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EXHIBIT 10.1.6
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FORBEARANCE AGREEMENT
K-TRON
Between
Swiss Bank Corp. Aarau (SBC) (Leading bank)
Credit Suisse Aarau (CS)
Swiss Volksbank (SVB) (Subsequently referred to as Banks)
Union Bank of Switzerland (UBS)
Banque Cantonale Neuchateloise (BCN)
as well as
CS Immobilien Leasing Ltd. (Subsequently referred to as CSIL)
and
K-Tron (Switzerland) Ltd.
K-Tron Vertech Ltd. (Subsequently referred to as K-Tron
K-Tron Patent Ltd. Group)
K-Tron Asia Pacific Pte. Ltd.
and
K-Tron International Inc. (Subsequently referred to as K-Tron
K-Tron Investment Co. International)
Preamble
As per agreement of June 29, 0000, X-Xxxx (Xxxxxxxxxxx) Ltd. merged with K-Tron
Holding Ltd., as a result of which all assets and liabilities of the latter
were transferred to K-Tron (Switzerland) Ltd. retroeffective January 1, 1995.
Through a number of organizational and technical measures and with the aid of
the present forbearance agreement the excessively high debt-to-equity ratio of
K-Tron (Switzerland) Ltd. shall be reduced as quickly as possible to an
acceptable level.
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Within the framework of this reorganization also the structure of the entire
K-Tron Group shall be optimized.
1. SUBJECT AND SCOPE OF THE FORBEARANCE AGREEMENT
1.1 This forbearance agreement relates to all credits and credit
limits (incl. contingent commitments) which the banks have
granted to the companies of the K-Tron Group as of March 31,
1995, or which will be granted after this date.
The credits and credit limits granted to K-Tron (Switzerland)
Ltd. as of March 31, 1995, are listed in Appendix 1. With the
ratification of this agreement the banks confirm the correctness
and completeness of the credit limits and credit facilities
listed in Appendix. 1.
Appendix 2 contains the reorganization and restructuring concept
of K-Tron (Switzerland) Ltd.
Appendix 1 and Appendix 2 are a integral parts of this
forbearance agreement.
1.2 All parties to this forbearance agreement concur that of the
currently blocked amounts (resulting from the sale of Colortronic
GmbH, Germany), that is,
a) US$ 3.00 million at SBC Aarau
b) US$ 2.15 million at CS Aarau
c) US$ 0.40 million at Xx. X. X. Xxxxxxxxx, escrow agent, blocked until
Dec. 31, 1995 according to the Colortronic sales
agreement
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the amount a) of SBC Aarau, and the amount b) of CS Aarau shall
be applied to reduce in the corresponding amount the credits
formerly granted to K-Tron Holding Ltd. -- which on account of
the merger have been transferred to K-Tron (Switzerland) Ltd.
The amount c) of US$ 400,000.00 plus accrued interest per Jan. 1,
1996, shall also be transferred to SBC Aarau and CS Aarau in the
ratio of 3:2.15, exchanged into SFr., and be applied to further
reduce immediately the residual balance of the credits originally
granted to K-Tron Holding Ltd.
2. STIPULATIONS OF FORBEARANCE AGREEMENT
2.1 AVAILABILITY OF CREDIT LIMITS
For the duration of this forbearance agreement the banks pledge
to make the credit limits specified in Appendix 1, and after the
application of funds according to Section 1.2, freely and
completely available to the companies of the K-Tron Group for
operational purposes. But the existing agreements between the
banks and the companies of the K-Tron Group still remain in
effect to the extent that they do not contravene this forbearance
agreement.
2.2 DEFERMENT OF CREDIT MATURITIES
The banks agree to defer repayment of the credits and credit
tranches maturing up to March 31, 1997, according to Appendix 1,
as well as to defer the amortization payments on mortgages and
fixed loans that become due up to that time.
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Not covered by this deferment agreement are interest payments,
fees and commissions which shall be paid in accordance with the
individual credit agreements negotiated between the banks and
companies of the K-Tron Group.
For the term of this forbearance agreement the banks and CSIL
agree not to call in the outstanding credits (principal) from the
companies of the K-Tron Group and not to enforce their claim
through compulsory execution or court order. This waver becomes
null and void if the companies of the K-Tron Group fail to pay
the interest, fees and commissions according to the individual
credit agreements negotiated with the banks and CSIL; in this
case the banks and CSIL are entitled to demand repayment of the
credits (principal) or to demand the return of the leased object.
