-----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, FZrz57ZIFSmd3PzJljJSUJwCapRWpYw5Z9y4dTKSju6au2/ejtMJs03gfn0VM/3d lGk/3IjRqXM30JGUdXbbAA== 0000893220-97-001715.txt : 19971028 0000893220-97-001715.hdr.sgml : 19971028 ACCESSION NUMBER: 0000893220-97-001715 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971027 SROS: NONE 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09576 FILM NUMBER: 97701349 BUSINESS ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 BUSINESS PHONE: 6096616240 MAIL ADDRESS: STREET 1: ROUTE 55 & 553 STREET 2: P O BOX 888 CITY: PITMAN STATE: NJ ZIP: 08071-0888 10-Q 1 FORM 10-Q, K-TRON INTERNATIONAL, INC. 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 1997 ------------------ 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 (IRS Employer ID #) incorporation of organization) Routes 55 & 553 P.O. Box 888 Pitman, New Jersey 08071-0888 ---------------------------------------- (Address of Principal Executive Offices) (Zip Code) (609) 589-0500 ---------------------------------------- (Registrant's Telephone Number Including Area Code) Not Applicable ---------------------------------------- (Former name, former address and formal fiscal year, if changed since last report) 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 --- --- The number of shares of Common Stock outstanding as of September 27, 1997 was: 3,183,259 Shares --------- 2 K-TRON INTERNATIONAL, INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements -------------------- Consolidated Balance Sheets September 27, 1997 and December 28, 1996 1 Consolidated Statements of Income and Retained Earnings for the Three and Nine Months Ended September 27, 1997 and September 28, 1996 2 Consolidated Statements of Cash Flows Nine Months Ended September 27, 1997 and September 28, 1996 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 - 8 PART II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K 9 3 ITEM 1. FINANCIAL STATEMENTS PART I. FINANCIAL STATEMENTS K-TRON INTERNATIONAL, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands except Share Data)
Sept.27, December 28, 1997 1996 (Unaudited) (Audited) ----------- --------- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 5,144 $ 3,079 Accounts receivable (less allowance for doubtful accounts of $1,001 and $1,037) 16,199 16,336 Inventories 11,435 13,258 Deferred income taxes 641 641 Prepaid expenses and other current assets 1,089 1,353 ------- ------- Total Current Assets 34,508 34,667 PROPERTY, PLANT AND EQUIPMENT, net 14,703 15,624 PATENTS, net 614 493 EXCESS OF COST OVER NET ASSETS ACQUIRED, net 3,767 4,422 OTHER ASSETS 176 124 ------- ------- Total Assets $53,768 $55,330 ======= ======= LIABILITIES & SHAREHOLDERS' EQUITY ---------------------------------- CURRENT LIABILITIES: Notes payable to banks $ -- $ 494 Current portion of long-term debt 465 367 Accounts payable 5,291 5,641 Accrued expenses & other current liabilities 5,056 3,440 Accrued payroll 3,954 2,579 Accrued commissions 2,357 2,407 Customer advances 1,877 2,318 Accrued warranty 1,006 826 Income taxes payable 990 1,226 Deferred income taxes 7 7 -------- -------- Total Current Liabilities 21,003 19,305 LONG-TERM DEBT, net of current portion 14,440 20,807 DEFERRED INCOME TAXES 459 459 OTHER NONCURRENT LIABILITIES 1,172 1,565 COMMITMENTS AND CONTINGENCIES SERIES A JUNIOR PARTICIPATING PREFERRED SHARES, $.01 par value - authorized 50,000 shares; none issued -- -- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value - authorized 950,000 shares; none issued -- -- Common stock, $.01 par value - authorized 15,000,000 shares; issued 4,246,209 shares and 4,200,328 shares 42 42 Paid-in capital 14,541 14,120 Retained earnings 13,565 9,802 Cumulative translation adjustments (890) (206) -------- -------- 27,258 23,758 Treasury stock, 1,062,950 shares - at cost (10,564) (10,564) -------- -------- Total Shareholders' Equity 16,694 13,194 -------- -------- Total Liabilities and Shareholders' Equity $ 53,768 $ 55,330 ======== ========
See Notes to Consolidated Financial Statements -1- 4 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME & RETAINED EARNINGS (Dollars in Thousands except Share Data) (Unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 27, Sept. 28, Sept. 27, Sept. 28, 1997 1996 1997 1996 ---- ---- ---- ---- REVENUES $ 21,790 $ 22,547 $ 64,897 $ 68,006 COST OF REVENUES 11,813 12.943 35,767 38,393 ---------- ---------- ---------- ---------- Gross profit 9,977 9,604 29,130 29,613 OPERATING EXPENSES Selling, general and administrative 7,016 7,145 21,042 22,063 Research and development 644 523 2,050 1,755 ---------- ---------- ---------- ---------- 7,660 7,668 23,092 23,818 ---------- ---------- ---------- ---------- Operating Profit 2,317 1,936 6,038 5,795 INTEREST EXPENSE 281 505 915 1,684 ---------- ---------- ---------- ---------- Income Before Income Taxes 2,036 1,431 5,123 4,111 INCOME TAX PROVISION 575 270 1,360 1,270 ---------- ---------- ---------- ---------- Net Income 1,461 1,161 3,763 2,841 RETAINED EARNINGS Beginning of period 12,104 7,456 9,802 5,776 ---------- ---------- ---------- ---------- End of period $ 13,565 $ 8,617 $ 13,565 $ 8,617 ========== ========== ========== ========== EARNINGS PER SHARE $ .45 $ .37 $ 1.17 $ .91 ========== ========== ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 3,227,000 3,138,000 3,207,000 3,128,000 ========== ========== ========== ==========
See Notes to Consolidated Financial Statements -2- 5 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Nine Months Ended ----------------- Sept. 27, Sept. 28, 1997 1996 ---- ---- OPERATING ACTIVITIES: Net Income $ 3,763 $ 2,841 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,287 2,461 Amortization of deferred gain on sale/leaseback transaction (284) (340) Deferred income taxes -- 343 Changes in assets and liabilities: Accounts receivable, net (871) 1,941 Inventories 1,321 3,028 Prepaid expenses and other current assets 214 86 Other assets (66) (102) Accounts payable (95) (3,646) Accrued expenses and other current liabilities 3,229 2,846 Accrued warranty 226 (86) Income taxes (221) 256 -------- -------- Net cash provided by operating activities 9,503 9,628 -------- -------- INVESTING ACTIVITIES: Capital expenditures (1,774) (1,356) Investment in patents (151) (46) -------- -------- Net cash used in investing activities (1,925) (1,402) -------- -------- FINANCING ACTIVITIES: Net re-payments under notes payable to banks (5,420) (14,907) Principal payments on long-term debt (475) (213) Proceeds from issuance of long-term debt 225 5,949 Proceeds from issuance of common stock 421 70 -------- -------- Net cash used in financing activities (5,249) (9,101) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (264) (111) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,065 (986) -------- -------- CASH AND CASH EQUIVALENTS Beginning of period 3,079 3,239 -------- -------- End of period $ 5,144 $ 2,253 ======== ========
