any Plan Year in which the Plan is a Top-Heavy Plan and who remained in the employ of the Employer or an Affiliated Company through the end of such Plan Year (whether or not in the status of Eligible Employee) will be not less than the lesser of: (a) Three percent (3%) of the Compensation of each such Participant for such Plan Year; or (b) The percentage of such Compensation so allocated under the Plan to the Account of the Key Employee for whom such percentage is the highest for such Plan Year. If any person who is an active Participant in the Plan is a Participant under any defined benefit pension plan qualified under section 401(a) of the Code sponsored by the Employer or an Affiliated Company, there will be substituted "Four percent (4%)" for "Three percent (3%)" in subsection (a) above. For the purposes of determining whether or not the provisions of this Section have been satisfied, (i) contributions or benefits under chapter 2 of the Code (relating to tax on self-employment income), chapter 21 of the Code (relating to Federal Insurance Contributions Act), title II of the Social Security Act, or any other Federal or state law are disregarded; (ii) all defined contribution plans in the Aggregation Group will be treated as a single plan; and (iii) employer matching contributions and elective deferrals under all plans in the Aggregation Group will be disregarded. For the purposes of determining whether or not the requirements of this Section have been satisfied, contributions allocable to the account of the Participant under any other qualified defined contribution plan that is part of the Aggregation 40 42 Group will be deemed to be contributions made under the Plan, and, to the extent thereof, no duplication of such contributions will be required hereunder solely by reason of this Section. Subsection (b) above will not apply in any Plan Year in which the Plan is part of an Aggregation Group containing a defined benefit pension plan (or a combination of such defined benefit pension plans) if the Plan enables a defined benefit pension plan required to be included in such Aggregation Group to satisfy the requirements of either section 401(a)(4) or section 410 of the Code. 8.4. Top-Heavy Plan Maximum Allocations. Effective for Plan Years beginning before January 1, 2000, if the Plan is a Super Top-Heavy Plan, or if the Plan is a Top-Heavy Plan which fails to satisfy the additional minimum allocation requirements under Section 8.3 hereof, the definitions of "defined contribution fraction" and "defined benefit fraction" as incorporated by reference in Section 5.4 will be modified as required under section 416 of the Code. 41 43 ARTICLE IX. COMMITTEE 9.1. Committee. The Committee will be appointed by and serve at the discretion of the Board of Directors. The Committee will act by a majority of its members with minutes being recorded for each meeting. Such minutes will be made available to any member upon written request. 9.2. Authority and Responsibility of the Committee. The Committee will be the Plan "administrator" as such term is defined in section 3(16) of ERISA, and as such will have the following duties and responsibilities: (a) to adopt and enforce such rules and regulations and prescribe the use of such forms as may be deemed necessary to carry out the provisions of the Plan; (b) to maintain and preserve records relating to Participants, former Participants, and their Beneficiaries and Alternate Payees; (c) to prepare and furnish to Participants, Beneficiaries and Alternate Payees all information and notices required under federal law or the provisions of this Plan; (d) to prepare and file or publish with the Secretary of Labor, the Secretary of the Treasury, their delegates and all other appropriate government officials all reports and other information required under law to be so filed or published; (e) to provide directions to the Trustee with respect to methods of benefit payment, valuations at dates other than regular Valuation Dates and on all other matters where called for in the Plan or requested by the Trustee; (f) to determine all questions of the eligibility of Employees and of the status of rights of Participants, Beneficiaries and Alternate Payees, to make factual determinations, to construe the provisions of the Plan, to correct defects therein and to supply omissions thereto; (g) to engage assistants and professional advisers; (h) to arrange for bonding, if required by law; (i) to provide procedures for determination of claims for benefits and to establish rules, not inconsistent with the provisions or purposes of the Plan, as it may deem necessary or desirable for the proper administration of the Plan or transaction of its business; (j) to determine whether any domestic relations order constitutes a QDRO and to take such action as the Committee deems appropriate in light of such domestic relations order; 42 44 (k) to make such determinations as are required pursuant to the provisions of Sections 7.3 hereof; (l) to retain records on elections and waivers by Participants, their spouses and their Beneficiaries and Alternate Payees; (m) to perform such other functions and duties as are set forth in the Plan that are not specifically given to another Named Fiduciary; (n) to monitor the performance of various Investment Funds; (o) to appoint the Trustee and, at least once during each Plan Year, to review the Trustee's performance; (p) to approve and amend the Trust Agreement; (q) to terminate the Trust Agreement and settle the account of the Trustee and to remove the Trustee and, upon such removal or upon the resignation of the Trustee, to appoint a successor; (r) to appoint an Investment Manager(s) (or to refrain from such appointment), to monitor the performance of the Investment Manager(s) so appointed, to terminate such appointment and, upon such termination or upon resignation of the Investment Manager(s), to appoint a successor, to amend the separate agreement(s) which will be entered into with the Investment Manager(s) and either increase or decrease the portion of the Trust Fund which will be managed by the Investment Manager(s); (s) to establish, revise from time to time, and communicate to the Trustee and/or Investment Manager(s), a funding policy and method for the Plan; and (t) to ensure that an independent qualified public accountant examines the Trustee's accounts and records as of the close of each Plan Year and renders an opinion. 9.3. Reporting and Disclosure. The Committee will keep all individual and group records relating to Plan Participants, Beneficiaries and Alternate Payees, and all other records necessary for the proper operation of the Plan. Such records will be made available to the Employer and to each Participant, Beneficiary and Alternate Payee for examination during normal business hours except that a Participant, Beneficiary or Alternate Payee will examine only such records as pertain exclusively to the examining Participant, Beneficiary or Alternate Payee and those records and documents relating to all Participants generally. The Committee will prepare and will file as required by law or regulation all reports, forms, documents and other items required by ERISA, the Code, and every other relevant statute, each as amended, and all regulations thereunder. This provision will not be construed as imposing upon the 43 45 Committee the responsibility or authority for the preparation, preservation, publication or filing of any document required to be prepared, preserved or filed by the Trustee or by any other Named Fiduciary to whom such responsibilities are delegated by law or by this Plan. 9.4. Construction of the Plan. The Committee will take such steps as are considered necessary and appropriate to remedy any inequity that results from incorrect information received or communicated in good faith or as the consequence of an administrative error. The Committee will have full discretionary power and authority to make factual determinations, to interpret the Plan, to make benefit eligibility determinations, and to determine all questions arising in the administration, interpretation and application of the Plan. The Committee will correct any defect, reconcile any inconsistency, resolve any ambiguity or supply any omission with respect to the Plan. All such corrections, reconciliations, interpretations and completions of Plan provisions will be final, binding and conclusive upon the parties, including the Employer, the Employees, their families, dependents, Beneficiaries and any Alternate Payees. 9.5. Compensation of the Committee. The Committee will serve without compensation for its services as such. 44 46 ARTICLE X. ALLOCATION AND DELEGATION OF AUTHORITY 10.1. Authority and Responsibilities of the Committee. The Committee will have the authority and responsibilities imposed by Article X hereof. With respect to the said authority and responsibility, the Committee will be a "Named Fiduciary," and as such, will have no authority and responsibility other than as granted in the Plan, or as imposed by law. 10.2. Authority and Responsibilities of the Trustee. The Trustee will be the "Named Fiduciary" with respect to those powers and duties set forth in the Trust Agreement. The Trustee will keep complete and accurate accounts of all of the assets of, and the transactions involving, the Trust Fund. All such accounts will be open to inspection by the Committee during normal business hours. 10.3. Limitations on Obligations of Named Fiduciaries. No Named Fiduciary will have authority or responsibility to deal with matters other than as delegated to it under this Plan, under the Trust Agreement, or by operation of law. Except as provided by section 405 of ERISA, a Named Fiduciary will not in any event be liable for breach of fiduciary responsibility or obligation by another fiduciary (including Named Fiduciaries) if the responsibility or authority for the act or omission deemed to be a breach was not within the scope of the said Named Fiduciary's authority or delegated responsibility. The determination of any Named Fiduciary as to any matter involving its responsibilities hereunder will be conclusive and binding on all persons. 10.4. Designation and Delegation. Each Named Fiduciary may designate other persons to carry out such of its responsibilities hereunder for the operation and administration of the Plan as it deems advisable and delegate to the persons so designated such of its powers as it deems necessary to carry out such responsibilities. Such designation and delegation will be subject to such terms and conditions as the Named Fiduciary deems necessary or proper. Any action or determination made or taken in carrying out responsibilities hereunder by the persons so designated by the Named Fiduciary will have the same force and effect for all purposes as if such action or determination had been made or taken by such Named Fiduciary. 10.5. Reports to Board of Directors. As deemed necessary or proper, the Named Fiduciaries, or an appropriate committee thereof, will report to the Board of Directors on the operation and administration of the Plan. 10.6. Engagement of Assistants and Advisers. Any Named Fiduciary will have the right to hire, at the expense of the Trust Fund, such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable. 10.7. Payment of Expenses. The expenses incurred by the Named Fiduciaries in connection with the operation of the Plan, including but not limited to, the expenses incurred by 45 47 reason of the engagement of professional assistants and consultants, will be expenses of the Plan and will be payable from the Trust Fund at the direction of the Committee. The Company will have the option, but not the obligation, to pay any such expenses, in whole or in part, and by so doing, to relieve the Trust Fund from the obligation of bearing such expenses. Payment of any such expenses by the Company on any occasion will not bind the Company to thereafter pay any similar expenses. 