1
(b)(1)
Prepared by:
XXXXXXX X. XXXXXXXXX, ESQ.
Xxxxxxxxx Xxxx
00 Xxxxxx Xxxxxx, X.X. Xxx 000
Xxxxxxxx, XX 00000
(000) 000-0000
NOTE
$7,000,000.00 WOODBURY, NEW JERSEY
February 4, 2000
BETWEEN the Borrower(s) K-TRON AMERICA, INC., A DELAWARE CORPORATION,
whose address is Routes 55 and 553, X.X. Xxx 000, Xxxxxx, Xxx Xxxxxx 00000-0000,
referred to as "Borrower".
AND the Lender, THE BANK of Gloucester County, whose address is 000
Xxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000, referred to as "THE BANK".
The word "THE BANK" means the original Lender and anyone else who takes
this Note by transfer.
BORROWER'S PROMISE TO PAY PRINCIPAL AND INTEREST. In return for the
loan that Borrower may receive hereunder, Borrower promises to pay the maximum
principal sum of $7,000,000.00 or such lesser amount as may be advanced by THE
BANK as hereinafter set forth (called "principal"), plus interest to the order
of THE BANK. The Borrower may borrow up to one-half of the amount of the loan,
not to exceed $3,500,000.00, on a fixed interest rate basis, and all or any part
of the loan on a floating rate basis as Borrower elects at time of funding under
this Note. Interest will be charged on that part of the principal which has not
been paid from the date of funding of this Note until all principal has been
paid. Interest shall be calculated hereunder for the actual number of days that
principal is outstanding based on a year of 360 days. Interest rate charged
shall be as follows:
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1. For the fixed rate portion of the Note, a fixed interest rate equal
to the two (2) year Treasury rate plus 175 basis points, such rate to be
determined as of the date of funding under the terms of this Note. Said rate
established at time of funding shall be fixed for two (2) years from the date of
funding of the Note. At the two (2) year anniversary of the funding under the
terms of this Note, the rate on this fixed interest rate portion of the Note
shall change to the variable rate of interest described in paragraph 2 below,
unless the Borrower then elects to accept a fixed rate option to be determined
and offered by THE BANK at that time.
2. For the floating rate portion of the Note, a variable interest rate
equal to the one (1) month LIBOR rate plus 185 basis points. The rate of
interest shall be established on the twenty-fifth (25th) day of each calendar
month, or the next business day thereafter, and said interest rate to commence
on the first business day of each calendar month thereafter. For purpose of this
Note, LIBOR interest rate shall be defined as the rate of interest equal to the
sum of (a) the London Interbank Offered Rate (LIBOR) for maturities of one (1)
month, expressed as an annual yield, as reported in the Wall Street Journal or a
comparable source on the date the quote by THE BANK is given (the "LIBOR Index
Rate"); and (b) 185 basis points. The rate of interest so established shall
remain in effect until the first business day of the succeeding calendar month,
at which time the rate of interest shall be reestablished as provided herein.
The interest rate established at time of funding under the terms of this Note
shall be the same as if established on the first of said month.
TERM AND PAYMENTS. Borrower will pay principal together with interest
accrued based on a FOUR (4) YEAR schedule with equal principal monthly payments,
PLUS INTEREST AS SET FORTH ABOVE commencing on MAY 1, 2000 and continuing on the
first business day of each month thereafter during the term hereof with a final
payment to be due and payable on the FIRST DAY OF
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APRIL 2004. An amount of each principal payment equal to 1/48th of the amount
borrowed under the fixed rate portion shall be allocated to the fixed rate
portion of the loan, and the balance to the variable rate portion. All payments
will be made to THE BANK at the address shown above or to a different place if
required by THE BANK.
SECURITY. The Borrower hereunder has delivered as security for this
instrument a second mortgage bearing even date herewith covering premises
designated on the official tax map as Xxx 0.00, Xxxxx 000, Xxxxxxxx xx Xxxxxx,
Xxxxxxxxxx Xxxxxx, New Jersey, which Mortgage is about to be recorded in the
office of the Clerk of Gloucester County. The provisions of any mortgage given
as security for this Note are incorporated herein by reference. Further, the
Borrower shall deliver a second lien perfected security interest in the accounts
receivable, inventory, machinery and equipment now owned or hereafter acquired
by Borrower located at Xxxxxx 00 xxx 000, Xxxxxx, Xxx Xxxxxx 00000 and Suite
601, VPR Commerce Center, 0000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000.