See Notes to Consolidated Financial Statements -3- 6 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 27, 1997 (Unaudited) 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of K-Tron International, Inc. ("K-Tron" or the "Company") and its subsidiaries. All intercompany transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation of results for interim periods have been made. The results for the interim periods are not necessarily indicative of the results for a full year. The unaudited financial statements herein should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 28, 1996 which was previously filed with the Securities and Exchange Commission. 2. Supplemental Disclosures of Cash Flow Information The Company considers all highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents. Cash paid in the first nine months of 1997 and 1996 for interest was $1.0 million and $1.1 million, respectively, and for income taxes was $1.5 million and $.6 million, respectively. 3. Impact of New Accounting Pronouncement In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128") which requires the Company to present in the financial statements "basic" and "diluted" earnings per share, as defined. SFAS No. 128 is effective for interim and annual periods ending after December 15, 1997; however, pro forma "basic" and "diluted" earnings per share as defined for the third quarter and nine month periods ended September 27, 1997 and September 28, 1996 would be as follows, if SFAS No. 128 were adopted for those periods:
Third Quarter Nine Months ------------- ----------- 1997 1996 1997 1996 ---- ---- ---- ---- Basic $.46 $.37 $1.19 $.91 Diluted $.45 $.37 $1.17 $.91
-4- 7 ITEM 2. K-TRON INTERNATIONAL, INC. & SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 27, 1997 Results of Operations For the third quarter and first nine months of 1997, the Company reported net income of $1,461,000 and $3,763,000, respectively, compared to $1,161,000 and $2,841,000 in the same periods in 1996. K-Tron is an international company with approximately 60% of its revenues derived from products manufactured and services performed from its facilities outside the United States, primarily in Europe. As such, the financial position and performance of the Company is sensitive to both translation and transaction fluctuations in foreign currency exchange rates ("foreign exchange rates"). The following table sets forth the Company's results of operations expressed as a percentage of total revenues:
Three Months Ended Nine Months Ended ----------------------- --------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Total Revenues 100.0% 100.0% 100.0% 100.0% Cost of Revenues 54.2 57.4 55.1 56.5 ----- ----- ----- ----- Gross Profit 45.8 42.6 44.9 43.5 Selling, General & Administrative 32.2 31.7 32.5 32.4 Research & Development 3.0 2.3 3.1 2.6 ----- ----- ----- ----- Operating Income 10.6 8.6 9.3 8.5 Interest 1.3 2.2 1.4 2.5 ----- ----- ----- ----- Income before income taxes 9.3% 6.4% 7.9% 6.0% ===== ===== ===== =====
Backlog at end of period (at Sept. 27, 1997 constant foreign exchange rates, in millions): Sept. 1997 Dec. 1996 Sept.1996 ---------- --------- --------- $18,586 $19,606 $19,442 ======= ======= ======= Translation of the Company's foreign revenues and results of operations into U.S. dollars is affected by changes in foreign exchange rates, particularly with respect to the Swiss franc and the Deutsche mark. In addition, revenues and income of the Company with respect to particular transactions may be affected by changes in foreign exchange rates where sales are made in other currencies, including in particular the U.S. dollar/Swiss -5- 8 franc, U.S. dollar/Deutsche mark and Deutsche mark/Swiss franc exchange rates. For the third quarter and first nine months of 1997 as well as the same periods in 1996, the changes in these exchange rates were as follows:
Three Months Ended Nine Months Ended -------------------- ---------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Average U.S. dollar equivalent of one Swiss franc $.671 $.820 $.687 $.822 % devaluation vs. prior year -18.2% -16.4% Average U.S. dollar equivalent of one Deutsche mark $.554 $.670 $.580 $.670 % devaluation vs. prior year -17.3% -13.4% Average Swiss franc equivalent of one Deutsche mark .826 .817 .845 .815 % appreciation vs. prior year +1.1% +3.7%
Total revenues decreased by $.8 million or 3.4% in the third quarter of 1997 and by $3.1 million or 4.6% for the first nine months of 1997 when compared to the same periods in 1996. The decrease in revenues was due to lower exchange translation rates of certain currencies into U.S. dollars. If the average foreign exchange translation rates for the third quarter and first nine months of 1997 were applied to the same periods in 1996, revenues would have increased 9.6% for the quarter and 6.2 % for the first nine months. Gross profit as a percent of revenues improved to 45.8% in the third quarter of 1997 and to 44.9% for the first nine months of 1997, as compared to 42.6% and 43.5% for the same periods in 1996. The change in gross margin in 1997 was primarily due to sales mix. Selling, general and administrative (SG&A) expense decreased by $.1 million or 1.8% in the third quarter of 1997 and by $1.0 million or 4.6% for the first nine months of 1997, as compared to the same periods in 1996. The decrease in SG&A was due to the lower foreign exchange translation rates previously described offset in part by higher selling expenses. Research and development (R&D) expenditures increased by $.1 million or 23.1% in the third quarter of 1997 and by $.3 million or 16.8% for the first nine months of 1997, as compared to the same periods in 1996. R&D expenses increased due to the development of new product enhancements, offset in part by lower foreign exchange translation rates. Interest expense decreased by $.2 million or 44.4% in the third quarter of 1997 and by $.8 million or 45.7% for the first nine months of 1997, as compared to the same periods in 1996, primarily due to lower debt levels and lower foreign exchange translation rates. The effective tax rates for the third quarter and first nine months of 1997 were 28.2% and 26.5%, respectively, compared to 18.9% and 30.9% for the same periods in 1996. The effective tax rate in the first nine months of 1997 was lower than the same period in 1996 due to the utilization of foreign net operating loss carry forwards. The effective tax rate was lower in the third quarter of 1996 as compared to the same period in 1997 due to the 1996 reduction of the valuation allowance for certain foreign net operating loss carry forwards that arose from foreign operation restructuring. -6- 9 The September 1997 backlog decreased by 5.2%, primarily in the U.S., when compared to December 1996 and decreased by 4.4%, primarily in Europe, when compared to the same period in 1996 (at constant foreign exchange rates). Liquidity and Capital Resources The Company's capitalization as of the end of the third quarter of 1997 and fiscal years 1996 and 1995 is set forth below:
September December December (Dollars in Thousands) 1997 1996 1995 --------- -------- -------- Short-term debt including current portion of long-term debt $ 465 $ 861 $ 2,133 Long-term debt 14,440 20,807 35,004 ------- ------- ------- Total debt 14,905 21,668 37,137 Shareholders' equity 16,694 13,194 9,421 ------- ------- ------- Total debt and shareholders' equity $31,599 $34,862 $46,558 ======= ======= ======= Percent total debt to total capitalization 47% 62% 80% Percent long-term debt to equity 86% 158% 372% Percent total debt to equity 89% 164% 394%