This waver is also subject to the stipulations of Sections 2.3
and 6.
2.3 OFFSET ENTITLEMENT
Irrespective of 2.2 above each bank is entitled to reduce the
credits granted to the companies of the K-Tron Group by applying
the following proceeds against the credits (and to reduce the
credit limits accordingly):
Within the scope of the collateral: Net income (gross income less
taxes, duties or other brokerage fees and legal expenses admitted
by the banks) from the sale of assets that have been pledged as
collateral to the corresponding banks and to CSIL.
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3. OBLIGATIONS OF THE K-TRON GROUP
3.1 MEASURES FOR LOWERING COSTS, INCREASING THE INCOME, AND IMPROVING
THE LIQUIDITY
The K-Tron Group shall
3.1.1 take all measures deemed to be necessary in accordance with sound
business management principles to lower the costs, increasing the
income and improving the liquidity, and shall report to the
leading bank and CSIL monthly the status of the steps taken.
3.1.2 use all moneys received from the sale of non-operational assets
to proportionately reduce the credit limits of the banks.
3.1.3 ensure that the participations/companies that form part of the
K-Tron Group do not take any actions that contravene the
stipulations of this agreement, that violate or jeopardize this
agreement, or that could impair the economic situation of the
K-Tron Group.
3.1.4 implement the reorganization measures listed in Appendix 2.
3.2 FUND TRANSFERS
The K-Tron Group
3.2.1 shall use, as far as possible, all credit limits proportionately
to the established limits and in addition authorize the banks to
compensate the balances at their own discretion.
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3.2.2 shall handle all fund transfers exclusively through payment
orders (no checks) and only via the banks.
3.2.3 agrees not to use open credit limits of the undersigned banks to
repay other banks.
3.3 TRANSACTIONS REQUIRING APPROVAL
The K-Tron Group
3.3.1 may not without prior written approval of the xxxxx xxxxx any
credits or loans to third parties or affiliated companies, may
not repay any such credits or loans, may not incur any contingent
liabilities, and may not pledge additional collateral for other
credits or claims.
3.3.2 may not distribute any dividends without the approval of the
banks.
3.3.3 shall obtain the approval of the banks before the sale of any
assets valued at over SFr. 100,000.00.
3.3.4 may not without the prior written consent of the banks make any
(partial) investments or disinvestments in/of shares, including
any participations except those in the annually submitted
investment budget. The banks are aware of the planned sale of
K-Tron (France) S.a.r.l. and Xxxxxx Freres Brazil Ind. e. com.
Ltda.
3.3.5 may not, without the written consent of the banks, borrow any
funds from banks that are not part of this agreement.
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3.3.6 may not, without the written consent of the banks, deviate from
the reorganization concept or the action plan according to
Appendix 2.
3.3.7 may not, without the written consent of the banks, conclude any
new license agreements and may not modify the existing license
agreements.
3.4 MANDATORY RECORD KEEPING AND RIGHT OF INSPECTION
The K-Tron Group
3.4.1 shall provide the banks and CSIL at all times with the desired
information and release them from the banking secrecy among each
other.
3.4.2 authorizes the statutory auditors and external consultants to
supply information to the banks and CSIL.
3.4.3 authorizes the banks and CSIL to inspect all account books and
all supplementary records and documents.
3.4.4 shall submit to the leading bank per March 31 of each year, at
the latest, the annual report per December 31 (with
consolidation) audited by Xxxxxx Xxxxxxxx, including the report
of the statutory auditors and any explanatory reports, as well as
the original of other documents prepared by the statutory
auditors that have been signed by the K-Tron Group and the
statutory auditors.