10.8. Indemnification. Each person who is a Named Fiduciary or a member of any committee or board comprising a Named Fiduciary (other than the Trustee) will be indemnified by the Company against costs, expenses and liabilities (other than amounts paid in settlement to which the Company does not consent) reasonably incurred by him in connection with any action to which he may be a party by reason of his service as a Named Fiduciary except in relation to matters as to which he will be adjudged in such action to be personally guilty of gross negligence or willful misconduct in the performance of his duties. The foregoing right to indemnification will be in addition to such other rights as the person may enjoy as a matter of law or by reason of insurance coverage of any kind, but will not extend to costs, expenses and/or liabilities otherwise covered by insurance or that would be so covered by any insurance then in force if such insurance contained a waiver of subrogation. Rights granted hereunder will be in addition to and not in lieu of any rights to indemnification to which the person may be entitled pursuant to the bylaws of the Company. Service as a Named Fiduciary will be deemed in partial fulfillment of the person's function as an employee, officer and/or director of the Company, if he serves in that capacity as well as in the role of Named Fiduciary. 10.9. Bonding. The Committee will arrange for such bonding as is required by law for persons who are Employees and/or members of the Board of Directors, but no bonding in excess of the amount required by law will be considered required by the Plan. The Company will obtain, and pay the expense of, any bond required by law. 46 48 ARTICLE XI. CLAIMS PROCEDURES 11.1. Application for Benefits. Each Participant, Beneficiary or Alternate Payee believing himself or herself eligible for benefits under the Plan will apply for such benefits by completing and filing with the Committee an application for benefits on a form supplied by the Committee. Before the date on which benefit payments commence, each such application must be supported by such information and data as the Committee deems relevant and appropriate. Evidence of age, marital status (and, in the appropriate instances, health, death or Disability), and location of residence will be required of all applicants for benefits. In the event a Participant, Beneficiary or Alternate Payee fails to apply to the Committee at least sixty (60) days prior to the applicable required distribution date described in Section 7.2, the Committee will make diligent efforts to locate such Participant, Beneficiary or Alternate Payee and obtain such application. In the event the Participant, Beneficiary or Alternate Payee fails to make application by the applicable date described in Section 7.2, the Committee will commence distribution as of such date without such application; provided, however, that in the event the Committee fails to locate the Participant, Beneficiary or Alternate Payee so that distribution as of the applicable date described in Section 7.2 is not possible, payment will be made no later than sixty (60) days after the date on which the Participant, Beneficiary or Alternate Payee is located. 11.2. Appeals of Denied Claims for Benefits. In the event that any claim for benefits is denied in whole or in part, the Participant, Beneficiary or Alternate Payee whose claim has been so denied will be notified of such denial in writing by the Committee. The notice advising of the denial will be furnished to the Participant, Beneficiary or Alternate Payee within ninety (90) days of receipt of the benefit claim by the Committee, unless special circumstances require an extension of time to process the claim. If an extension is required, the Committee will provide notice of the extension prior to the termination of the ninety (90) day period. In no event may the extension exceed a total of one hundred eighty (180) days from the date of the original receipt of the claim. The notice advising of the denial will specify the reason or reasons for denial, make specific reference to pertinent Plan provisions, describe any additional material or information necessary for the claimant to perfect the claim (explaining why such material or information is needed), and will advise the Participant, Beneficiary or Alternate Payee, as the case may be, of the procedure for the appeal of such denial. All appeals will be made by the following procedure: (a) The Participant, Beneficiary or Alternate Payee whose claim has been denied will file with the Committee a notice of desire to appeal the denial. Such notice will be filed within sixty (60) days of notification by the Committee of claim denial, will be made in writing, and will set forth all of the facts upon which the appeal is based. Appeals not timely filed will be barred. 47 49 (b) The Committee will consider the merits of the claimant's written presentations, the merits of any facts or evidence in support of the denial of benefits, and such other facts and circumstances as the Committee will deem relevant. (c) The Committee will ordinarily render a determination upon the appealed claim within sixty (60) days after its receipt which determination will be accompanied by a written statement as to the reasons therefor. However, in special circumstances the Committee may extend the response period for up to an additional sixty (60) days, in which event it will notify the claimant in writing prior to commencement of the extension. Notwithstanding the foregoing, if the Committee holds regularly scheduled meetings at least quarterly to review such appeals, a individual's request for review will be acted upon at the meeting immediately following the receipt of the individual's request unless such request is filed within thirty (30) days preceding such meeting. In such instance, the decision will be made no later than the date of the second meeting following the Committee's receipt of such request. If special circumstances (such as a need to hold a hearing) require a further extension of time for processing a request, a decision will be rendered not later than the third meeting of the Committee following the receipt of such request for review and written notice of the extension will be furnished to the individual prior to the commencement of the extension. Any determination rendered by the Committee will be final and binding upon all parties. 48 50 ARTICLE XII. AMENDMENT AND TERMINATION 12.1. Amendment. (a) The Plan may be amended or otherwise modified by the Board of Directors, or the Committee to the extent authorized in accordance with Subsection (c). Copies of any such amendment or modification shall be sent to the governing body of each Employer. It shall be deemed each Employer consented to such amendment or modification unless its governing body delivers written notice to the contrary to the Board of Directors, the Committee and the Trustee within 30 days of its receipt of such amendment or modification. (b) No amendment or modification shall: (1) permit any part of the Trust Fund, other than such part as is required to pay taxes, administrative expenses and expenses incurred in effectuating such changes, to be used for or diverted to purposes other than the exclusive benefit of the Participants or Beneficiaries and/or persons entitled to benefits under the Plan or permit any portion of the Trust Fund to revert to or become the property of the Company; (2) have the effect of reducing the Account of any Participant as of the date of such amendment or deprive any Participant or Beneficiary of a benefit accrued and payable; or (3) eliminate any option which constitutes a valuable right available to a Participant with respect to benefits previously accrued to the extent the Participant satisfied, either before or after the amendment, the conditions for the form of payment except as otherwise permitted by applicable law and regulations. (c) The Committee may amend or modify the Plan in order to bring the Plan into compliance with applicable law or regulations, provided said amendment or modification does not have a material effect on the estimated cost of maintaining the Plan and does not create a new class of benefits or entitlements. 12.2. Plan Termination. (a) The Company expects to continue this Plan and the corresponding Trust indefinitely, but reserves the right to terminate in whole or in part either or both at any time by resolution of the Board of Directors, without the consent of any Participant, Alternate Payee, Surviving Spouse or Beneficiary. (b) Any termination of the Plan will become effective as of the date designated by the Board of Directors. Except as expressly provided elsewhere in the Plan, prior to the satisfaction 49 51 of all liabilities with respect to the benefits provided under this Plan, no termination will cause any part of the funds or assets held to provide benefits under the Plan to be used other than for the benefit of Participants and their Beneficiaries or Alternate Payees or to meet the administrative expenses of the Plan. Upon termination or partial termination of the Plan, or upon complete discontinuance of contributions, the rights of all affected persons to benefits accrued to the date of such termination will be nonforfeitable. Upon termination of the Plan, Accounts will be distributed in accordance with applicable law. 12.3. Mergers and Consolidations of Plans. Pursuant to action by the Board of Directors, the Plan may be merged or consolidated with, or a portion of its assets and liabilities may be transferred to, another qualified plan. In the event of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each Participant will have a benefit in the surviving or transferee plan if such plan were then terminated immediately after such merger, consolidation or transfer that is equal to or greater than the benefit he would have had immediately before such merger, consolidation or transfer in the plan in which he was then a participant had such plan been terminated at that time. For the purposes hereof, former Participants, Beneficiaries and Alternate Payees will be considered Participants. 50 52 ARTICLE XIII. PARTICIPATING COMPANIES 13.1. Adoption by Other Entities. Any corporation or other business entity may, by resolution of its own governing body, and with the approval of the Board of Directors, adopt the Plan and thereby become an Employer. Notwithstanding the adoption of the Plan by other entities, the Plan will be administered as a single plan and all Plan assets will be available to pay benefits to all Participants under the Plan 13.2. Alternative Provisions. No Employer may adopt alternative provisions as to itself or its Employees. Upon request of the governing body of an Employer, the Board of Directors may amend the Plan with respect to the Employees of such Employer provided that any change will only apply if any inequity resulting from such changed Plan provisions is not found to be discriminatory on behalf of Highly Compensated Employees. 13.3. Right to Withdraw (Plan Spinoff). Each Employer having adopted the Plan shall have the right as of the last day of any month to withdraw from the Plan and/or Trust Agreement by delivering to the Board of Directors, the Committee and the Trustee written notification from its own governing body of such action and setting forth the date as of which the withdrawal shall be effective. The date specified in such written notice shall be deemed a Valuation Date. 13.4. Procedure Upon Withdrawal. (a) If an Employer withdraws from the Plan and Trust Agreement as of the result of its adoption of a different plan, the Trustee shall segregate the portion of the Trust Fund attributable to the Accounts of Participants employed solely by such Employer. As soon as administratively feasible following receipt of a favorable letter of determination from the Internal Revenue Service with regard to the adoption of such successor plan, the Trustee shall transfer the segregated assets to the insurance carrier or fiduciary designated by the Employer as the agency through which the benefits of such successor plan are to be disbursed. (b) If an Employer withdraws from the Plan and Trust Agreement as the result of its adoption of a resolution to terminate its participation in the Plan and to distribute assets to its Employees who are Participants, the Trustee shall segregate the portion of the Trust Fund attributable to the Accounts of the Participants who are employed solely by such Employer, and the termination provisions of Article XII shall apply with respect to such segregated assets. 