Borrower shall also deliver the Guaranty of K-Tron International, Inc.
("Guarantor").
PREPAYMENT PENALTY: This Note may be prepaid at any time, subject to
the following provision. There shall be a Prepayment Penalty on the fixed
interest rate portion of this Note as set forth above in the amount of 2% OF THE
AMOUNT OF PREPAYMENT AS DEFINED HEREIN for the first two (2) years following
funding under the terms of this Note, provided however that the Borrower may
prepay up to 30% of the principal balance per year without penalty. The said 30%
shall be calculated on the original principal balance or the outstanding
principal balance at the beginning of each anniversary of funding under the
terms of this Note, as applicable. After two (2) years from funding under the
terms of this Note, the balance on the fixed interest rate portion of this
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Note may be prepaid without penalty. At no time will there be a prepayment
penalty on the variable interest rate portion of this Note.
BORROWER COVENANTS. Borrower agrees that until all obligations under
the terms of this Note and the loan commitment dated January 21, 2000 are fully
paid and discharged, without prior written consent of THE BANK:
A. The consolidated debt to net worth ratio of Guarantor shall not be
more than 1.55 at fiscal year-end 2000 or more than 1.50 at fiscal year-end 2001
and each fiscal year-end thereafter.
B. The consolidated annual debt coverage ratio of Guarantor at each
fiscal year-end shall not be less than 1.20.
C. The consolidated net worth of Guarantor shall not be less than
$22,000,000.00 at fiscal year-end 2000 or less than $24,000,000.00 at fiscal
year-end 2001 and each fiscal year-end thereafter, excluding any declines due to
changes in foreign exchange rates subsequent to January 1, 2000.
D. There shall be no additional borrowing of funded debt by Guarantor
or its subsidiaries from any party other than THE BANK in an amount greater than
the sum of (i) $2,000,000.00 above the borrowings on Guarantor's consolidated
January 1, 2000 financial statements, exclusive of changes in borrowings due to
foreign exchange rate changes, and (ii) the difference between $12,000,000.00
and the amount of Borrower's borrowings from THE BANK outstanding at the time of
any such additional borrowing, excluding the existing $2,700,000.00 mortgage for
all purposes of this calculation.
E. There shall be no upstreaming of funds from Borrower to Guarantor or
K-Tron Technologies, Inc. except for management fees consistent with past
practice and royalties paid in the
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ordinary course of business at the new royalty rate established as of January 2,
2000, and except for dividends paid with the proceeds of this loan.
F. For two (2) years from the date of funding under the terms of this
Note, there shall be no mergers or acquisitions by Guarantor or its subsidiaries
involving consideration of more than $2,000,000.00.
LATE CHARGE: The effective date of the receipt by the holder of any
installment of this Note shall be the day on which the holder receives cash or
collected funds at the place of payment as specified herein in payment of any
such installment. Borrower shall be entitled to a FIFTEEN (15) DAY grace period
after which period a "late charge" of $0.05 FOR EACH $1.00 SO OVERDUE OR $25.00
WHICHEVER IS GREATER, NOT TO EXCEED $1,000.00 may be charged by the holder for
the purpose of defraying the expense incident to handling such delinquent
payment.
DEFAULT: If any installment of this Note or interest payment is not
paid within 15 days of the date and at the place herein specified and after THE
BANK has given the Borrower fifteen (15) days written notice to cure said
default, THE BANK may at its option, and without further notice declare this
Note to be in default and the entire principal balance then remaining unpaid
together with all interest which shall have accrued on the unpaid principal
balance from and after the date of such default shall be due and payable in full
without notice.