3.4.5 shall submit to the leading bank and for the use by the other
banks and CSIL, the following reports -- broken down by Xxxxx
Division and Xxxxxx Division as well as consolidated:
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Documents Interval First time on
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(Audited) interim report (balance sheet and P&L quarterly Dec. 31, 1995
statement) within 45 days from the scheduled reporting
dates
Budget (with comparison of desired/ actual) signed by semiannually Dec. 31, 1995
the statutory auditors, within 30 days from the
scheduled reporting dates
12-Months revolving liquidity forecast, within 30 days quarterly Dec. 31, 1995
of the scheduled reporting dates
Order book, within 30 days of the scheduled reporting quarterly Dec. 31, 1995
dates
Bank limits and draw-downs, within 30 days of the quarterly Dec. 31, 1995
scheduled reporting dates
Report on the progress of business with brief comment, quarterly Dec. 31, 1995
within 30 days of the scheduled reporting date
Aged list of accounts payable, within 30 days of the quarterly Dec. 31, 1995
scheduled reporting date
Aged list accounts receivable, within 30 days of the quarterly Dec. 31, 1995
scheduled reporting date
3.4.6 shall inform the leading bank immediately on any legal actions on
the part of creditors that are either received or expected, or
any other compulsory execution measures.
3.4.7 agrees to the consulting services of the experts proposed by the
leading bank and to provide them with access to all account
books.
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4. LEADING BANK
The leading bank assumes the leadership not only with respect to
the relationship among the banks and CSIL, but also the
relationship of the banks and CSIL with the companies of the
K-Tron Group as well as other third parties that may possibly
participate in this forbearance agreement.
Except for gross negligence, any liability of the leading bank
for damage resulting from its leadership is explicitly waived,
not only with respect to the other banks and CSIL, but also the
companies of the K-Tron group.
5. BANK SECRECY
The companies of the K-Tron Group release the banks from the bank
secrecy among each other. This means that the banks are
authorized to supply each other at any time with any information
on their business relationships with companies of the K-Tron
Group with respect to the credit limits and facilities listed in
Appendix 2. The companies of the K-Tron Group also release the
banks from the bank secrecy in relevant contacts with external
consultants, lawyers and auditors, and release the latter from
their business or professional secrecy in contacts with the
banks.
6. DURATION OF THE AGREEMENT
This agreement remains in force until
MARCH 31, 1997
Appendix 2 is an integral part of this forbearance agreement and
remains in
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force until the reorganization/restructuring of K-Tron
(Switzerland) Ltd. has been completed according to Section 4 of
Appendix 2.
Early termination of this forbearance agreement on part of the
banks and CSIL is only possible for valid cause, namely, if this
agreement is violated by a company of the K-Tron Group or by one
of the banks or CSIL, if bankruptcy is declared or if a
composition agreement is made by K-Tron Switzerland (Ltd.) or if
a comparable composition or liquidation procedure under foreign
law is opened against a subsidiary of K-Tron (Switzerland).
In addition, early termination is possible if due to the periodic
reporting or other available information such a negative
development of the business situation of the K-Tron Group is
revealed that the continuation of the credits on part of the
banks can no longer be justified.
Early termination cancels the forbearance agreement immediately.
Notice shall be given in writing by the corresponding bank to the
debtor companies of the K-Tron Group and a copy shall be
forwarded to all other banks and to CSIL.
7. CLAIM FOR DAMAGES
Claims may be raised for damages against any party who violates
this agreement, particularly also against a bank who terminates
this agreement without valid cause.
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8. MAILING ADDRESSES
Communications related to the forbearance agreement are
considered to have been duly delivered by the banks and the
companies of the K-Tron Group if they are received at the
following addresses:
Swiss Bank Corporation
Attn. Dr. U. A. Xxxxxxxx/X0
Xxxx Xxxxxxx
XX-0000 Xxxxx/Xxxxxxxxxxx
Credit Suisse
Attn. Xxx. X. Xxxx
Xxxxxxxxxxxxxx 00
XX-0000 Xxxxx/Xxxxxxxxxxx
Swiss Volksbank
Attn. Xx. X. Xxxxxxxxxxxxxx
Xxxxxxxxxxxxxxx 0
XX-0000 Xxxx/Xxxxxxxxxxx
Union Bank of Switzerland
Attn. Xx. X. Xxxxxx
Xxxxxxxxxxxxxx 00
XX-0000 Xxxxx/Xxxxxxxxxxx
Banque Cantonale Neuchateloise
Attn. Xx. X. Xxxxxxx
Place Xxxx 0
XX-0000 Xxxxxxxxx/Xxxxxxxxxxx
CS Immobilien Leasing Ltd.
Attn. Xxx. X. Xxxxxxxxx
Xxxxxxxxxxxxxxxx 00
XX-0000 Xxxxxx/Xxxxxxxxxxx
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For the K-Tron Group and K-Tron International:
K-Tron (Switzerland) Ltd.