51 53 ARTICLE XIV. MISCELLANEOUS PROVISIONS 14.1. Nonalienation of Benefits. (a) Except as provided in Section 14.1(b), none of the payments, benefits or rights of any Participant, Alternate Payee or Beneficiary will be subject to any claim of any creditor, and, in particular, to the fullest extent permitted by law, all such payments, benefits and rights will be free from attachment, garnishment, trustee's process, or any other legal or equitable process available to any creditor of such Participant, Alternate Payee or Beneficiary. Except as provided in Section 14.1(b), no Participant, Alternate Payee or Beneficiary will have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which he may expect to receive, contingently or otherwise, under the Plan, except the right to designate a Beneficiary or Beneficiaries as hereinabove provided. (b) Compliance with the provisions and conditions of (1) any QDRO, (2) any federal tax levy made pursuant to section 6331 of the Code, or (3) subject to the provisions of section 401(a)(13) of the Code, a judgment, order, decree or settlement agreement between the Participant and the Secretary of Labor or the Pension Benefit Guaranty Corporation relating to a violation (or an alleged violation) of part 4 of subtitle B of title I of ERISA, will not be considered a violation of this provision. 14.2. No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits will be construed as giving any Participant or Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Participants and other Employees will remain subject to discharge to the same extent as if the Plan had never been adopted. 14.3. Severability of Provisions. If any provision of the Plan will be held invalid or unenforceable, such invalidity or unenforceability will not affect any other provisions hereof, and the Plan will be construed and enforced as if such provisions had not been included. 14.4. Heirs, Assigns and Personal Representatives. This Plan will be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant, Beneficiary and Alternate Payee, present and future (except that no successor to the Employer will be considered a Plan sponsor unless that successor adopts the Plan). 14.5. Headings and Captions. The headings and captions herein are provided for reference and convenience only, will not be considered part of the Plan, and will not be employed in the construction of the Plan. 52 54 14.6. Gender and Number. Except where otherwise clearly indicated by context, the masculine and the neuter will include the feminine and the neuter, the singular will include the plural, and vice-versa. 14.7. Controlling Law. This Plan will be construed and enforced according to the laws of the State of New Jersey to the extent not preempted by Federal law, which will otherwise control. 14.8. Funding Policy. The Committee will establish, and communicate to the Trustee, a funding policy and method consistent with the objectives of the Plan and of the Trust Fund. 14.9. Title to Assets; Source of Benefits. No person will have any right to, or interest in, any assets of the Trust Fund, except as provided from time to time under the Plan, and then only to the extent of the benefits payable under the Plan to such person or out of the assets of the Trust Fund. All payments of benefits as provided for in the Plan will be made from the assets of the Trust Fund, and neither the Employer nor any other person will be liable therefor in any manner. 14.10. Payments to Minors, Etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefor will be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment will fully discharge the Trustee, the Committee, the Employers and all other parties with respect thereto. 14.11. Reliance on Data and Consents. The Employers, the Trustee, the Committee, all fiduciaries with respect to the Plan, and all other persons or entities associated with the operation of the Plan, the management of its assets, and the provision of benefits thereunder, may reasonably rely on the truth, accuracy and completeness of all data provided by any Participant, Beneficiary or Alternate Payee, including, without limitation, data with respect to age, health and marital status. Furthermore, the Employers, the Trustee, the Committee and all fiduciaries with respect to the Plan may reasonably rely on all consents, elections and designations filed with the Plan or those associated with the operation of the Plan and its corresponding trust by any Participant, the spouse of any Participant, any Beneficiary of any Participant, any Alternate Payee of any Participant or the representatives of such persons without duty to inquire into the genuineness of any such consent, election or designation. None of the aforementioned persons or entities associated with the operation of the Plan, its assets and the benefits provided under the Plan will have any duty to inquire into any such data, and all may rely on such data being current to the date of reference, it being the duty of the Participants, spouses of Participants, Beneficiaries and Alternate Payees to advise the appropriate parties of any change in such data. 14.12. Lost Payees. A benefit will be deemed forfeited, and used to reduce future Matching Contributions made pursuant to Section 4.2 by the Employer that last employed the Participant, if the Committee is unable to locate a Participant, a Beneficiary or an Alternate Payee 53 55 to whom payment is due; provided, however, that such benefit will be reinstated if a claim is made by the party to whom properly payable. 14.13. No Warranties. Neither the Board of Directors nor its members nor the Committee nor the Company nor any Affiliated Company nor the Trustee nor any Employer warrants or represents in any way that the value of each Participant's Accounts will increase or will not decrease. The Participant assumes all risk in connection with any change in values. 14.14. Notices. Each Participant, Beneficiary and Alternate Payee will be responsible for furnishing the Committee with the current and proper address for the mailing of notices, reports and benefit payments. Any notice required or permitted to be given will be deemed given if directed to the person to whom addressed at such address and mailed by regular United States mail, first-class and prepaid. If any check mailed to such address is returned as undeliverable to the addressee, mailing of checks will be suspended until the Participant, Beneficiary or Alternate Payee furnishes the proper address. This provision will not be construed as requiring the mailing of any notice or notification if the regulations issued under ERISA deem sufficient notice to be given by the posting of notice in appropriate places, or by any other publication device. Executed this 20th day of July, 1999. K-Tron International, Inc. By: /s/ Edward B. Cloues, II ----------------------------- Title: Chairman and Chief Executive Officer ------------------------------------ Attest: /s/ Mary Vaccara ---------------- Secretary 54 EX-10.8 4 EMPLOYMENT AGREEMENT RONALD REMICK 1 Exhibit 10.8 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (the "Agreement") dated as of May 7, 1999 by and between K-TRON INTERNATIONAL, INC., a New Jersey corporation ("K-Tron"), and RONALD R. REMICK, a resident of Pennsylvania (the "Employee"). WHEREAS, K-Tron and the Employee desire to enter into an agreement to provide for the Employee's employment by K-Tron or another member of the K-Tron Group (K-Tron and its subsidiaries as they may exist from time to time are collectively referred to herein as the "K-Tron Group" and each is sometimes individually referred to herein as a "member" of the K-Tron Group), upon the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment. K-Tron agrees that either K-Tron or another member of the K-Tron Group will employ the Employee, and the Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. 1.1 Employment Term. The employment term of this Agreement (the "Employment Term") shall commence on May 10, 1999 (the "Commencement Date") and shall continue until terminated in accordance with Section 8 hereof or otherwise. 1.2 Duties and Responsibilities. During the Employment Term, the Employee shall be employed by K-Tron or another member of the K-Tron Group, as determined by K-Tron, and he shall perform all duties and accept all responsibilities incidental to any position in which he shall be so employed or as may be assigned to him by the Board of Directors of K-Tron (the 2 "K-Tron Board") or its chief executive officer and shall cooperate fully with the K-Tron Board and K-Tron's chief executive officer. If the Employee is employed by another member of the K-Tron Group, the foregoing reference to the K-Tron Board and to K-Tron's chief executive officer shall also be deemed to include the board of directors and chief executive officer of such other member. The Employee's initial employment with K-Tron shall be as its Senior Vice President, Chief Financial Officer and Treasurer. 1.3 Extent of Service. During the Employment Term, the Employee shall use his best efforts in the business of the member of the K-Tron Group by which he is employed, and he shall devote substantially his full time, attention and energy to the business of the member of the K-Tron Group by which he is employed and to the performance of his services and the discharge of his duties and responsibilities hereunder. Except as provided in Section 5 hereof, the foregoing shall not be construed as preventing the Employee from making investments in other businesses or enterprises or from being engaged in civic or charitable affairs provided that the Employee agrees not to become engaged in any other activity which may interfere with his ability to discharge his duties and responsibilities hereunder to K-Tron or another member of the K-Tron Group. The Employee further agrees not to work on either a part time or independent contractual basis for any other business or enterprise during the Employment Term without the prior written approval of the K-Tron Board. 1.4 Compensation. For all the services rendered during the Employment Term by the Employee hereunder as an employee of a member of the K-Tron Group, such member of the K-Tron Group by which he is employed shall pay the Employee an annual base salary of One Hundred Seventy Thousand U.S. dollars ($170,000), less such withholding and other deductions -2- 3 as may be required by law or any employee benefit plan in which the Employee participates or agreed to by the Employee, payable in installments at such times as such member of the K-Tron Group customarily pays its other officers (but in no event less often than monthly). Such salary may be increased from time to time during the Employment Term in the sole discretion of K-Tron, and any such increased salary shall thereafter be the Employee's new base salary for purposes of this Agreement. Notwithstanding the foregoing, either the K-Tron Board or K-Tron's chief executive officer, or the board of directors or chief executive officer of any other member of the K-Tron Group employing the Employee, shall have the right at any time or times to reduce the Employee's base salary if such reduction is generally being made for other officers of K-Tron or of other members of the K-Tron Group holding comparable positions. The Employee shall also be entitled to receive bonus payments in the sole discretion of the K-Tron Board or its Compensation and Human Resources Committee. In addition to said annual salary and bonus payments (if any), and except as may otherwise be agreed with the Employee in writing, the Employee shall be entitled to receive an automobile allowance of $10,000 per year (or a car in accordance with K-Tron policy as it may exist from time to time, as the Employee may elect) and annual paid vacation of four weeks and to participate in such employee benefit plans of the member of the K-Tron Group employing the Employee as may exist from time to time on the same basis as other persons holding comparable positions with such member of the K-Tron Group, except that the Employee shall have no right solely by virtue of this Agreement to participate in any such plans that are not generally available to all employees of K-Tron or of the other member of the K-Tron Group by which he is employed. 