Total debt decreased by $6.8 million in the first nine months of 1997, of which $1.1 million was due to the effect of foreign exchange translation. Total debt without the effect of the foreign exchange translation decreased by $5.7 million. European and U.S. debt decreased by $6.7 million and $.1 million, respectively. At September 27, 1997, the Company had $5.0 million of availability under its U.S. revolving credit agreement and $9.8 million of availability under certain of its Swiss loan agreements. At September 27, 1997, there was working capital of $13.5 million as compared to $15.4 million at December 28, 1996, and the ratio of current assets to current liabilities at those dates was 1.64 and 1.80, respectively. Working capital decreased in 1997 primarily due to the utilization of funds generated from operations and improved asset management to reduce indebtedness. In the first nine months of 1997 and 1996, the Company utilized earnings from operations and internally-generated funds to meet its working capital needs and reduce debt. Net cash provided by operating activities was $9.5 million in the first nine months of 1997 as compared to $9.6 million in the same period of 1996. -7- 10 Net cash used in investing activities in the first nine months of 1997 and 1996 was for capital additions. Net cash used in financing activities in the first nine months of 1997 and 1996 was for the reduction of debt and was obtained from the cash provided by operating activities. Changes in foreign exchange rates, particularly with respect to the Swiss franc and Deutsche mark, caused a translation adjustment decrease in shareholders' equity of $.7 million in the first nine months of 1997. -8- 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 10.1 Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II 11.1 Computation of Earnings Per Share 27.1 Financial Data Schedule
(b) Reports on Form 8-K There were no reports on Form 8-K for the nine months ended September 27, 1997. -9 - 12 SIGNATURES Pursuant to the requirements 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: October 27, 1997 ---------------- By: /s/ Robert L. Weinberg ----------------------------- Robert L. Weinberg Senior Executive Vice President & Chief Financial Officer (Duly authorized officer and principal financial officer of the registrant) By: /s/ Alan R. Sukoneck ----------------------------- Alan R. Sukoneck Vice President, Chief Accounting & Tax Officer (Duly authorized officer and principal accounting officer of the registrant) -10- 13 EXHIBIT INDEX
Exhibit Number Description -------------- ----------- 10.1 Employment Agreement dated as of October 6, 1997 by and between K-Tron International, Inc. and Edward B. Cloues, II 11.1 Computation of Earnings Per Share 27.1 Financial Data Schedule
EX-10.1 2 EMPLOYMENT AGREEMENT DATED AS OF OCTOBER 6, 1997 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (the "Agreement") dated as of October 6, 1997 by and between K-TRON INTERNATIONAL, INC., a New Jersey corporation ("K- Tron"), and EDWARD B. CLOUES, II, a resident of Pennsylvania (the "Employee"). WHEREAS, K-Tron and the Employee desire to enter into an agreement to provide for the Employee's employment by K-Tron, upon the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment. K-Tron agrees to employ the Employee, and the Employee accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms, conditions and other provisions hereinafter set forth. 1.1 Employment Term. The employment term of this Agreement (the "Employment Term") shall commence on January 5, 1998 and shall continue until terminated in accordance with Section 8 or 9 hereof. 1.2 Duties and Responsibilities. During the Employment Term, the Employee shall serve as the Chairman of the Board and Chief Executive Officer of K-Tron, and he shall perform all duties and accept all responsibilities incident to such positions. 1.3 Extent of Service. During the Employment Term, the Employee shall use his reasonable best efforts in the performance of his duties and responsibilities hereunder, and he shall devote such time and attention thereto as may be necessary to perform such duties and responsibilities, it being understood that substantially all of his business time shall be devoted to K-Tron and to other activities of a type that might typically be performed by the chairman and chief executive officer of a company such as K-Tron. Without limiting other activities in which the Employee may be or become involved, it is recognized by K-Tron that the Employee shall continue as the non-executive Chairman of the Board of AMREP Corporation; however, the Employee will resign this position at any time after December 31, 1998 if so requested at that time by the Board of Directors of K-Tron (the "K-Tron Board"). 1.4 Compensation and Benefits. For all the services rendered during the Employment Term by the Employee hereunder, K-Tron shall pay the Employee a base salary ("Base Salary"), commencing on January 5, 1998, at the annual rate of $380,000, payable in installments at such times as K-Tron customarily pays its other senior level executives (but in no event less often than monthly). Such Base Salary may be increased from time to time during the Employment Term in the sole discretion of the K-Tron Board or any duly authorized committee thereof, and any such increased salary shall thereafter be the Employee's new Base Salary for all purposes of this Agreement. The Employee shall also be 2 entitled to receive bonus payments in the sole discretion of the K-Tron Board or any duly authorized committee thereof. In addition to said annual salary and bonus payments (if any), the Employee shall be entitled to a suitable car or car allowance, an annual physical examination by a physician selected by the Employee and annual paid vacation of six weeks per year, and he shall also be entitled to participate in such employee benefit plans of K-Tron as may exist from time to time on the same basis as other senior level executives of K-Tron. Notwithstanding the foregoing, and subject to the Employee qualifying for coverage on a reasonable basis, the Employee shall be provided with a term life insurance policy having a death benefit of $1,000,000 and disability insurance providing coverage equal to $30,000 per month through age 65 (alternatively, the Employee may purchase such disability coverage himself, with a waiting period of two years, and be reimbursed the cost thereof by K-Tron plus the estimated income taxes to be incurred on such reimbursement). The definition of disability shall be that the Employee is unable to perform his duties as the chief executive officer of K-Tron. The other terms of any such term life and disability insurance policies shall be reasonably satisfactory to both K-Tron and the Employee. 