It shall be a default of this Note if Borrower shall default in any
payment of principal or interest on any indebtedness or contingent obligation
for money borrowed (other than Borrower's obligations under this Note) or any
other event shall occur, the effect of which is to permit such indebtedness or
contingent obligation to be declared or such indebtedness or contingent
obligation shall otherwise become due prior to its stated maturity, provided,
however, that this provision shall
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not apply concerning obligations other than Borrower's obligations under this
Note unless the amount involved exceeds $50,000.00.
If a default shall occur in this loan and not be cured as provided in
the loan documents or otherwise agreed to by THE BANK, THE BANK shall, after
declaring the loan to be in default, have the right to increase the interest
rate TWO (2%) PERCENT PER YEAR in excess of the note rate. This provision is in
addition to any late charges that may be due.
ATTORNEY'S FEE: If this Note is placed in the hands of an attorney for
collection because of a default in the terms hereof or in the terms of the
mortgage given as security for the within obligation, the undersigned agrees to
pay the reasonable fees and costs of such attorney, whether or not legal action
is instituted and further consents that if a judgment is entered in any action
the amount of such fees shall form a part of such judgment in addition to any
fees allowed by Statute or Rule of the Court.
COMMITMENT LETTER COMPLIANCE: Funding under this Note is contingent
only upon Borrower's compliance with all of the terms and conditions contained
in the commitment letter issued by THE BANK to Borrower on January 21, 2000.
Also upon breach of any term or condition contained therein THE BANK shall have
the right to declare this loan in default and demand payment in full of the
principal balance remaining unpaid, together with all interest which shall have
accrued thereon. Further, providing the said commitment letter so provides, THE
BANK reserves the right to increase the interest rate in accordance with the
provisions of the loan commitment for failure of the Borrower or any guarantor
to submit required financial information within thirty days of the date of
request by THE BANK.
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PAYMENT AT MATURITY: THIS LOAN IS PAYABLE IN FULL AT MATURITY OR UPON
DEMAND IN THE EVENT OF A DEFAULT HEREUNDER OR DEFAULT UNDER THE MORTGAGE
SECURING THIS NOTE OR DEFAULT UNDER THE TERMS OF ANY OTHER APPLICABLE LOAN
INSTRUMENT. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID
INTEREST THEN DUE. THE BANK IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT
TIME.
WAIVER OF PRESENTMENT: EACH AND ALL PARTIES hereto whether maker,
endorsers, sureties, guarantor or otherwise do hereby jointly and severally
waive presentment and demand for payment, notice of dishonor, protest and notice
of protest.
INCONSISTENCY: In the event of any inconsistency between this Note and
any other loan document, this Note shall govern.
IN WITNESS WHEREOF, the Borrower hereunder has hereunto set its hands
and seals the day and year first above written.
ATTEST: K-TRON AMERICA, INC.
BY:
/s/ XXXX XXXXXXX /s/ XXXXXXXX X. XXXXX
------------------------------------- ---------------------------------
XXXX XXXXXXX, SECRETARY XXXXXXXX X. XXXXX,
VICE PRESIDENT-FINANCE
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000 Xxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
(000) 000-0000
January 21, 2000
Xxxxxx X. Xxxxxx, XX
K-Tron America, Inc.
Xxxxxx 00 & 000 X.X. Xxx 000
Xxxxxx, Xxx Xxxxxx 00000-0000
Dear Xx. Xxxxxx:
This commitment letter replaces the one dated January 19, 2000, which is now
null and void.
We are pleased to advise you that The Bank of Gloucester County ("The Bank") has
approved your request for a Term Loan under the following terms and conditions:
BORROWER: K-Tron America, Inc.
GUARANTOR: K-Tron International, Inc.
AMOUNT: up to $7,000,000.00
USE OF PROCEEDS: The loan proceeds shall be used to finance
the purchase by K-Tron International, Inc.
of up to 450,000 shares of K-Tron
International, Inc. stock.
INTEREST RATE: Variable Interest Rate Option:
A variable interest rate equal to the one
(1) month LIBOR rate plus 185 basis points,
such rate to change as of the first business
day of each calendar month.
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K-Tron America, Inc.
