-----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, HU1MR/yhNzfIvc+iRIkVIx6viZjPcCaiVc5zz8/FJWwxRiDu/+JYA7HOh0BDMw0u 120pPyyArB+1t+0M0Ra5Wg== 0000893220-02-000282.txt : 20020415 0000893220-02-000282.hdr.sgml : 20020415 ACCESSION NUMBER: 0000893220-02-000282 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20011229 FILED AS OF DATE: 20020320 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: 1934 Act SEC FILE NUMBER: 000-09576 FILM NUMBER: 02580229 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 w58583e10-k405.txt 10-K405 FOR FISCAL YEAR ENDED DECEMBER 29, 2001 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 For the fiscal year ended December 29, 2001 OR [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ COMMISSION FILE NUMBER 0-9576 ------ K-TRON INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) New Jersey 22-1759452 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Routes 55 and 553 P.O. Box 888 Pitman, New Jersey 08071-0888 ------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (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 __ --- 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 the 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 February 28, 2002, the aggregate market value of the Common Stock held by non-affiliates of the Registrant was $29,728,264. Such aggregate market value was computed by reference to the closing sale price of the Common Stock as quoted 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 February 28, 2002, there were 2,432,092 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," "the Company," "we," "our" and "us" refer to K-Tron International, Inc. and, where appropriate, one or more of its subsidiaries. -2- PART I ITEM 1. BUSINESS. GENERAL K-Tron is a global leader in the design, production, marketing and servicing of gravimetric and volumetric feeders and related equipment for the handling of bulk solids in a wide variety of manufacturing processes. Our feeders control the flow of materials into a process that then transforms those materials into an end product. We also design, produce, market and service pneumatic conveying systems and related equipment, some of which may be used in conjunction with our feeders, as well as ancillary equipment used primarily by plastics molding and extrusion companies. The plastics, food, chemical, detergent and pharmaceutical industries are among those served by our material handling equipment. Through our K-Tron Electronics unit, we design and produce electronic assemblies for our own use and also for sale to others, and we make controller hardware for our own business. We have manufacturing facilities in the United States, Switzerland, the United Kingdom and Canada, and our equipment is sold throughout the world. We provide service and spare parts for our feeding and pneumatic conveying equipment on a worldwide basis, and offer customer and employee training through our K-Tron Institute in the United States, Switzerland and elsewhere. On July 31, 2001, we sold our Hasler heavy feeder business, which served primarily the cement industry. In December 2001, we sold our Swiss machine and welding shops. These transactions are described in more detail in Item 7 of this annual report on Form 10-K. K-Tron International, Inc. was incorporated in New Jersey in 1964. We operate in one principal business segment, material handling equipment and systems, and our operations are conducted largely through subsidiary companies. BUSINESS UNITS AND BRAND NAMES We have two main business units, a Feeder Group and a Pneumatic Conveying Group, and we market our equipment under three brand names: K-Tron Soder (feeders), PCS (pneumatic conveying equipment) and Colormax (ancillary equipment for the plastics industry). We market these brands on both an equipment and total systems basis. FEEDING EQUIPMENT Our Feeder Group produces feeders which control the flow of materials into a manufacturing process by mass or weight (gravimetric feeding) or by volume (volumetric feeding). Feeding equipment manufactured by us is used in many different industries. -3- K-Tron Soder Brand. The K-Tron Soder brand offers feeding equipment and systems that provide precise control of the flow of ingredients in the manufacture of many different kinds of products. The plastics, food, chemical, detergent and pharmaceutical industries are among those served by K-Tron Soder feeders. K-Tron Soder feeders, including loss-in-weight feeders, weigh belt feeders, volumetric feeders, flow meters and related controls, are assembled at our facilities in Pitman, New Jersey and Niederlenz, Switzerland in a complete range of feeding equipment types and sizes for these and other industries. 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 rarely need recalibration and may also be used as batchers. 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 which 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. 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 that is weighed and using the weight signal to start and stop each feeder. PNEUMATIC CONVEYING AND ANCILLARY EQUIPMENT Our Pneumatic Conveying Group ("PCG") integrates two brands, PCS and Colormax, and the manufacturing of our Hurricane product line into one business group capable of addressing a broad range of pneumatic conveying problems. PCG's products are distributed -4- through the Feeder Group's distribution channels under the Hurricane product name and through PCG's distribution channels under the PCS and Colormax brand names. Hurricane. The Hurricane product name is used with any pneumatic conveying equipment sold through the Feeder Group into any market. The Hurricane product line is produced at K-Tron's Canadian subsidiary, Hurricane Pneumatic Conveying Inc. in Brantford, Ontario, and equipment is shipped either to an end user site or a K-Tron assembly operation. Hurricane loaders, available as both self-contained and central vacuum systems, may be used on their own or in conjunction with K-Tron Soder feeders for the conveying of pellets and powders. In addition, any PCS or Colormax equipment sold by the Feeder Group would also be sold under the Hurricane product name. Colormax. The Colormax brand name is used with any pneumatic conveying equipment or material handling system sold through the Pneumatic Conveying Group into the plastics extrusion and molding industries, including Hurricane or PCS equipment. The Colormax product line is produced at our Colormax Limited subsidiary (purchased on October 2, 2000) in Telford, England. Products are marketed directly to end users and also through distributors. The Colormax product line includes self-contained and central vacuum systems, dryers, volumetric and gravimetric blenders, material storage bins and feeders for handling various resin materials in the molding or extrusion of consumer plastic products such as automotive components and plastic food containers. To differentiate itself from the competition, Colormax has introduced the first posimetric(R) feeder, the Posimax, for the industries that it serves. The Posimax is based on a patented technology for which K-Tron has obtained a worldwide exclusive license in the relevant fields of use. Posimetric(R) is a registered trademark of Stamet, Incorporated, the licensor. The Posimax feeds material based on the principle of lockup and eliminates material flow pulsation which is typical for screw feeders operating at low mass flow rates. The Posimax is available both as a volumetric and gravimetric feeder for free flowing materials. Our testing has shown that feeders based on the posimetric(R) principle have the most linear performance of any feeder type when measured over a turn down range of 100:1. PCS. The PCS brand name is used with any pneumatic conveying equipment or material handling system sold through the Pneumatic Conveying Group into the food, pharmaceutical and chemical industries, including Hurricane or Colormax equipment. PCS products and material handling systems are engineered and assembled at our Pneumatic Conveying Systems Limited subsidiary (purchased on November 30, 2001) in Stockport, England. The PCS product line includes standard vacuum conveyors for hard-to-handle materials, an all stainless steel pharmaceutical line of equipment and a variety of ancillary equipment. PCS's capabilities include expertise in conveying fragile products without degradation and designing dense phase vacuum conveying systems for the transport of products without segregation. -5- K-TRON ELECTRONICS K-Tron Electronics designs, produces and tests electronic assemblies for outside customers, as well as for use by us in our products, and also produces controller hardware for us. Its facilities, which are located in Blackwood, New Jersey, provide both automated surface mount and through-hole assembly capabilities as well as testing equipment. CUSTOMERS We sell our equipment throughout the world to a wide variety of customers in our addressed markets, ranging from large, global companies to regional and local businesses. No single customer accounted for more than 10% of our total revenues in fiscal 2001. MANUFACTURING AND SUPPLIERS Our primary manufacturing activities consist of the assembly, calibration and testing of equipment and the production of electronic assemblies and controllers. We also manufacture the weight sensors that are used in most of our gravimetric feeders. We assemble a number of components used in our products that are manufactured by others to our specifications. These components include sheet metal parts, screws, castings, integrated circuits, printed circuit boards and enclosures. We produce a number of basic feeder and pneumatic conveying equipment 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 our products are currently purchased from sole sources, we believe that comparable components can be obtained readily from alternative suppliers at prices competitive with those of our current sources. We have never had a significant production delay that was primarily attributable to an outside supplier. PATENTS Our technology is protected by numerous patents in the United States and in other major countries that offer patent protection. Certain of our 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 our business. RESEARCH AND DEVELOPMENT We invest in research and development ("R&D") to maintain a technological leadership position in the feeding and pneumatic conveying equipment industries. R&D focuses on new products as well as on improvements to existing products, with particular emphasis on the application of weighing and control technologies and mechanical design improvements. Current efforts are aimed at developing new products, shortening the time spent in the development of such products, -6- 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. Our research and development expenses were $2,644,000, $3,182,000 and $3,353,000 in fiscal 2001, 2000 and 1999, respectively. COMPETITION We are a leading worldwide producer of feeders and related equipment for the handling of bulk solids in manufacturing processes. We believe we have reached this position primarily because of our use of electronic and digital control technology, our use of digital weighing technology, our development of mechanical design improvements to our products and our knowledge of material handling. We also rely on our reputation and experience in serving the needs of our large customer base to maintain a competitive advantage. We also design systems and assemble equipment for the pneumatic conveying market using our Hurricane, Colormax and PCS brands and products. The addressable market is very large, and our strategy is to target specific geographic and product markets. Our Colormax brand offers loaders, feeders and ancillary equipment to handle granular materials, which are primarily used by plastics molding and extrusion companies. Our PCS brand includes a standard and a pharmaceutical line of loaders and ancillary equipment to transport hard-to-handle powdery material, and this equipment is primarily used by pharmaceutical, food and chemical companies. Our Hurricane product line includes a line of filterless, dual cyclone loaders best suited to work as an integrated solution with K-Tron Soder feeders handling powdery and pelletized materials, and this equipment is primarily used by K-Tron Soder customers in the plastics compounding, food and pharmaceutical markets. K-Tron Electronics was established to design and manufacture electronic assemblies and controller hardware for use by us and also to sell such assemblies to third parties, 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 we serve. Competitors range in size from large corporations (or subsidiaries or divisions thereof) with a broad line of products to regional organizations that may specialize in a limited range of products. BACKLOG At the end of fiscal 2001, our backlog of unfilled orders was approximately $12,138,000, compared to a backlog of approximately $19,259,000 ($16,543,000 without the Hasler business) at the end of fiscal 2000, a decrease of 37.0% (26.6% without Hasler). The backlog of orders at the end of fiscal 2001, excluding Hasler, was lower than the 2000 year-end backlog primarily due to lower -7- orders received at our facilities in Switzerland and the United States. The effect of foreign exchange translation was minimal when comparing year-end 2001 with 2000. The bulk of our 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 2001 will be shipped prior to April 30, 2002. EMPLOYEES At the end of fiscal 2001, we had 379 employees, of which 206 were located in Europe, 156 in the United States, 10 in Singapore, 4 in Canada and 3 in China. None of our employees are represented by labor unions. We consider relations with our employees to be good. ITEM 2. PROPERTIES. In North America, we own a 92,000 square foot building located on a 17 acre tract in Pitman, New Jersey where we have manufacturing facilities, administrative offices, our corporate headquarters, research and development offices and a technical center for product demonstrations and training. A portion (approximately 10,000 square feet) of our Pitman facility is leased to a sheet metal business that is a major supplier to us. We also have leased facilities in Blackwood, New Jersey, where we produce electronic assemblies and controller hardware, and in Brantford, Ontario, where we assemble pneumatic conveying equipment in the Hurricane product line. In Niederlenz, Switzerland, we own a 65,000 square foot building, where we have manufacturing facilities and a technical center for product demonstrations, and an adjacent five floor, 40,000 square foot office building that houses administrative offices, training facilities and research and development offices. In 2001, approximately one-half of one floor of the office building was leased to a third party. We also occupy an adjacent leased facility where we manufacture weight sensors. Certain sales and service activities are conducted at a K-Tron-owned facility in the United Kingdom (20% leased to a third party) and in leased office space in Germany, France, Singapore and China. We lease a facility in Telford, England, where we assemble Colormax products and have office space for that brand. We also lease a facility in Stockport, England, where we specialize in the design of customized solutions for a broad range of pneumatic conveying problems and assemble PCS products. As of July 31, 2001, our German subsidiary began leasing all of a Company-owned facility to the buyer of our former Hasler business. We believe that our present facilities will be sufficient to meet our needs for the foreseeable future. -8- ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our 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 2001. EXECUTIVE OFFICERS OF THE REGISTRANT Our current executive officers are as follows:
Name Age Position Edward B. Cloues, II 54 Chairman of the Board of Directors and Chief Executive Officer Kevin C. Bowen 50 Senior Vice President, Feeder Group and President and Chief Executive Officer of K-Tron America, Inc. Lukas Guenthardt 43 Senior Vice President, Pneumatic Conveying Group and Chief Strategy Officer Ronald R. Remick 55 Senior Vice President, Chief Financial Officer and Treasurer
Edward B. Cloues, II has been a director since July 1985 and was most recently reelected at the 2001 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 in 1998, 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. and Penn Virginia Corporation. Kevin C. Bowen has been Senior Vice President, Feeder Group of the Company since June 2000 and 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 -9- 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, Pneumatic Conveying Group and Chief Strategy Officer of the Company since February 2002. Prior to that, he was Senior Vice President, New Businesses and Chief Strategy Officer from June 2000 to February 2002 and Senior Vice President - Strategic Planning, Product Development and Marketing from June 1998 to June 2000. Mr. Guenthardt was Managing Director of K-Tron (Schweiz) AG ("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 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 K-Tron, 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. 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. -10- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Our 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 2000 and 2001 as quoted on the Nasdaq National Market.