1.5 Stock Grant. On January 2, 1998, K-Tron shall issue to the Employee 10,000 fully vested shares of its Common Stock, which shares shall be unregistered and contain an appropriate securities law restrictive legend. On October 7, 1998, K-Tron shall issue to the Employee 20,000 shares of its Common Stock as a restricted stock grant under Section 6 of the K-Tron International, Inc. 1996 Equity Compensation Plan, as amended (the "1996 Equity Compensation Plan"), with the grant to provide that the restriction shall lapse as to 10,000 of such shares on January 5, 1999 and as to the other 10,000 shares on January 5, 2000, provided that the Employee is still employed by K-Tron on those dates; provided, however, that the foregoing restrictions shall lapse immediately if the Employment Term is terminated by (a) K-Tron for any reason other than "cause" as defined in Section 8.4(b) hereof or (b) the Employee either pursuant to Section 8.4(a) hereof or in connection with a Termination upon a Change of Control as described in Section 9.1(c) hereof. 1.6 Early Start Part-Time Employment. The Employee will be employed by K-Tron on a part-time basis and in a non-officer capacity from October 6, 1997 through January 4, 1998. His compensation for this three-month period shall equal $10,000 per month, or $30,000, plus an amount equal to the fees he would have received as a non-employee director of K-Tron for this period, including any bonus for 1997. This compensation of $10,000 per month (excluding the Board fee equivalent) for part-time services rendered by the Employee during the last three months of 1997 is intended by the parties to equate to, and was determined by reference to, the full-time annual compensation to be paid to the Employee in 1998 (that is, the sum of (a) the Base Salary the Employee will receive in 1998 when he is a full-time employee plus (b) the estimated value of the 10,000 shares of K-Tron Common Stock to be received by him on January 2, 1998). The Employee shall not be entitled to any fringe benefits during this three-month period, and his sole duty and responsibility shall be to work with Leo C. Beebe, the current Chairman and Chief Executive Officer of K-Tron, to ensure a smooth transition of responsibilities on January 5, 1998, which is the beginning of the Employment Term. -2- 3 1.7 Stock Option Grant. As of the date hereof, the Employee was granted two ten-year stock options under the 1996 Equity Compensation Plan to purchase a total of 100,000 shares of K-Tron Common Stock at the last reported sale price on the Nasdaq Stock Market as of this date and on the other terms and conditions set forth in two stock option agreements dated as of the date hereof between K-Tron and the Employee. 1.8 Location. Without his express written consent, the Employee shall not be obligated to relocate outside of the greater Philadelphia metropolitan area. 2. Reimbursement of Expenses. K-Tron shall reimburse the Employee for all ordinary and necessary out-of-pocket business expenses incurred by him in connection with the discharge of his duties and responsibilities hereunder in accordance with K-Tron's expense approval procedures then in effect and upon presentation by the Employee of an itemized account of such expenses. 3. Developments. The Employee shall disclose fully, promptly and in writing to K-Tron any and all inventions, discoveries, improvements, modifications and the like, whether patentable or not, which he conceives, makes or develops, solely or jointly with others, while employed by K-Tron and which (a) relate to the business, work or activities of K-Tron or any of its subsidiaries (K-Tron and its subsidiaries as they may exist from time to time are collectively referred to herein as the "K-Tron Group", and each is sometimes individually referred to herein as a "member" of the K-Tron Group) or (b) result from or are suggested by the carrying out of his duties hereunder, or from or by any information which he may receive while employed by K-Tron. The Employee hereby assigns, transfers and conveys to K-Tron or its designee all of his right, title and interest in and to any and all such inventions, discoveries, improvements, modifications and the like and agrees to take all such actions as may be requested by K-Tron at any time with respect to any such invention, discovery, improvement, modification or the like to confirm or evidence such assignment, transfer and conveyance. Furthermore, at any time and from time to time, upon the request of K-Tron, the Employee shall execute and deliver to K-Tron, or to another member of the K-Tron Group designated by K-Tron, any and all instruments, documents and papers, give evidence and do any and all other acts which, in the opinion of counsel for K-Tron, are or may be necessary or desirable to document such assignment, transfer and conveyance or to enable K-Tron or such other member of the K-Tron Group to file and prosecute applications for and to acquire, maintain and enforce any and all patents, trademark registrations or copyrights under United States or foreign law with respect to any such inventions, discoveries, improvements, modifications or the like or to obtain any extension, validation, reissue, continuance or renewal of any such patent, trademark or copyright. K-Tron or such other member of the K-Tron Group shall be responsible for the preparation of any such instruments, documents and papers and for the prosecution of any such proceedings and shall reimburse the Employee for all reasonable expenses incurred by him in compliance with the provisions of this Section 3. -3- 4 4. Confidential Information. The Employee acknowledges that, by reason of his employment by K-Tron, he will have access to confidential information of the K-Tron Group, including, without limitation, information and knowledge pertaining to business strategies, financial performance, products, inventions, discoveries, improvements, innovations, designs, ideas, trade secrets, proprietary information, manufacturing, packaging, advertising, distribution and sales methods, customer and client lists and relationships between members of the K-Tron Group and dealers, distributors, sales representatives, wholesalers, customers, clients, suppliers and others who have business dealings with such members ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset of K-Tron and the other members of the K-Tron Group and covenants that, both during and after the Employment Term, he will not disclose any such Confidential Information to any person, except in connection with the performance of his duties and responsibilities hereunder, without the prior written authorization of the K-Tron Board. The obligation of confidentiality imposed by this Section 4 shall not apply to information which appears in issued patents or printed publications, which otherwise becomes generally known in the industry through no act of the Employee in breach of this Agreement or which is required to be disclosed by court order or applicable law. 5. Non-Competition. (a) During (i) the Employment Term and (ii) for (A) two years thereafter only in the event that such Employment Term is terminated under Section 8.2 or 8.4(b) hereof or (B) one year thereafter if the Employee terminates employment with K-Tron with or without giving the notice required by Section 8.1 hereof (but excluding any termination by the Employee under Section 8.4(a) hereof or which is a Termination upon a Change of Control as defined in Section 9.1(c) hereof) or if it is terminated under Section 8.5 hereof, the Employee shall not, unless acting as an employee pursuant hereto or with the prior written consent of the K-Tron Board, directly or indirectly, own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit his name to be used