1.5 Stock Grant. On the Commencement Date and subject to the Employee -3- 4 having purchased prior to such date and owning on such date 2,000 shares of K-Tron Common Stock, K-Tron shall issue to the Employee 2,000 shares of its Common Stock as a restricted stock grant under Section 6 of the K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (the "1996 Equity Compensation Plan"). K-Tron and the Employee agree that the sole restriction applicable to such restricted shares shall be that the Employee be employed by K-Tron on the first anniversary of the Commencement Date, in which case the restriction shall lapse at that time; provided, however, that the foregoing restriction shall lapse immediately if the Employment Term is earlier terminated by K-Tron for any reason other than "cause" as defined in Section 8.4 hereof. In all other respects, the restricted stock grant shall be governed by Section 6 and other applicable provisions of the 1996 Equity Compensation Plan. 1.6 Stock Option Grant. On the Commencement Date, the Employee will be granted a ten-year nonqualified stock option under the 1996 Equity Compensation Plan to purchase a total of 7,500 shares of K-Tron Common Stock at the last reported sale price on the Nasdaq Stock Market on that date (or, if there are no trades on that date, the latest preceding date upon which a sale was reported) and on the other terms and conditions to be set forth in a stock option grant agreement to be entered into on that date between K-Tron and the Employee, the form of which is attached hereto as Exhibit A. Provided that the Employee is still employed by K-Tron or another member of the K-Tron Group on the first and second anniversaries of the Commencement Date, respectively, he will be granted similar stock options on those dates for 7,500 shares (first anniversary) and 5,000 shares (second anniversary) of K-Tron Common Stock, using the same form of stock option grant agreement or such other standard form of grant agreement as may then be used by K-Tron. -4- 5 2. Reimbursement of Expenses. The member of the K-Tron Group employing the Employee shall reimburse the Employee for all ordinary and necessary out-of-pocket business expenses incurred by him in connection with the discharge of his duties and responsibilities hereunder during the Employment Term in accordance with such company's expense approval procedures then in effect and upon presentation to such company of an itemized account and written proof of such expenses. 3. Developments. The Employee shall disclose fully, promptly and in writing to K-Tron or to any other member of the K-Tron Group by which he is employed any and all inventions, discoveries, improvements, modifications and the like, whether patentable or not, which he conceives, makes or develops, solely or jointly with others, while employed by K-Tron or another member of the K-Tron Group and which (i) relate to the business, work or activities of any member of the K-Tron Group or (ii) result from or are suggested by the carrying out of his duties hereunder, or from or by any information which he may receive while employed by K-Tron or another member of the K-Tron Group. The Employee hereby assigns, transfers and conveys to K-Tron or its designee all of his right, title and interest in and to any and all such inventions, discoveries, improvements, modifications and the like and agrees to take all such actions as may be requested by K-Tron at any time and with respect to any such invention, discovery, improvement, modification or the like to confirm or evidence such assignment, transfer and conveyance. Furthermore, at any time and from time to time, upon the request of K-Tron, the Employee shall execute and deliver to K-Tron, or to another member of the K-Tron Group designated by K-Tron, any and all instruments, documents and papers, give evidence and do any and all other acts which, in the opinion of counsel for K-Tron, are or may be necessary or -5- 6 desirable to document such assignment, transfer and conveyance or to enable K-Tron or such other member of the K-Tron Group to file and prosecute applications for and to acquire, maintain and enforce any and all patents, trademark registrations or copyrights under United States or foreign law with respect to any such inventions, discoveries, improvements, modifications or the like or to obtain any extension, validation, reissue, continuance or renewal of any such patent, trademark or copyright. K-Tron or such other member of the K-Tron Group shall be responsible for the preparation of any such instruments, documents and papers and for the prosecution of any such proceedings and shall reimburse the Employee for all reasonable expenses incurred by him in compliance with the provisions of this Section 3. 4. Confidential Information. The Employee acknowledges that, by reason of his employment by K-Tron or another member of the K-Tron Group, he will have access to confidential information of the K-Tron Group, including, without limitation, information and knowledge pertaining to products, inventions, discoveries, improvements, innovations, designs, ideas, trade secrets, proprietary information, manufacturing, packaging, advertising, distribution and sales methods, sales and profit figures, customer and client lists and relationships between members of the K-Tron Group and dealers, distributors, sales representatives, wholesalers, customers, clients, suppliers and others who have business dealings with them ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset of K-Tron and the other members of the K-Tron Group and covenants that, both during and after the Employment Term, he will not disclose any Confidential Information to any person (except as his duties as an employee of K-Tron or another member of the K-Tron Group may require) without the prior written authorization of the K-Tron Board. The obligation of -6- 7 confidentiality imposed by this Section 4 shall not apply to information which appears in issued patents or printed publications, which otherwise becomes generally known in the industry through no act of the Employee in breach of this Agreement or which is required to be disclosed by court order or applicable law. 5. Non-Competition. During (i) the term of the Employment Term and (ii) for one year thereafter only in the event that (A) such Employment Term is terminated under Section 8.2 or 8.4 (but only if it is terminated by a member of the K-Tron Group) hereof or (B) the Employee terminates employment with the member of the K-Tron Group employing him without giving the notice required by Section 8.1 hereof, the Employee shall not, unless acting as an employee pursuant hereto or with the prior written consent of the K-Tron Board, directly or indirectly, own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit his name to be used in connection with, any business or enterprise engaged in the business of designing, engineering, manufacturing, marketing or distributing feeding or blending equipment, or in any other business then engaged in by K-Tron or any other member of the K-Tron Group, within (i) any state of the United States or the District of Columbia or (ii) any other country in which K-Tron or any member of the K-Tron Group has engaged in any such business within the prior year or is about to engage in any such business; provided, however, that notwithstanding the foregoing, this provision shall not be construed to prohibit the passive ownership by the Employee of not more than 1% of the capital stock of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities -7- 8 Exchange Act of 1934. In the event that the provisions of this Section 5 should ever be adjudicated to exceed the time, geographic, product or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, product or other limitations permitted by applicable law. 6. No Solicitation. During (i) the term of the Employment Term and (ii) for one year thereafter only in the event that (A) such Employment Term is terminated under Section 8.2 or 8.4 (but only if it is terminated by a member of the K-Tron Group) hereof or (B) the Employee terminates employment with the member of the K-Tron Group employing him without giving the notice required by Section 8.1 hereof, the Employee shall not, unless acting as an employee pursuant hereto or with the prior written consent of the K-Tron Board, call on or solicit, either directly or indirectly, any person, firm, corporation or other entity who or which is, or within two years prior thereto had been, a customer of any member of the K-Tron Group, with respect to any matters involving the designing, engineering, manufacturing, marketing or distributing of feeding or blending equipment or involving any other businesses then engaged in by any member of the K-Tron Group. 7. Equitable Relief. (a) The Employee acknowledges that the restrictions contained in Sections 3, 4, 5 and 6 hereof are, in view of the nature of the business of K-Tron and the other members of the K-Tron Group, reasonable and necessary to protect the legitimate interests of the K-Tron Group, that K-Tron would not have entered into this Agreement in the absence of such restrictions, that the business of the K-Tron Group is international in scope and that any violation of any provision of those Sections will result in irreparable injury to K-Tron and the other -8- 9 members of the K-Tron Group. (b) The Employee agrees that in the event of any violation of the restrictions referred to in Section 7(a) above, K-Tron and any other member of the K-Tron Group shall be entitled to preliminary and permanent injunctive relief, without the necessity of posting a bond or proving actual damages, and to an equitable accounting of all earnings, profits and other benefits arising from any such violation, which rights shall be cumulative and in addition to any other rights or remedies to which K-Tron or any other member of the K-Tron Group may be entitled. (c) The Employee irrevocably and unconditionally agrees that in the event of any violation of the restrictions referred to in Section 7(a) above, an action may be commenced for preliminary and permanent injunctive relief and other equitable relief in any federal or state court of competent jurisdiction sitting in Gloucester or Camden County, New Jersey or in any other court of competent jurisdiction. The Employee hereby waives, to the fullest extent permitted by law, any objection that he may now or hereafter have to such jurisdiction or to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that such suit, action or proceeding has been brought in an inconvenient forum. The Employee agrees that effective service of process may be made upon him by mail under the notice provisions contained in Section 10 hereof and that all pleadings, notices and other papers may be served upon him in the same manner. (d) The Employee agrees that he will provide, and that any member of the K-Tron Group may similarly provide, a copy of Sections 3, 4, 5 and 6 of this Agreement to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, -9- 10 control or participate in the ownership, management, operation, financing or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Sections 5 and 6 of this Agreement after expiration of the time periods set forth therein. (e) The Employee represents and acknowledges that (i) he has been advised by K-Tron to consult his own legal counsel in respect of this Agreement and (ii) he has had full opportunity to do so. 8. Termination. 8.1 Generally. Either party may terminate the Employment Term upon not less than one year's prior notice to the other party. Should either party elect to terminate the Employment Term on this basis, neither K-Tron nor any member of the K-Tron Group shall have any liability or obligation to the Employee after the date on which the Employment Term ends except for unpaid salary and benefits accrued to such date and any additional benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covers the Employee at the time of his termination. 