Fiscal Year 2000 High Low - ---------------- ---- --- First Quarter . . . . . . . . . . . . . . . . . . . $17.875 $12.875 Second Quarter. . . . . . . . . . . . . . . . . . $16.375 $14.438 Third Quarter . . . . . . . . . . . . . . . . . . . $17.938 $15.250 Fourth Quarter . . . . . . . . . . . . . . . . . . $18.750 $16.938 Fiscal Year 2001 - ---------------- First Quarter . . . . . . . . . . . . . . . . . . . $18.750 $13.750 Second Quarter . . . . . . . . . . . . . . . . . . $15.120 $12.250 Third Quarter . . . . . . . . . . . . . . . . . . . $13.250 $ 9.000 Fourth Quarter . . . . . . . . . . . . . . . . . . $11.750 $ 9.510
On February 28, 2002, the closing price of a share of K-Tron Common Stock as quoted on the Nasdaq National Market was $13.25. There were 248 record holders of our Common Stock on February 28, 2002. DIVIDEND POLICY We have never paid a cash dividend on our Common Stock, and we currently intend to retain all future earnings for use in our 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 our earnings, financial condition, capital requirements and other factors. In addition, one of our credit facilities contains certain restrictions on the transfer of funds that may limit our ability to declare and pay dividends. ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated financial data presented below for, and as of the end of, each of our last five fiscal years have been derived from and are qualified by reference to our consolidated financial statements. Our consolidated financial statements for the fiscal years ended December 29, 2001, December 30, 2000, January 1, 2000, January 2, 1999 and January 3, 1998 have been audited by Arthur Andersen LLP, independent public accountants. -11- This information should be read in conjunction with our consolidated financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere herein. We have not paid any cash dividends on our shares of Common Stock during the periods presented.
FISCAL YEAR ENDED ---------------------------------------------------------------- DEC. 29 DEC. 30 JAN. 1 JAN. 2 JAN. 3 2001 2000 2000 1999 1998 ------- ------- ------ ------ ------ FINANCIAL SUMMARY ($000): Revenues $71,819 $84,912 $87,887 $89,142 $87,152 Income before taxes 1,279 8,008 8,644 8,718 7,309 Net income 1,048 5,838 6,759 6,593 5,444 Total assets 47,644 54,421 54,770 56,617 54,249 Working capital 15,565 13,770 14,057 11,446 9,423 Additions to property, plant and equipment 2,144 3,699 2,605 2,713 3,000 Depreciation and amortization 2,921 3,138 3,362 3,158 2,977 PER SHARE ($): Basic net earnings $0.43 $2.30 $2.28 $2.10 $1.72 Diluted net earnings 0.43 2.25 2.23 2.03 1.69 Book value 8.87 8.75 8.61 7.34 5.87 CAPITALIZATION ($000): Shareholders' equity $21,561 $21,311 $25,210 $22,274 $18,892 Long-term debt 12,499 12,390 7,252 9,638 10,619 Short-term debt (1) 2,186 3,595 4,627 1,534 3,148 Total debt 14,685 15,985 11,879 11,172 13,767 RATIOS: Return on average shareholders' equity (%) 4.9 25.1 28.4 32.0 33.9 Return on revenues (%) 1.5 6.9 7.7 7.4 6.2 Long-term debt to shareholders' equity (%) 58.0 58.1 28.8 43.3 56.2 Current assets to current liabilities 2.2 1.7 1.6 1.5 1.4 Average inventory turnover 3.8 4.2 4.7 4.7 4.1 Average accounts receivable turnover 4.2 4.3 4.4 5.2 5.5 OTHER DATA: Shares outstanding (000) (2) 2,431 2,436 2,927 3,033 3,218 Shareholders of record 251 258 287 304 342 Number of employees 379 522 475 496 491
(1) Including current portion of long-term debt. (2) Net of treasury stock of 1,053 for fiscal year 1997, 1,295 for fiscal year 1998, 1,447 for fiscal year 1999, 1,968 for fiscal year 2000 and 2,001 for fiscal year 2001. -12- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with our consolidated financial statements and accompanying notes. All references to 2001, 2000 and 1999 mean the fiscal years ended December 29, 2001, December 30, 2000 and January 1, 2000, respectively. RESULTS OF OPERATIONS In 2001, 2000 and 1999, K-Tron reported net income of $1,048,000, $5,838,000 and $6,759,000, respectively. Revenues and net income for 2001 declined significantly from 2000 and 1999 levels (even before the loss on the sale of the Hasler business noted below), reflecting a weak global economy, particularly in the United States, and a steep decline in capital equipment spending, especially in the plastics and chemical industries. We are an international company, and we derived approximately 58%, 53% and 59% of our 2001, 2000 and 1999 revenues, respectively, from products manufactured in, and services performed from, our facilities located outside the United States, primarily in Europe. Since we operate globally, we are 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 as sales made from our Swiss manufacturing facility in currencies other than the Swiss franc. On July 31, 2001, we sold our Hasler heavy feeder business to our largest distributor of Hasler equipment and recorded a pretax loss of $620,000. The assets sold were primarily inventory and fixed assets. The buyer took over operation of our Hasler leased sales office in Neuchatel, Switzerland and leased from us a Company-owned facility in Lengerich, Germany. The purchase price consisted of a combination of one million Swiss francs cash ($594,000), promissory notes in the principal amount of three million seventeen thousand three hundred twenty-seven Swiss francs (approximately $1,792,000) which bear interest and amortize over seven years and a less than 20% equity position in the buyer. We retained all of the Hasler accounts receivable and payables at the time of the sale as well as the building in Lengerich, Germany which, as noted above, is being leased to the buyer. In December 2001, we sold our Swiss machine and welding shops to a Swiss machine shop company and recorded a pretax gain of $242,000. The purchase price consisted of a combination of three hundred thousand Swiss francs cash ($182,000) and a seven hundred thousand Swiss franc obligation ($420,000), which is supported by a bank guaranty. -13- The following table sets forth our results of operations expressed as a percentage of total revenues for the periods indicated.
Fiscal Year ---------------------------------------- 2001 2000 1999 ---- ---- ---- Total revenues 100.0% 100.0% 100.0% Cost of revenues 59.9 55.4 55.7 ---- ---- ---- Gross profit 40.1 44.6 44.3 Selling, general and administrative 33.2 30.2 30.1 Research and development 3.7 3.7 3.8 --- --- --- Operating income 3.2 10.7 10.4 Interest 1.4 1.3 0.6 --- --- --- Income before income taxes 1.8% 9.4% 9.8% === === === Year-end backlog (at year-end 2001 foreign exchange rates, in thousands) Backlog including Hasler business $12,138 $18,727 $17,038 ======= ======= ======= Backlog excluding Hasler business (sold $12,138 $16,156 $13,130 July 31, 2001) ======= ======= =======
As previously noted, more than half of our revenues in recent years have been derived from activities in foreign jurisdictions. Consequently, our results can be significantly affected by changes in foreign exchange rates, particularly in U.S. dollar exchange rates with respect to the Swiss franc and euro and, to a lesser degree, the British pound sterling 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, since we typically receive a majority of our revenues in currencies other than the U.S. dollar, we generally benefit from a weaker dollar and are 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 our total revenues, gross profit and operating income as expressed in U.S. dollars. -14- In addition, our revenues and income 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 (for sales from the Company's Swiss manufacturing facility) exchange rates. For 2001, 2000 and 1999, the changes in these and the U.S. dollar/euro exchange rates were as follows:
Fiscal Year ----------------------------------------------- 2001 2000 1999 ---- ---- ---- Average U.S. dollar equivalent of one Swiss franc 0.594 0.593 0.664 % change vs. prior year 0.2% -10.7% Average U.S. dollar equivalent of one euro 0.896 0.924 1.064 % change vs. prior year -3.0% -13.2% Average Swiss franc equivalent of one euro 1.508 1.558 1.602 % change vs. prior year -3.2% -2.8%
Total revenues decreased by $13,093,000 or 15.4% ($8,077,000 or 10.7% without Hasler) in 2001 compared to 2000. Most of the 2001 revenue decrease was in North America, reflecting the weak economy and a steep decline in capital equipment spending in the plastics and chemical industries, with a small portion of the decrease coming from a reduction in Hasler revenues in Western Europe. The effect of foreign exchange translation was minimal when comparing 2001 with 2000. Total revenues decreased by $2,975,000 or 3.4% in 2000 compared to 1999. North American revenues increased and Western European revenues decreased in 2000 compared to 1999. If the average exchange translation rates for 2000 were applied to 1999, revenues would have increased by 3.9% in 2000. Gross profit as a percent of total revenues decreased to 40.1% in 2001 as compared to 44.6% in 2000 and 44.3% in 1999. The decrease in gross profit was primarily due to geographic and product sales mix, and partly due to the deterioration in economic conditions discussed above, which led to fixed costs being absorbed over a smaller revenue base. Selling, general and administrative (SG&A) expense decreased by $1,785,000 or 7.0% in 2001 compared to 2000 ($2,163,000 or 8.4% after excluding the loss on sale of the Hasler business and gain on sale of the Swiss machine and welding shops discussed above) and by $833,000 or -15- 3.1% in 2000 compared to 1999. The decrease in 2001 SG&A was primarily due to lower commissions on the reduced revenues, fewer employees and the elimination of Hasler SG&A after July 31, 2001 offset in part by the $378,000 net loss on the assets sold. The decrease in 2000 SG&A was due to the lower foreign exchange translation rates of certain foreign currencies into U.S. dollars offset in part by the 1999 restructuring costs of $710,000 relating to the Hasler business. As a percent of total revenues, SG&A was 33.2% in 2001, 30.2% in 2000 and 30.1% in 1999. Research and development (R&D) expenditures decreased by $538,000 or 16.9% in 2001 compared to 2000 and by $171,000 or 5.1% in 2000 as compared to 1999. R&D decreased in 2001 as compared to 2000 due to lower staff costs, partly resulting from the sale of the Hasler business. R&D expense when expressed in local currencies increased in 2000 when compared to 1999 due to greater emphasis on the development of new products. R&D expense as a percent of total revenues was 3.7% in 2001 and 2000 and 3.8% in 1999. Interest expense decreased by $53,000 or 4.9% in 2001 as compared to 2000 and increased by $586,000 or 118% in 2000 as compared to 1999. The 2001 decrease was due to lower interest rates and debt reductions while the 2000 increase was primarily due to interest on funds borrowed in March 2000 related to the repurchase of 508,000 shares of our Common Stock, which is discussed below in the liquidity section, partly offset by the effects of lower foreign exchange translation rates. Interest expense as a percent of total revenues was 1.4% in 2001, 1.3% in 2000 and 0.6% in 1999. Income before income taxes was $1,279,000 in 2001, $8,008,000 in 2000 and $8,644,000 in 1999. The changes during the periods were the result of the items discussed above. The 2001, 2000 and 1999 provisions for income tax of $231,000, $2,170,000 and $1,885,000, respectively, related primarily to our results in the United States and Germany. The effective tax rates were 18.1% for 2001, 27.1% for 2000 and 21.8% for 1999. The lower effective tax rate in 2001 versus 2000 was primarily due to a one-time benefit from a German tax law change. The higher effective tax rate in 2000 as compared to 1999 was due to a greater proportion of income in the United States as compared to Switzerland where we did not provide for any income tax in 2000 and 1999 due to net operating loss carryforwards. We have state and foreign tax loss carryforwards that total $6,600,000 and $505,000, respectively, which, if realized, would have an estimated future net income benefit of $315,000 and $148,000, respectively. We do not believe that inflation has had a material impact on the results of operations during the last three years. Our backlog at constant foreign exchange rates decreased by 35.2% (24.9% without the Hasler business) at the end of 2001 compared to 2000 due to lower orders received at our facilities in Switzerland and the United States. The bulk of the year-end 2001 backlog consisted of orders that should be ready for delivery in less than 120 days. Our backlog at constant foreign exchange rates increased by 9.9% (23.0% without the Hasler business) at the end of 2000 compared to 1999, primarily due to increased orders from customers in the United States. -16- LIQUIDITY AND CAPITAL RESOURCES On March 20, 2000, our U.S. manufacturing subsidiary borrowed $7,000,000 under a term loan facility with a U.S. bank, and we used these funds, together with $1,194,000 of available cash and a borrowing of $950,000 on a $5,000,000 revolving credit facility with the same bank, to repurchase 508,000 shares of our Common Stock. The $7,000,000 term 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 which secures the revolving credit loan and also a separate mortgage loan from the same U.S. bank. One-half of the term loan bears interest at the fixed rate of 8.23% for the first two years and as of February 4, 2002 will be adjusted to a variable rate basis of one month LIBOR plus 1.85 percent, and the other half is subject to the same variable rate basis of interest equal to one month LIBOR plus 1.85 percent (3.96% at December 29, 2001). At December 29, 2001, there was $4,083,000 outstanding under the term loan. The term loan facility requires that we maintain certain specific ratios of consolidated debt to net worth, minimum annual debt coverage and minimum levels of net worth, calculated at the end of each fiscal year. In 2001 and 2000, we were in compliance with all of these covenants. At December 29, 2001, our Swiss subsidiary had separate credit facilities totaling 17.5 million Swiss francs ($10.4 million) with three Swiss banks. The Company's real property in Switzerland is pledged as collateral. As of December 29, 2001, there were long-term borrowings outstanding of 10.3 million Swiss francs ($6.1 million) with the remaining 7.2 million Swiss francs ($4.3 million) available for short-term borrowings. The annual interest rates on the long-term borrowings range from 3.375% to 4.5%. In June 1998, our U.S. manufacturing subsidiary refinanced its 20-year mortgage debt with a U.S. bank for $2,700,000 at an annual interest rate of 7.625%. Monthly principal and interest payments of $25,143 are amortized over 15 years. Every five years the lender has the right to review this borrowing and adjust its terms, including due dates and interest rates, with the first such right occurring in June 2003. At December 29, 2001, the remaining amount owed under this borrowing was $2,329,000. Also in June 1998, our U.S. manufacturing subsidiary entered into a two-year secured revolving credit facility with a U.S. bank that provides for a maximum borrowing of $5,000,000. This credit facility has now been extended through July 2003. The annual interest rate as of December 29, 2001 was 4.5%. At December 29, 2001, there was $1,125,000 borrowed under this facility, and $3,875,000 was available for future borrowings. -17- Our capitalization at the end of 2001, 2000 and 1999 is set forth below: (Dollars in thousands)