in connection with, any business or enterprise engaged in the business of designing, engineering, manufacturing, marketing or distributing feeding or blending equipment, or in any other business then engaged in by K-Tron or any other member of the K-Tron Group, within (i) any state of the United States or the District of Columbia or (ii) any other country in which K-Tron or any member of the K-Tron Group has engaged in any such business within the prior year; provided, however, that notwithstanding the foregoing, the Employee shall not be prohibited from acting in any capacity for or with respect to any such entity if the Employee is not involved in any way with that part of the entity which is engaged in the competitive activity; and further provided, that this provision shall not be construed to prohibit the passive ownership by the Employee of not more than 1% of the equity of any entity which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the provisions of this Section 5(a) should ever be adjudicated to exceed the time, geographic, -4- 5 product or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, product or other limitations permitted by applicable law. (b) Nothing in Section 5(a) above shall be construed to prohibit the Employee from being connected as a partner, principal, shareholder, associate, special counsel, of counsel or otherwise with another lawyer or a law firm, including Morgan, Lewis & Bockius LLP, which performs services for clients engaged in any business or enterprise that is competitive with any business or enterprise in which K-Tron or any member of the K-Tron Group is engaged, provided that the Employee is not personally and knowingly involved in performing services for any such clients during the period specified in Section 5(a) with respect to any part of their businesses that would be so competitive. The parties further agree that, with respect to the confidentiality obligations of Section 4 of this Agreement, the Employee's knowledge of such confidential information shall not be imputed to any other lawyer or law firm with which the Employee may be or become connected. 6. No Solicitation. During (a) the Employment Term and (b) for (i) two years thereafter only in the event that such Employment Term is terminated under Section 8.2 or 8.4(b) hereof or (ii) one year thereafter if the Employee terminates employment with K-Tron with or without giving the notice required by Section 8.1 hereof (but excluding any termination by the Employee under Section 8.4(a) hereof or which is a Termination upon a Change of Control as defined in Section 9.1(c) hereof) or if it is terminated under Section 8.5 hereof, the Employee shall not, unless acting as an employee pursuant hereto or with the prior written consent of the K-Tron Board, (A) call on or solicit, either directly or indirectly, any person, firm, corporation or other entity who or which is, or within two years prior thereto had been, a customer of any member of the K-Tron Group, with respect to any matters involving the designing, engineering, manufacturing, marketing or distributing of feeding or blending equipment or involving any other business then engaged in by any member of the K-Tron Group, or (B) knowingly solicit for employment any person who is an employee of any member of the K-Tron Group (or who was such an employee within six months prior to any such termination). 7. Equitable Relief. (a) The Employee acknowledges that the restrictions contained in Sections 3, 4, 5 and 6 hereof are, in view of the nature of the business of K-Tron and the other members of the K-Tron Group, reasonable and necessary to protect the legitimate interests of the K-Tron Group, that K-Tron would not have entered into this Agreement in the absence of such restrictions, that the business of the K-Tron Group is international in scope and that any violation of any provision of those Sections could result in irreparable injury to K-Tron and the other members of the K-Tron Group. (b) The Employee agrees that in the event of any violation of the restrictions referred to in Section 7(a) above, K-Tron shall be entitled to preliminary and -5- 6 permanent injunctive relief, without the necessity of posting a bond or proving actual damages, and to an equitable accounting of all earnings, profits and other benefits arising from any such violation, which rights shall be cumulative and in addition to any other rights or remedies to which K-Tron may be entitled. (c) The Employee irrevocably and unconditionally agrees that in the event of any violation of the restrictions referred to in Section 7(a) above, an action may be commenced for preliminary and permanent injunctive relief and other equitable relief in any federal or state court of competent jurisdiction sitting in Gloucester or Camden County, New Jersey or in any other court of competent jurisdiction. The Employee hereby waives, to the fullest extent permitted by law, any objection that he may now or hereafter have to such jurisdiction or to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that such suit, action or proceeding has been brought in an inconvenient forum. The Employee agrees that effective service of process may be made upon him by mail under the notice provisions contained in Section 14 hereof and that all pleadings, notices and other papers may be served upon him in the same manner. (d) The non-competition and no solicitation provisions of Sections 5(a) and 6 above shall be extended by any time period during which the Employee is in violation of any of such provisions. (e) The Employee may provide, and any member of the K-Tron Group may similarly provide, a copy of Sections 3, 4, 5 and 6 of this Agreement to any business or enterprise (i) which the Employee may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or (ii) with which he may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Sections 5 and 6 of this Agreement after expiration of the time periods set forth therein. (f) The Employee represents and acknowledges that (i) he has been advised by K-Tron to consult his own legal counsel in respect of this Agreement and (ii) he has had full opportunity to do so. 8. Termination. 8.1 By Employee. The Employee may terminate the Employment Term effective upon not less than 90 days prior written notice to K-Tron. Should the Employee elect to terminate the Employment Term on this basis, K-Tron shall not have any liability or obligation to the Employee hereunder after the date on which the Employment Term ends except for unpaid salary, bonus and benefits accrued to such date and any additional benefits or payments (excluding any severance benefits or payments) payable to the Employee under -6- 7 any applicable formal policy or plan of K-Tron which covers the Employee at the time of his termination. 