January 19, 2000
Page 2 of 9
Fixed Interest Rate Option:
For up to $3,500,000.00 or one-half the loan
amount, whichever is less, a fixed interest
rate equal to the two (2) year Treasury rate
plus 175 basis points, such rate to be
determined as of the date of the note. Said
rate shall be fixed for two (2) years from
the date of the note. At the two (2) year
anniversary of the note, the rate on the
Fixed Interest Rate portion of the loan
shall change to a variable rate as described
under Variable Interest Rate Option above,
unless the Borrower then elects to accept a
fixed rate option to be determined and
offered by The Bank at that time.
Of the balance of this loan for which
Borrower now elects not to take the Fixed
Interest Rate Option, said balance shall
accrue interest at the Variable Interest
Rate Option described above.
COMMITMENT FEE: None
TERM OF LOAN
AND
REPAYMENT TERMS: The loan is to be repayable in forty-seven
(47) monthly principal installments of
$145,833.33, plus interest, and one final
payment of the remaining principal balance
and interest owing in the forty-eighth
(48th) month. Payments shall commence one
month from the date of settlement of the
loan.
In the event that less than $7 million is
borrowed hereunder, the amount of the
monthly principal installment shall be
correspondingly reduced so that the amount
borrowed is scheduled to amortize over 48
months.
COLLATERAL: This loan is to be secured by:
1. Second lien perfected security interest,
subject only to The Bank's first lien
security interest, in the
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K-Tron America, Inc.
January 19, 2000
Page 3 of 9
accounts receivable, inventory, machinery
and equipment now owned or hereafter
acquired by Borrower located at Xxxxxx 00
xxx 000, Xxxxxx, XX 00000 and Suite 601, VPR
Commerce Center, 0000 Xxxxx Xxxxxxx Xxxx,
Xxxxxxxxx, XX 00000.
2. Second mortgage, behind The Bank's $2.7
million first mortgage, on the commercial
real estate located at Xxxxxx 00 & 000
(Xxxxx 000 Xxx 3.01) in Mantua Township, New
Jersey ("Mortgaged Property").
3. The corporate unconditional, unlimited
guarantee of K-Tron International, Inc.
ATTORNEY: The Bank will be represented in this
transaction by Xxxxxxx X. Xxxxxxxxx,
Esquire, of Xxxxxxxxx Xxxx, 00 Xxxxxx
Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000,
000-000-0000. All documents pertaining to
this transaction must be prepared by or
reviewed by the Bank's attorney. All fees
charged by The Bank's counsel in connection
with this transaction shall be borne by the
Borrower.
The Borrower shall have the right to be
represented in this transaction by an
attorney of the Borrower's selection, whose
fee shall be borne by the Borrower.
Upon acceptance of this commitment, the
Borrower shall contact Xx. Xxxxxxxxx'x
office concerning the loan closing
procedure.
OTHER CONDITIONS The funding of this commitment and the
satisfactory continuance of this Term Loan
are contingent upon:
1. The loan documents shall include a
fifteen (15) day default clause. The
Borrower shall have fifteen (15) days to
cure said default after receiving written
notice of same. The loan documents shall
include a due on transfer clause. The Bank
shall require the
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K-Tron America, Inc.
January 19, 2000
Page 4 of 9
maintenance of adequate insurance coverage
on the Mortgaged Property and require
payment of real estate taxes, when due. A
hazard insurance policy must be obtained for
a term of not less than one year. The
original insurance policy and proof that the
first year's premium is paid must be
provided at settlement. The policy must be
dated on or before the date of settlement,
must provide coverage in an amount not less
than the lesser of (i) this loan balance or
(ii) $2,700,000.00, and the "Mortgagee
Clause" must indicate: The Bank of
Gloucester County, its successors and/or
assigns, 000 Xxxx Xxxxxx, Xxxxxxxx, XX
00000.
2. The loan documents shall contain such
other provisions as The Bank or its counsel
may deem appropriate in order to maintain
the adequacy of its security and primarily
obligate the Borrower and Guarantor for
repayment of the loan. This commitment and
the obligations and undertakings therein
shall be incorporated in the loan documents
and become an integral part thereof.
3. In regard to the second mortgage on the
Mortgaged Property located at Xxxxxx 00 &
000 (Xxxxx 000 Xxx 3.01) in Mantua Township,
New Jersey:
A. The Bank is in receipt
of a satisfactory
appraisal on the Mortgaged
Property.