Fiscal Year ---------------------------------------- 2001 2000 1999 ---- ---- ---- Short-term debt, including current portion of long-term debt $ 2,186 $ 3,595 $ 4,627 Long-term debt 12,499 12,390 7,252 ------ ------ ----- Total debt 14,685 15,985 11,879 Shareholders' equity 21,561 21,311 25,210 ------ ------ ------ Total debt and shareholders' equity $36,246 $37,296 $37,089 (total capitalization) ======= ======= ======= Percent total debt to total capitalization 41% 43% 32% Percent long-term debt to equity 58% 58% 29% Percent total debt to equity 68% 75% 47%
Total debt decreased by $1,300,000 in 2001 compared to the end of 2000 and increased in 2000 by $4,106,000 compared to the end of 1999. Total debt without the effect of foreign currency translation decreased by $1,257,000 in 2001 and increased by $3,788,000 in 2000. At the end of 2001 and 2000, working capital was $15,565,000 and $13,770,000, respectively, and the ratio of current assets to current liabilities was 2.18 and 1.67, respectively. In 2001 and 2000, we utilized internally generated funds and our lines of credit to meet our working capital needs, while in 2000 we also used bank borrowings and available cash to complete a share repurchase. Net cash provided by operating activities was $5,253,000 in 2001, $7,107,000 in 2000 and $2,995,000 in 1999. The decrease in operating cash flow in 2001 was primarily due to lower net income. The increase in operating cash flow in 2000 was primarily the result of a reduction in accounts receivable and an increase in accounts payable partly offset by an increase in inventories. 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 86 days in 2001 compared to 85 days in 2000 and 82 days in 1999. The average number of days to convert inventory into accounts receivable was 96 days in 2001 compared to 88 days in 2000 and 78 days in 1999. -18- Net cash used in investing activities was $2,057,000, $4,267,000 and $2,804,000 in 2001, 2000 and 1999, respectively. Capital expenditures were $2,144,000, $3,699,000 and $2,605,000 in 2001, 2000 and 1999, respectively. Funds used in 2001 to acquire Pneumatic Conveying Systems Limited were $621,000 while funds received from the sale of the assets of the Hasler business and the Swiss machine and welding shops described above were $776,000. Funds used in 2000 to acquire Colormax Limited were $491,000. Cash used in financing activities in 2001, 2000 and 1999 was primarily for the purchase of 43,700 shares of our Common Stock in 2001, 520,200 shares in 2000 and 166,400 shares in 1999, as well as for debt reduction in 2001. In 2001, 2000 and 1999, cash was obtained from operations, and cash was also obtained from long-term borrowings in 2000 and short-term borrowings in 1999. Cash and short-term investments increased to $2,214,000 at the end of 2001. Cash decreased to $553,000 at the end of 2000 from $3,093,000 a year earlier. Changes in foreign exchange rates, particularly with respect to the Swiss franc and euro, caused a translation decrease in shareholders' equity of $620,000 in 2001, $601,000 in 2000 and $1,754,000 in 1999. CRITICAL ACCOUNTING POLICIES The Company believes the following represent its critical accounting policies: Revenue Recognition The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB 101A and SAB 101B. SAB 101 requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgment regarding the fixed nature of the fee charged for services rendered and products delivered and the collectibility of those fees. Based upon this judgment, revenue is recognized when risk of ownership and title to the product transfers to the customer, which usually occurs at the time goods are shipped. Should changes in conditions cause management to determine that these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected. Equipment sold is generally covered by a warranty of one year. The Company accrues a warranty reserve for estimated costs to provide warranty services. The Company's estimate of costs to service its warranty obligations is based on historical experience and expectation of future conditions. To the extent the Company experiences increased warranty claim activity or increased costs associated with servicing those claims, its warranty accrual will increase, resulting in decreased gross profit. -19- Legal Contingencies We are currently involved in certain legal proceedings. We have accrued our estimate of the probable costs for the resolution of these claims. This estimate has been developed in consultation with outside counsel handling our defense in these matters and is based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. We do not believe these proceedings will have a material adverse effect on our consolidated financial position. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions, of the effectiveness of our strategies, related to these proceedings. FORWARD-LOOKING STATEMENTS AND RISK FACTORS The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by us or on our behalf. We and our 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 our shareholders and news releases. All statements that express expectations, estimates, forecasts or 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 us or on our behalf. 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 forward-looking statements contained in this report include statements regarding our ability to find alternative suppliers for certain components, the effect of the expiration of our patents on our business, the expected time for shipments of our products to customers and the resulting effect on our backlog, the sufficiency of our facilities, our retention of all of our future earnings for use in our business, the effect of changes in foreign exchange rates on our business and the effect on our business of legal proceedings in which we are involved. We undertake 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 our future performance and financial and competitive position, 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 us; (iii) rapid technological changes and developments and our 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 held by us and our competitors; (vi) the cyclical nature of our 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 our future business, including capacity expansions and possible acquisitions; (ix) the loss of key customers, employees or -20- suppliers; (x) the failure to carry out marketing and sales plans; (xi) the failure to integrate acquired businesses 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; (xiii) domestic and international political and economic conditions; and (xiv) the outcome of any legal proceeding in which we are involved. This list of factors that may affect our future performance and financial and competitive position and also 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 our 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 is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information called for by Item 11 of Form 10-K will be set forth under the caption "Executive Compensation" in our 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. -21- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information called for by Item 12 of Form 10-K will be set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in our 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. -22- 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. Current Report on Form 8-K dated October 16, 2001 and filed with the Securities and Exchange Commission on October 17, 2001 reporting our adoption of a shareholder rights plan. (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. 2.1 Basic Agreement regarding the Assignment of Assets of the Hasler Division between K-Tron (Suisse) SA and MJ Enterprises SA dated July 31, 2001 (Filed as Exhibit 2.1 to our report on Form 10-Q for the quarterly period ended September 29, 2001 and incorporated herein by reference) 3.1 Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1 to our 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* 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 16, 2001 with American Stock Transfer & Trust Company, as Rights Agent (Filed as Exhibit 4.1 to our report on Form 8-K dated October 16, 2001 and incorporated herein by reference) 10.1 1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to our annual report on Form 10-K for the year ended January 4, 1992 ("1991 Form -23- 10-K") and incorporated herein by reference)** 10.2 1988 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.2.4 to our 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 Amendment 2001-1 to the Amended and Restated K-Tron International, Inc. 1996 Equity Compensation Plan** * 10.5 K-Tron International, Inc. and Affiliated Companies Profit-Sharing and Thrift Plan, as amended and restated** * 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 our 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 our 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 (Filed as Exhibit 10.9 to the our annual report on Form 10-K for the year ended January 1, 2000 ("1999 10-K") and incorporated herein by reference)** 10.10 Form of Employment Agreement with certain of our employees, 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 our 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 of our directors and officers 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 (Filed as Exhibit 10.11 to the 1999 Form 10-K and incorporated herein by reference)** 10.11A Supplement to Schedule 10.11, listing additional directors and officers who are parties to an Indemnification Agreement referenced in Exhibit 10.11.* -24- 10.12 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 our Tender Offer Statement on Schedule TO dated February 16, 2000 and incorporated herein by reference) 10.13 Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit 10.15 to the 1999 Form 10-K and incorporated herein by reference) 10.14 Loan Modification Agreement dated June 24, 1998 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.16 to the 1999 Form 10-K and incorporated herein by reference) 10.15 Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit 10.17 to the 1999 Form 10-K and incorporated herein by reference) 10.16 Loan Modification Agreement dated as of July 22, 1999 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.18 to the 1999 Form 10-K and incorporated herein by reference) 10.17 Loan Modification Agreement dated June 21, 2000 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.19 to our annual report on Form 10-K for the year ended December 30, 2000 and incorporated herein by reference) 10.18 Loan Modification Agreement dated June 25, 2001 between K-Tron America, Inc. and The Bank of Gloucester County* 10.19 Letter Agreement dated November 30, 2001 among K-Tron International, Inc., 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)* 99.1 Letter responsive to Temporary Note 3T to Article 3 of Regulation S-X.* * Filed herewith ** Management contract or compensatory plan or arrangement required to be filed or incorporated as an exhibit -25- COPIES OF THE EXHIBITS ARE AVAILABLE TO SHAREHOLDERS (UPON PAYMENT OF A $.20 PER PAGE FEE TO COVER OUR 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. -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 20, 2002 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 20, 2002 Chief Executive Officer - ---------------------------- (principal executive officer) Edward B. Cloues, II and Chairman of the Board of Directors /s/ Ronald R. Remick March 20, 2002 Senior Vice President, Chief - ---------------------------- Financial Officer and Treasurer Ronald R. Remick (principal financial officer) /s/ Alan R. Sukoneck March 20, 2002 Vice President, Chief - ---------------------------- Accounting and Tax Officer Alan R. Sukoneck (principal accounting officer)
-27-
Signature Date Capacity - --------- ---- -------- /s/ Norman Cohen March 18, 2002 Director - --------------------------------- Norman Cohen /s/ Robert A. Engel March 19, 2002 Director - --------------------------------- Robert A. Engel /s/ Edward T. Hurd March 20, 2002 Director - --------------------------------- Edward T. Hurd /s/ Richard J. Pinola March 20, 2002 Director - --------------------------------- Richard J. Pinola
-28- K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 29, 2001 TOGETHER WITH AUDITORS' REPORT 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 - December 29, 2001 and December 30, 2000 F-3 Consolidated Statements of Income for the Fiscal Years Ended December 29, 2001, December 30, 2000 and January 1, 2000 F-5 Consolidated Statements of Changes in Shareholders' Equity for the Fiscal Years Ended December 29, 2001, December 30, 2000 and January 1, 2000 F-6 Consolidated Statements of Cash Flows for the Fiscal Years Ended December 29, 2001, December 30, 2000 and January 1, 2000 F-7 Notes to Consolidated Financial Statements F-9 SCHEDULE: Schedule II--Valuation and Qualifying Accounts S-1