8.2 Partial or Total Disability. If in the good faith judgment of the K-Tron Board, based upon the advice of two disinterested physicians, the Employee is unable to perform his duties and responsibilities hereunder by reason of illness, injury or incapacity for six consecutive months, or for six months during any 12 month period, during which time K-Tron shall continue to compensate the Employee hereunder, the Employment Term may be terminated by K-Tron. In the event the Employee is terminated for disability as aforesaid, he shall be entitled to receive two years of severance following the termination date of the Employment Term at his then-annual Base Salary, payable in equal monthly installments, plus the amount of any bonus that may have been previously awarded to him but not yet paid. All severance payments payable to the Employee under this Section 8.2 shall be reduced by the amount of any payments due the Employee for this time period under any applicable disability benefit programs, including Social Security disability, worker's compensation and disability retirement benefits. Except as provided above and in Section 8.6 hereof, and except for any other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of K-Tron which covered the Employee at the termination date of the Employment Term, K-Tron shall not have any other liability or obligation to the Employee in the event of the termination of the Employment Term due to his disability. 8.3 Death. In the event that the Employee dies during the Employment Term, K-Tron shall pay to his executors, administrators or personal representatives, as appropriate, an amount equal to the installment of his then-annual Base Salary payable for the month in which he dies and for three months thereafter (and also the amount of any bonus that may have been previously awarded to him but not yet paid). K-Tron shall not have any other liability or obligation hereunder to the Employee's executors, administrators, personal representatives, heirs, assigns or any other person claiming under or through him, except for any benefits or other payments (excluding any severance benefits or payments) payable to the Employee under any applicable formal policy or plan of K-Tron which covered the Employee at the time of his death. 8.4 For Cause. The Employment Term may be terminated at any time either (a) by the Employee for the failure of K-Tron to observe or perform any of the material terms or provisions hereof provided that the Employee has given written notice of such failure to K-Tron and such failure has continued for 30 days thereafter, or (b) by K-Tron, by action taken in good faith by the K-Tron Board, for "cause." For purposes of this Agreement, "cause" shall mean the failure of the Employee to observe or perform (other than by reason of illness, injury or incapacity) any of the material terms or provisions of this Agreement provided that the Employee has been given written notice of such failure by the K-Tron Board and such failure has continued for 30 days thereafter, conviction of a felony or other crime involving moral turpitude, misappropriation of K-Tron funds, habitual insobriety, -7- 8 habitual substance abuse or the commission of an act of dishonesty by the Employee resulting in or intended to result in wrongful personal gain or enrichment at the expense of K-Tron. 8.5 Without Cause. (a) K-Tron, by action of the K-Tron Board, may terminate the Employment Term effective at any time after January 8, 2001 without cause upon not less than two years prior written notice to the Employee, which notice may be given at any time after the date hereof. If the Employee is given notice of the termination of the Employment Term on this basis, the Employee may elect to terminate the Employment Term within 60 days after receipt of such notice and to be paid, on the date of such termination, a lump sum amount equal to 200% of the Employee's then-annual Base Salary, in which event K-Tron shall not have any further liability or obligation to the Employee hereunder after such date of termination except for (i) any unpaid salary and benefits accrued to such date and the amount of any bonus that may have been previously awarded to him but not yet paid, (ii) any additional or other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of K-Tron which covers the Employee at that time and (iii) the benefits provided under Section 8.6 hereof. (b) After January 8, 2001, K-Tron, by action of the K-Tron Board, may terminate the Employment Term without cause upon not less than 30 days prior written notice to the Employee accompanied by payment to the Employee of a lump sum amount equal to 200% of the Employee's then-annual Base Salary, in which event K-Tron shall not have any further liability or obligation to the Employee hereunder after the date of termination of the Employment Term except for (i) any unpaid salary and benefits accrued to such date and the amount of any bonus that may have been previously awarded to him but not yet paid, (ii) any additional or other benefits or payments (excluding any other severance benefits or payments) payable to the Employee under any applicable formal policy or plan of K-Tron which covers the Employee at that time and (iii) the benefits provided under Section 8.6 hereof. 8.6 Continuation of Health Coverage. Notwithstanding any other provision of this Agreement, in the event of the termination of the Employment Term for partial or total disability under Section 8.2 hereof or without cause under Section 8.5 hereof, K-Tron shall continue until the second anniversary of the termination date, on the same cost-sharing basis in effect immediately prior to such termination, the medical and other health care benefits which were provided to the Employee immediately prior to such termination. 9. Special Compensation Provisions. 9.1 Definitions. For purposes hereof, the following terms shall have the following meanings unless the context clearly otherwise requires: -8- 9 (a) As used in this Section 9, a "Change of Control" shall be deemed to have occurred if: (i) a liquidation or dissolution of K-Tron or the sale (excluding transfers to subsidiaries) of all or a substantial majority of the assets of K-Tron or the K-Tron Group occurs; (ii) as a result of a tender offer, exchange offer, stock purchase (excluding a redemption approved by the K-Tron Board which is not in connection with any of the other events mentioned in this clause (ii)), other stock acquisition, merger, consolidation, recapitalization, reverse stock split, sale or transfer of assets or other transaction, any person or group (as such terms are used in and under Section 13(d) of the Exchange Act) other than the Employee or a group which includes the Employee becomes the beneficial owner (as defined in Rule 13-d under the Exchange Act), directly or indirectly, of securities of K-Tron representing more than 20% of the Common Stock of K-Tron or the combined voting power of K-Tron's then outstanding securities; or (iii) during any period of two consecutive years, individuals who, at the beginning of such period, constitute the K-Tron Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by K-Tron's shareholders, of at least two-thirds of the directors who were not directors at the beginning of such period was approved by a vote of at least two-thirds of the directors then still in office who were either directors at the beginning of the period or who, in connection with their election or nomination, received the foregoing two-thirds approval. (b) "Termination of Employment" means the termination of the Employee's actual employment relationship with K-Tron, and "Termination Date" means the date of such termination. (c) "Termination upon a Change of Control" means a Termination of Employment upon or within one year after a Change of Control either: (i) initiated by K-Tron or any successor thereto for any reason other than a valid Termination of Employment permitted under any of Sections 8.2, 8.3 or 8.4(b) hereof; or (ii) initiated by the Employee in his sole discretion and without regard to the reason. 