Executive Management
Industrie Lenzhard
5702 Niederlenz
9. EFFECTIVE DATE
This agreement enters into force when it has been duly signed by
all parties involved.
10. APPLICABLE LAW/PLACE OF JURISDICTION
This forbearance agreement is subject to Swiss law.
THE PLACE OF JURISDICTION FOR ALL LEGAL DISPUTES ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT IS AARAU. The banks and CSIL
have the right, however, to initiate legal action against
companies of the K-Tron Group also at their domicile or in any
other competent court.
Aarau . . . . . . . . . . . . . . 22.12.95 . . . . . . . . . . . . . . . . . .
(Swiss Bank Corporation
Aarau; leading bank)
Aarau . . . . . . . . . . . . . . 3.1.96 . . . . . . . . . . . . . . . . . .
(Credit Suisse)
Bern . . . . . . . . . . . . . . . 5.1.96 . . . . . . . . . . . . . . . . . .
(Swiss Volksbank)
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Aarau . . . . . . . . . . . . . . 17.1.96 . . . . . . . . . . . . . . . . . .
(Union Bank of Switzerland)
Nauchatel . . . . . . . . . . . . 27.1.96 . . . . . . . . . . . . . . . . . .
(Bank Cantonale
Neuchateloise)
. . . . . . . . . . . . . . . . . 26.1.96 . . . . . . . . . . . . . . . . . .
(CS Immobilien Leasing Ltd.)
. . . . . . . . . . . . . . . . . 25./28. Nov. 95 . . . . . . . . . . . . . . .
K-Tron (Switzerland) Ltd.
. . . . . . . . . . . . . . . . . 25./28.Nov. 95 . . . . . . . . . . . . . . .
(K-Tron Vertech Ltd.)
. . . . . . . . . . . . . . . . . 25./28. Nov 95 . . . . . . . . . . . . . . .
(K-Tron Patent Ltd.)
. . . . . . . . . . . . . . . . . 25. Nov. 95 . . . . . . . . . . . . . . .
(K-Tron Asia Pacific Pte. Ltd.)
(Signature authenticated)
. . . . . . . . . . . . . . . . . 25. Nov. 95 . . . . . . . . . . . . . . .
(K-Tron International, Inc.)
(Signature authenticated)
. . . . . . . . . . . . . . . . . 25. Nov. 95 . . . . . . . . . . . . . . .
(K-Tron Investment Co.)
(Signature authenticated)
APPENDICES:
Appendix 1: Credit limits and drawdowns per March 31, 0000
Xxxxxxxx 2: Reorganization and restructuring concept K-Tron
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APPENDIX 1
Large bank schedule
Group name : K-Tron K-Tron (Swizterland) Ltd.; Niederlenz
Credit limits and draw-downs as of March 31, 1995 in 000 Swiss Francs
Creditor
Total committment
Collateral allocation
Collateral
Unsecured portion
Quota*
Information on collateral / comments
Pro Memoria
Commitments of leasing companies and banks not participating in the forbearance
agreement (foreign banks, pension fund)
* Quota according to calculation method "Large bank schedule"
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APPENDIX 2: REORGANIZATION AND RESTRUCTURING CONCEPT
K-TRON
1. BOARD OF DIRECTORS
The present board of directors of K-Tron (Switzerland) Ltd.
consisting of Dr. Hans Xxxx Xxxxxxxxx, will be supplemented by
Xx. Xxxxx Gunthardt and Xx. Xxx Xxxxxxxx. The board of directors
shall be limited to three members. This arrangement remains in
effect until the reorganization according to Section 4 has been
completed.
K-Tron International Ltd., K-Tron Investment Co. as well as the
companies of the K-Tron Group agree not to interfere with the
directives of the new board of K-Tron (Switzerland) Ltd.
2. RESTRUCTURING K-TRON (SWITZERLAND) LTD.
Through the following organizational, operational and technical
measures the K-Tron Group shall be restructured as quickly as
possible:
a) Streamlining of the organization structure within 6 months:
- The shares of K-Tron Asia Pacific Pte. Ltd. Singapore shall,
after the restructuring of the latter (i.e. when the share
capital is again fully covered), be transferred at the
nominal value, excluding goodwill, to K-Tron (Switzerland)
Ltd.