B. Receipt by the Bank of
a satisfactory title
report and superior court
searches which must
indicate that our lien
position on Mortgaged
Property is a second lien
position, the cost of
which is to be borne by
the Borrower.
C. If flood insurance is
required at settlement or
subsequently the Mortgaged
Property becomes
designated by HUD as
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K-Tron America, Inc.
January 19, 2000
Page 5 of 9
containing special flood
or mud-slide hazards, then
in accordance with Federal
regulations evidence of
coverage and proof that
the first year's premium
is paid will be required.
The Flood Insurance
Policy, if required, must
be in an amount not less
than the lesser of (i)
this loan balance or (ii)
the fair market value of
the Mortgaged Property,
and the "Mortgagee Clause"
must indicate: The Bank of
Gloucester County, its
successors and/or assigns,
000 Xxxx Xxxxxx, Xxxxxxxx,
XX 00000.
4. Receipt by The Bank of a Corporate Status
Search for the Borrower and Guarantor, the
cost of which shall be borne by the
Borrower.
5. Receipt by the Bank of satisfactory state
and county UCC searches, which must indicate
that our lien position on the assets of the
Borrower, referenced above, is in second
position, subject only to The Bank's first
position, the cost of which is to be borne
by the Borrower.
6. Receipt by the Bank of acceptable current
financial statements and annual updates on
the Borrower and Guarantor. The updates for
financial statements and tax returns are to
be submitted within thirty (30) days of the
date requested by the Bank. Should the
Borrower or Guarantor fail to submit
required financial information within 30
days of the date of request, the Bank may,
at its sole option, increase the interest
rate on the note by one half (1/2) of one
(1) percent per annum.
7. The Borrower must develop and maintain
with The Bank a meaningful deposit
relationship satisfactory to The Bank.
8. If a default shall occur in this loan and
not be cured as provided in the loan
documents or otherwise agreed to by THE
BANK, THE BANK
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K-Tron America, Inc.
January 19, 2000
Page 5 of 9
shall, after declaring the loan to be in
default, have the right to increase the
applicable interest rate to two (2%) percent
in excess of the contract rate. This
provision is in addition to any late charges
that may be due.
9. Borrower and Guarantor agree that until
all obligations hereunder are fully paid and
discharged, Borrower and Guarantor will not
without the prior written consent of The
Bank:
A. Permit the consolidated
debt to worth ratio of
Guarantor to be more than
1.55 at fiscal year-end
2000 or more than 1.50 at
fiscal year-end 2001 and
each fiscal year-end
thereafter.
B. Permit the consolidated
annual debt coverage ratio
of Guarantor to be less
than 1.20.
C. Permit the consolidated
net worth of Guarantor to
be less than $22 million
at fiscal year-end 2000 or
less than $24 million at
fiscal year-end 2001 and
each fiscal year-end
thereafter.
D. Permit additional
borrowing elsewhere by
Guarantor or its
subsidiaries in an amount
greater than the sum of
(i) $2 million above the
borrowings on Guarantor's
consolidated 1/1/00
financial statements,
exclusive of changes in
borrowings due to foreign
exchange rate changes, and
(ii) the difference
between $12 million and
the amount of Borrower's
borrowings from The Bank
outstanding at the time of
any such additional
borrowing, excluding the
existing $2.7 million
mortgage for all purposes
of this calculation.
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K-Tron America, Inc.
January 19, 2000
Page 7 of 9
E. Permit upstreaming of
funds from Borrower to
Guarantor or K-Tron
Technologies, Inc. except
for management fees
consistent with past
practice and royalties
paid in the ordinary
course of business at the
new royalty rate
established as of January
2, 2000, and except for
dividends paid in
connection with the
proceeds of this loan.
F. For two years from the
date of the loan, permit
mergers or acquisitions by
Guarantor or its
subsidiaries involving
consideration of more than
$2 million without the
written approval of The
Bank.