8.2 Partial or Total Disability. If in the judgment of the K-Tron Board, the Employee is unable to perform his duties and responsibilities hereunder by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of 12 calendar months, during which time K-Tron or the member of the K- -10- 11 Tron Group actually employing the Employee at the time of his disability shall continue to compensate the Employee hereunder (with such compensation to be reduced by the amount of any payments due the Employee for this time period under any applicable disability benefit programs, including Social Security disability, worker's compensation and disability retirement benefits), the Employment Term may be terminated by K-Tron in which event neither K-Tron nor any other member of the K-Tron Group shall have any further liability or obligation to the Employee except for unpaid salary and benefits accrued to the date of his termination and for any additional disability or other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covers the Employee at the time of his termination. The Employee agrees, in the event of any dispute under this Section 8.2 and if requested by K-Tron, to submit to a physical examination by a licensed physician selected by K-Tron, the cost of such examination to be paid by K-Tron. 8.3 Death. In the event that the Employee dies during the Employment Term, the member of the K-Tron Group actually employing the Employee at the time of his death shall pay to his executors, administrators or personal representatives, as appropriate, an amount equal to the installment of his salary payable for the month in which he dies. Thereafter, neither K-Tron nor any other member of the K-Tron Group shall have any further liability or obligation hereunder to the Employee's executors, administrators, personal representatives, heirs, assigns or any other person claiming under or through him, except for any benefits or other payments (excluding any severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covered the Employee at the -11- 12 time of his death. 8.4 For Cause. Nothing in this Agreement shall be construed to prevent the termination of the Employment Term at any time either (i) by the Employee for the failure of K-Tron or any other member of the K-Tron Group actually employing the Employee at the time to observe or perform any of the material terms or provisions hereof provided that the Employee has given written notice of such failure to K-Tron and any other member of the K-Tron Group employing the Employee and such failure has continued for 30 days thereafter, or (ii) by K-Tron, by action of the K-Tron Board, for "cause." For purposes of this Agreement, "cause" shall mean the failure of the Employee to observe or perform (other than by reason of illness, injury or incapacity) any of the material terms or provisions of this Agreement provided that the Employee has been given written notice of such failure and such failure has continued for 30 days thereafter, dishonesty, disloyalty, willful misconduct, conviction of a felony or other crime involving moral turpitude, misappropriation of funds, habitual insobriety, substance abuse, similar like cause, any action on the part of the Employee involving willful and deliberate malfeasance or gross negligence in the performance of his duties and responsibilities hereunder, any other action on the part of the Employee that is damaging or detrimental in a significant way to any member of the K-Tron Group or any willful violation by the Employee of a written directive from the K-Tron Board or K-Tron's chief executive officer. 8.5 Without Cause. K-Tron, by action of the K-Tron Board, may terminate the Employment Term at any time without cause upon notice to the Employee accompanied by payment to the Employee of a lump sum amount equal to 100% of the Employee's then-annual base salary hereunder, in which event neither K-Tron nor any other member of the K-Tron Group -12- 13 shall have any further liability or obligation to the Employee after the date of termination of the Employment Term except for any unpaid salary and benefits accrued to such date and for any additional or other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of any member of the K-Tron Group which covers the Employee at the time of his termination. Notwithstanding the foregoing, if notice of termination shall have previously been given to the Employee under Section 8.1 hereof and be in effect, the amount to be paid to the Employee shall be reduced to 100% of the base salary hereunder to which the Employee would otherwise have been entitled for the remaining balance of his Employment Term. 9. Survival. Notwithstanding the termination of the Employment Term for any reason whatsoever, the obligations of the Employee under Sections 3, 4, 5 and 6 hereof shall survive and remain in full force and effect for the periods therein provided, and the provisions for equitable relief found in Section 7 hereof shall continue in force. 10. Notices. All notices and other communications hereunder shall be in writing and deemed to have been given when hand delivered, in person or by a recognized courier or delivery service, when telefaxed to the recipient's correct telefax number (with receipt confirmed) or when mailed by registered or certified mail, return receipt requested, or by air mail to any addressee located outside the United States, as follows (provided that notice of change of address shall be deemed given only when received): If to K-Tron, to: K-Tron International, Inc. -13- 14 Routes 55 and 553 Pitman, NJ 08071 Attention: Chief Executive Officer With a required copy to: Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 Attention: Timothy Maxwell, Esquire If to the Employee, to: Ronald R. Remick 521 Avonwood Road Haverford, PA 19041 or to such other name or address as any designated recipient shall specify by notice to the other designated recipients in the manner specified in this Section 10. Any communication delivered in another manner shall be deemed given when actually received. 11. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, United States of America without giving effect to any conflict of laws provisions. 12. Contents of Agreement, Amendment and Assignment. (a) This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes any prior employment agreement between the parties and shall not be changed, modified or terminated except upon written amendment executed by a duly authorized officer of K-Tron and the Employee. Furthermore and without -14- 15 limitation, nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of any member of the K-Tron Group beyond the expiration of the Employment Term, and if employed thereafter the Employee specifically acknowledges that he shall be an employee-at-will and thus subject to discharge with or without cause and without further compensation of any nature. (b) Employee acknowledges that from time to time, K-Tron and other members of the K-Tron Group may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of K-Tron or other members of the K-Tron Group may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of any member of the K-Tron Group (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of employment or continued employment by K-Tron or any other member of the K-Tron Group. (c) All of the provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, personal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee hereunder are of a personal nature and shall not be assignable or delegable in whole or in part by the Employee. (d) In the event that the Employee is employed by a member ("such other member") of the K-Tron Group other than K-Tron, and in the further event that either (i) K-Tron -15- 16 or another member of the K-Tron Group shall sell 50% or more of the voting stock of such other member to a third party after such other member shall have assumed all of K-Tron's obligations hereunder or (ii) such other member shall sell substantially all of its operating assets to a third party which agrees in writing to assume all of K-Tron's obligations hereunder, then K-Tron shall, upon the closing of any such transaction, have no further duties or obligations hereunder. (e) All references in this Agreement to the "K-Tron Board" shall also be deemed to include the Executive Committee of the K-Tron Board. 13. Severability. If any provision of this Agreement or the application thereof to anyone or any circumstance is held invalid or unenforceable in any jurisdiction, the remainder of this Agreement, and the application of such provision to such person or entity or such circumstance in any other jurisdiction or to other persons, entities or circumstances in any jurisdiction, shall not be affected thereby, and to this end the provisions of this Agreement are severable. 14. Remedies Cumulative; No Waiver. No remedy conferred upon any party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by any party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its or his sole discretion. 15. Miscellaneous. The masculine pronoun whenever used shall include the feminine and the singular shall be construed as the plural, where applicable. All section headings -16- 17 are for convenience only. This Agreement may be executed in several counterparts, each of which shall be an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, K-Tron and the Employee have executed this Agreement as of the date first above written. [Corporate Seal] K-TRON INTERNATIONAL, INC. Attest: By: - ----------------------------- ------------------------------ Secretary As its Chairman and Chief Executive Officer EMPLOYEE - ------------------------------ ------------------------------ Witness Ronald R. Remick -17- EX-10.11 5 FORM OF INDEMNIFICATION AGREEMENT 1 EXHIBIT 10.11 INDEMNIFICATION AGREEMENT This INDEMNIFICATION AGREEMENT is made as of the __ day of ______, _____, by and between K-TRON INTERNATIONAL, INC., a New Jersey corporation (the "Corporation"), and the individual whose name appears on the signature page hereof (such individual being referred to herein as the "Indemnified Representative" and collectively with other individuals who may execute substantially similar agreements as the "Indemnified Representatives"), with reference to the following background: A. The Indemnified Representative currently is serving in one or more capacities as a director or officer of the Corporation or has been specifically designated as a person whom the Corporation shall indemnify as hereinafter provided (which may include any person serving at the request of the Corporation as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise) and as such is performing a valuable service to or on behalf of the Corporation. B. The Corporation has been unable to obtain at reasonable cost directors' and officers' liability insurance to protect directors and officers of the Corporation and its subsidiaries from certain liabilities or has in the past experienced difficulty in obtaining such insurance. At the same time, directors and officers of corporations in general are being increasingly subjected to expensive and time consuming litigation, including matters that traditionally would be brought only against the corporation. The Indemnified Representative has indicated that the Indemnified Representative may not be willing to remain in office or otherwise continue to serve the Corporation absent the protections afforded by this Agreement. C. To induce the Indemnified Representative to continue to serve the Corporation and in consideration for such continued service, and to assist in the recruitment of qualified personnel in the future, the Corporation agrees to indemnify the Indemnified Representative upon the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing premises, the Corporation and the Indemnified Representative agree as follows: 2 1. Agreement to Serve. The Indemnified Representative agrees to serve or continue to serve in each Indemnified Capacity (as hereinafter defined in Section 2(c) (i)) held now or in the future for so long as the Indemnified Representative is duly elected or appointed or until such time as the Indemnified Representative tenders a resignation in writing. This Agreement shall not be deemed an employment contract between the Corporation or any of its affiliates and any Indemnified Representative who is an employee of the Corporation or any of its affiliates, and the Indemnified Representative specifically acknowledges that the Indemnified Representative's employment with the Corporation or any of its affiliates is at will and that the Indemnified Representative may be discharged at any time for any reason, with or without cause, and with or without severance compensation, except as may be otherwise provided in a written employment contract between the Indemnified Representative and the Corporation or any of its affiliates or other applicable formal severance policies duly adopted by the board of directors of the Indemnified Representative's employer. 