9.2 Compensation upon Termination Involving a Change of Control. In the event of the Employee's Termination upon a Change of Control, K-Tron shall: -9- 10 (a) pay to the Employee, within five business days of the Termination Date, the following sums in cash: (i) an amount equal to three times the Employee's annual Base Salary in effect either immediately prior to the Termination Date or immediately prior to the Change of Control, whichever is higher; and (ii) unless the Employee notifies K-Tron in writing that he intends to retain his options, an amount in redemption of such options equal to the amount, if any, by which the aggregate exercise price of all stock options held by the Employee under any K-Tron stock option or similar plan which have an exercise price below the fair market value of the shares subject to such options (whether or not such options are exercisable at the Termination Date) is less than the aggregate fair market value of the shares of stock subject to such options, with all computations based upon the average closing market price of a share of such stock for the five trading days immediately preceding the Termination Date (or, if higher, the highest cash amount per share paid by the acquiror in connection with any tender offer, stock purchase, other stock acquisition, merger, consolidation or other event which constituted the applicable Change of Control); (b) continue or cause to be continued for the benefit of the Employee, and at no cost to the Employee, the coverage existing for his benefit immediately prior to the Change of Control under all life, disability, health and other welfare benefit plans provided to the Employee pursuant to Section 1.4 hereof until the earlier of (i) 24 months after the Termination Date and (ii) such time as the Employee has received, at no or nominal cost to him, similar benefits from a subsequent employer; and (c) permit the Employee free use of his company car, if any, for a period of 24 additional months. Thereafter, the Employee shall return the car to K-Tron unless, in the case of a car owned by a member of the K-Tron Group, the Employee elects to purchase the car at the net book value thereof at the date of purchase or, in the case of a car leased by a member of the K-Tron Group, the Employee pays to such member, as such amounts become due and payable, all rental payments charged to such member for the use of such car. In the event of the Employee's Termination upon a Change of Control, the Employee shall receive the benefits of this Section 9.2 in lieu of any other post-termination severance payments to which he might otherwise be entitled under this Agreement on account of the termination of his Employment Term. In addition, the Employee shall be entitled to receive within five business days of the Termination Date any unpaid salary and benefits accrued to the date of such termination and the amount of any bonus that may have been previously awarded to him but not yet paid, and thereafter the Employee shall also be entitled to receive any additional or other benefits or payments (excluding any other severance -10- 11 benefits or payments) payable to the Employee under any applicable formal policy or plan of K-Tron which covered the Employee at the time of his termination. 9.3 Enforcement. In the event that K-Tron shall fail or refuse to make payment of any amount due the Employee under Section 9.2 above within the time described therein or to provide the Employee any of the benefits described in Sections 9.2(b) and (c) above, K-Tron shall pay to the Employee, in addition to the payment of any other sums provided in this Agreement: (a) interest, compounded quarterly, on any amount remaining unpaid from the date payment is required under such Section 9.2 until paid to the Employee, at the rate from time to time announced by Citibank N.A. (or any successor) as its "prime rate" plus 3%, each change in such rate to take effect on the effective date of the change in such prime rate; and (b) on demand, the amount necessary to reimburse the Employee in full for all expenses (including all attorneys' fees and expenses) incurred by the Employee in enforcing any of the obligations of K-Tron under such Section 9.2. 9.4 Certain Increase in Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by K-Tron to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar successor provision or statute, the Employee shall be paid an additional amount (the "Gross-Up Payment") such that the net amount retained by the Employee after deduction of (i) any excise tax imposed under Section 4999 of the Code, or any similar or successor provision, and (ii) all federal, state and local income, wage and employment taxes and excise taxes imposed upon the Gross-Up Payment, shall be equal to the Payment. For purposes of determining the amount of the Gross-Up Payment, the Employee shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local taxes at the highest marginal rate of taxation in the state and locality of the Employee's residence on the Termination Date, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes. (b) All determinations to be made under this Section 9 shall be made by K-Tron's independent public accounting firm immediately prior to the Change of Control (the "Accounting Firm"), which firm shall provide its determinations and any supporting calculations to both K-Tron and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon K-Tron and the Employee. -11- 12 Within five days after the Accounting Firm's determination, K-Tron shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement which exceed the amount already paid or distributed under Section 9.2(a) above. (c) In the event that upon any audit by the Internal Revenue Service, or by any state or local taxing authority, of the Payment or Gross-Up Payment, a change is finally determined to be required in the amount of taxes paid by the Employee, appropriate adjustments shall be made under this Agreement such that the net amount which is payable to the Employee after taking into account the provisions of Section 4999 of the Code, or any similar or successor provision, shall reflect the intent of the parties as expressed in subsection (a) above, in the manner determined by the Accounting Firm. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by K-Tron. K-Tron agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 10. Survivorship. The respective rights and obligations of the parties under this Agreement shall survive any termination of the Employee's employment to the extent necessary for the intended preservation of such rights and obligations. 11. Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due the Employee under this Agreement on account of any remuneration attributable to any subsequent or other employment that the Employee may have or obtain. 12. Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in the City of Philadelphia, Pennsylvania in accordance with National Rules for the Resolution of Employee Disputes then in effect of the American Arbitration Association (the "AAA") (or, if no such rules be in effect, then under the regular rules of the AAA), before a panel of three arbitrators, two of whom shall be selected by K-Tron and the Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Any award entered by the arbitrators shall be final, binding and nonappealable (except as provided by applicable statutory law), and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue -12- 13 of the Agreement. If the Employee prevails on any material issue which is the subject of such arbitration or lawsuit, K-Tron shall be responsible for all of the fees of the AAA and the arbitrators and any expenses relating to the conduct of the arbitration (including K-Tron's and the Employee's reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its or his own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the AAA. 13. Withholding. K-Tron may withhold from any payments under this Agreement all federal, state and local taxes as K-Tron is required to withhold pursuant to any law or governmental rule or regulation. Except as otherwise specifically provided herein, the Employee shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement. 14. Notices. All notices and other communications hereunder shall be in writing and deemed to have been given when hand delivered, in person or by a recognized courier or delivery service, or when mailed by registered or certified mail, return receipt requested, as follows (provided that notice of change of address shall be deemed given only when received): If to K-Tron, to: K-Tron International, Inc. Routes 55 and 553 Pitman, NJ 08071 Attention: Corporate Secretary If to the Employee, to: Edward B. Cloues, II 1133 Forest Hill Drive Lower Gwynedd, PA 19002 or to such other name or address as any designated recipient shall specify by notice to the other designated recipient in the manner specified in this Section 14. Any communication delivered in another manner shall be deemed given when actually received by the intended recipient. 15. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, without giving effect to any conflict of laws provisions. -13- 14 16. Contents of Agreement, Amendment and Assignment. (a) This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes any prior employment agreement between the parties and shall not be changed, modified or terminated except upon written amendment executed by a duly authorized officer of K-Tron and the Employee. (b) Employee acknowledges that from time to time, K-Tron and other members of the K-Tron Group may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of K-Tron or other members of the K-Tron Group may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of any member of the K-Tron Group (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement. (c) All of the provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, personal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee hereunder are of a personal nature and shall not be assignable or delegable in whole or in part by the Employee. K-Tron shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of K-Tron, by agreement in form and substance satisfactory to the Employee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that K-Tron would be required to perform if no such succession had taken place. 17. Severability. If any provision of this Agreement or the application thereof to anyone or any circumstance is held invalid or unenforceable in any jurisdiction, the remainder of this Agreement, and the application of such provision to such person or entity or such circumstance in any other jurisdiction or to other persons, entities or circumstances in any jurisdiction, shall not be affected thereby, and to this end the provisions of this Agreement are severable. 18. Remedies Cumulative; No Waiver. Except as expressly stated herein, no remedy conferred upon any party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by any party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its or his sole discretion. -14- 15 19. Beneficiaries/References. The Employee shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following the Employee's death by giving K-Tron written notice thereof. In the event of the Employee's death or a judicial determination of the Employee's incompetence, reference in this Agreement to the Employee shall be deemed, where appropriate, to refer to the Employee's beneficiary, estate or other legal representative. 20. K-Tron Counsel. This Agreement has been negotiated on K-Tron's behalf by the Compensation and Human Resources Committee of the K-Tron Board, comprised solely of independent directors, which has been advised by the law firm of Fox, Rothschild, O'Brien & Frankel LLP. The parties acknowledge that Morgan, Lewis & Bockius LLP, where the Employee is currently a partner and which regularly represents K-Tron, has not advised K-Tron in this matter. 21. Miscellaneous. The masculine pronoun whenever used shall include the feminine and the singular shall be construed as the plural, where applicable. All section headings are for convenience only. This Agreement may be executed in several counterparts, [Balance of Page Intentionally Left Blank] -15- 16 each of which shall be an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, K-Tron and the Employee have executed this Agreement as of the date first above written. [Corporate Seal] K-TRON INTERNATIONAL, INC. Attest: /s/ MARY E. VACCARA By: /s/ LEO C. BEEBE - -------------------------- -------------------------- Mary E. Vaccara Leo C. Beebe As its Assistant Secretary As its Chairman and Chief Executive Officer EMPLOYEE /s/ TIMOTHY MAXWELL /s/ EDWARD B. CLOUES, II - -------------------------- ----------------------------- Witness Edward B. Cloues, II Approved as of the date first above written by the Compensation and Human Resources Committee of the K-Tron Board of Directors: By: /s/ NORMAN COHEN - -------------------------- Norman Cohen As its Chairman -16- EX-11.1 3 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11.1 K-TRON INTERNATIONAL, INC. & SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 27, Sept. 28, Sept. 27, Sept. 28, 1997 1996 1997 1996 ---- ---- ---- ---- AVERAGE COMMON AND COMMON-EQUIVALENT SHARES: Weighted Average Common Shares Outstanding per Period 3,170,000 3,127,000 3,150,000 3,117,000 Stock Options 57,000 11,000 57,000 11,000 ---------- ---------- ---------- ---------- ADJUSTED AVERAGE COMMON AND COMMON-EQUIVALENT SHARES COMPUTATION 3,227,000 3,138,000 3,207,000 3,128,000 ========== ========== ========== ========== EARNINGS FOR COMMON AND COMMON-EQUIVALENT SHARES COMPUTATION: Net income applicable to Common Stock $1,461,000 $1,161,000 $3,763,000 $2,841,000 ========== ========== ========== ========== EARNINGS PER SHARE $ .45 $ .37 $ 1.17 $ .91 ========== ========== ========== ==========
EX-27.1 4 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JAN-03-1998 SEP-27-1997 5,144 0 17,200 1,001 11,435 34,508 38,795 24,092 53,768 21,003 14,440 0 0 42 16,652 53,768 64,897 64,897 35,767 35,767 23,092 0 915 5,123 1,360 3,763 0 0 0 3,763 1.17 1.17
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