10. As to the amount borrowed under the
Fixed Interest Rate Option, Borrower shall
have the right at any time during the term
hereof to prepay all or a part of the
principal balance then outstanding under the
note upon payment of the premiums and
charges hereinafter set forth. A principal
prepayment shall be deemed to have occurred
upon Borrower's payment to The Bank in any
Loan Year during the first two (2) Loan
Years of the note of any sum in reduction of
principal which exceeds 30% of the
outstanding principal balance at the
beginning of that Loan Year, excluding
principal payments (including scheduled
amortization) the Borrower is obligated to
make under any other term or provision of
the note, the mortgage securing the note or
any other document constituting a part of
the loan transaction evidenced by the note.
Upon the occurrence of a principal
prepayment including prepayment of the
entire debt, The Bank shall be entitled to
charge and Borrower shall be obligated to
pay, in addition to interest and all other
charges then properly due, a prepayment
premium equal to 2% of the amount prepaid.
No premium shall be charged on any principal
reduction made after the second (2nd)
anniversary of the note. The term "Loan
Year" as used herein is defined as any
period
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K-Tron America, Inc.
January 19, 2000
Page 8 of 9
of one year commencing on the date of the
note or on any anniversary of such date.
At no time will there be a prepayment
penalty on the Variable Interest Rate
portion of the loan.
This commitment will expire at the end of fifteen (15) days from the date hereof
unless written acceptance is received from the Borrower, and in any case, at the
end of sixty (60) days from the date hereof if settlement has not been held
hereunder. Your signature and return of the enclosed copy of this letter shall
constitute written acceptance. Upon acceptance of this commitment, borrower
agrees to reimburse The Bank of Gloucester County for all expenses incurred for
ordering appraisals, surveys, title insurance, environmental evaluations, and
the like as may be necessary to meet the requirements on this loan commitment.
IMPORTANT: THE BANK (AND ITS COUNSEL) CANNOT BEGIN PROCESSING YOUR LOAN UNTIL
YOU HAVE RETURNED THIS EXECUTED COMMITMENT LETTER TO THE BANK. FURTHERMORE, YOUR
ELECTIONS AS TO THE AMOUNT BORROWED AND THE INTEREST RATE OPTIONS MUST BE MADE
NO LESS THAN TEN (10) DAYS PRIOR TO THE CLOSING OF THIS LOAN.
Sincerely,
The Bank of Gloucester County
/s/ XXXXX X. XXXXXXXX, XX.
Xxxxx X. Xxxxxxxx, Xx.
Vice President
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K-Tron America, Inc.
January 19, 2000
Page 9 of 9
NOTICE
PURSUANT TO THE PROVISIONS OF N.J.S.A. 46:10A-6, AS AMENDED, YOU ARE PUT ON
NOTICE THAT THE INTERESTS OF THE BORROWER AND LENDER ARE OR MAY BE DIFFERENT AND
MAY CONFLICT, AND THAT THE LENDER'S ATTORNEY REPRESENTS ONLY THE LENDER AND NOT
THE BORROWER AND THE BORROWER IS THEREFORE ADVISED TO EMPLOY AN ATTORNEY OF THE
BORROWER'S CHOICE LICENSED TO PRACTICE LAW IN THE STATE OF NEW JERSEY TO
REPRESENT THE INTERESTS OF THE BORROWER.
The fee of The Bank's counsel is based upon a fixed fee basis and is
estimated to be $3,000.00.
ACCEPTED BY:
K-TRON AMERICA, INC.
/s/ XXXXX X. XXXXX FEBRUARY 4, 2000
____________________________________ __________________
Xxxxx X. Xxxxx, President Date
/s/ XXXX X. XXXXXXX FEBRUARY 4, 2000
____________________________________ __________________
Xxxx X. Xxxxxxx, Corp. Secretary Date
GUARANTOR:
K-TRON INTERNATIONAL, INC.
/s/ XXXXXX X. XXXXXX, XX FEBRUARY 4, 2000
____________________________________ __________________
Xxxxxx X. Xxxxxx, XX, Chairman/CEO Date
/s/ XXXX X. XXXXXXX FEBRUARY 4, 2000
____________________________________ __________________
Xxxx X. Xxxxxxx, Corp. Secretary Date