2. Indemnification. (a) Except as provided in Sections 2(b) and 3, the Corporation shall indemnify the Indemnified Representative against any Liability (as hereinafter defined in Section 2(c) (ii)) incurred by the Indemnified Representative in connection with any Proceeding (as hereinafter defined in section 2(c) (iii)) in which the Indemnified Representative may be involved as a party or otherwise, by reason of the fact that the Indemnified Representative is or was serving in an Indemnified Capacity, including, without limitation, any Liability resulting from actual or alleged breach or neglect of duty, error, misstatement or misleading statement, gross negligence, negligence or act giving rise to strict or products liability, whether occurring prior to or after the date of this Agreement. If the Indemnified Representative is entitled to indemnification in respect of a portion, but not all, of any Liability, the Corporation shall indemnify the Indemnified Representative to the maximum extent for such portion of any Liability. (b) Notwithstanding the provisions of subsection (a), the Corporation shall not indemnify the Indemnified Representative under this Agreement for any Liability incurred in a Proceeding initiated (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an 2 3 intervenor or amicus curiae by the Indemnified Representative unless such initiation of or participation in the Proceeding is authorized, either before or after commencement of the Proceeding, by the affirmative vote of a majority of the directors then in office. This subsection does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 5(d) or otherwise successfully prosecuting or defending the rights granted to the Indemnified Representative by or pursuant to this Agreement. (c) As used in this Agreement: (i) "Indemnified Capacity" means any and all past, present or future service by an Indemnified Representative in one or more capacities (A) as a director, officer, employee or agent of the Corporation, or of any constituent corporation absorbed by the Corporation in a consolidation or merger and designated by the Board of Directors of the Corporation, or, (B) at the request of the Corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation or of any partnership, joint venture, employee benefit plan or other entity or enterprise. (ii) "Liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to any employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys fees and disbursements); and (iii) "Proceeding" means any threatened, pending or completed action, suit, appeal, or other proceeding of any nature, whether civil, criminal, arbitrative, administrative or investigative, whether formal or informal, and whether brought by or in the right of the Corporation, a class of its security holders or otherwise. 3. Exclusions. (a) The Corporation shall not be liable under this Agreement to make any payment in connection with any Liability incurred by the Indemnified Representative: 3 4 (i) to the extent payment for such Liability is made to the Indemnified Representative under an insurance policy provided by the Corporation; (ii) to the extent the Indemnified Representative is indemnified for such Liability by the Corporation under its certificate of incorporation or by-laws or under the New Jersey Business Corporation Act or otherwise than pursuant to this Agreement; (iii) for any claim for an accounting of profits made either from the purchase or sale by such Indemnified Representative of securities of the Corporation pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any corresponding superseding provision, or from any use of material, non-public information, if such use is illegal under applicable provisions of the Exchange Act or the regulations thereunder; (iv) for which the conduct of the Indemnified Representative has been determined in a final adjudication pursuant to Section 5(d) or otherwise to constitute breach of such person's duty of loyalty to the Corporation or its shareholders, bad faith or knowing violation of law, or receipt by such person of an improper personal benefit, and which conduct was material to the cause of action or claim giving rise to the Liability; or (v) to the extent such indemnification has been determined in a final adjudication pursuant to Section 5(d) or otherwise to be unlawful. (b) Any fact, act or omission pertaining to the Indemnified Representative shall not be imputed to any other Indemnified Representative for the purposes of determining the applicability of any exclusion set forth herein. (c) The termination of a proceeding by judgement, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that 4 5 the Indemnified Representative is not entitled to indemnification under this Agreement. 4. ADVANCEMENT OF EXPENSES. The Corporation shall pay any Liability incurred in good faith by the Indemnified Representative in advance of the final disposition of a Proceeding upon receipt of an undertaking by or on behalf of the Indemnified Representative to repay such amount if it shall ultimately be determined pursuant to Section 5 (d) or otherwise that the Indemnified Representative is not entitled to be indemnified by the Corporation pursuant to this Agreement. The financial ability of the Indemnified Representative to repay an advance shall not be a prerequisite to the making of such advance. 5. INDEMNIFICATION PROCEDURE. (a) The Indemnified Representative shall use such Indemnified Representative's best efforts to notify promptly the Secretary of the Corporation of the commencement of any Proceeding or the occurrence of any event which might give rise to a Liability under this Agreement, but the failure so to notify the Corporation shall not relieve the Corporation of any liability which it may have to the Indemnified Representative under this Agreement or otherwise. (b) The Corporation shall be entitled, upon notice to the Indemnified Representative, to assume the defense of any Proceeding with counsel reasonably satisfactory to the Indemnified Representative involved in such Proceeding or a majority of the Indemnified Representatives involved in such Proceeding if there be more than one. If the Corporation notifies the Indemnified Representative, of its election to defend the Proceeding, the Corporation shall have no liability for the expenses (including attorney's fees and disbursements) of the Indemnified Representative incurred in connection with the defense of such Proceeding subsequent to such notice, unless (i) such expenses (including attorney's fees and disbursements) have been authorized by the Corporation, (ii) the Corporation shall not in fact employed counsel reasonably satisfactory to such Indemnified Representative or Indemnified Representatives to assume the defense of such Proceeding, or (iii) it shall have been determined pursuant to Section 5(d) that the Indemnified Representative was entitled to indemnification for such expenses under this Agreement or otherwise. Notwithstanding the 5 6 foregoing, the Indemnified Representative may elect to retain counsel at the Indemnified Representative's own cost and expense to participate in the defense of such Proceeding. (c) The Corporation shall not be required to obtain the consent of the Indemnified Representative to the settlement of any Proceeding which the Corporation has undertaken to defend if the Corporation assumes full and sole responsibility for such settlement and the settlement grants the Indemnified Representative an unqualified release in respect of all Liabilities at issue in the Proceeding. The Corporation shall not be liable for any amount paid by an Indemnified Representative in settlement of any Proceeding that is not defended by the Corporation, unless the Corporation has consented to such settlement (which consent shall not be unreasonably withheld). (d) Any dispute related to the right to indemnification or advancement of expenses hereunder, except with respect to indemnification for liabilities arising under the Securities Act of 1933, as amended, which the Corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the City of Philadelphia, Pennsylvania (or such other metropolitan area to which the Corporation's principal executive offices may be relocated), in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Corporation, the second of whom shall be selected by the Indemnified Representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, or if one of the parties fails or refuses to select an arbitrator, or if the arbitrators selected by the Corporation and the Indemnified Representative cannot agree on the selection of the third arbitrator within seven days after such time as the Corporation and the Indemnified Representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction of the State of New Jersey (or, if the Corporation's principal executive offices have been relocated to another metropolitan area, then by the presiding judge of the court of general jurisdiction for the county in which such offices have 6 7 been relocated). Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. The party or parties challenging the right of an Indemnified Representative to the benefits of this Agreement shall have the burden of proof. The Corporation shall reimburse the Indemnified Representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. (e) Upon a payment to the Indemnified Representative under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of the Indemnified Representative to recover against any person for such Liability, and the Indemnified Representative shall execute all documents and instruments required by the Corporation and shall take such other actions requested by the Corporation and at its expense as may be necessary to secure such rights, including the execution of such documents as may be necessary for the Corporation to bring suit to enforce such rights. 6. Non-Exclusively. The indemnification rights granted to the Indemnified Representative pursuant to this Agreement (i) shall not be deemed exclusive of any other rights to which the Indemnified Representative may be entitled under any statute, by-law, certificate or articles of incorporation, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an Indemnified Capacity and in any other capacity, and (ii) shall continue as to a person who has ceased to be an Indemnified Representative in respect of matters arising prior to such time or involving such person at a time when he or she was an Indemnified Representative. Without limiting the generality of the foregoing, the Corporation and the Indemnified Representative acknowledge the provisions of Article X of the Corporation's By-laws and confirm that the Indemnified Representative is acting in reliance thereon. Section 9 of Article X also provides that the indemnifications rights granted 7 8 by Article X shall not be deemed exclusive of any other rights to which the Indemnified Representative may be otherwise entitled. 