F-1 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 December 29, 2001 and December 30, 2000, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three fiscal years in the period ended December 29, 2001. These consolidated 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 consolidated 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 December 29, 2001 and December 30, 2000, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 29, 2001, 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 and financial statement schedule 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 the 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 6, 2002 F-2 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (dollars in thousands)
December 29, December 30, 2001 2000 ----------------- ---------------- CURRENT ASSETS: Cash and cash equivalents $ 2,214 $ 553 Accounts receivable, net of allowance for doubtful accounts of $687 and $778 14,723 19,139 Inventories 10,212 12,446 Deferred income taxes 326 326 Prepaid expenses and other current assets 1,293 1,723 ---------------- ---------------- Total current assets 28,768 34,187 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $25,830 and $27,736 13,848 15,470 PATENTS, net of accumulated amortization of $649 and $589 799 879 GOODWILL, net of accumulated amortization of $365 and $4,523 2,053 3,825 NOTES RECEIVABLE AND OTHER ASSETS 2,176 60 ---------------- ---------------- Total assets $ 47,644 $ 54,421 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. F-3 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (dollars in thousands, except share data)
December 29, December 30, 2001 2000 ----------------- ---------------- CURRENT LIABILITIES: Current portion of long-term debt $ 2,186 $ 3,595 Accounts payable 4,218 8,889 Accrued expenses and other current liabilities 4,547 5,047 Accrued commissions 1,220 1,572 Customer advances 1,032 1,314 --------------- --------------- Total current liabilities 13,203 20,417 --------------- --------------- LONG-TERM DEBT, net of current portion 12,499 12,390 --------------- --------------- DEFERRED INCOME TAXES 381 303 --------------- --------------- COMMITMENTS AND CONTINGENCIES (Note 12) SERIES A AND B 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; 4,432,742 and 4,403,871 shares issued 44 44 Paid-in capital 16,697 16,437 Retained earnings 35,484 34,436 Cumulative translation adjustment (3,167) (2,547) --------------- --------------- 49,058 48,370 Treasury stock, 2,001,250 and 1,967,550 shares, at cost (27,497) (27,059) --------------- --------------- Total shareholders' equity 21,561 21,311 --------------- --------------- Total liabilities and shareholders' equity $ 47,644 $ 54,421 =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. F-4 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except share data)
For the Fiscal Years Ended ------------------------------------------------------ December 29, December 30, January 1, 2001 2000 2000 ----------------- ----------------- --------------- REVENUES $ 71,819 $ 84,912 $ 87,887 COST OF REVENUES 43,022 47,010 48,931 --------------- --------------- --------------- Gross profit 28,797 37,902 38,956 --------------- --------------- --------------- OPERATING EXPENSES: Selling, general and administrative 23,846 25,631 26,464 Research and development 2,644 3,182 3,353 --------------- --------------- --------------- 26,490 28,813 29,817 --------------- --------------- --------------- Operating income 2,307 9,089 9,139 INTEREST EXPENSE 1,028 1,081 495 --------------- --------------- --------------- Income before income taxes 1,279 8,008 8,644 INCOME TAX PROVISION 231 2,170 1,885 --------------- --------------- --------------- Net income $ 1,048 $ 5,838 $ 6,759 ============== ============== ============== BASIC EARNINGS PER SHARE $ 0.43 $ 2.30 $ 2.28 ============== ============== ============== DILUTED EARNINGS PER SHARE $ 0.43 $ 2.25 $ 2.23 ============== ============== ============== AVERAGE COMMON SHARES OUTSTANDING 2,435,000 2,541,000 2,962,000 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 2,465,000 2,595,000 3,026,000
The accompanying notes are an integral part of these consolidated financial statements. F-5 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (dollars in thousands)
Common Stock Paid-in Cumulative Treasury Stock -------------------- Retained Translation --------------------- Shares Amount Capital Earnings Adjustment Shares Amount Total ---------- -------- ---------------------- ----------- ----------- -------- ------- 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 Comprehensive income- Net income -- -- -- 5,838 -- -- -- 5,838 Translation adjustments -- -- -- -- (601) -- -- (601) -------- Total comprehensive income 5,237 -------- Issuance of stock 29,366 -- 334 -- -- -- -- 334 Purchase of treasury shares -- -- -- -- -- 520,200 (9,470) (9,470) ---------- ---------- ---------- ---------- ------------ ---------- ---------- -------- BALANCE, DECEMBER 30, 2000 4,403,871 44 16,437 34,436 (2,547) 1,967,550 (27,059) 21,311 Comprehensive income- Net income -- -- -- 1,048 -- -- -- 1,048 Translation adjustments -- -- -- -- (620) -- -- (620) -------- Total comprehensive income 428 -------- Issuance of stock 28,871 -- 260 -- -- (10,000) 138 398 Purchase of treasury shares -- -- -- -- -- 43,700 (576) (576) ---------- ---------- ---------- ---------- ------------ ---------- ---------- -------- BALANCE, DECEMBER 29, 2001 4,432,742 $ 44 $ 16,697 $ 35,484 $ (3,167) 2,001,250 $ (27,497) $ 21,561 ========== ========= ========= ========= =========== ========== ========== ========
The accompanying notes are an integral part of these consolidated financial statements. F-6 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
For the Fiscal Years Ended ------------------------------------------------------- December 29, December 30, January 1, 2001 2000 2000 ----------------- ----------------- ---------------- OPERATING ACTIVITIES: Net income $ 1,048 $ 5,838 $ 6,759 Adjustments to reconcile net income to net cash provided by operating activities- Loss on disposition of assets 378 -- -- Depreciation and amortization 2,921 3,138 3,362 Amortization of deferred gain on sale/leaseback transaction -- (271) (367) Deferred income taxes 78 147 226 Changes in assets and liabilities-- Accounts receivable, net 5,269 878 (3,298) Inventories 876 (2,427) (299) Prepaid expenses and other current assets 406 (246) (495) Other assets (24) (43) 170 Accounts payable (4,811) 3,360 (786) Accrued expenses and other current liabilities (888) (3,267) (2,277) --------------- --------------- --------------- Net cash provided by operating activities 5,253 7,107 2,995 --------------- --------------- --------------- INVESTING ACTIVITIES: Proceeds from disposition of assets 776 -- -- Business acquired (621) (491) -- Capital expenditures (2,144) (3,699) (2,605) Investment in patents (68) (77) (199) --------------- --------------- --------------- Net cash used in investing activities (2,057) (4,267) (2,804) --------------- --------------- ---------------
(Continued) F-7 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
For the Fiscal Years Ended ------------------------------------------------------ December 29, December 30, January 1, 2001 2000 2000 ----------------- ----------------- --------------- FINANCING ACTIVITIES: Net (payments) borrowings under notes payable to banks $ 286 $ (2,528) $ 2,511 Proceeds from issuance of long-term debt 412 7,950 -- Principal payments on long-term debt (1,955) (1,634) (550) Purchase of treasury stock (576) (9,470) (2,836) Proceeds from issuance of common stock 398 334 767 --------------- --------------- --------------- Net cash used in financing activities (1,435) (5,348) (108) --------------- --------------- --------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (100) (32) (210) --------------- --------------- --------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,661 (2,540) (127) CASH AND CASH EQUIVALENTS: Beginning of year 553 3,093 3,220 --------------- --------------- --------------- End of year $ 2,214 $ 553 $ 3,093 =============== =============== =============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for- Interest $ 944 $ 945 $ 496 =============== =============== =============== Income taxes $ 268 $ 2,225 $ 1,663 =============== =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. F-8 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 and industries. The Company has manufacturing facilities in the United States, Switzerland, the United Kingdom 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 December 29, 2001 (referred to herein as 2001), December 30, 2000 (referred to herein as 2000), and January 1, 2000 (referred to herein as 1999) each include fifty-two weeks. Cash and Cash Equivalents Cash equivalents represent all highly liquid, interest-bearing investments purchased with original 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 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 to 30 years for acquisitions consummated prior to July 1, 2001. Subsequent to an acquisition, the Company 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 risk of ownership and title to the product transfers to the customer, which usually occurs at the time 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 losses of approximately $160,000 and $80,000 for 2001 and 2000, respectively, and a gain of $98,000 for 1999. 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 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141, which was adopted by the Company as of the beginning of fiscal 2002, requires all business combinations to be accounted for by the purchase method and adds disclosure requirements related to business combination transactions. This pronouncement applies to all business combinations for which the acquisition date was July 1, 2001 or later. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. The pronouncement provides that goodwill and some intangibles will no longer be amortized on a recurring basis. Instead, goodwill and intangible assets with an indefinite life will be subject to an initial impairment test within six months of adoption of SFAS No. 142 and annually thereafter. The pronouncement also requires disclosure of certain information about goodwill and other intangible assets subsequent to their acquisition. The Company adopted SFAS No. 142 as of the beginning of fiscal 2002. Amortization expense was $345,000 during fiscal 2001, or $0.14 per share. The Company is still evaluating the impact of adopting this pronouncement on its financial statements for 2002. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company is required to adopt the provisions of this pronouncement no later than the beginning of fiscal 2003. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company was required to adopt the provisions of this pronouncement no later than the beginning of fiscal 2002. The Company is currently evaluating the impact of both SFAS No. 143 and No. 144. Reclassifications Certain prior year amounts have been reclassified to conform to current year presentation. 3. DISPOSITION OF ASSETS: On July 31, 2001, the Company sold its Hasler heavy feeder business to its largest distributor of Hasler equipment and recorded a pretax loss of $620,000. The assets sold were primarily inventory and fixed assets. The buyer took over operation of the Hasler leased sales office in Neuchatel, Switzerland and Company-owned facility in Lengerich, Germany. F-11 The purchase price consisted of a combination of one million Swiss francs cash (approximately $594,000), promissory notes in the principal amount of three million seventeen thousand three hundred twenty seven Swiss francs (approximately $1,792,000) which bear interest and amortize over seven years, and a less than 20% equity position in the buyer. The Company retained all of the Hasler accounts receivable and payables at the time of the sale as well as a building in Lengerich, Germany which is being leased to the buyer. In December 2001, the Company sold its Swiss machine and welding shops and recorded a pretax gain of $242,000. The purchase price consisted of a combination of three hundred thousand Swiss francs cash (approximately $182,000) and a seven hundred thousand Swiss franc obligation (approximately $420,000), which is supported by a bank guaranty. Both of these amounts are included in selling, general and administrative expenses on the consolidated statements of income. 4. INVENTORIES: Inventories consist of the following:
2001 2000 ----------------- --------------- (in thousands) Components $ 8,416 $ 9,773 Work-in-process 1,692 2,530 Finished goods 104 143 --------------- --------------- $ 10,212 $ 12,446 =============== ===============
5. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consists of the following:
2001 2000 ----------------- --------------- (in thousands) Land $ 1,015 $ 1,051 Buildings and improvements 16,256 16,602 Automotive equipment 760 653 Machinery and equipment 9,801 12,201 Furniture and fixtures 11,846 12,699 --------------- --------------- 39,678 43,206 Less- Accumulated depreciation and amortization (25,830) (27,736) --------------- --------------- $ 13,848 $ 15,470 =============== ===============