- K-Tron Patent Ltd. shall either be merged with K-Tron
(Switzerland) Ltd. or liquidated;
- K-Tron Vertech Ltd. shall be merged or liquidated
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b) Set-up of a management information system MIS within the new
organization according to a).
c) Optimization of the development and production process.
d) Product development according to Section 3.
e) Optimization and streamlining of the existing product range.
3. DEVELOPMENT OF NEW PRODUCTS
The development of new products at K-Tron (Switzerland) Ltd.
shall be intensified. Patents issued or acquired in this
connection shall remain with K-Tron (Switzerland) Ltd., and
remain so even after the termination of this forbearance
agreement or Appendix 2 thereof. As long as any of the banks has
an open credit against any company of the K-Tron Group, and/or if
it does not agree with the transfer of patents by K-Tron
(Switzerland) Ltd., these may not be transferred to K-Tron
Investment Co. or K-Tron International, Inc., or any other
physical person or legal entity.
4. FINANCIAL AND BANKING RELATED MEASURES
4.1 The reorganization of K-Tron (Switzerland) Ltd. is considered to
be complete when a debt-to-equity ration of 60:40 has been
attained. Acceptable proof that the reorganization has been
completed is the submission to the leading bank of an audited
semi-annual financial report of K-Tron (Switzerland) Ltd. that
shows the aforementioned ratio.
a) Beginning March 1, 1996, and until the completion of the
reorganization of K-Tron (Switzerland) Ltd., neither K-Tron
(Switzerland) Ltd. nor any of its subsidiaries will no longer
pay any management fees to the American K-Tron companies.
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Xxx xxxxxx xx X-Xxxx (Xxxxxxxxxxx) Ltd. against the American
K-Tron companies that have arisen before the signing of this
forbearance agreement shall be settled by the latter by
March 1, 1996.
In addition, deliveries of K-Tron (Switzerland) Ltd. to
the American K-Tron companies will be made only against
prepayment (or against letter or credit).
b) Until the reorganization of K-Tron (Switzerland) has been
completed, K-Tron Investment Co. -- as the owner of all shares
of K-Tron (Switzerland) Ltd. -- agrees
- Not to change in any way the capital structure of K-Tron
(Switzerland) Ltd. without the prior written consent of the
banks and CSIL;
- To vote into or out of office the board of directors
(according to Section 1) and to appoint the statutory
auditors of K-Tron Switzerland (Ltd.) only in consultation
with the banks;
- Not to transfer the owned shares of K-Tron (Switzerland) Ltd.
c) With the execution of this forbearance agreement K-Tron
(Switzerland) Ltd. globally assigns to the leading bank as
security for the amounts owed to the banks and to CSIL all
future receivables that will be generated in the course of its
operations. The terms will be covered by a separate agreement
concluded between K-Tron (Switzerland) Ltd. and the banks.
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4.2 Until the desired debt-to-equity ratio stipulated in Section 4.1
has been achieved , the assistance of the banks is absolutely
essential. As compensation for their assistance they are entitled
to increase the interest margins then in effect at the leading bank
by 2.5% p.a. (pro rata) after the expiration of the forbearance
agreement until the reorganization has been completed. If K-Tron
(Switzerland) Ltd. does not borrow any additional funds from the
banks during the term of this forbearance agreement, the banks will
increase this interest margin by no more than 2% p.a. (pro rata).
However, these interest payments which are due in addition to the
other interest, commissions, fees and amortizations, must not cause
K-Tron (Switzerland) Ltd. to become illiquid or insolvent. For this
reason the additional interest payments will be claimed by the
banks only if K-Tron (Switzerland) Ltd. does not experience
financial difficulty on account of this.
5. PENSION FUND
An expert's opinion on the status of the pension fund will be
prepared. If necessary, corrective steps will be initiated, in
parallel with those in Sections 1 to 4.
6. TERM OF VALIDITY
The reorganization and restructuring concept defined in Appendix 2
has a term of validity that is independent of the forbearance
agreement, and shall remain valid also after the latter has been
terminated, until the reorganization of K-Tron (Switzerland) Ltd.
has been completed according to Section 4.1
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(debt-to-equity ratio of 60:40). Section 3 of this Appendix 2
remains in force until the conditions stipulated therein are
fulfilled.