7. Discharge of Duty. The Indemnified Representative shall be deemed to have discharged such person's duty to the Corporation if he or she has relied in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following; (a) one or more officers or employees of the Corporation whom the Indemnified Representative reasonably believes to be reliable and competent with respect to the matter presented; (b) legal counsel, public accountants or other persons as to matters that the Indemnified Representative reasonably believes are within the person's professional or expert competence; or (c) a committee of the Board of Directors of the Corporation on which he or she does not serve as to matters within its area of designated authority, which committee he or she reasonably believes to merit confidence. 8. Reliance on Provisions. The Indemnified Representative shall be deemed to be acting in such person's Indemnified Capacity in reliance upon the rights of indemnification provided by this Agreement. 9. Severability and Reformation. Any provision of this Agreement which is adjudicated to be invalid or unenforceable in any jurisdiction or under any circumstance shall be ineffective to the extent of such invalidity or unenforceability only and shall be deemed reformed so as to continue to apply to the maximum extent and to provide the maximum indemnification permissible under the applicable law of such jurisdiction. Any such adjudication shall not invalidate or render unenforceable the remaining provisions hereof and shall not invalidate or render unenforceable such provision in any other jurisdiction or under any other circumstances. 10. Notices. Any notice, claim, request or demand required or permitted hereunder shall be in writing and shall be deemed given if delivered personally or sent by telegram or by 8 9 registered or certified mail, postage prepaid: (i) if to the Corporation, to Routes 55 & 553, PO Box 888, Pitman, NJ 08071-0888, or to such other address to which the principal executive offices of the Corporation may be moved, Attention: Secretary, or (ii) if to the Indemnified Representative, to the address listed on the signature page hereof; or to such other address as any party hereto shall have specified in a notice given in accordance with this Section. 11. Amendments; Binding Effect. No amendment, modification, termination or cancellation of this Agreement shall be effective as to the Indemnified Representative unless signed in writing by the Corporation and the Indemnified Representative. This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of the heirs, executors, administrators and personal representatives of the Indemnified Representative. 12. Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the substantive laws of the State of New Jersey, without reference to the principles governing the conflict of laws applicable in that or any other jurisdiction. 13. Gender and Number. Words used herein, regardless of the gender or number specifically used, shall be deemed to include any other gender, masculine, feminine or neuter, and any other number, singular or plural, as the context may require. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first set forth above. K-TRON INTERNATIONAL, INC. INDEMNIFIED REPRESENTATIVE By:_________________________ _____________________________(SEAL) Title: Chairman and Chief Name: Executive Officer Address: 9 10 Schedule 10.11 Indemnification Agreements The following persons are parties to indemnification agreements with K-Tron International, Inc.: Richard E. Andeen Leo C. Beebe Kenneth W. Bullivant Edward B. Cloues, II Norman Cohen Robert L. Edwards Robert A. Engel Dr. Mario Gallo Lukas Guenthardt Edward Kane Ronald G. Larson Richard J. Pinola Ronald R. Remick Marcel O. Rohr Martin W. Schuler Dr. Hans-Jurg Schurmann Jean Head Sisco Alan R. Sukoneck John C. Tucker Robert L. Weinberg Johannes Wirth EX-10.15 6 MORTGAGE LOAN DATED JUNE 11. 1996 1 Exhibit 10.15 Prepared by: /s/ Jeffrey G. Albertson JEFFREY G. ALBERTSON, ESQ Albertson, Ward & McCaffrey 36 Euclid Street P.O. Box 685 Woodbury, New Jersey 08096 (609) 853-7770 MORTGAGE NOTE $2,700,000.00 Woodbury, New Jersey June 11, 1996 BETWEEN the Borrower(s) K-TRON AMERICA, INC., whose address is Route 55 and 553, P.O. Box 888, Pitman, New Jersey 08071-0888, referred to as "Borrower". AND the Lender, THE BANK of Gloocester County, whose address is 1100 Old Broadway, Woodbury, New Jersey 08096, referred to as "THE BANK". If more than one Borrower signs this Note, the word "Borrower" shall mean each Borrower named above. The word "THE BANK" means the original Lender and anyone else who takes this Note by transfer. BORROWER'S PROMISE TO PAY PRINCIPAL AND INTEREST. In return for a loan that Borrower received, Borrower promises to pay $2,700,000.00 (called "principal"), plus interest to the order of THE BANK. Interest, at a yearly rate of 9.0% will be charged on that part of the principal which has not been paid from the date of this Note until all principal has been paid. Interest shall be calculated hereunder for the actual number of days that principal is outstanding based on a year of 360 days. 2 PAYMENTS. Borrower will pay principal and interest based on a TWENTY (20) YEAR schedule with monthly payments of $24,292.60 on the fIRST DAY OF EACH MONTH BEGINNING ON AUGUST 1996. Borrower will pay all amounts owed under this Note no later than JULY 1, 2016. All payments will be made to THE BANK at the address shown above or to a different place if required by THE BANK. OPTION TO DECLARE LOAN DUE: Although the repayment of the loan evidenced by this instrument has been designed as if it were to extend for a term of TWENTY (20) YEARS, BORROWERS understand that THE BANK expressly reserves the right and option, exercisable at its discretion, to declare the entire unpaid principal balance under this Note together with all interest which shall have accrued thereon to be due and payable on the FIFTH (5TH) ANNIVERSARY of the date of the first payment due under this Note and on each succeeding FIVE (5) YEAR anniversary of that date during the term hereof (Loan Call Date). In the event THE BANK desires to exercise its option to declare the loan due, it shall deliver written notice thereof by regular first class mail to BORROWERS' last known address within the 180-day period commencing on the 90th day prior to and ending on the 90th day after a Loan Call Date. BORROWERS shall, within 90 days after BORROWER'S receipt of written notice from THE BANK of its exercise of the option, repay the entire principal balance due under this Note together with all unpaid interest which shall have accrued-thereon as well as any other sums which may then be due under this Note, the mortgage security, or any other document constituting a part of the within loan transaction. SECURITY. The Borrower hereunder has delivered as security for this instrument a mortgage bearing even date herewith covering premises designated on the official tax map as Lot 3 3.01, Block 249, Township of Mantua, Gloucester County, New Jersey, which Mortgage is about to be recorded in the office of the Clerk of Gloucester County. PREPAYMENT: Borrower shall have the right to prepay this Note in whole or in part at any time without penalty. Prepayments shall first be applied to interest due and then to the remaining principal. LATE CHARGE: The effective date of the receipt by the holder of any installment of this Note shall be the day on which the holder receives cash or collected funds at the place of payment as specified herein in payment of any such installment. BORROWERS shall be entitled to a FIFTEEN (15) DAY grace period after which period a "late charge" of $0.05 FOR EACH $1.00 SO OVERDUE OR $25.00 WHICHEVER IS GREATER, NOT TO EXCEED $1,000.00 may be charged by the holder for the purpose of defraying the expense incident to handling such delinquent payment. DEFAULT: If any installment of this Note or interest payment is not paid within 15 days of the date and at the place herein specified, THE BANK may at its option, and without further notice declare this Note to be in default and the entire principal balance then remaining unpaid together with all interest which shall have accrued on the unpaid principal balance from and after the date of such default shall be due and payable in full without notice. If a default shall occur in this loan and not be cured as provided in the loan documents or otherwise agreed to by THE BANK, THE BANK shall, after declaring the loan to be in default, have the right to increase the interest rate TWO (2%) PERCENT PER YEAR in excess of the note rate. This provision is in addition to any late charges that may be due. 4 ATTORNEY'S FEE: If this Note is placed in the hands of an attorney for collection because of a default in the terms hereof or in the terms of the mortgage given as security for the within obligation, the undersigned jointly and severally agree to pay the reasonable fees and costs of such attorney, whether or not legal action is instituted and further consent that if a judgment is entered in any action the amount of such fees shall form a part of such judgment in addition to any fees allowed by Statute or Rule of the Court. COMMITMENT LETTER COMPLIANCE: This Note is contingent upon BORROWERS' compliance with all of the terms and conditions contained in the commitment letter issued by THE BANK to BORROWERS on or about June 5, 1996. Upon breach of any term or condition contained therein THE BANK shall have the right to declare this loan in default and demand payment in full of the principal balance remaining unpaid, together with all interest which shall have accrued thereon. Further, providing the said commitment letter so provides, THE BANK reserves the right to increase the interest rate in accordance with the provisions of the loan commitment for failure of the BORROWER or any guarantor to submit required financial information within thirty days of the date of request by THE BANK. PAYMENT AT MATURITY: THIS LOAN IS PAYABLE IN FULL: A. AT MATURITY; OR B. UPON DEMAND IN THE EVENT OF A DEFAULT HEREUNDER OR DEFAULT UNDER THE MORTGAGE SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER LOAN INSTRUMENT. IN SUCH EVENT, YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST THEN DUE. THE BANK IS UNDER NO 5 OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT 0UT 0F 0THER ASSETS YOU MAY 0WN OR YOU WILL HAVE TO FIND A LENDER WILLING TO LEND YOU THE MONEY. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM THE BANK. WAIVER OF PRESENTMENT: EACH AND ALL PARTIES hereto whether maker, endorsers, sureties, guarantor or otherwise do hereby jointly and severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest. IN WITNESS WHEREOF, the BORROWERS hereunder have hereunto set their hands and seals the day and year first above written. ATTEST: K-TRON AMERICA, INC. BY: /s/ Patricia M. Moore /s/ Kevin C. Bowen PATRICIA M. MOORE, KEVIN C. BOWEN, PRESIDENT VICE PRESIDENT - FINANCE EX-10.16 7 LOAN MODIFICATION AGREEMENT, JUNE 24, 1998 1 Exhibit 10.16 THE BANK OF GLOUCESTER COUNTY LOAN MODIFICATION AGREEMENT K-TRON AMERICA, INC. Date: June 24, 1998 Loan # 6039359-6500 Original Amount: $2,700,000.00 Present Balance: $2,091,600.32 WHEREAS, the undersigned borrower executed the mortgage and note referred to above on June 11, 1996 and WHEREAS, the mortgage and note executed by the borrower allow a modification of interest rate, due date or other terms without affecting the priority of The Bank of Gloucester County's lien. NOW, therefore, in consideration of a modification fee of $500.00, the above referenced note and mortgage are modified as follows: INTEREST RATE AND REPAYMENT TERMS: FROM THE DATE HEREOF THIS LOAN SHALL ACCRUE INTEREST AT A RATE OF 7.625% AND SHALL BE REPAYABLE IN FIFTY NINE (59) MONTHLY PAYMENTS OF $19,538.26 PRINCIPAL AND INTEREST (CALCULATED BASED ON A 15 YEAR AMORTIZATION SCHEDULE) BEGINNING AUGUST 1, 1998, AND ONE (1) FINAL PAYMENT OF ALL UNPAID PRINCIPAL AND ACCRUED INTEREST DUE AND OWING ON JULY 1, 2003. THE PARAGRAPH OF THE MORTGAGE NOTE DATED JUNE 1996 THAT BEGINS WITH THE PHRASE "OPTION TO DECLARE LOAN DUE" IS HEREBY DELETED IN ITS ENTIRETY. ADDITIONALLY, THE BORROWER SHALL HAVE THE OPTION TO RE-ADVANCE MONEY ON THIS MORTGAGE LOAN. MONEY MAY BE RE-ADVANCED ONLY TO THE EXTENT THAT THE TOTAL AMOUNT OUTSTANDING UNDER THIS MORTGAGE LOAN IS LESS THAN OR EQUAL TO $2,700,000. A RE-ADVANCE OF MONEY WITHIN THE FIRST SIX (6) MONTHS FOLLOWING THE DATE HEREOF SHALL BEAR INTEREST AT A RATE OF 7.625%. A RE-ADVANCE OF MONEY AFTER SIX (6) MONTHS BUT WITHIN TWELVE (12) MONTHS OF THE DATE HEREOF SHALL BEAR INTEREST AT A FIXED RATE EQUAL TO THE FIVE YEAR T-BILL RATE PLUS 275 BASIS POINTS. A RE-ADVANCE OF MONEY AFTER 12 MONTHS BUT WITHIN 60 MONTHS OF THE DATE OF THE MODIFICATION SHALL BEAR INTEREST AT A RATE TO BE DECIDED IN THE SOLE DETERMINATION OF THE BANK. REGARDLESS OF WHEN THE RE-ADVANCE OCCURS, IN ORDER TO BE ENTITLED TO REQUEST A RE-ADVANCE, THE BORROWER MUST EXHIBIT A DEBT COVERAGE RATIO OF NO LESS THAN 1.20 FOR ALL ITS DEBT INCLUDING THE NEW MORTGAGE PAYMENT. THE BORROWER MUST DISCLOSE THE PURPOSE OF THE RE-ADVANCE AND THERE MUST BE NO EVENT OF DEFAULT ON THE LOAN. 2 OTHER CONDITIONS THE BORROWER SHALL HAVE THE RIGHT TO PREPAY THE WHOLE OR ANY PART OF THE PRINCIPAL AND INTEREST HEREUNDER PROVIDED THAT: (a) AT THE TIME OF PREPAYMENT NO EVENT OF DEFAULT HEREUNDER SHALL HAVE OCCURRED; (b) ANY PREPAYMENT DURING THE FIRST LOAN YEAR FROM THE DATE OF THE MODIFICATION SHALL BE ACCOMPANIED BY A PREPAYMENT PENALTY EQUAL TO THREE PERCENT (3%) OF THE AMOUNT, DURING THE SECOND LOAN YEAR FROM THE DATE OF THE MODIFICATION SHALL BE ACCOMPANIED BY A PREPAYMENT PENALTY EQUAL TO TWO PERCENT (2%) OF THE AMOUNT, AND DURING THE THIRD LOAN YEAR FROM THE DATE OF THE MODIFICATION SHALL BE ACCOMPANIED BY A PREPAYMENT PENALTY EQUAL TO ONE (1%) OF THE AMOUNT; ANY PREPAYMENT MADE AFTER THE THIRD LOAN YEAR FROM THE DATE OF THE MODIFICATION SHALL NOT BE SUBJECT TO ANY PREPAYMENT PENALTY; (c) ANY PARTIAL PREPAYMENT SHALL BE APPLIED TO THE UNPAID PRINCIPAL BALANCE, AND NO PREPAYMENT SHALL REDUCE THE AMOUNT OF THE SCHEDULED INSTALLMENTS NOR RELIEVE THE UNDERSIGNED FROM PAYING THE SCHEDULED INSTALLMENTS ON EACH DUE DATE, UNTIL THE ENTIRE INDEBTEDNESS IS PAID. (NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH ABOVE, THE PREPAYMENT PENALTY WILL NOT BE CHARGED IF IN THE SOLE DETERMINATION OF THE BANK ANY PREPAYMENT COMES FROM THE BORROWER'S INTERNALLY GENERATED FUNDS. THE TERM "LOAN YEAR" AS USED HEREIN IS DEFINED AS ANY PERIOD OF ONE YEAR COMMENCING ON THE DATE OF THE MODIFICATION OR ON ANY ANNIVERSARY OF SUCH DATE.) All terms and conditions of the note, mortgage or other security executed by the borrower, to the extent not modified by this agreement, shall remain in force and effect. THE BANK OF GLOUCESTER COUNTY K-TRON AMERICA, INC. By: /s/ David J. Hanrahan /s/ Kevin C. Bowen David J. Hanrahan, Sr., VP Kevin C. Bowen, President/CEO, Date /s/ Patricia M. Moore Patricia M. Moore, Vice President, Date EX-10.17 8 NOTE DATED JUNE 24, 1998 1 Exhibit 10.17 Prepared by: /s/ Jeffrey G. Albertson JEFFREY G. ALBERTSON, ESQ. Albertson Ward 36 Euclid Street P.O. Box 685 Woodbury, NJ 08096 (609) 853-7770 NOTE $5,000,000.00 WOODBURY, NEW JERSEY JUNE 24, 1998 PAYMENT OBLIGATION: FOR VALUE RECEIVED, BORROWER K-TRON AMERICA, INC., A DELAWARE CORPORATION does hereby bind and oblige itself to pay to the order of THE BANK OF GLOUCESTER COUNTY (hereinafter referred to as "THE BANK"), at its offices, 100 Park Avenue, Woodbury, New Jersey 08096 the maximum principal sum of FIVE MILLION DOLLARS ($5,000,000.00) or such lesser amount as may from time to time be advanced by THE BANK and remain outstanding under this Note with interest thereon at the rate of 0.00% above THE WALL STREET JOURNAL'S Prime Rate. Interest shall be calculated hereunder for the actual number of days that principal is outstanding based on a year of 360 days. This loan shall be repaid over a term of two (2) YEAR(S) AND NINE DAYS during which the BORROWER shall make monthly payments of interest only on the FIRST DAY of each month. All principal and accumulated interest shall be due on JULY 3, 2000; provided however, this note shall be for the purpose of creating a line of credit in the maximum amount of FIVE 2 MILLION DOLLARS ($5,000,000.00) during which period of time principal may be increased or reduced at the option of the BORROWER subject to the said maximum amount. Further, the principal amount outstanding on this Line of Credit shall never exceed the sum of EIGHTY (80%) PERCENT of accounts receivable aged ninety (90) days or less plus a sum representing FIFTY (50%) PERCENT of the current inventory valuation. The BORROWER shall submit to THE BANK on a monthly basis its accounts receivable certification (via its "DSO" Report) and on a quarterly basis its accounts receivable aging along with the inventory certification. PRIME RATE: PRIME RATE as used herein is defined as that rate of interest established from time to time by THE WALL STREET JOURNAL and announced as its PRIME RATE. For the purposes hereof, PRIME RATE is influenced by varying factors including money market conditions which cannot be predicted with any degree of certainty and which may cause the PRIME RATE to fluctuate at variable intervals at the discretion of THE WALL STREET JOURNAL. The rate announced by THE WALL STREET JOURNAL as its PRIME RATE may or may not be the rate charged by THE BANK to its most creditworthy borrowers. SECURITY: The BORROWER hereunder has delivered as security for this instrument a first perfected security interest on all inventory and accounts receivable now owned and/or hereafter acquired by BORROWER, including insurance proceeds therefrom. PREPAYMENT: BORROWER shall have the right to prepay this Note in whole or in part at any time without penalty. Prepayments shall first be applied to interest due and then to the remaining principal. LATE CHARGE: The effective date of the receipt by the holder of any installment of this Note shall be the day on which the holder receives cash or collected funds at the place of 3 payment as specified herein in payment of any such installment. BORROWER shall be entitled to a FIFTEEN (15) DAY grace period after which period a "late charge" of $0.05 FOR EACH $1.00 SO OVERDUE OR $25.00 WHICHEVER IS GREATER, may be charged by the holder for the purpose of defraying the expense incident to handling such delinquent payment. DEFAULT: If any installment of this Note or interest payment is not paid within FIFTEEN (15) DAYS of the date and at the place herein specified, THE BANK may at its option, and without further notice declare this Note to be in default and the entire principal balance then remaining unpaid together with all interest which shall have accrued on the unpaid principal balance from and after the date of such default shall be due and payable in full without notice. If a default shall occur in this loan and not be cured as provided in the loan documents or otherwise agreed to by THE BANK, THE BANK shall, after declaring the loan to be in default, have the right to increase the interest rate TWO (2%) percent in excess of the note rate. This provision is in addition to any late charges that may be due. ATTORNEY'S FEE: If this Note is placed in the hands of an attorney for collection because of a default in the terms hereof or in the terms of the security agreement as security for the within obligation, the undersigned jointly and severally agree to pay the reasonable fees and costs of such attorney, whether or not legal action is instituted and further consent that if a judgment is entered in any action the amount of such fees shall form a part of such judgment in addition to any fees allowed by Statute or Rule of the Court. COMMITMENT LETTER COMPLIANCE: This Note is contingent upon BORROWER'S compliance with all of the terms and conditions contained in the commitment letter issued by THE BANK to BORROWER on June 23, 1998. Upon breach of any term or 4 condition contained therein THE BANK shall have the right to declare this loan in default and demand payment in full of the principal balance remaining unpaid, together with all interest which shall have accrued thereon. PAYMENT AT MATURITY: THIS LOAN IS PAYABLE IN FULL AT MATURITY OR UPON DEMAND IN THE EVENT OF A DEFAULT HEREUNDER OR DEFAULT UNDER THE FINANCING AGREEMENT SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER LOAN INSTRUMENT. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST THEN DUE. THE BANK IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN OR YOU WILL HAVE TO FIND A LENDER WILLING TO LEND YOU THE MONEY. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM THE BANK. WAIVER OF PRESENTMENT: EACH AND ALL PARTIES hereto whether maker, endorsers, sureties, guarantor or otherwise do hereby jointly and severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest. 5 IN WITNESS WHEREOF. the BORROWER hereunder has hereunto set their hands and seals the day and year first above written. ATTEST: K-TRON AMERICA, INC. BY: /s/ Patricia M. Moore /s/ Kevin C. Bowen PATRICIA M. MOORE KEVIN C. BOWEN, PRESIDENT VICE PRESIDENT/FINANCE EX-10.18 9 LOAN MODIFICATION AGREEMENT, JULY 22, 1999 1 Exhibit 10.18 THE BANK OF GLOUCESTER COUNTY LOAN MODIFICATION AGREEMENT K-TRON AMERICA, INC. Date: July 22, 1999 ACCOUNT #6039359-6600 Maturity Date: July 3, 2001 Original Amount: $ 5,000,000.00 Annual Fee: $12,500.00 Present Balance: $ 0.00 WHEREAS, the undersigned borrower executed the note referred to above on June 27, 1998, And, WHEREAS, the note, security agreement and commitment letter executed by the borrower allow a modification of interest rate, due date or other terms or conditions without affecting the priority of The Bank of Gloucester County's lien. NOW, therefore, in consideration of an annual fee of $12,500.00, the above referenced note is extended and modified as follows: IT IS HEREBY AGREED THAT THE ABOVE NUMBERED NOTE SHALL BECOME DUE JULY 3, 2001. DURING THE TERMS OF THE RENEWAL, PAYMENTS OF INTEREST ONLY SHALL BE DUE EACH MONTH BEGINNING AUGUST 1, 1999 AND SHALL BE APPLIED TO INTEREST AND THEN TO PRINCIPAL. BORROWER AGREES THAT UNTIL ALL OBLIGATIONS HEREUNDER ARE FULLY PAID AND DISCHARGED, BORROWER WILL NOT WITHOUT PRIOR WRITTEN CONSENT OF THE BANK: PERMIT THE CONSOLIDATED NET WORTH OF BORROWER, DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED, TO BE LESS THAN $7,000,000 AT DECEMBER 31,1999, OR PERMIT THE RATIO OF CONSOLIDATED TOTAL LIABILITIES TO CONSOLIDATED NET WORTH TO BE MORE THAN 2.50:1 AT DECEMBER 31, 1999. 2 All terms and conditions of the original note, commitment letter and any security thereto attached is fully incorporated herein and fully ratified except as specifically modified by this modification agreement. K-TRON AMERICA, INC. THE BANK OF GLOUCESTER COUNTY /s/ Kevin C. Bowen 7/30/99 KEVIN C. BOWEN, PRESIDENT/DATE By: /s/ David J. Hanrahan /s/ Patricia M. Moore 7/26/99 David J. Hanrahan, Sr., VP PATRICIA M. MOORE/VP/FINANCE/DATE EX-21.1 10 SUBSIDIARES 1 EXHIBIT 21.1 K-Tron International, Inc. List of Subsidiaries*
State or Jurisdiction Name of Subsidiary of Incorporation K-Tron Investment Co..................................................... Delaware Hurricane Pneumatic Conveying Inc................................ Canada K-Tron America, Inc.............................................. Delaware K-Tron (Schweiz) AG.............................................. Switzerland K-Tron Asia Pacific Holding Pte Ltd..................... Singapore K-Tron Asia Pacific Pte....................... Singapore K-Tron China Ltd...... ................................. China K-Tron Deutschland GmbH................................. Germany K-Tron France S.a.r.l................................... France K-Tron Great Britain Ltd................................ England K-Tron Technologies, Inc................................................. Delaware
* Pursuant to applicable Securities and Exchange Commission regulations, the Registrant has omitted those subsidiaries which when considered in the aggregate as a single subsidiary, would not have been considered a significant subsidiary as of the end of fiscal year 1999. EX-23.1 11 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To K-Tron International, Inc.: As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 File Nos. 333-52523, 333-26531, 33-7921, 33-8043, 33-39039, 33-39040 and 2-72898. /s/Arthur Andersen LLP Philadelphia, Pa March 28, 2000 EX-27.1 12 FINANCIAL DATA SCHEDULE
5 1,000 YEAR JAN-01-2000 JAN-03-1999 JAN-01-2000 3,093 0 21,424 924 10,193 35,775 41,918 27,307 54,770 21,718 7,252 0 0 44 25,166 54,770 87,887 87,887 48,931 48,931 29,817 0 495 8,644 1,885 6,759 0 0 0 6,759 2.28 2.23
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