Depreciation of property, plant and equipment for 2001, 2000 and 1999 was $2,496,000, $2,576,000 and $2,760,000, respectively. F-12 6. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT: The self-tender offer discussed in Note 8 was financed by using $1,194,000 of available cash, a $7 million term loan obtained from a U.S. bank on February 4, 2000 and $950,000 from an existing $5 million line of credit with that same bank. The $7 million term loan is payable in equal monthly installments of principal plus accrued interest over a period of four years which commenced May 1, 2000 and is secured by liens on the same collateral securing other loans from the same U.S. bank. One-half of the term loan facility bears interest at the fixed rate of 8.23% for the first two years and as of February 4, 2002 will be subject to a variable rate of interest equal to one month LIBOR plus 1.85%. The other half is subject to a variable rate of interest equal to one month LIBOR plus 1.85% (3.96% at December 29, 2001). As of December 29, 2001, the Company had a total of $4,083,000 outstanding under the term loan facility. The term loan facility requires that the Company maintain certain specified ratios of consolidated debt to net worth, minimum annual debt coverage and minimum levels of net worth. At December 29, 2001, the Company was in compliance with these covenants. At December 29, 2001, the Company's Swiss subsidiary had separate credit facilities totaling 17.5 million Swiss francs (approximately $10.4 million) with three Swiss banks. The Company's real property in Switzerland is pledged as collateral. As of December 29, 2001, there were long-term outstanding borrowings of 10.3 million Swiss francs (approximately $6.1 million) under these facilities, with 7.2 million Swiss francs (approximately $4.3 million) available for short-term borrowings. 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 of $25,143 are amortized over 15 years. The lender has the right to review and adjust the terms of the mortgage every five years. As of December 29, 2001, there were outstanding borrowings of $2,329,000. 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. This credit facility has now been extended through July 2003. As of December 29, 2001, there were outstanding borrowings of $1,125,000 under this credit facility, and $3,875,000 was available for future borrowings. The annual interest rate as of December 29, 2001 was 4.5%. Under the terms of the various U.S. credit facilities, fixed assets with a book value of $2,639,000 and accounts receivable and inventory with a book value of $9,859,000 are pledged as collateral. In addition, fixed assets with a book value of $5,303,000 are pledged as collateral under the Swiss credit facilities. F-13 Long-term debt consists of the following:
2001 2000 ----------------- -------------- (in thousands) U.S. mortgage, interest at 7.625% $ 2,329 $ 2,446 U.S. line of credit, interest at 4.5% 1,125 865 U.S. term facility, interest at 3.96% to 8.23% 4,083 5,833 Swiss facilities, interest at market rates 3.375% to 4.5% 6,124 6,369 Other 1,024 472 --------------- --------------- 14,685 15,985 Less- Current portion (2,186) (3,595) --------------- --------------- $ 12,499 $ 12,390 =============== ===============
Future annual payments required on long-term debt are as follows (in thousands):
Fiscal Year Amount 2002 $ 2,186 2003 5,605 2004 770 2005 -- 2006 -- Thereafter 6,124 ----------- $ 14,685 ===========
7. 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, if any, 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 2001, 2000, and 1999. The Board of Directors did not authorize any 2001, 2000, or 1999 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 Company expense associated with the thrift plan for 2001, 2000 and 1999 was $383,000, $419,000 and $405,000, respectively. The foreign pension expense for 2001, 2000 and 1999 was $979,000, $769,000 and $1,008,000, 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 F-14 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 of stock in any year. Under this plan, the Company issued 6,910 shares of common stock at an average price of $10.41 in 2001, 16,250 shares of common stock at an average price of $12.38 in 2000, and 15,706 shares of common stock at an average price of $13.25 in 1999. This plan expired at the end of June 2001. 8. SHAREHOLDERS' EQUITY: In 2001, the Board of Directors determined the rights on 50,000 shares of the authorized preferred stock as the Series B Junior Participating Preferred Shares (the Series B Preferred Shares). Each one one-hundredth of a share of the Series B 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. At the same time as the Series B Preferred Shares were established, the number of Series A Junior Participating Preferred Shares were reduced from 50,000 to 0 and returned to authorized but unissued shares of the Company's preferred stock. The Board of Directors has not determined the rights on the remaining 950,000 shares of the authorized preferred stock as of December 29, 2001. 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 some 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. 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 also permits the awarding of restricted stock grants. 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. 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. F-15 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 December 29, 2001 is as follows:
Average Outstanding Price Available Shares Per Share Shares 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 Granted 12,500 15.80 (12,500) Canceled (3,834) 15.38 3,334 Exercised (13,116) 9.02 -- ------------- -------- BALANCE, DECEMBER 30, 2000 353,217 310,668 Granted 136,000 12.47 (136,000) Canceled (18,867) 16.29 16,667 Exercised (24,149) 9.46 -- Restricted stock granted 10,000 -- (10,000) Restricted stock exercised (10,000) -- -- ------------- -------- BALANCE, DECEMBER 29, 2001 446,201 181,335 ======= =======
As of December 29, 2001, thirteen employees held options under the 1986 plan for an aggregate of 43,200 shares at exercise prices ranging from $6.25 to $12.50 with a weighted average price of $8.18. These options expire at varying times through 2005. As of December 29, 2001, thirty-five employees and five nonemployee directors held options under the 1996 plan for an aggregate of 383,001 shares at exercise prices from $12.20 to $19.00 with a weighted average price of $14.90. These options expire at varying times through 2011. As of December 29, 2001, two nonemployee directors held options under the 1988 plan for an aggregate of 20,000 shares at exercise prices from $9.25 to $10.38 with a weighted average price of $9.82. These options expire at varying times through 2004. During 1999, the Company repurchased 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. On March 23, 2000, the Company completed a self-tender offer begun on February 16, 2000 and repurchased 508,000 shares of its common stock at $18.00 per share for a total cost of $9.249 million (including $105,000 of costs associated with the tender offer). The share purchase represented approximately 17.3% of the common stock then outstanding. In the fourth quarter of 2000, the Company also repurchased 12,200 shares of its common stock for a total purchase price of $221,000 or an average of $18.11 a share. F-16 During 2001, the Company repurchased 43,700 shares of its common stock in seven separate transactions, representing approximately 1.8% of its outstanding common stock as of the beginning of the fiscal year. The total purchase price was $576,000 or an average of $13.17 a share. 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 requires 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:
2001 2000 1999 ----------- ----------- ----------- (in thousands, except per share) Net income - as reported $ 1,048 $ 5,838 $ 6,759 Net income - pro forma 702 5,454 6,340 Basic earnings per share - as reported 0.43 2.30 2.28 Basic earnings per share - pro forma 0.29 2.15 2.14 Diluted earnings per share - as reported 0.43 2.25 2.23 Diluted earnings per share - pro forma 0.28 2.10 2.10
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 32.46%, 29.76% and 41.45%; risk-free interest rate of 5.20%, 5.59% and 5.17%; and expected life of 7.47 years, 6.00 years and 6.00 years in 2001, 2000 and 1999, 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. 9. SHAREHOLDER RIGHTS PLAN: The Company has a Shareholder Rights Plan (the Rights Plan) which was adopted by the Board of Directors on October 16, 2001 and which replaced an earlier plan that was adopted on October 3, 1991 and expired on October 14, 2001. The new Rights Plan provides for the distribution as a dividend of one preferred stock purchase right (a Right) on each share of the Company's common stock outstanding as of the close of business on October 29, 2001, and thereafter each share of the Company's common stock will have a Right associated with it. The new Rights will expire on October 29, 2011, and each Right will entitle a shareholder to purchase one one-hundredth of a share of Series B Junior Participating Preferred Stock upon the terms specified in the Rights Plan. The Rights generally will be exercisable only if a person or group acquires beneficial ownership of 15 percent or more of the Company's common stock or commences a tender or exchange offer upon consummation of which such F-17 person or group would beneficially own 15 percent or more of the Company's common stock, in each case without the approval of the Company's Board of Directors. 10. INCOME TAXES: Following are the domestic and foreign components of income before income taxes:
2001 2000 1999 ----------------- ----------------- ---------- (in thousands) United States $ 774 $ 6,051 $ 5,196 Foreign 505 1,957 3,448 -------------- -------------- ------------- Income before income taxes $ 1,279 $ 8,008 $ 8,644 ============ ============ ===========
The income tax provision (benefit) consists of the following:
2001 2000 1999 ----------------- ----------------- ----------- (in thousands) Current: Federal and state $ 101 $ 2,001 $ 1,524 Foreign 52 22 103 ------------- ------------- ------------- Total current 153 2,023 1,627 ------------- ------------- ------------- Deferred: Federal and state 71 169 270 Foreign 7 (22) (12) ------------- ------------- ------------- Total deferred 78 147 258 ------------- ------------- ------------- Total income tax provision $ 231 $ 2,170 $ 1,885 ============= ============= ===========
Significant components of the deferred tax accounts at December 29, 2001 and December 30, 2000 are as follows:
2001 2000 ------------------ ----------- (in thousands) Deferred tax assets: Depreciation $ 30 $ 26 Accrued liabilities 218 197 Net operating loss carryforwards 537 416 Inventory basis differences 86 118 Other 403 439 ------------ ------------ 1,274 1,196 Valuation allowance (475) (540) ------------ ------------ Total assets 799 656 ------------ ------------ Deferred tax liabilities: Depreciation (519) (522) Other (335) (111) ------------ ------------ Total liabilities (854) (633) ------------ ------------ Net deferred (liability) asset $ (55) $ 23 ======== ========
F-18 Foreign and U.S. state operating loss carryforwards as of December 29, 2001 were $505,000 and $6.6 million, respectively. Of the $505,000 of foreign losses, $141,000 are available to offset future income through 2002. The balance of $364,000 has an unlimited carryforward period. U.S. state operating losses are available through 2008. 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 December 29, 2001, retained earnings include $13.9 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. An estimated $1.3 million in U.S. income and foreign withholding taxes would be due if these earnings were remitted as dividends. 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:
2001 2000 1999 ------------------ ----------------- ----------- (in thousands) Income tax provision on income before income tax at statutory federal income tax rates $ 435 $ 2,723 $ 2,939 Foreign tax rate differential -- (170) (199) State tax, net of federal benefit 2 97 134 U.S. and foreign permanent tax differences (80) 34 21 Change in valuation allowance (139) (473) (870) Other 13 (41) (140) --------------- --------------- ------------- Income tax provision $ 231 $ 2,170 $ 1,885 =========== =========== ===========
11. EARNINGS PER SHARE: ------------------- The Company previously 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 The Company's Basic and Diluted Earnings Per Share are calculated as follows:
Net Income Available To Common Earnings Shareholders Shares Per Share 2001 Basic $ 1,048,000 2,435,000 $ .43 Common Share Equivalent of Options Issued -- 30,000 -- ------------------- ------------------- ------------- Diluted $ 1,048,000 2,465,000 $ .43 =================== =================== ============= 2000 Basic $ 5,838,000 2,541,000 $ 2.30 Common Share Equivalent of Options Issued -- 54,000 (.05) ------------------- ------------------- ---------------- Diluted $ 5,838,000 2,595,000 $ 2.25 =================== =================== ============= 1999 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 =================== =================== =============
Diluted earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during each year. Such average number includes 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 12. 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 former heavy feeder division which was sold in July 2001, 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 had been classified as Other Noncurrent Liabilities in the Company's consolidated balance sheets. This deferred gain was amortized over the life of the resulting operating lease (ten years) and was fully amortized as of October 2000. Amortization of the deferred gain for 2000 and 1999 was $271,000 and $367,000, respectively. As of December 29, 2001, future minimum payments under operating leases having noncancellable terms in excess of one year are summarized below:
Operating Leases --------------- (in thousands) 2002 $ 535 2003 406 2004 280 2005 59 2006 50 ------------ $ 1,330 ============
Rent expense for 2001, 2000 and 1999 was $445,000, $601,000 and $768,000, respectively. The Company has employment contracts with seven executives. Except in one case when two year's 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 December 29, 2001, the estimated future obligation under these contracts is $1,407,000 (2002) and $437,000 (2003). The Company in the normal course of business has commitments, lawsuits, contingent liabilities and claims. However, the Company does not expect that any sum it may have to pay in connection with these matters will have a material adverse effect on its consolidated financial position or results of operations. 13. 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 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. F-21 The Company is engaged in one business segment, material handling equipment and systems. The Company operates in two primary geographic locations, North America and Western Europe.
North Western Elimi- Consoli- America Europe nations dated --------------- ----------- ------------ ------------- (in thousands) 2001 Revenues- Sales to unaffiliated customers $ 29,922 $ 41,897 $ -- $ 71,819 Sales to affiliates 4,443 1,865 (6,308) $ -- -------------- ----------- ----------- ------------- Total sales $ 34,365 $ 42,762 $ (6,308) $ 71,819 ============== =========== =========== ============= Operating income $ 1,537 $ 706 $ 64 $ 2,307 ============== =========== =========== Interest expense (1,028) ------------- Income before income taxes $ 1,279 ============= Capital expenditures $ 1,409 $ 735 $ 2,144 Depreciation and amortization expense 1,147 1,774 2,921 Total assets 18,981 28,663 47,644 2000 Revenues- Sales to unaffiliated customers $ 40,116 $ 44,796 $ -- $ 84,912 Sales to affiliates 4,007 3,014 (7,021) -- -------------- ----------- ----------- ------------- Total sales $ 44,123 $ 47,810 $ (7,021) $ 84,912 ============== =========== =========== ============= Operating income $ 6,774 $ 2,186 $ 129 $ 9,089 ============== =========== =========== Interest expense (1,081) ------------- Income before income taxes $ 8,008 ============= Capital expenditures $ 1,016 $ 2,683 $ 3,699 Depreciation and amortization expense 1,198 1,940 3,138 Total assets 18,900 35,521 54,421 1999 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
F-22 14. QUARTERLY FINANCIAL INFORMATION (Unaudited): The following table summarizes unaudited quarterly financial data for 2001 and 2000 (in thousands, except share data):
2001 by Quarter --------------------------------------------------------------- First Second Third Fourth -------------- -------------- -------------- -------------- Revenues $ 21,558 $ 19,318 $ 16,081 $ 14,862 Gross profit 8,900 7,683 6,365 5,849 Net income (loss) 975 610 (768) 231 Basic earnings (loss) per share .40 .25 (.32) .10 Diluted earnings (loss) per share .39 .25 (.32) .09
2000 by Quarter --------------------------------------------------------------- First Second Third Fourth -------------- -------------- -------------- -------------- Revenues $ 20,288 $ 22,084 $ 19,994 $ 22,546 Gross profit 9,276 10,457 9,157 9,012 Net income 1,373 1,832 1,561 1,072 Basic earnings per share .48 .76 .64 .44 Diluted earnings per share .47 .74 .63 .43
F-23 SCHEDULE II K-TRON INTERNATIONAL, INC. VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Beginning Charged Balance at of Period to Income Deductions(1) End of Period ---------- --------- ------------- --------------- FISCAL YEAR ENDED DECEMBER 29, 2001: Allowance for doubtful accounts $ 778,000 $ 53,000 $ 144,000 $ 687,000 Provision for restructuring reserve 104,000 -- 104,000 -- FISCAL YEAR ENDED DECEMBER 30, 2000: Allowance for doubtful accounts 924,000 56,000 202,000 778,000 Provision for restructuring reserve 450,000 -- 346,000 104,000 FISCAL YEAR ENDED JANUARY 1, 2000: Allowance for doubtful accounts 1,286,000 39,000 401,000 924,000 Provision for restructuring reserve -- 710,000 260,000 450,000
(1) Accounts written off less recoveries, net of foreign exchange translation adjustment. S-1 EXHIBIT INDEX Exhibit Number Description - ------ 2.1 Basic Agreement regarding the Assignment of Assets of the Hasler Division between K-Tron (Suisse) SA and MJ Enterprises SA dated July 31, 2001 (Filed as Exhibit 2.1 to our report on Form 10-Q for the quarterly period ended September 29, 2001 and incorporated herein by reference) 3.1 Restated Certificate of Incorporation, as amended (Filed as Exhibit 3.1 to our 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* 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 16, 2001 with American Stock Transfer & Trust Company, as Rights Agent (Filed as Exhibit 4.1 to our report on Form 8-K dated October 16, 2001 and incorporated herein by reference) 10.1 1986 Stock Option Plan, as amended and restated (Filed as Exhibit 10.2.1 to our 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 our 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 Amendment 2001-1 to the Amended and Restated K-Tron International, Inc. 1996 Equity Compensation Plan** * 10.5 K-Tron International, Inc. and Affiliated Companies Profit-Sharing and Thrift Plan, as amended and restated** * 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 our 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 our 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 ((Filed as Exhibit 10.9 to the our annual report on Form 10-K for the year ended January 1, 2000 ("1999 10-K") and incorporated herein by reference) ** 10.10 Form of Employment Agreement with certain of our employees, 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 our 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 of our directors and officers 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 (Filed as Exhibit 10.11 to the 1999 Form 10-K and incorporated herein by reference)** 10.11A Supplement to Schedule 10.11, listing additional directors and officers who are parties to an Indemnification Agreement referenced in Exhibit 10.11.* 10.12 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 our Tender Offer Statement on Schedule TO dated February 16, 2000 and incorporated herein by reference) 10.13 Mortgage Note dated June 11, 1996 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit 10.15 to the 1999 Form 10-K and incorporated herein by reference) 10.14 Loan Modification Agreement dated June 24, 1998 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.16 to the 1999 Form 10-K and incorporated herein by reference) 10.15 Note dated June 24, 1998 from K-Tron America, Inc. in favor of The Bank of Gloucester County (Filed as Exhibit 10.17 to the 1999 Form 10-K and incorporated herein by reference) 10.16 Loan Modification Agreement dated as of July 22, 1999 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.18 to the 1999 Form 10-K and incorporated herein by reference) 10.17 Loan Modification Agreement dated June 21, 2000 between K-Tron America, Inc. and The Bank of Gloucester County (Filed as Exhibit 10.19 to our annual report on Form 10-K for the year ended December 30, 2000 and incorporated herein by reference) 10.18 Loan Modification Agreement dated June 25, 2001 between K-Tron America, Inc. and The Bank of Gloucester County* 10.19 Letter Agreement dated November 30, 2001 among K-Tron International, Inc., 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)* 99.1 Letter responsive to Temporary Note 3T to Article 3 of Regulation S-X* * Filed herewith ** Management contract or compensatory plan or arrangement required to be filed or incorporated as an exhibit EX-3.2 3 w58583ex3-2.txt K-TRON INTERNATIONAL, INC BY-LAWS EXHIBIT 3.2 K-TRON INTERNATIONAL, INC. * * * BY-LAWS (Effective October 16, 2001) * * * ARTICLE I OFFICES Section 1. The registered office of the corporation shall be located at 28 West State Street, Trenton, New Jersey 08608, unless otherwise established by a vote of the majority of the board of directors in office and a statement of change is filed in the manner provided by statute. Section 2. The corporation may also have offices at such other places both within and without the State of New Jersey as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. The annual meeting of shareholders for the election of directors shall be held at the registered office of the corporation or at such other place within or without the State of New Jersey as shall be fixed by the board of directors. Section 2. Annual meetings of shareholders shall be held on the first Friday of May, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 11:00 A.M., or at such other date and time as shall be fixed by the board of directors and stated in the notice of meeting, at which the shareholders shall elect, by a plurality vote, directors to the class of directors whose term of office is then expiring and shall transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the time, place and purpose or purposes of the meeting shall be given not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at such meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders for any purpose may be held at such time and place within or without the State of New Jersey as shall be fixed by the board of directors. Section 2. Special meetings of shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the chairman of the board of directors, the president, the board of directors or the holders of not less than seventy-five percent (75%) of all the shares entitled to vote at the meeting. Section 3. Written notice of a special meeting stating the time, place and purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at such meeting. Section 4. Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice thereof. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of shares entitled to cast a majority of the votes at a meeting, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally called. Section 2. If a quorum is present, the affirmative vote of a majority of the votes cast at the meeting shall be the act of the shareholders unless a greater plurality is required by law or the certificate of incorporation. The shareholders present in person or by proxy at a duly organized meeting may continue to do business notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 3. Each outstanding share of stock having voting power shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, unless otherwise provided in the certificate of incorporation. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his agent. -2- In all elections for directors every shareholder entitled to vote shall have the right to vote, in person or by proxy, the number of shares owned by him, for as many persons properly nominated for election as there are directors to be elected and for whose election he has a right to vote. Section 4. Except as otherwise provided by the certificate of incorporation, directors shall be elected by a plurality of votes cast at an election. Section 5. No action which may be taken at a meeting of shareholders or of a class of shareholders may be taken without a meeting except by unanimous written consent of all shareholders. ARTICLE V DIRECTORS Section 1. The board of directors shall consist of seven directors or of such other number of directors as shall be fixed from time to time by resolution of the board, adopted by a vote of three-fourths of the directors then in office, even if less than a quorum. Directors need not be residents of the State of New Jersey nor shareholders of the corporation. Each director shall have a single vote of equal value with respect to all matters voted upon by the board. The board of directors shall be divided into four classes, which shall be as nearly equal in number as possible. Directors of each class shall serve for a term of four years and until their successors shall have been elected and qualified. The four initial classes of directors shall be comprised as follows: Class I shall be comprised of a director who shall serve until the annual meeting of shareholders in 1986 and until his or her successor shall have been elected and qualified. Class II shall be comprised of two directors who shall serve until the annual meeting of shareholders in 1987 and until their successors shall have been elected and qualified. Class III shall be comprised of two directors who shall serve until the annual meeting of shareholders in 1988 and until their successors shall have been elected and qualified. Class IV shall be comprised of two directors who shall serve until the annual meeting of shareholders in 1989 and until their successors shall have been elected and qualified. -3- Section 2. Any director or member of a committee may resign at any time. Such resignation shall be made in writing and shall take effect at the time of its receipt by the chairman of the board of directors, the president or the secretary, or if a time subsequent to such receipt be specified therein, then at the time specified. The acceptance of a resignation shall not be necessary to make it effective. Section 3. Directors may not be removed without cause for any reason. No decrease or increase in the size of the board shall shorten or otherwise affect the term of any incumbent director. Section 4. A person shall be appointed or elected a director to fill a vacancy in the board of directors (including any vacancy resulting from any increase in the authorized number of directors) only by a vote of a majority of the directors then in office, even if less than a quorum, and any director so elected shall hold office until the next election of the class for which such director shall have been elected and until a successor shall have been elected and qualified. Section 5. No person may be nominated for election as a director by a shareholder at an annual or special meeting unless written notice of such shareholder's intent to make such nomination has been given, either by personal delivery or by United States mail, postage prepaid, to the secretary of the corporation at the principal executive offices of the corporation not later than (a) with respect to an election to be held at an annual meeting of shareholders, ninety days in advance of such meeting, and (b) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the board of directors; and (v) the consent of each nominee to serve as a director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Section 6. The business and affairs of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. -4- Section 7. The directors may keep the books and records of the corporation, except such as are required by law to be kept within the state, outside of the State of New Jersey, at such place or places as they may from time to time determine. Section 8. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of New Jersey. Section 2. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Any notice that may be required to be given need not be given to any director who signs a waiver of notice, whether before or after the meeting. Section 3. Special meetings of the board of directors shall be held whenever called by the chairman of the board of directors or the president, and special meetings shall be called by the chairman of the board of directors, the president or the secretary on the written request of two directors. Notice of any such meeting shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone) or 48 hours (in the case of notice by telegram, telex, telecopier, telefax or other facsimile transmission) or 10 days (in the case of notice by mail) before the time at which the meeting is to be held. Each such notice shall state the time and place of the meeting to be so held. Notice need not be given to any director who signs a waiver of notice, whether before or after the meeting. Section 4. Where appropriate communication facilities are reasonably available, any or all directors shall have the right to participate in all or any part of a meeting of the board or a committee of the board by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 6. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Notice of an adjourned meeting, whether regular or special, need not be given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten days. -5- Section 7. A majority of the entire board, or of any committee thereof, shall constitute a quorum for the transaction of business at any board or committee meeting unless a greater or lesser number is required by statute or by the certificate of incorporation, except that when the entire board or a committee thereof consists of one director, then one director shall constitute a quorum. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors or of the committee, unless the act of a greater or lesser number is required by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Unless otherwise provided by the certificate of incorporation, any action required or permitted to be taken at a meeting of the board, or any committee thereof, shall be deemed the action of the board of directors or of a committee thereof, if all directors or committee members, as the case may be, execute either before or after the action is taken, a written consent thereto, and the consent is filed with the minutes of the proceedings of the board or committee. ARTICLE VII EXECUTIVE COMMITTEE; OTHER COMMITTEES Section 1. The board of directors may, by resolution adopted by a majority of the entire board, designate an executive committee and one or more other committees, each committee to consist of one or more directors. Any such committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors, except that no such committee shall (a) make, alter or repeal any by-law of the corporation; (b) elect or appoint any director, or remove any officer or director; (c) submit to shareholders any action that requires their approval; or (d) amend or repeal any resolution theretofore adopted by the board which by its terms is amendable or repealable only by the board. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. In addition to designating such committees, the board of directors may, by resolution adopted by a majority of the entire board, fill any vacancy in any such committee; appoint one or more directors to serve as alternate members of any such committee, to act in the absence or disability of members of any such committee with all the powers of such absent or disabled members; abolish any such committee at its pleasure; and remove any director from membership on such committee at any time, with or without cause. Each committee of the board of directors formed pursuant to this section shall keep regular minutes of its meetings, and actions taken at a meeting of any such committee shall be reported to the board at its next meeting following such committee meeting; except that, when the meeting of the board is held within 2 days after the committee meeting, such report shall, if not made at the first meeting, be made to the board at its second meeting following such committee meeting unless otherwise required by law to be earlier reported. If the committee -6- report to the board is reflected in the minutes of the meeting of the board, this shall be sufficient to satisfy the requirement for regular minutes of the committee meeting. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of any statute or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given in accordance with section 3 of Article VI hereof. Section 2. Whenever any notice whatever is required to be given under the provisions of any statute or under the provisions of the certificate of incorporation or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE IX OFFICERS Section 1. The officers of the corporation shall be elected by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also elect a chairman and a vice-chairman (who shall not be officers of the corporation unless so designated by the board of directors in the resolution electing such persons), additional vice-presidents and one or more assistant secretaries and assistant treasurers. In the absence of the chairman of the board, the vice-chairman, if there be one, shall preside at all meetings of directors or shareholders unless otherwise determined by the board. Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall elect a president, one or more vice-presidents, a secretary and a treasurer, none of whom need be a member of the board. Section 3. The board of directors may elect such other officers and agents as it shall deem necessary who shall hold their offices for such terms as shall be designated by the board and who shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors or by the president. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. -7- Section 5. Any officer may resign at any time. Such resignation shall be made in writing and shall take effect upon receipt thereof by the corporation or at such subsequent time as shall be specified therein. The acceptance of a resignation shall not be necessary to make it effective. Section 6. Each officer of the corporation shall hold office until his successor is elected and qualifies, except in the event of his death, resignation or removal. Any officer may be removed at any time with or without cause by the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. Any two or more offices may be held by the same person. THE CHAIRMAN OF THE BOARD Section 7. The chairman of the board of directors shall preside at all meetings of the shareholders and board of directors if present thereat, and he shall have and perform such other duties as from time to time may be assigned to him by the board of directors or as may be specified elsewhere in these by-laws. THE PRESIDENT Section 8. The president shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of the chief executive officer of a corporation. He shall have general and active management, supervision, direction and control of the business of the corporation, subject to the policies and direction of the board of directors, shall see that all orders and resolutions of the board of directors are carried into effect and shall supervise and direct all officers and employees of the corporation, but may delegate in his discretion any of his powers to any officer or such other executives as he may designate. In the absence or non-election of the chairman of the board of directors and any vice-chairman, the president shall preside at all meetings of the shareholders if present thereat and at all meetings of the board of directors (if a member). Section 9. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENTS Section 10. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors or the president may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 11. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation -8- and of the board of directors in a book to be kept for that purpose and shall perform like duties for any committees of the board of directors when requested. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or the president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 12. The assistant secretary, or if there shall be more than one, the assistant secretaries in the order determined by the board of directors or the chairman of the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 13. The treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 14. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the chairman of the board of directors and the president upon request and also to the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 15. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 16. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. -9- ARTICLE X INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES Section 1. Scope of Indemnification. (a) The corporation shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise, by reason of the fact that such person is or was serving in an indemnified capacity, including without limitation liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except to the extent that any such indemnification against a particular liability is expressly prohibited by applicable law or where a judgment or other final adjudication adverse to the indemnified representative establishes that his or her acts or omissions (i) were in breach of such person's duty of loyalty to the corporation or its shareholders, (ii) were not in good faith or involved a knowing violation of law or (iii) resulted in receipt by such person of an improper personal benefit. (b) If an indemnified representative is not entitled to indemnification in respect of a portion of any liabilities to which such person may be subject, the corporation shall nonetheless indemnify such indemnified representative to the maximum extent for the remaining portion of the liabilities. (c) The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the indemnified representative is not entitled to indemnification. (d) For purposes of this Article: (1) an act or omission in breach of a person's duty of loyalty to the corporation or its shareholders means an act or omission which that person knows or believes to be contrary to the best interests of the corporation or its shareholders in connection with a matter in which he or she has a material conflict of interest; (2) "indemnified capacity" means any and all past, present or future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation or, 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; (3) "indemnified representative" means any and all directors and officers of the corporation, or of any constituent corporation absorbed by the corporation in a consolidation or merger designated by the board of directors, and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person serving at the request of the corporation, as a director, officer, employee, -10- agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (4) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (5) "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. Section 2. Proceedings Initiated by Indemnified Representatives. Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative 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 intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section 2 of this Article X does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under section 6 of this Article X or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 3. Advancing Expenses. The corporation shall pay the expenses (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in section 1 of this Article X or authorized pursuant to section 2 of this Article X 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 6 of this Article X that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 4. Securing of Indemnification Obligations. To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. Section 5. Payment of Indemnification. An indemnified representative shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. -11- Section 6. Arbitration. Any dispute related to the right to indemnification or advancement of expenses as provided under this Article X, except with respect to indemnification for liabilities under the Securities Act of 1933 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 been relocated). Each arbitrator selected as provided herein is required to be or have been a director or 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 Article X shall have the burden of proof. The corporation shall reimburse an 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 non-appealable 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. Section 7. Discharge of Duty. An 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 such 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 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. -12- Section 8. Contract Rights; Amendment or Repeal. All rights to indemnification and advancement of expenses under this Article X shall be deemed to be a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing nor shall any repeal, amendment or modification reduce the rights of any indemnified representative to be indemnified hereunder for any actions taken before the indemnified representative has received actual notice thereof. Section 9. Scope of Article. The rights granted by this Article X shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, certificate or articles of incorporation, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in all indemnified capacities and as to action in another capacity while holding such office. The rights of indemnification and advancement of expenses provided by or granted pursuant to this Article X 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, and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 10. Reliance on Provisions. Each person who shall act as an indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification and advancement of expenses provided by this Article X. Section 11. Interpretation. The provisions of this Article X are intended to constitute by-laws authorized by Section 14A:3-5(8) of the New Jersey Business Corporation Act. ARTICLE XI CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by certificates signed by the chairman of the board of directors, the president or a vice-president and may be countersigned by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designations, relative rights, preferences and limitations of the shares of each class and series authorized to be issued, so far as the same have been determined, and the authority of the board of directors to divide the shares into classes or series and to determine the relative rights, preferences and limitations of any class or series. -13- Section 2. Any or all signatures of the officers of the corporation upon a certificate may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate canceled and the transaction recorded upon the books of the corporation. Section 5. Rights issued pursuant to the Rights Agreement, dated as of October 16, 2001 between the corporation and the Rights Agent listed therein (the "Rights Agreement") may be transferred by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as such terms are defined in the Rights Agreement) only in accordance with the terms of, and subject to the restrictions contained in, the Rights Agreement. CLOSING OF TRANSFER BOOKS Section 6. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof or entitled to receive payment of any dividend or allotment of any right, or entitled to give a written consent to any action without a meeting, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to give a written consent to any action without a meeting, such books may not be closed for more than sixty days before the date fixed for tabulation of consents or if no date has been fixed for tabulation, the books may not be closed for more than sixty days before the last day on which consents received may be counted. In lieu of closing the stock transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such -14- determination of shareholders, is to be taken and, in case of determining shareholders entitled to give a written consent the record date may not be more than sixty days before the date fixed for tabulation of the consents or if no date has been fixed for the tabulation, more than sixty days before the last day on which consents may be counted. If the stock transfer books are not closed and no record date is fixed, the record date for a meeting of shareholders shall be the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day next preceding the day on which the meeting is held; and the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the resolution of the board relating thereto is adopted. When a determination of shareholders of record for a meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. REGISTERED SHAREHOLDERS Section 7. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of New Jersey. LIST OF SHAREHOLDERS Section 8. The officer or agent having charge of the transfer books for shares shall make a complete list of the shareholders entitled to vote at a meeting of shareholders, or any adjournment thereof, arranged in alphabetical order within each class, series or group of shareholders maintained by the corporation for convenience of reference, with the address of and the number of shares held by each shareholder. A list required by this section may consist of cards arranged alphabetically or any equipment which permits the visual display of the information required. Such list shall be produced (or available by means of a visual display) at the time and place of the meeting and shall be subject to the inspection of any shareholder for reasonable periods during the meeting. Such list shall be prima facie evidence as to who are the shareholders entitled to examine such list or to vote at any meeting of the shareholders. ARTICLE XII GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the certificate of incorporation relating thereto, if any, dividends may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in its bonds, in its own shares or other property, including the shares or bonds of other corporations, subject to any provisions of law and of the certificate of incorporation. -15- CHECKS Section 2. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 3. The fiscal year of the corporation shall end on the Saturday in December or January that is closest to December 31 in each year, unless otherwise fixed by resolution of the board of directors. SEAL Section 4. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, New Jersey". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XIII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board, subject to any provision in the certificate of incorporation reserving to the shareholders the power to adopt, amend or repeal by-laws, and provided, further, that the provisions of Sections 1 (except for the first paragraph thereof), 3, 4 and 5 of Article V of these by-laws and of this Article XIII with respect thereto may not be repealed or amended in any respect unless such action is approved by the affirmative vote of seventy-five percent (75%) of the outstanding shares of stock of the corporation entitled to vote with respect to the election of directors generally. By-laws made by the board may be altered or repealed and new by-laws made by the shareholders. The shareholders may prescribe that any by-law made by them shall not be altered or repealed by the board. -16- EX-10.4 4 w58583ex10-4.txt AMENDMENT 2001-1 TO AMENDED 1996 EQUITY COMP. PLAN EXHIBIT 10.4 AMENDMENT 2001-1 TO THE AMENDED AND RESTATED K-TRON INTERNATIONAL, INC. 1996 EQUITY COMPENSATION PLAN WHEREAS, K-Tron International, Inc. (the "Company") maintains the Amended and Restated K-Tron International, inc. 1996 Equity Compensation Plan (the "Plan") for the benefit of the eligible officers and other employees of the company and its subsidiaries as well as for members of the company's Board of Directors who are not officers or employees of the company and its subsidiaries; WHEREAS, upon recommendation of counsel, the Board desires to amend the Plan with respect to the rate of withholding tax with respect to federal, state and local tax liabilities applicable to grants under the Plan; WHEREAS, also upon recommendation of counsel, the Board desires to amend the Plan to reflect an amendment to the Fair Labor Standards Act of 1938, as amended (the "FLSA"), for option grants to non-exempt employees; WHEREAS, the Board has approved the terms of this Amendment 2001-1 to the Plan; NOW, THEREFORE, in accordance with the foregoing, the Plan shall be amended as follows: 1. Section 15(b) of the Plan is amended to read, in its entirety, as follows: "(b) If the Committee so permits, a Grantee may elect to satisfy the Company's income tax withholding obligation with respect to a Grant paid in Company Stock by having shares withheld up to an amount that does not exceed the Grantee's minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Committee and shall be subject to the prior approval of the Committee." 2. A new subsection (j) is added to Section 5 of the Plan to read, in its entirety, as follows: "(j) Option Grants to Non-Exempt Employees. Notwithstanding the foregoing, Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, shall have a per share purchase price not less than 85% of the Fair Market Value of the Company Stock on the date of grant, and may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Board, upon the Grantee's death, disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations)." 3. In all respects not amended, the Plan is hereby ratified and affirmed and may be restated in its entirety to include the above amendment. IN WITNESS WHEREOF, and as evidence of the adoption of Amendment 2001-1 set forth herein, this Amendment has been executed this 16th day of October, 2001. K-TRON INTERNATIONAL, INC. By: /s/ Edward B. Cloues, II ------------------------------------ Edward B. Cloues, II Chairman and Chief Executive Officer EX-10.5 5 w58583ex10-5.txt PROFIT SHARING AND THRIFT PLAN EXHIBIT 10.5 K-TRON INTERNATIONAL, INC. AND AFFILIATED COMPANIES PROFIT-SHARING AND THRIFT PLAN As Amended and Restated Effective As Of January 1, 2002 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, 2002. The purpose of this amendment and restatement is to reflect changes permitted by the Economic Growth Tax Relief and Reconciliation Act of 2001 ("EGTRRA") 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 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); (b) Participant contributions (including mandatory or voluntary employee contributions made under a qualified defined benefit plan of the Employer or an Affiliated 2 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. (c) 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 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. 3 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; or (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; and earned income as described in section 401(c)(2) 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 transferrable or is no longer subject to a substantial risk of forfeiture; any other amounts which receive special tax benefits; 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, and for Plan Years beginning after December 31, 2000, amounts excluded from gross income under section 132(f)(4) of the Code. (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 4 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 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. 5 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. 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. 6 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 a Participant attained age 65 and as to all other 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 7 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. 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 8 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. (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. 9 (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. 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, effective January 1, 2001, any business day on which the New York Stock Exchange is open for trading. 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. 10 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 be eligible to participate in the Plan on the date he is reemployed or on the first day of any subsequent calendar quarter. 11 (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. 12 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 fifty percent (50%), 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) Additional Salary Deferrals A Participant who will attain age 50 prior to the end of the Plan Year and is unable to elect additional Salary Deferrals under subsection (a) may elect to reduce his Compensation for the Plan Year by an amount equal to from 1% to 50%, in whole percentages, of his Compensation payable with respect to any payroll period; provided, however, that the amount contributed pursuant to this subsection (b) may not exceed the lesser of (1) $1,000 (or such other amount as may be applicable under section 414(v) of the Code) or (2) the excess of the Participant's Compensation (as defined in Section 2.15(b)) for the Plan Year over the Salary Deferrals contributed in the Participant's behalf under subsection (a) above for the Plan Year. Salary Deferrals under this subsection (b) shall not be subject to the limitations described in Article V. (c) 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. (d) 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 made 13 pursuant to Section 4.1(a) 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. (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 14 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. 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) 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 15 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. 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. 16 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 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 17 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 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. 18 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 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 19 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 the Participant's elective contributions for 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. 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 such other amount as may be in effect under Section 415(c)(1)(A) of the Code), or (2) twenty-five percent (25%) (or such other percentage that may be in effect under Section 415(c)(1)(A) of the Code) 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 20 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 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. 21 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 at the time or times prescribed by the Committee, by making a new election in such form, at such time in advance and in accordance with other procedures and subject to such restrictions as the Committee or its delegate may prescribe. Until changed in accordance with this Section 6.4, an Investment Fund election shall remain in effect for all subsequent periods. 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 at the time or times prescribed by the Committee, by making a new election in such form, at such time in advance and in accordance with other procedures and subject to such restrictions as the Committee or its delegate may prescribe. 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 22 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 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. 23 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%
24 (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; (ii) any Participant who is reemployed after incurring five consecutive Breaks-in-Service, or 25 (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. ?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 exceeds $5,000 (including Rollover Contributions) ($3,500 for Benefit Payment Dates before January 1, 1999), no distribution will be made at such time without the consent of the Participant provided in a manner and at the time agreed upon by the Committee and the Trustee and that complies with applicable law. 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. 26 (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. (c) Effective Date of Regulations. With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2002, the Plan will apply the minimum distribution requirements of section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under section 401(a)(9) that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar beginning before the effective date of final regulations under section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. (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 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. The Committee may permit the information described in this paragraph and/or the Participant's consent to a distribution be provided at any time or in any manner permitted by applicable law. 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 one Plan Year (for periods prior to January 1, 2001, three 27 Plan Years) must elapse before such Participant is 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, any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution; 28 (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 (for withdrawals occurring before January 1, 2002) or 6 months (for withdrawals occurring on or after January 1, 2002) 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. (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: 29 (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 cash lump sum. 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 (including Rollover Contributions) ($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. 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 30 (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. 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. 31 (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 (including Rollover Contributions) ($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 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. 32 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. Eligible Rollover Distributions. (a) 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 former spouse of a Participant, would constitute an "eligible rollover distribution," the individual may request that such payment or payments be transferred directly from the Trust Fund 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, (iv) a qualified retirement plan the terms of which permit the acceptance of rollover distributions, or (v) effective for distributions made on or after January 1, 2002, (A) an eligible deferred compensation plan described in Section 457(b) of Code maintained by an eligible employer described in Section 457(e)(1)(A) of the Code that separately accounts for eligible rollover distributions or (B) an annuity contract described in Section 403(b) of the Code; provided, however, that clause (iii) and (iv) shall not apply to an eligible rollover distribution made prior to January 1, 2002 to a beneficiary who is the surviving spouse of a Participant. Any such request shall be made in writing, on the form prescribed by the Benefits Committee for such purpose, at such time in advance as the Benefits Committee may specify. Notwithstanding the foregoing, any "eligible rollover distribution" in excess of $1,000 made after final regulations are issued by the Department of Labor with respect to Section 402(c)(2)(A) of the Code shall be transferred directly to the individual retirement plan of a designated trustee or insurer, unless the Participant elects to receive such distribution. (b) For purposes of this Section 7.8, eligible rollover distribution shall mean a distribution from the Plan, excluding (i) 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 lives (or life expectancies) of the individual and the individual's designated beneficiary, or a specified period of ten (10) or more years, (ii) any distribution to the extent such distribution is required under Section 401(a)(9) of the Code, (iii) any distribution to the extent such distribution is not included in gross income and (iv) 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. Notwithstanding the foregoing, clause (iii) of the preceding sentence shall not apply to a distribution that is made on or after January 1, 2002 and rolled over to an eligible retirement plan described in clause (i) or (ii) of the preceding paragraph or a qualified defined contribution plan that will separately account for the portion of the distribution that is includible in gross income. 7.9. Delay of Payment. 33 (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. 34 ARTICLE VIII. PROVISIONS RELATING TO TOP-HEAVY PLANS 8.1. Definitions. For purposes of this Article VIII: (a) An "Aggregation Group" means the group of qualified plans sponsored by the Employer or by an Affiliate that consists of either the Required Aggregation Group or the Permissive Aggregation Group, whichever applies. (b) The "Determination Date" means 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) A "Key Employee" is any current or former employee (and the beneficiaries of such employee) who at any time during (i) the Plan Year or during any of the preceding four (4) Plan Years or (ii) effective January 1, 2002, the Plan Year, was any of the following: (1) An officer of the Employer having an annual compensation of more than (A) 50% of the amount in effect under Section 415(b)(1)(A) of the Code for the Plan Year or (B) effective January 1, 2002, $130,000 or such other amount as may be in effect under Section 416(i)(1)(A)(i) of the Code. The number of persons to be considered officers in any Plan Year and the identity of the persons to be so considered shall be determined pursuant to the provisions of Section 416(i) of the Code and the regulations published thereunder. (2) For periods prior to January 1, 2002, one of the 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 Affiliate, provided that no person shall 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 shall 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 1/2% in value of any of the entities forming the Employer and the Affiliates. (3) A 5% owner of the Employer; (4) A person who is both an employee whose annual compensation exceeds $150,000 and who is a 1% owner of the Employer. (d) A "Non-Key Employee" means 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. (e) For any Plan Year beginning after December 31, 1983, this Plan is "Top-Heavy" if, as of the Determination Date with respect to a Plan Year, either of the following conditions exists: 35 (1) The Plan is not part of an Aggregation Group and the Top-Heavy Ratio, determined by substituting the "Plan" for the "Aggregation Group" each place it appears in Section 8.1(e), exceeds 60%. (2) The Plan is part of an Aggregation Group and the Top-Heavy Ratio of such Aggregation Group exceeds 60%. The Plan shall 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 (1) or (2) hereof are met with "90%" substituted for "60%" therein. (f) The "Top-Heavy Ratio" shall 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) either (1) the aggregate amount distributed from all plans in such Aggregation Group to or on behalf of any Key Employee during the period of 5 Plan Years ending on the Determination Date or (2) effective January 1, 2002, the sum of the amount of any in-service distributions during the period of 5 Plan Years ending on the Determination Date, and the amount of any other distribution during the one-year period ending on the Determination Date, to or on behalf of any Key Employee from all plans in such Aggregation Group. (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 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 (or, effective January 1, 2002, the one-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. 36 The present value of accrued benefits under any defined contribution plan shall be determined under the method used for accrual purposes for all plans maintained by the Employer and all Affiliates 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. (g) "Permissive Aggregation Group" means the Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410. (h) "Required Aggregation Group" means (1) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the Determination Period (regardless of whether the plan has terminated), and (2) any other qualified plan of the Employer which enables a plan described in (1) to meet the requirements of Code Section 401(a)(4) or 410. (i) "Present Value" shall be based on an interest assumption of 5% and a post-retirement mortality assumption based on the 1971 TPF&C Forecast Mortality Table. (j) "Employer" means the Employer and all Affiliates except for purposes of determining ownership under Code Section 416(i)(1). 8.2. Top-Heavy Plan Requirements. 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 Affiliate through the end of such Plan Year (whether or not in the status of Eligible Employee) shall be not less than the lesser of: (a) 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. 8.3. Other Top-Heavy Plan Requirements. (a) 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 Affiliate, there shall be substituted "4%" for "3%" in subsection 8.2(a) above. For the purposes of determining whether or not the provisions of this Section have been satisfied, (1) 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; (2) all defined contribution plans in the Aggregation Group shall be treated as a single plan; and (3) employer matching contributions made with respect to periods beginning before January 1, 2002 and elective deferrals under all plans in the Aggregation Group shall 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 Group shall be deemed to be contributions made under the Plan, 37 and, to the extent thereof, no duplication of such contributions shall be required hereunder solely by reason of this Section. Subsection 8.2(b) above shall 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. (b) The minimum allocation described in Section 8.2 shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year because of (A) the Participant's failure to complete 1,000 hours of service (or any equivalent provided in the Plan), (B) the Participant's failure to make mandatory employee contributions to the Plan, or (C) Considered Compensation less than a stated amount. (c) The provision in (a) above shall not apply to any Participant to the extent the Participant is covered under any other plan or plans of the Employer and the Employer's contribution and forfeitures allocated under such plan or plans are equal to or exceed the amount required to be allocated under (a) above. (d) The minimum allocation required (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D). 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. 38 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; (k) to make such determinations as are required pursuant to the provisions of Sections 7.3 hereof; 39 (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 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 40 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. 41 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 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 42 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. 43 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, including the time limits applicable for such procedure, including a statement of the claimant's right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on appeal. 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. The claimant or the claimant's authorized representative may examine the Plan and obtain, upon request and without charge, copies of all information relevant to the claimant's appeal. 44 (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. 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. (d) The decision on review shall be written in a manner calculated to be understood by the claimant. Such notice shall include the specific reasons for the decision, specific references to the pertinent Plan provisions on which the decision is based, the claimant's right to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits, and the claimant's right to bring a civil action under section 502(a) of ERISA. 45 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 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 46 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. 47 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. 48 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. 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. 49 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 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. 50 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 March, 2002. K-Tron International, Inc. By: /s/ Edward B. Cloues, II -------------------------- Title: Chairman and CEO ---------------------- Attest: /s/ Mary Vaccara ----------------- 51 EX-10.11.A 6 w58583ex10-11_a.txt SUPPLEMENT SCHEDULE LISTING ADDITIONAL PERSONS EXHIBIT 10.11A Indemnification Agreements The following additional persons are parties to Indemnification Agreements with K-Tron International, Inc.: Kevin C. Bowen Edward T. Hurd EX-10.18 7 w58583ex10-18.txt LOAN MODIFICATION AGREEMENT BETWEEN K-TRON & BANK EXHIBIT 10.18 THE BANK OF GLOUCESTER COUNTY LOAN MODIFICATION AGREEMENT K-TRON AMERICA, INC. Date: June 25, 2001 Loan #6039359-6600 Original Amount: $5,000,000.00 Annual Fee: $12,500.00 Maturity Date: July 03, 2003 WHEREAS, the undersigned borrower executed the note referred to above on June 24, 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, 2003. DURING THE TERMS OF THE RENEWAL, PAYMENTS OF INTEREST ONLY SHALL BE DUE EACH MONTH BEGINNING JULY 01, 2001 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: 1. Permit the consolidated debt to net worth ratio of Guarantor (K-Tron International, Inc.) to be more than 1.60 at fiscal year-end 2001 and each fiscal year thereafter. 2. Permit the consolidated annual debt coverage ratio of Guarantor at each fiscal year-end to be less than 1.50. 3. Permit the consolidated net worth of Guarantor to be less than $23,400,000.00 at fiscal year-end 2001 and each fiscal year thereafter, excluding any declines due to changes in foreign exchange rates subsequent to January 1, 2000. 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. ACCEPTED BY: K-TRON AMERICA, INC. THE BANK OF GLOUCESTER COUNTY /s/ Kevin Bowen 6/22/01 ----------------------------------- KEVIN C. BOWEN, PRESIDENT/DATE By: /s/ David J. Hanrahan, Sr. --------------------------------- David J. Hanrahan, Sr., VP /s/ Patricia M. Moore ----------------------------------- PATRICIA M. MOORE/VP/FINANCE/DATE EX-10.19 8 w58583ex10-19.txt LETTER AGREEMENT DATED BETWEEN K-TRON & THE BANK EXHIBIT 10.19 [THE BANK OF GLOUCESTER COUNTY LETTERHEAD] November 30, 2001 Ronald Remick Senior Vice President & Chief Financial Officer K-Tron International, Inc. Patricia M. Moore Vice President Finance K-Tron America, Inc. P.O. Box 888 Pitman, NJ 08071-0888 Dear Mr. Remick & Ms. Moore: At present K-Tron America, Inc. (KA) has a net worth loan covenant on its credit facilities with The Bank of Gloucester County as follows: KA will not without prior written consent of The Bank permit the consolidated net worth of K-Tron International, Inc. (KI) to be less than $23,400,000. at fiscal year end 2001 and each fiscal year thereafter, excluding any declines due to changes in foreign exchange rates subsequent to January 1, 2000. At the request of KA & KI, The Bank of Gloucester County hereby agrees to alter that covenant on all KA credit facilities to the following: KA will not without prior written consent of The Bank permit the consolidated net worth of KI to be less than $21,800,000. at fiscal year end 2001 and each fiscal year thereafter, excluding any declines due to changes in foreign exchange rates subsequent to January 1, 2000. All other terms, conditions, and covenants of the existing credit facilities (including but not limited to the debt to net worth ratio of KI and the annual debt coverage ratio of KI) remain unchanged except as specifically altered above. Kindly review this alteration, and if you are in agreement with it please sign below as your acceptance of the alteration. Sincerely, The Bank of Gloucester County /s/ David J. Hanrahan, Sr. David J. Hanrahan, Sr. Senior Vice President ACCEPTED BY: K-Tron America, Inc. /s/ Patricia M. Moore 11/30/01 - -------------------------------------------- Patricia M. Moore Date Vice President Finance K-Tron International, Inc. /s/ Ronald Remick 11/30/01 - -------------------------------------------- Ronald Remick Date Senior Vice President/CFO EX-21.1 9 w58583ex21-1.txt K-TRON LIST OF SUBSIDIARIES 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 Colormax Limited....................................... United Kingdom Pneumatic Conveying Systems Limited ................... United Kingdom K-Tron (Schweiz) AG........................................... Switzerland K-Tron Asia Pacific Holding Pte Ltd. .................. Singapore K-Tron Asia Pacific Pte ........................ Singapore K-Tron China Limited................................... Hong Kong K-Tron Deutschland GmbH................................ Germany K-Tron France S.a.r.l.................................. France K-Tron Great Britain Ltd............................... United Kingdom 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 2001. EX-23.1 10 w58583ex23-1.txt CONSENT OF INDEPENDENT ACCOUNTANTS 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, 33-39039, 33-39040 and 2-72898. /s/Arthur Andersen LLP Philadelphia, Pennsylvania March 18, 2002 EX-99.1 11 w58583ex99-1.txt LETTER RESPONSIVE TO TEMPORARY NOTE 3T EXHIBIT 99.1 [K-TRON INTERNATIONAL, INC. LETTERHEAD] [K-TRON LOGO] March 20, 2002 Securities and Exchange Commission Washington, DC 20549 Re: Letter responsive to Temporary Note 3T to Article 3 of Regulation S-X Dear Sir or Madam: In compliance with Temporary Note 3T to Article 3 of Regulation S-X, I am writing to inform you that Arthur Andersen LLP ("Andersen") has represented to K-Tron International, Inc. ("K-Tron") that Andersen's audit of the consolidated balance sheets of K-Tron and its subsidiaries as of December 29, 2001 and December 30, 2000, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three fiscal years in the period ended December 29, 2001, was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen personnel working on the audit, availability of national office consultation and availability of personnel at foreign affiliates of Andersen to conduct the relevant portions of the audit. Sincerely, /s/ Edward B. Cloues, II - ------------------------- Edward B. Cloues, II Chairman of the Board and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----